We are Hanno Beck, Lindy Davies, Fred Foldvary, Mike O'Mara, Jeff Smith, and assorted volunteers, all dedicated to bringing you the news and views that make a difference in our species struggle to win justice, prosperity, and eco-librium.
This 2013 excerpt of BBC News, Oct 3, is by James Morgan.
Five physics discoveries with the potential to transform the world have been selected by Physics World for its 25th birthday issue:
Hadron therapy – targeting tumours with miniature, table-top particle accelerators.
Quantum computers – potentially able to simulate new drug molecules.
Nanoscopic “superlenses” using evanescent light.
Power on the go – kinetic energy harvesting using triboelectrics that could enable shoes to charge a mobile phone.
Graphene – for electronics and super-strong materials.
Graphene’s strength, flexibility, and conductivity make it a potentially ideal material for bendable smartphones and superior prosthetic limbs. Despite being just one atom thick, it is impervious to almost all liquids and gases. Generating holes in sheets of graphene could therefore create a selective membrane – “the ultimate water purifier” – which might someday create drinking water from the sea.
The magazine also picked its top five breakthroughs of the last 25 years:
Quantum teleportation (1992)
The creation of the first Bose-Einstein condensate (1995)
The accelerating expansion of the universe (1997)
Experimental proof that neutrinos have mass (1998)
The sighting of the Higgs boson at Cern (2012)
The magazine’s 25th anniversary issue also highlights five images that have allowed us to “see” a physical phenomenon or effect. In all, the publication compiled five lists of five to examine different aspects of physics.
Physics World is the monthly magazine of the Institute of Physics and was first published in October 1988.
Ed. Notes: Physics gets real results while most economic conclusions can’t even reach the standard of accuracy. No wonder economists suffer from “physics envy”. And when physicists make mistakes, after a while of competing physicists arguing and providing counter evidence, then the truth usually wins out.
None of this is true for economics, mainly because economics must confront profit and property in order to become a science, and those topics are way too controversial for most people, economists included.
Because economics is not a science, mainstream economists can not predict accurately, while geonomists can. Yet these scientific geonomists are ignored by the conventional economists. What will it take for the paradigm to shift?
This 2013 excerpt of MoneyWeek, Dec 11, is by Merryn Somerset Webb, and continues earlier British press coverage of the proposal.
We’ve written here several times before about how useful a land/location value tax (LVT) might be.
If you build a bypass around a village, the price of houses in the village goes up. And if the taxpayer has put up the cash for the bypass, why should the owners of this tiny group of houses reap a windfall of tax-free cash? Makes no sense really.
But what of the people who can now see and hear the bypass where before they lived in peace? Some of them will have ended up with a little compensation. Most will have had none. Yet they will have suffered one way and another, so why shouldn’t they be compensated via the tax system – paying less tax on their now devalued land than those inside the village in their newly desirable homes?
Imagine if a new wind farm were going up in clear sight of your hill-top cottage, or perhaps that fracking was about to ruin your sense of rural idyll. Would you complain so hard if your compensation came in the form of zero council tax for ever?
The current compensation system for those living around new infrastructure projects is geared to paying out as little as possible. That pretty much guarantees that people will oppose it, and do so for as long as possible.
In the Autumn Statement was a decision to “run a pilot project that will share some of the benefits of the development directly with the individual households adversely affected by it.”
There have been a good many hints since the last election that the coalition is unusually interested in the LVT. This is another one.
Ed. Notes: Bigger picture, all of us should be compensated for being excluded from everyone else’s private property on Earth, our common heritage, just as each of us should compensate everyone else for our excluding them. That means, we’d all pay Land Dues into the common kitty and get Rent Dividends back. Those who claim more desirable locations would pay more while all citizens would get back an equal amount. Compensation could go a long way to taking the sting out of nuisances such as above, plus people might not mind so much when they must move to make way for progress. And extra money in the pocket would undoubtedly help pass the land tax or land dues into law.
These three 2013 excerpts on banking and money are from the New York Times, Oct 2, by (1) Ellen Brown on public banks and (2) James K. Galbraith, U. of Texas, author of Inequality and Instability on public currency; and (3) Consent Chronicle, Dec 18, on currency competition by James Wilson.
Public Banks Are Key to Capitalism
To ask whether public banks would interfere with free markets assumes that we have free markets, which we don’t. Banking is heavily subsidized and is monopolized by Wall Street, which has effectively “bought” Congress. Banks have been bailed out by the government, when in a free market they would have gone bankrupt. The Federal Reserve blatantly manipulates interest rates in a way that serves Wall Street, lending trillions at near-zero interest and pushing rates so artificially low that local governments have lost billions in interest-rate swaps.
Public banks lend countercyclically, providing credit when and where other banks won’t. This does not crowd out private banks. Germany and Taiwan, which have strong public banking sectors, are among the most competitive banking markets in the world.
In North Dakota, the only state with its own “mini-Fed,” the state-owned Bank of North Dakota routes its public lending programs through community banks. The Bank of North Dakota cooperates rather than competes with local banks, aiding with capital and liquidity requirements. Its deposit base is almost entirely composed of the revenue of the state and state agencies. North Dakota has more banks per capita than any other state, because they have not been forced to sell to their Wall Street competitors. The North Dakota Bankers’ Association endorses the Bank of North Dakota, which has a mandate to support the local economy.
The Bank of North Dakota takes almost no individual deposits, but a national postal bank would, just as postal banks have done routinely in other countries without destabilizing markets. One-fourth of American families are unbanked or underbanked. With $3 trillion in excess deposits, Wall Street doesn’t want these small depositors.
By providing inexpensive, accessible financing to the free enterprise sector of the economy, public banks make commerce more vital and stable.
Could the Treasury pay its bills without bonds? Well, the Fed does have regulations governing “overdrafts”.
Yet under present law, Secretary of the Treasury Jack Lew could pay off public debt held by the Federal Reserve by issuing a high-value, legal-tender coin – so long as the coin happened to be platinum. A coin is not debt, so that simple exchange would retire the Fed’s debt holdings and lower the total public debt below any given ceiling.
Legally, the president’s officers have the power to use one gimmick to deflate the other.
The Zero Aggression Project and DownsizeDC urge Congress to pass the Free Competition in Currency Act (HR 77).
For 100 years, the Fed notes have robbed the dollar of over 95% of its value. This money inflation led to and perpetually higher prices and devalued savings and overheated stock markets.
HR 77 ends the Fed’s monopoly on issuing new currency; it allows we the people to choose better, non-inflationary forms of money, such as gold or silver. If it becomes law the Fed will either have to stop inflating or lose customers.
Free market money would mean my savings would be protected and prices would stabilize and Congress couldn’t borrow so much.
Send Congress a letter using DownsizeDC.org’s Educate the Powerful System. Please share your letter with friends. Ask them to take the same action.
Ed. Notes: Like most people, these writers can see money but can’t see land. Money we touch every day but land, eventho’ we can’t go anywhere without stepping on it, has faded away into the background.
Yet why do banks lend most of their money? So people can buy land and the building upon it. Why are governments continually in debt? Because they refuse to recover the socially-generated value of land and resources, a value that’d make an ideal tax base.
Society’s spending for land is plenty of money, and unlike other tax targets — income, sales, buildings — the value of locations actually grows when recovered by the community. That’s because the land tax or land dues prompt landowners to quit speculating in land and instead put their sites to good use, which raises the value of all parcels in a region.
If government were to tap this growing flow of funds and keep itself out of debt, it’d have no reason to over-issue new money. Instead of inflation, as technology advances then the cost of living would fall. And if government paid surplus public revenue to citizens as a dividend, then people would not have to borrow so much.
Even without reforming the creation of new money — and the process sure deserves to be corrected — you could turn money, banking, and debt into non-issues by recovering and sharing the value of land and natural resources.
This 2013 excerpt of Business Standard, Dec 10, is by Hrusikesh Mohanty.
Salt manufacturers in the state of Odisha suffered major blow to their business couple of months back because of cyclone Phailin and subsequent floods.
Now the central government has increased the ground rent on salt fields from Rs 5 to Rs 120 per acre per annum. It has also increased the assignment charge on the manufacturers from Rs 4 to Rs 100 per tonne of salt per annum, retroactive to last January.
The salt manufacturers’ association will ask the government to reconsider its decision.
Ganjam is the major salt producing district in the state having around 5,000 acres of lands. There are 43 manufactures, including private ones and two cooperative societies engaged in making salt from the sea water. They produce 15,000 to 20,000 tonnes of salt every year. The salt farming land is leased to cooperative and private sector firms by the central and state governments.
While the infrastructure facilities like the sheds, pump sets, iodization godowns, and electric transformers were damaged in the cyclone, there was heavy siltation in the fields due to heavy rains and floods following the storm. At least Rs 10,000 per acre is needed to de-silt the salt fields to revive the production.
Ed. Notes: While it is fair for those who use land to pay their community for excluding everyone else from the land, and fair for government to collect such rent for community use, it is not fair for government to collect more than the annual market value of the land. After a devastating storm, wouldn’t the land be worth less? Wouldn’t lowering the rent make more sense? However, perhaps in this case, where the rent had been so low, the increase is still not much, only raising the amount to a fair amount. It’s not possible for us to judge without knowing how much profit the salt farmers make on public land each year. If only the reporter would complete the story!
This 2013 excerpt of Pacific Standard, Oct 2, is by Michael Todd.
Last year, research suggested that the idea of people not being able to look in the eyes when they were lying was fundamentally wrong. Your eyes don’t indicate your honesty, although your hands are a different story.
Not only does looking someone in the eye not convince them, it may actually harm your case. Eye contact, especially if someone is predisposed to disagree with you and you’re pushing them to look you back, is not persuasive at all.
If this sounds at odds with past research that’s found speakers who looks at their audience more are rated as more persuasive, understand that their outward gaze isn’t the same as making eye contact. That’s a two-person activity.
Spontaneous gaze at a speaker’s eyes is associated with greater prior agreement and (sometimes) greater receptiveness, but also with less attitude change.
Not all eye contact is created equal — when you’re with friends or loved ones, looking into their eyes generates trust. But when there’s conflict, it may suggest an effort to intimidate and or dominate, and so hurt your argument.
Ed. Notes: Don’t lock your gaze onto another’s may be sound advice but isn’t it also common sense? Along with how much you gaze at the person you’re talking to, your listener will probably also take into account how you appear to them — your smile, your words, your voice, your gestures, your dress, your subconscious aroma that humans can’t pick up consciously, etc. If there’s a shortcut to changing the minds of others, probably nothing works better than appearing as a posse of powerful individuals.
This 2013 excerpt of USA Today, Oct 2, is by Cal Thomas, a conservative columnist, and Bob Beckel, a Democratic strategist — longtime friends.
CAL: The $80 billion federal auto bailout was such a big mistake. Now to make matters worse, the Obama administration is bailing out the Motor City with $300 million. That’s $400 for every resident of the city. The federal government subsidizes failure.
BOB: But the federal assistance to General Motors and Chrysler saved the companies, many GM and Chrysler workers’ jobs, and hundreds of thousands of jobs at companies that make auto parts far beyond Detroit.
CAL: That’s what people who support bailouts say, but Ford didn’t take the money and it is doing much better. A company focused on giving drivers what they want instead of courting help from Washington is going to thrive in a free market. When businesses that fail get government handouts, more companies will come asking in the future.
BOB: I didn’t notice outrage among many conservatives when the federal government bailed out Wall Street and the big banks. That was over a trillion dollars and hardly a whimper from Republicans about their fat-cat banker buddies.
CAL: I was outraged! People and companies (and cities) that make bad decisions should be allowed to fail as a lesson to others. Without fixing the underlying cause of urban blight — people and businesses fleeing the city’s high taxes, poor services and corruption — the blight will just return. Politicians there don’t seem as interested in fixing problems as much as lining their own pockets. Many have gone to prison.
BOB: Most major cities have suffered from corruption and urban blight at some point. In the 1990s, New York went into high-crime neighborhoods and replaced broken windows and streetlights and tore down vacant buildings used by criminals. The results were staggering. Crime dropped, and law abiding citizens reclaimed control of their streets. It’s a model being widely followed.
CAL: Detroit defaulted on $600 million in bonds, twice as much as their bailout. What is needed is a shakeup in the one-party rule that has gripped Detroit for more than 50 years. The last Republican mayor, Louis Miriani, was elected when Eisenhower was president.
BOB: He was convicted of federal tax evasion and sentenced to prison in 1969, keeping up a less-than-proud and bipartisan Detroit “tradition.”
CAL: The city needs to pay 100,000 creditors. That breaks down to $28,000 per resident. In 1950, Detroit had 296,000 manufacturing jobs and, 10 years later, the nation’s highest per capita income. Today, manufacturing employment is down 90%. You can buy a house in Detroit for $500 or less.
BOB: The city became too dependent on one industry.
CAL: Times change, and people must change with them.
BOB: Detroit needs to attract technology and manufacturing jobs. The days of overly generous contracts in the manufacturing and civil service sectors are over.
CAL: Spending as if there is no tomorrow guarantees there won’t be a tomorrow for Detroit.
Ed. Notes: Now do you know what we should do: bailout Detroit or any city or company? These guys above who get millions of readers do make a degree of sense (for thinking within the box) but woefully lack the understanding of analysts who get far fewer readers (such as our contributors). Why won’t mainstream media give equal time to the structural reforms that have proven themselves to work? Would fixing the economy so that it works right for everyone, would that dethrone the powers that be?
The Mason Gaffney Reader: Essays on Solving the Unsolvable (so-called)
Most economists neither really understand their subject nor love its history. Mason Gaffney’s love of truth and the history of economics pervades what he has written. One of my few regrets in life is not having been closer than 7,650 miles away from Mason Gaffney to discuss in detail crucial derailments in economic thought and tax policy, such as John Bates Clark’s (absurdly successful) fraudulent attempt to pretend that land is merely man-made capital.
— Dr. Terry Dwyer, Economist, lawyer, Former Tax advisor to the Australian Prime Minister
If you have ever wondered why big cities have empty lots while development sprawls far into what was once farmland, Mason Gaffney’s essays will explain it all in clear and upbeat terms. For decades Gaffney has led the Georgist movement that seeks to tax land, but not buildings, to foster the best use of land while ending the subtle, and corrosive, redistribution of wealth to owners of real estate. Even if you disagree with Mase his insights will bring new clarity to economics.
— David Cay Johnston, Pulitzer Prize winning tax journalist
Mason Gaffney is a national treasure. He boldly treads where few other economists even dare to peek: at the extraction of rent from the many by the few. Such rent extraction is now massive and threatens to destroy our democracy. To those who wonder how to stop it, my advice is simple: read Gaffney.
— Peter Barnes, author of Capitalism 3.0 and The Sky Trust
The scope, scale and quality of Prof. Mason Gaffney’s anthology are truly breathtaking. This little gem will be on my students’ required reading list with a note: “They don’t make economists this way anymore.” Yes, unfortunately, when they made Mase, they broke the mold.
— Steve H. Hanke, The Johns Hopkins University
Mason Gaffney is an ideal “liberal arts” economist: Question everything, especially your own views; use common sense; be open about your judgments, and encourage debate by stating your conclusions boldly. I don’t always agree with him, but I always learn from him.
— David Colander, Middlebury College
Mason Gaffney has taught generations of urban planners and economists to appreciate how taxing land can improve cities, the economy, and the environment. His rare combination of theoretical rigor, political passion, and clear writing impressed me early in my own academic career. This wonderful collection of his incisive essays will educate and entertain everyone who wants to know more about land and taxes.
— Donald Shoup, Distinguished Professor of Urban Planning, UCLA
In 1970, I was an uppity Nader’s Raider, on the trail of giant California land barons. I stumbled on a hilarious account of California’s preposterous irrigation system with its crisscrossing canals. I just had to meet the author, so I tracked Mason down in Washington, DC, where he then worked for Resources for the Future. He invited me and my ex to dinner, fried us up hamburgers with soy sauce, sang Gilbert and Sullivan tunes with his own words, and sent us on our way with reprints and the dictum, “Tax capital and labor and you drive them away; tax land and you drive it into use!” That meeting led me to study economics in Mason’s old department at UC Berkeley, and into a lifetime of learning from him.
— Mary M. Cleveland, Columbia University
Mason Gaffney is the rare economist who looks for practical solutions. Gaffney explains how taxing land rather than buildings can generate local government revenue and promote urban infill development, greater employment, and overall urban revitalization — results urban planners have long advocated. Gaffney also lays out ways to counteract leapfrogging sprawl, the nation’s leading land use problem, through removing public subsidies. He shows why cities should also adopt land value taxation as an incentive to create more compact and economically robust communities.
— Thomas Daniels, University of Pennsylvania
While too much his own man to be a disciple, Mason Gaffney is widely known as the leading active Georgist economist. This selection of his extensive writings provides an excellent introduction to his body of thought. All apply economics to the design of a more productive economy and a fairer society, and most discuss how expanding land taxation can go far in achieving these goals. These stimulating and thought-provoking articles are written with flair, elegance, and erudition.
— Richard Arnott, University of California, Riverside
Mason Gaffney is the greatest economist the world has never heard of. Professor Gaffney supplies a theory of public finance that shows why Western economies overexploit natural resources, underemploy labor, lurch from crisis to crisis and are prone to ever-widening disparities of wealth. He explains why neither “liberal” demand-side stimulus nor “conservative” supply-side fiscal policies have suceeded. Mason Gaffney’s analysis has never been refuted; it has simply been ignored. Somehow, remarkably, he has maintained his cheery optimism and side-splitting humor, so evident in these essays.
— Kris Feder, Bard College
Mason Gaffney’s insightful writings on public finance, the structure of capital goods, and the business cycle are a bolt of enlightenment, in contrast to the dreary and almost useless mainstream thought that treats symptoms rather than causes. You cannot find better economic writing than that of Professor Mason Gaffney.
— Fred Foldvary, San Jose State University
Prof. Gaffney writes about important questions, with elegance, clarity and wit. I always enjoy reading his papers. When I refer to one of them to check on a point, I often find myself re-reading the whole paper, because I find it so engaging. When I read other economists I find errors in their thinking. That doesn’t seem to happen when I read Mason Gaffney’s work.
— Nicolaus Tideman, Virginia Polytechnic Institute
Here is an economist that the vast majority of our tribe is too defectively educated to understand. Economics is not the dismal science; it is we economists who are dismal, because we have lost our imagination. One need not agree with everything that Mason says to marvel at the depth of his mind and the reach of his wit. We have here marvelous observations and comments upon the timeless necessity of “getting and spending.”
— Daniel Bromley, Professor Emeritus, University of Wisconsin-Madison; Editor, Land Economics
Gaffney’s instructive case histories brilliantly probe beneath the surface of economic phenomena to expose what modern economic analysis has lost by downplaying land values as the primary source of unearned riches. He reveals how current fiscal regimes increasingly privilege unearned income and wealth while penalizing production and harming the poor with regressive sales taxes.
— Roger Sandilands, Emeritus Professor of Economics, University of Strathclyde, Glasgow, Scotland
Gaffney is the preeminent scholar of what’s ailing our economy and how to revitalize it with job opportunities and decent living standards for all Americans.
— Walt Rybeck, Director, Center for Public Dialogue; author of Re-Solving the Economic Puzzle
If the Nobel Prize Committee ever returns to its original mission of awarding prizes for research that benefits society, they should give serious consideration to the life’s work of Mason Gaffney. He has shown how to create a peaceful, prosperous economy that does not depend on imperialism or exploitation.
— Clifford Cobb, author, historian
Mason Gaffney recently retired from active teaching at the University of California, Riverside, at age 90 — with his wits fully intact: three of the essays in this collection were written this year. Prior to Riverside, he was a Professor of Economics at several Universities, a journalist with TIME, Inc., a researcher with Resources for the Future, Inc., the head of the British Columbia Institute for Economic Policy Analysis, which he founded, and an economic consultant to several businesses and government agencies.
Given the radical insights that Gaffney has propounded throughout his career, it’s amazing that he rose as high in the profession as he did. Over the years he found that the subjects that most interested him were precisely the ones best left unexplored by young economists seeking advancement. In a recent essay he recalled being invited to join an Air Conservation Commission in the late 1950s. Hardly any economists at that time had any interest in air pollution; they dismissed it and like matters as “externalities,” outside their narrow realm of markets for “commodities.”
Mason Gaffney doesn’t accept error without complaint, but his (mostly) judicious corrections are offered without condescension. It’s a sort of unassailable, humble authority that comes from really, really knowing what one is talking about.
His essay “Europe’s Fatal Affair with the Value-Added Tax” is far more than an explanation of the economics of sales taxes. It becomes a meditation on the age-old question of what belongs to individuals, and what belongs to communities. He shows how the views of the Physiocrats, the French economistes of the 18th century, had far-reaching influence on the US’s founding fathers, and on the American economy to this day. Public, societal choices with regard to this question have consequences, and Gaffney’s long historical view shows that these consequences are more predictable than many (particularly modern economists) would have you believe.
His “Reverberations” is the best — bar none — brief exposition of the mechanics of macroeconomic cycles, and should be required reading for every econ major.
Mason Gaffney’s work as an economist is deeply important, but he gives you more: his work as a wordsmith, and as a whimsical, eclectic historian, is delightful. There’s deep wisdom here, snazzily expressed.
This 2013 excerpt of Fortune Magazine, Nov 21, is by Vivienne Walt.
Early last year a Brazilian music producer named James Cesari hopped onto the back of a motorbike taxi and roared up to the top of one of Rio de Janeiro’s favelas. There on a hillcrest in Vidigal, an area that had suffered years of gang violence, he found his dream home. Set amid a tangle of electrical wires, potholed roads, and small eateries, Cesari’s one-bedroom cost 15,000 reais (about $7,500), plus about 50,000 reais (about $25,000) to renovate. Now the living room has a view of Ipanema’s beaches and the tropical islands beyond. Cesari, who is 36, gazes out at the view from his couch and says, “This place is priceless.”
The Vidigal shantytown in Rio is gentrifying, and prices of housing are soaring.
Ed. Notes: As always, what matters most in real estate? Hint: it’s not the buildings, in this case favelas or hovels. It’s the land, or, the location, over and over and over.
Brazil being the host of the next World Cup of Futbol is causing lots of investment in the country which is driving up the value of locations, so the poor must move again.
What might make it fair would be compensating the poor for their move. That is, paying them and everyone a share of the region’s or nation’s land value. People on the most desirable sites would pay the most, and the people with the least income would benefit the most.
Plus, collecting the ground rents would spur owners to develop their under-utilized sites (in order to afford the land tax or land dues). As they build up, they must hire people, so the formerly poor could get jobs and afford to live in higher quality dwellings.
And if government also removed the counterproductive taxes on earnings, purchases, and structures, then people would be more productive and that’d drive up location values, fattening everyone’s dividend. Everyone would be better off — both the people moving up and the people moving out.
These two 2013 excerpts on agri-biz subsidies are from (1) the BBC, Spt 26, by Chris Morris, and (2) Weekly Wastebasket (Volume XVIII No. 48) Nov 27, by Taxpayers for Common Sense.
Members of European Parliament Slam Funding Sofa Farmers
The direct payments to farmers – known as the Common Agricultural Policy (CAP) – make up most of the EU’s agriculture budget. Nearly 40% of total EU spending is allocated to agriculture.
The current payments system is largely based on land area and past subsidy levels, meaning that landowners like airports and sports clubs, which do not farm, have been getting subsidies on the basis of their grasslands or other eligible land areas.
Protection of wildlife and other environmental measures generally come under the rural development budget – called “pillar two”. Direct payments to farmers – “pillar one” – dwarf such spending and Europe’s big agricultural firms and landowners are major beneficiaries.
MEPs’ calls to set an upper limit on farm subsidies were rejected. Under the new deal, EU member states can transfer 15% of rural development funding to pillar one. But that can reach 25% in countries where direct farm payments are below the EU average.
The plan is to spend about 50bn euros (£42bn; $65bn) annually on agriculture in 2014-2020.
As the USDA reported, net farm income for 2013 is set to be a record $131 billion. That’s 15% more than last year and, after adjusting for inflation, the best year since 1973.
Covering everything from loan guarantees for biofuels facilities and grants for drinking water wells to food assistance and crop insurance, the farm bill is a nearly $1 trillion buffet of special interest dishes. And it’s a spread that routinely costs more than expected – the last two farm bills are on pace to cost $400 billion more than was estimated when they were adopted. With our nation now $17 trillion in debt, the agriculture committees are being forced to change their ways.
One of the richest parts of the farm bill is the federally subsidized crop insurance entitlement program. Producers of everything from almonds to oysters receive taxpayer subsidies to buy insurance, not just on their crops, but also on the revenue they expect from those crops. It’s extremely (overly) generous, on average more than 60% of the premium is covered by taxpayers, and the program cost $14 billion last year – in a year with the best profits in more than a generation!
Ed. Notes: Why do governments subsidize farm owners? People need food, much more than other products which don’t get subsidies. How can farming be a losing business? How can real farmers and farmworkers make so little money while sofa farmers, lenders, seed sellers, tractor manufacturers, fertilizer & insecticide makers, harvest brokers, and shippers make so much money? If government stayed out of agriculture — no subsidies, no tax breaks — and just recovered the socially-generated ground rents then distributed them to citizens — would growing crops finally become a normal enterprise? Probably. And the organic, no-till farmers would probably profit the most.
Ed. Notes: Just a reminder that what you’re paying for is not land as dirt (the island) but land as location (where sits a London flat). And until we geonomize, who you’re paying is the wrong person. Owners don’t create land or its value; nobody by themselves does that. It’s the presence of society who creates the value of sites. Hence it is they — your neighbors — whom you should pay, just as they’d pay you. That’s how we could share the socially-generated value of locations: pay Land Dues into the public treasury and get rent dividends back from your local government. And that’s how we could get over imposing all those taxes on workers and bestowing all those subsidies for insiders … soon!
This 2013 excerpt of The Star, Dec 14, is by Frank de Jong, president, Earthsharing Canada, Toronto.
Relying primarily on gas taxes to fund mass transit, as suggested by the Anne Golden transit panel, is a socially divisive idea, pitting suburban and rural residents who rarely use transit against urban dwellers who generally drive shorter distances if at all. The war on the car will only get worse.
Transit and other infrastructure should be financed by those who benefit financially from it, not by those who live far away. Land value capture, which collects the rise in local land values that the new transit generates, could finance the infrastructure.
People bid up the price of land around new transit, hospitals, and schools because of the advantages of living and working near them. A rise in land values that was created by the government-funded infrastructure should therefore go back to government to pay for the project and not be a windfall profit to those who happen to own nearby land.
Ed. Notes: The best transit system in the world — Hong Kong’s — uses leases to recover the value of the land that arose around its stops and stations. All truly desired projects could be self-financing, concluded big-name economists William Vickrey and Joseph Stiglitz. What are we waiting for?
Informal social customs often work better than laws in Influencing good behavior.
This 2013 excerpt of On the Commons, Spt 25, by Jay Walljasper.
The vast majority of us voluntarily add 10-20 percent of the cost of a restaurant bill as a tip. There’s no law requiring this. But people tip anyway because it’s a custom. You feel guilty, like some kind of Ebenezer Scrooge, when you don’t.
Informal sanctions such as these are a neglected social resource. They often are more effective than formal ones and central to the functioning of many commons. They are one reason that the supposed “tragedy of the commons” is largely a canard, at the local level at least.
Why not make more use of this non-government and non-market force?
Ed. Notes: Somebody’s thinking creatively about how to improve our group behavior; that’s great. However, it seems like customs, sanctions, and opprobrium depend on people having already reached widespread agreement on certain actions being right or wrong. So we still need to find a creative way to win widespread agreement on the morality of sharing Earth’s worth.
These two 2013 excerpts on the new Wall Street landlords are from (1) Huffington Post, Oct 25 by Ben Hallman & Jillian Berman and (2) Tom Dispatch, Nov 26, by Laura Gottesdiener.
Here’s What Happens When Wall Street Builds A Rental Empire
Most rental houses in the U.S. are owned by individuals, or small, local businesses. A new breed: a Wall Street-backed investment company with billions of dollars at its disposal. Over the past two years, Colony American and its two biggest competitors, Invitation Homes and American Homes 4 Rent, have spent more than $12 billion on at least 75,000 homes.
This new incursion by hedge funds and private equity groups into the American single-family home rental market is unprecedented, and is proving disastrous for many of the tens of thousands of families who are moving into these newly converted rental homes.
Tenants of these Wall Street-backed rental companies have posted hundreds of scathing reviews on Internet message boards, such as Yelp, Topix and Zillow. (These sites also include a sprinkling of positive comments, though they comprise a distinct minority.)
Attempts to get issues fixed usually end in frustration, the renters said. Local management companies hired to service the homes ignore calls and emails, sometimes for weeks. When tenants try to get in touch with the owners — the firms buying up the properties — the result is often the same, they said.
Some tenants have grown frustrated enough to sue.
“Complaints were coming at us like out of a fire hose,” said a former Invitation Homes employee. Call centers were overwhelmed. “Getting someone on the phone was next to impossible,” the employee said. “I have no doubt the customer experience was compromised.”
The investment companies are focusing most of their attention on cities like Atlanta, Las Vegas and Tampa, hard hit by the foreclosure crisis but with good prospects for long-term growth. They are buying up so many houses in these places — 200,000 in the past two years, according to Bloomberg News — that they are pushing up prices and edging out ordinary buyers.
Over the last year and a half, Wall Street hedge funds and private equity firms have bought more than 200,000 cheap, mostly foreclosed houses in cities hardest hit by the economic meltdown.
Millions of evicted Americans need a place to live, as millions of bank-owned houses are vacant. Wall Street is renting these foreclosed houses back to us.
Since the buying frenzy began, no company has picked up more houses than the Blackstone Group, the largest private equity firm in the world. Using a subsidiary company, Invitation Homes, Blackstone has grabbed houses at foreclosure auctions, through local brokers, and in bulk purchases directly from banks the same way a regular person might stock up on toilet paper from Costco.
In one move, it bought 1,400 houses in Atlanta in a single day. As of November, Blackstone had spent $7.5 billion to buy 40,000 mostly foreclosed houses across the country. That’s a spending rate of $100 million a week since October 2012.
Blackstone is the largest owner of single-family rental homes in the nation — and of a whole lot of other things, too. It owns part or all of the Hilton Hotel chain, Southern Cross Healthcare, Houghton Mifflin publishing house, the Weather Channel, Sea World, the arts and crafts chain Michael’s, Orangina, and dozens of other companies.
Blackstone manages more than $210 billion in assets. It’s a public company whose institutional owners include Morgan Stanley, Citigroup, Deutsche Bank, UBS, Bank of America, Goldman Sachs, and of course JP Morgan Chase. (Deutsche Bank, JP Morgan Chase, Wells Fargo, and PNC Bank foreclosed on the most families in 2013.) If Blackstone makes money by capitalizing on the housing crisis, all these other Wall Street banks make money too.
In November, after many months of hype, Blackstone released history’s first rated bond backed by securitized rental payments. And once investors tripped over themselves in a rush to get it, Blackstone’s competitors announced that they, too, would develop similar securities as soon as possible.
Ed. Notes: Will what these writers get to complain about ever inspire them enough to focus on solutions? They really should take a page from their opponents and go for the rents. Don’t let lenders and landlords gobble it all up. Keep it all circulating at home. Just get the local government to shift the property tax off buildings, onto locations. As the tax on land rises, the price will fall, drying up the flow to Wall Street. Government could cut other taxes, and/or fund truly desired programs, and/or disburse the revenue as a dividend to residents. Whichever chosen, the fat flow of funds would no longer enrich speculators but benefit the community.
A tax is neutral if it has no forced effect on the economy or on individual behavior relative to the absence of the tax. Market prices are neutral, because the purchase is voluntary. But taxation is mandatory, and alters behavior. There is no such thing as a neutral tax.
A tax on flows of income or spending reduce the flow. The tax increases the cost of the good, reducing the quantity of demanded. The tax misallocates resources away from their most productive and desired uses. Taxes on production and goods impose a distortion of prices and profits, and a deadweight loss or excess burden on individuals and the economy.
However if the tax is on a resource that has a fixed supply or demand, since the quantity does not change, there is no deadweight loss. Spatial land is the prime resource with a fixed supply, and so a tax on land does not affect the quantity of land, and it does not affect the market rent. Land will not shrink, hide, or flee when taxed. A tax on a good with a fixed demand, where the quantity does not change even when the price rises, also has no deadweight loss.
A lump-sum or poll tax is a fixed amount of money regardless of income, spending, or wealth. While a lump-sum tax does not impose a penalty on marginal or extra income or spending, it is not neutral regarding leisure. If a person would have preferred more leisure to more goods, and has no savings, a high lump-sum tax forces that person to work in order to pay the tax. This forced labor makes a lump-sum tax non-neutral. Likewise, a tax on a good with a fixed demand acts like a lump-sum tax, and is not neutral.
The analysis of neutral taxation also has to account for the spending of the revenue. If the funds are spent for goods and services, the spending affects the economy, and the tax is not neutral. For example, if the government provides roads with the revenue, some will benefit more than others. That benefit is, in effect, an income. In that way, the spending redistributes income unequally. Therefore a tax is completely neutral only if the tax revenues are distributed to the whole population in equal amounts of money.
The anarchist economist Murray Rothbard wrote about “The Myth of Neutral Taxation” in 1981. Rothbard compares taxation to theft by a robber. In both cases, the victim is unable to spend his money as he pleases, and this makes any tax non-neutral. However, Rothbard does not consider the situation in which coercion takes place if there is no compulsory payment.
Pollution without compensation is in effect a tax on the health and welfare on those affected, and a subsidy to the producers and consumers who do not pay the full social cost of the good. A tax on pollution compensates society and removes the subsidy. A pollution tax also reduces pollution, and so it is not neutral relative to the absence of the tax. Pollution taxes are non-neutral in a good way.
When government provides goods and services, this spending makes locations more attractive and productive, raising the rent and land value. If there is no tax on land value, land owners receive a subsidy. Moreover, this subsidy induces greater land holding and speculation, which feeds on itself as land prices rise, until it becomes a real estate bubble that bursts into a collapse, recession, and depression.
Even though a tax on land value does not change the quantity of land, it changes behavior relative to the absence of the tax, by preventing the land-value speculative boom, and by shifting spending from the purchase of high-price land to the purchase of produced goods, including more investment in the tools of production. A tax on land value also promotes an optimally efficient use of land, since the tax is based on land as put to its highest and best use. Therefore a tax on land value or rent is non-neutral in a good way.
In physics, there are particles called “neutrons” that are neutral in having neither a positive nor negative charge. Protons have an electric charge designated by convention as positive, and electrons have the opposite negative charge.
Since taxes are economically positively or negatively charged, we should choose proton taxes with positive benefits rather than negative electron taxes. Yet, people democratically elect representatives who impose negative taxation.
Moreover, the thousands of scholarly economists who have PhD degrees and win prizes have not vehemently advocated a prosperity tax shift. The classical economics of Adam Smith had a positive effect in promoting free trade, but during the neoclassical tide of the past century, by condoning or even advocating market-hampering taxation, the field of economics has perhaps done more economic harm than good.
a discipline that, compared to economics, is as obscure as Warren Buffett’s investment strategy, compared to conventional investment theory, about which Buffett said, “You couldn’t advance in a finance department in this country unless you taught that the world was flat.” (The New York Times, Oct 29). The writer wondered, “But why? If it works, why don’t more investors use it?”
Good question. Geonomics works, too. Every place that has used it has prospered while conserving resources. Yet it remains off the radar of many wanna-be reformers. Gradually, tho’, that’s changing. More are becoming aware of what geonomics studies – all the money we spend on the nature we use. Geonomics (1) as an alternative worldview to the anthropocentric, sees human economies as part of the embracing ecosystem with natural feedback loops seeking balance in both systems. (2) As an alternative to worker vs. investor, it sees our need for sites and resources making those who own land into landlords. (3)As an alternative to economics, it tracks the trillions of “rent” as it drives the “housing” bubble and all other indicators. And (4) as an alternative to left or right, it suggests we not tax ourselves then subsidize our favorites but recover and share society’s surplus, paying in land dues and getting back “rent” dividends, a la Alaska’s oil dividend. Letting rent go to the wrong pockets wreaks havoc, while redirecting it to everyone would solve our economic ills and the ills downstream from them.
People must learn to stop whining so much and feel enough self-esteem to demand a fair share of rent, society’s surplus, the commonwealth.
a way to have everybody pulling on the same end of the rope. Last summer’s expansive forest fires shed light on growing class resentment in the West. Old loggers and ranchers rankled at the new urgency to stamp out the blazes that threatened the recent Aspenesque settlers. The newcomers expected working class firemen to make protecting their expensive homes top priority. (Chr Sci Mntr, Spt 7) The tinder for this envy? Rich people moving in bid up the price of land, making it hard to afford by people on the margin. The fault really lies with our system of privatizing land value. If this rising value were collected by land dues and shared by rent dividends – the essence of geonomic policy – who’d complain? The more people move in, the higher the land value, and the fatter the dividend paid to residents. Then people on the margin might go out of their way to invite rich outsiders in.
of interest to Dave Lakhani, President Bold Approach (Mar 8) and Matt Ozga (Jan 29): “I write for the Washington Square News, the student run newspaper out of New York University. Geonomics seems like it has great significance, especially in this area. When was geonomics developed, and by whom?”
About 1982 I began. Two years later, Chilean Dr Manfred Max-Neef offered the term geonomics for Earth-friendly economics. In the mid-80s, a millionaire founded a Geonomics Institute on Middlebury College campus in Vermont re global trade. In the 1990s, CNBC cablecast a show, Geonomics, on world trade as it benefits world traders. My version of geonomics draws heavily from the American Henry George who wrote Progress & Poverty (1879) and won the mayoralty of New York but was denied his victory by Tammany Hall (1886). He in turn got lots from Brits David Ricardo, Adam Smith, and the French physiocrats of the 1700s. My version differs by focusing not on taxation but on the flow of rents for sites, resources, sinks, and government-granted privileges. Forgoing these trillions, we instead tax and subsidize, making waste cheap and sustainability expensive. To quit distorting price, replace taxes with “land dues” and replace subsidies with a Citizens Dividend.
Matt: “This idea of sharing rents sounds, if not explicitly socialist, at least at odds with some capitalist values (only the strong survive & prosper, etc). Is it fair to say that geonomics has some basis in socialist theory?”
A closer descriptor would be Christian. Beyond ethics into praxis, Alaska shares oil rent with residents, and they’re more libertarian than socialist. While individuals provide labor and capital, no one provides land while society generates its value. Rent is not private property but public property. Sharing Rent is predistribution, sharing it before an elite or state has a chance to get and misspend it, like a public REIT (Real Estate Investment Trust) paying dividends to its stakeholders – a perfectly capitalist model. What we should leave untaxed are our sales, salaries, and structures, things we do produce.
more transformation than reform; it’s a step ahead. Harvard economics students this year did petition to change the curriculum, in the wake of the English who caught the dissension from across The Channel. French reformers, who fault conventional economics for conjuring mathematical models of little empirical relevance and being closed to critical and reflective thought, reject this “autism” – or detachment from reality – and dub their offering “post-autistic economics”. Not a bad name, but again, academics define themselves by what they’re not, not by what they are, unlike geonomists. We track rent – the money we spend on the nature we use – and watch it pull all the other economic indicators in its wake. We see economies as part and parcel of the ecosystem, similarly following natural patterns and able to self-regulate more so than allowed, once we quit distorting prices. To align people and planet, we’d replace taxes and subsidies with recovering and sharing rents.
the study of the money we spend on the nature we use. When we pay that money to private owners, we reward both speculation and over-extraction. Robert Kiyosaki’s bestseller, Rich Dad’s Prophecy, says, “One of the reasons McDonald’s is such a rich company is not because it sells a lot of burgers but because it owns the land at some of the best intersections in the world. The main reason Kim and I invest in such properties is to own the land at the corner of the intersection. (p 200) My real estate advisor states that the rich either made their money in real estate or hold their money in real estate.” (p 141, via Greg Young) When government recovers the rents for natural advantages for everyone, it can save citizens millions. Ben Sevack, Montreal steel manufacturer, tells us (August 12) that Alberta, by leasing oil & gas fields, recovers enough revenue to be the only province in Canada to get by without a sales tax and to levy a flat provincial income tax. While running for re-election, provincial Premier Ralph Klein proposes to abolish their income tax and promises to eliminate medical insurance premiums and use resource revenue to pay for all medical expense for seniors. After all this planned tax-cutting and greater expense, they still expect a large budget surplus. Even places without oil and gas have high site values in their downtowns, and high values in their utility franchises. Recover the values of locations and privileges, displace the harmful taxes on sales, salaries, and structures, then use the revenue to fund basic government and pay residents a dividend, and you have geonomics in action.
a POV that Spain’s president might try. A few blocks from my room in Madrid at a book fair to promote literacy, Sr Zapatero, while giving autographs and high fives to kids, said books are very expensive and he’d see about getting the value added tax on them cut down to zero. (El Pais, June 4; see, politicians can grasp geo-logic.) But why do we raise the cost of any useful product? Why not tax useless products? Even more basic: is being better than a costly tax good enough? Our favorite replacement for any tax is no tax: instead, run government like a business and charge full market value for the permits it issues, such as everything from corporate charters to emission allowances to resource leases. These pieces of paper are immensely valuable, yet now our steward, the state, gives them away for nearly free, absolutely free in some cases. Government is sitting on its own assets and needs merely to cash in by doing what any rational entity in the economy does – negotiate the best deal. Then with this profit, rather than fund more waste, pay the stakeholders, we citizenry, a dividend. Thereby geonomics gets rid of two huge problems. It replaces taxes with full-value fees and replaces subsidies for special interests with a Citizens Dividend for people in general. Neither left nor right, this reform is what both nature lovers and liberty lovers need to promote, right now.
a way to have everybody pulling on the same end of the rope. Last summer’s expansive forest fires shed light on growing class resentment in the West. Old log-gers and ranchers rankled at the new urgency to stamp out the blazes that threatened the recent Aspenesque settlers. The newcomers expected working class firemen to make protecting their expensive homes top priority. (Chr Sci Mntr, Spt 7) The tinder for this envy? Rich people moving in bid up the price of land, making it hard to afford by people on the margin. The fault really lies with our system of privatizing land value. If this rising value were collected by land dues and shared by rent dividends – the essence of geonomic policy – who’d complain? The more people move in, the higher the land value, and the fatter the dividend paid to residents. Then people on the margin might go out of their way to invite rich outsiders in.
a way to connect the dots. Making the cyber rounds is “The Cavernous Divide” by Scott Klinger, from AlterNet (posted March 21): “As the number of billionaires in the world expands, so does the number of those in poverty.” Duh. The yawning income gap is not news. Nearly every issue of our quarterly digest carries a similar quote. Yet the connection was worked out long ago by one of America’s greatest thinkers, Henry George, who labeled his masterpiece, Progress and Poverty. Techno- and socio-advances always enrich few and impoverish many. Yet progress also pushes up location values – the geonomic insight (is Silicon Valley cheaper now or more expensive?). Instead of taxing income, sales, or buildings, society could collect those values of sites, resources, EM spectrum, and ecosystem services via fees and dues, which would lower the income ceiling, and instead of lavishing corporate welfare, pay out the recovered revenue via dividends, which would jack up the income floor. Dots connected.
a scientific look at how we divvy up the work and the wealth, how some of us end up with too much or too little effort or reward. That’s partly due to Ricardo’s Law of Rent, showing how wasteful use of Earth cuts wages. And it’s partly due to how a society’s elite runs government around like water boys, dishing out subsidies and tax breaks. While geonomists look political reality right in the eye, without blinking, conventional economists flinch. When Paul Volcker, ex-chief of the Federal Reserve, moved on to a cushy professorship at Princeton cum book contract, the crush of deadlines bore down. So Volcker asked a junior associate to help with the book. The guy refused, explaining that giving serious consideration to policy would ruin his academic career. The ex-Fed chief couldn’t believe it and asked the department chair if truly that were the case. That head honcho pondered the question then replied no, not if he only does it once. And economics was AKA political economy!
as unfamiliar as geo-economics. The latter is a course some universities offer that combines geography and economics. A UN newsletter, Go Between (57, Apr/May ’96; thanks, Pat Aller), cited an Asian conference on geopolitics and “geoeconomics”. The abbreviated term ‘geonomics” is the name of an institute on Middlebury College campus and of a show on CNBC. Both entities use the neologism to mean “global economics”, in particular world trade. We use geonomics entirely differently, to refer to the money people spend on the nature they use, how letting this flow collect in a few pockets creates class and poverty and assaults upon the environment, and how, on the other hand, sharing this rental flow creates equality, prosperity, and a people/planet harmony. This flow of natural rent, several trillions dollars in the US each year, shapes society and belongs to society.