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This 2013 excerpt of Slate, Dec 6, is by Jessica Olien.
There is an awful lot of pressure to conform. “Satisfiers” avoid stirring things up, even if it means forsaking the truth or rejecting a good idea.
People’s partiality toward certainty biases them against creative ideas and can interfere with their ability to recognize creative ideas. Unexceptional ideas are far more likely to be accepted than wonderful ones.
The place where our first creative ideas go to die is the place that should be most open to them — school. Teachers overwhelmingly discriminate against creative students, favoring their satisfier classmates who more readily follow directions and do what they’re told. Schools make sure children’s minds are not on the “wrong” path, even though adults’ accomplishments are linked far more strongly to their creativity than their IQ.
Truly creative ideas take a very long time to be accepted. The better the idea, the longer it might take. Even the work of Nobel Prize winners was commonly rejected by their peers for an extended period of time.
What distinguishes those who become famously creative is their resilience. While creativity at times is very rewarding, it is not about happiness. A successful creative person is someone “who can survive conformity pressures and be impervious to social pressure.”
Ed. Notes: What happens to our childlike minds? Whatever, we should be able to avoid it. In the so-called primitive societies of hunters and gatherers, people are more exploratory, observed Jared Diamond in Guns, Germs, & Steel. Perhaps it would help to have student-driven education, as suggested by George Bernard Shaw, who also had kind things to say about Henry George, the reformer who promoted public recovery of natural rents, and about sharing the recovered rents. How fundamentally could sharing change society?
This 2013 excerpt of AlterNet, Spt 16, is by Marty Kaplan, winner of the LA Press Club’s Best Columnist award and a professor of entertainment, media, and society at USC.
In the public realm, a lack of information isn’t the real problem. The hurdle is how our minds work.
Do facts matter? No. When people are misinformed, giving them facts to correct those errors only makes them cling to their beliefs more tenaciously.
When people were asked to write a few sentences about an experience that made them feel good about themselves, a significant number of them changed their minds about the bad economy. If you spend a few minutes affirming your self-worth, you’re more likely to say that the number of jobs increased.
In one experiment, some people were asked to interpret a table of numbers about whether a skin cream reduced rashes, and some people were asked to interpret a different table – containing the same numbers – about whether a law banning private citizens from carrying concealed handguns reduced crime. when the numbers in the table conflicted with people’s positions on gun control, they couldn’t do the math right, though they could when the subject was skin cream. The more advanced that people’s math skills were, the more likely it was that their political views, whether liberal or conservative, made them less able to solve the math problem.
Denial is business-as-usual for our brains. More and better facts don’t turn low-information voters into well-equipped citizens. It just makes them more committed to their misperceptions. When there’s a conflict between partisan beliefs and plain evidence, it’s the beliefs that win. The power of emotion over reason isn’t a bug in our human operating systems, it’s a feature.
Ed. Notes: So now what? I’d say, downplay argument and up-play forging relationships around the topics that people can agree about. That might mean invoking a big familiar frame that resonates with a lot of people, hopefully a critical mass.
This 2013 excerpt of the Wall Street Journal, Dec 2, is by David Wessel.
Over the past 64 years and 16 presidential terms, the U.S. grew at an average rate of 4.35% when a Democrat was in the White House and at a 2.54% when a Republican was, a gap economists call “astoundingly large.”
The research was done by Alan Blinder, a macroeconomist who served in the Clinton White House and has advised several Democratic candidates, and Mark Watson, an econometrician who hasn’t dabbled in partisan policies.
Democrats would no doubt like to attribute the large Democrat-Republican growth gap to better macroeconomic policies.
The researchers reject the assertion that Democrats inherit stronger economies from Republican predecessors than vice versa. Instead, they assert it’s a matter of luck.
– Oil price shocks tend to occur when Republicans are in the White House: President Richard Nixon for the first OPEC oil shock, President Jimmy Carter for the second, but sGeorge H.W. Bush’s Gulf War and George W. Bush’s Iraq war were policy decisions that affected oil prices.
– Surges in productivity, or output per hour, account for about one-quarter of the gap.
– Swings in consumer confidence explain about a quarter of the Democrat-Republican gap between 1962 and 2013.
The difference between growth rates when Democrats control Congress and Republicans do is trivial. It’s the president’s party that matters.
There is a slight tendency for Fed-influenced interest rates to rise during Democratic presidencies and fall during Republican presidencies. This doesn’t suggest the Fed playing politics; it’s what the Fed does when the economy grows faster with rising inflation, which is what tends to happen when Democrats hold the White House.
A similar partisan growth gap is seen in Canada, but they found no statistically significant difference between economic growth records of left and right governments in the U.K., France or Germany.
Ed. Notes: While economists get lots of money and prestige for fiddling with numbers, numbers do not always tell the truth. As wits have been noting for over a century: “There are three types of lies: lies, damnable lies, and statistics.” Democrats were president during both the Great Depression and the Great Recession.
Further, there is the matter of lag time. Some policies don’t have an immediate impact; a subsidy to, say, dam builders would take years to bear fruit or wreak havoc. Plus, the first budget of a new administration they inherit as the last budget of the outgoing administration.
All in all, it’s a fun exercise if you like politics but essentially a distraction from the real issues that economist should measure: Why won’t the workweek shrink with so much techno-progress? And, how much damage do subsidies do? What’s their net gain or loss? And, how much more do people prosper when taxes get shifted off our efforts and onto never-produced land and resources and privileges? You could surely add to the list.
This 2013 excerpt of Pacific Standard, Spt 13, is by Tom Jacobs.
The easiest way to increase the value of your home [site]? Live near a winning high school football team.
A study of more than half a million single-family home [+land] sales in upstate New York between 2000 and 2009 finds that in places where the local Friday Night Lights squad won its first state football championship, property [location] values increased by 1.65 percent over the following year.
Andrew Friedson of the University of Colorado-Denver speculates the spike may be due to a “local pride effect,” most pronounced when the team plays in the highly competitive AA division, which is limited to schools with 1,000 students or more. The impact was strongest in the first three months following a championship victory, after which it gradually dissipated.
Ed. Notes: Not only in Texas but all across America regular Americans are crazy about their version of rugby they call football. I guess it must be nice to live near the loud cheering carrying across the familiar blocks on a fall Friday night. But it’s the location that rises in value, not anything on it, the media routinely neglect to point out.
The phenomenon is not just interesting but also presented as good news. American media assume homeowners don’t own homes so much as speculate in their house. A higher price for the site beneath the house doesn’t mean a higher land tax or land dues — eventho’ it should — but rather means a fatter profit when the owner sells out and moves on, uprooting his family and fraying the neighborhood fabric.
Scoring big in real estate is about the only way most regular people can every hope to score. It’s not capitalism that’s spreading over the world with the rise of China and others but land fever that’s infecting the human race. Like in a game of musical chairs, most ordinary people only hope to win and get out before the bubble bursts.
China accused of stealth land grab over Mozambique’s great rice project.
This 2013 excerpt of The Ecologist, Nov 30, is by Cecilia Anesi and Andrea Fama.
When you visit the Xai-Xai rice project its sheer scale takes you aback. Black soil, perfectly ploughed, extends for miles until it touches the horizon.
Local NGOs allege that 80,000 people have been displaced by the project; that villages have been left as small islands of habitation surrounded by square kilometres of intensively farmed land where villagers can no longer grow food, or graze their cattle; that crops have been run over or ploughed under; that cemeteries have been despoiled to make way for new developments.
Most worrying of all, they say these impacts are set to multiply as the farming project expands into new territory. The same NGOs also accuse the project of being led with lack of consultation with local communities, and violations of the International Labour Organization’s convention 169 which protects the rights of indigenous peoples.
As with many things in Africa, hard facts are difficult to come by. The project enveloped a massive portion of land, taking it from poor people most of whom had never heard the term ‘land rights’. The Chinese company that reaped the rewards, like a hostile alien invasion, has ‘conquered’ — dismissing any doubt regarding its right to be there. But it is the Mozambique Government that has allowed this to take place – and even encouraged it.
While dedicating all the project area to monocultural intensive farming might satisfy Southern Mozambique’s rice demand, it will certainly not solve the problems of hunger in Xai-Xai district. A partial solution could lie in allowing local farmers to continue using the machambas close to the villages, while contracting local farmers to work on Wanbao’s rice production project.
Ed. Notes: It’s an all too common occurrence: the powerful take land from the weak. Looking deeper, powerful locals and powerful outsiders collude to get what they want, the weak be damned. Haven’t we seen enough yet? Perhaps a more just system would be for the powerful to rent the land from the weak. Then the weak would be compensated, the powerful would acknowledge and perform their responsibilities, and the land would be put to its most productive use.
It’s not the morphine, it’s the size of the cage: Rat Park experiment upturns conventional wisdom about addiction
A 2013 excerpt of garry’s subposthaven, Spt 13.
About the rats in a cage who can self-administer morphine who get addicted to the stuff, and then just hit that lever until they die. A seemingly keystone argument in the war against drugs. But there’s another model: drugs do not cause addiction, living conditions do. Laboratory rats kept isolated in cramped metal cages, tethered to a self-injection apparatus, show only that severely distressed animals, like severely distressed people, will relieve their distress pharmacologically if they can.
Rat Park housing colony, 200 times the square footage of a standard laboratory cage, had 16–20 rats of both sexes, an abundance of food, balls and wheels for play, and enough space for mating and raising litters. Rats who had been forced to consume morphine hydrochloride for 57 consecutive days were brought to Rat Park and given a choice between plain tap water and water laced with morphine. For the most part, they chose the plain water. Control groups of rats isolated in small cages consumed much more morphine in this and several subsequent experiments.
Rats that are born into extreme conditions in small cages are clearly more likely to self-medicate.
The results are catastrophic for the simplistic idea that one use of a drug inevitably hooks the user by rewiring their brain. When Alexander’s rats were given something better to do than sit in a bare cage they turned their noses up at morphine because they preferred playing with their friends and exploring their surroundings to getting high.
Perhaps it’s time the war on drugs becomes a war on the existence of poverty? It’s not about the drugs. It’s about the social environment in which we live.
Ed. Notes: A big part of social conditions is the size of our space. Crowding many people into small spaces happens when those people are poor, of course, but also when space is limited. Who limits space? Speculators do, when they withhold locations from productive use. And cities do, when they rely on taxes upon sales and income and buildings and so let lots lie vacant and buildings remain abandoned.
To motivate both calculating speculators and dull-witted cities, reform the flow of public revenue. Don’t let governments tax anything willy-nilly but require them to first recover the values that society generates before trying to tax anything else. What values does the mere presence of society generate? Those would be the values of locations. Levy a land tax or require Land Dues. Then owners will quit keeping land under-utiliized and to afford the charge get busy and develop their sites or sell to others. To increase public revenue, cities too will sell-then-tax or lease public land.
All that activity will increase the supplies of both land and buildings. Plus, the construction of buildings and filling some of them with shops and stores will increase job opportunity, raise wages, and give poor people the chance to climb into prosperity. In a society of prosperous people following fair economic rules, people will feel more worthy and hence less likely to need to escape via drugs.
The Best, Brightest, and Least Productive? Are too many people choosing careers in finance – and, more specifically, in trading, speculating, and other allegedly “unproductive” activities?
This 2013 excerpt of Project Syndicate, Spt 20, is by Robert J. Shiller of Yale University, co-creator of the Case-Shiller Index of US house prices, and author of Irrational Exuberance.
In the United States, 7.4% of total compensation of employees in 2012 went to people working in finance and insurance. The share is even higher among the most educated and accomplished people, whose activities may be economically and socially useless, if not harmful.
In 2006, just before the financial crisis, 25% of graduating seniors at Harvard University, 24% at Yale, and a whopping 46% at Princeton were starting their careers in financial services. Those percentages have fallen somewhat since, but this might be only a temporary effect of the crisis.
From 1950 to 2006, credit intermediation (lending, including traditional banking) declined relative to “other finance” (including securities, commodities, venture capital, private equity, hedge funds, trusts, and other investment activities like investment banking). Moreover, wages in “other finance” skyrocketed relative to those in credit intermediation.
A significant amount of speculation and deal-making is pure rent-seeking — wasteful activity that achieves nothing more than enabling the collection of rents on items that might otherwise be free. Those in “other finance” often engage in such behavior.
Ed. Notes: You can rake in a lot of money without any more effort than flashing a winning smile if the money you rake in was already saved up by somebody else, somebody who trusts that you know what you’re doing when it comes to investing and have their best interests at heart. But taking a slice of the money that other people already earned and set aside is not the same thing as growing the pie, increasing output of goods and services, and making more money available for everybody. Growing the pie does benefit society in general while just shifting existing money around only creates winners and losers. But note which attracts more job-seekers. What sort of values must they have?
Bigger picture, how important would saving and investing and speculating be in a just economy? In a just economy, all the techno-progress going on would slash the cost of living. So to be comfy, you would not have to make as much money or save as much. As prices for goods and services drop, fall, and keep withering away, the surplus you saved up would go further and further.
What would stop inflation so the underlying deflation could come to the surface. Honest money — no more new money issued than new goods and services produced. To get bankers and politicians to quit devaluing the currency, you might have to allow consensual currencies to compete with them, such as community currencies on the left and gold-backed notes on the right. As more people switch to the currency they prefer, the bankers and politicians would have to rein in their profligate lending and spending just to keep people using their notes and coins.
Digging deeper still, of course it’d help to gather up all the “rents” — all the money that society spends for the nature and privileges it uses — and route them thru the public treasury and back out again as a Citizen’s Dividend. That’d leave no piles of money lying around for the spendthrift to use as collateral and none to lure the materialistic into socially useless careers. But they’d be getting a CD, too, so maybe they could learn to love the beauty in life.
Life could be so much simpler and fair with implemented geonomics.
This 2013 excerpt of the UK’s Telegraph, Nov 27, is by Ambrose Evans-Pritchard.
American scientists have made an unsettling discovery. Crop farming across the Prairies since the late 19th Century has caused a collapse of the soil microbia that holds the ecosystem together. The soils currently found throughout the region bear little resemblance to their pre-agricultural state.
There has never before been a metagenomic analysis of this kind and on this scale. Professor Fierer said “soil microbes play a key role and we can’t just keep adding fertilizers.”
Academics from South Africa’s Witwatersrand University fear that we are repeating the mistakes of past civilisations, over-exploiting the land until it goes beyond the point of no return, and leads to a vicious circle of famine, and then social disintegration.
Entitled “Dust to Dust”, the paper said 1pc of global land is being degraded each year, defined as a 70pc loss of the top soil.
Once the top soil crosses a crucial threshold, the recovery rate plunges. Chemicals can keep crop yields high for a while but the complex ecology beneath is being abused further. Yields have already fallen 8pc across Africa as a whole.
This comes as China and emerging Asia switch to an animal protein diet, replicating the pattern seen in Japan and Korea as they became rich. As a rule of thumb it takes 4kg-8kg of grains in animal feed to produce 1kg of meat.
The East side of Magdascar has been destroyed by slash and burn deforestation, perhaps irreversbily in any human time horizon. Iceland’s Norse settlers turned their green and partly forested island into a Nordic desert in the 10th Century. They have yet to restore the fragile soil a thousand years later, despite careful husbandry.
The Sumerian civilisation that first pioneered cereal farming in the Tigris and Euphrates was almost certainly destroyed by soil erosion and over-cultivation. The Gilgamesh epic describes tracts of cedar forest in Iraq before it was cut down for the timber trade around 2,600 BC.
The story is usually the same, whether for the lowland Maya central America, or the Khmer Empire of Angkor, or Easter Island, recounted by Jared Diamond in “Collapse”. Once the hillside trees are cut down, water flows are disturbed. It seems that a climate shock is the often the coup de grace, pushing them over the edge.
There have been counter-episodes. Yacouba Sawadogo, “the man who stopped the desert”, began to revive the ancient zai technique to stop soil erosion on his little farm in Burkina Faso. It involved digging smal holes and filling them with compost and tree seeds to catch the seasonal rains, recreating a woodland of 20 hectares in the arid Sahel. Then local officials expropriated the land.
Ed. Notes: Factory farmers — people pasting chemicals onto global soil — must know they’re doing something wrong, otherwise they would not demand limited liability. Perhaps government should get out of the business of limiting the liability of people doing damage merely to amplify their profit. While at it, government could also quit its corporate welfare that feeds the giantism in business, as do subsidies to agri-business. Instead, government could use surplus public revenue (from the recovered value of land and resources) to fund a dividend to the citizenry. Shrink down the size of polluters, and raise up the size of citizens, and then it becomes a lot easier to win these political battles.
This 2013 excerpt of Atlantic Cities, Spt 11, is by Emily Badger.
The city council in the California city of Richmond, pop. 105,000 with a Green Party mayor, narrowly voted to become the only municipality in the US to seriously consider using eminent domain to seize underwater mortgages from the investors who currently hold them. The city would not seize the properties themselves – as more typically happens in eminent domain cases – but would use the power to essentially purchase the mortgages at their current market value (against the wishes of the banks that hold them).
The median price of homes in town has dropped to less than half of what it was at the height of the housing boom. And the city has estimated that about 51 percent of its homeowners are underwater. Richmond’s unemployment and poverty rates are high.
Richmond CA would ultimately sell the restructured mortgages to new investors at rates that would keep the current residents in their homes.
Every other local government that’s been tempted by this idea has ultimately abandoned it in the face of growing pressure from the banking industry, realtor groups, and even the federal government.
Banks and the securities industry have threatened that no one will give credit to cities that show they’re willing to seize property like this. And the Federal Housing Finance Agency has said it may take legal action against cities that try the tactic and stop lending to would-be homeowners who live there.
Ed. Notes: If the city does stand up to the realtors, bankers, and politicians, it can still win, if it turns Richmond into a highly desirable place. That the city can do by making itself into an enterprise zone. And that any city can do by de-taxing buildings, sales, and earnings. Instead, the city would recover the value of locations. It would charge rent to landowners (a tax or fee or dues, etc). To pay the charge, owners would develop their land and the city would prosper. Everybody wants to do business in a prosperous city, even realtors and bankers who had been angry opponents.
A “canon” is a set of items which are regarded by the chiefs of a field to be the accepted elements of the domain. Every religion, for example, has a canon of accepted ideas and documents such as the established books of the Bible. Every scientific field has a canon of propositions and facts accepted as genuine by the experts and by those in authority such as editors of the major journals and most members of the departments of the prominent universities.
The canon of economics consists of the propositions, methods, and historical facts accepted as true and applicable by most scholarly economists. This canon appears in textbooks and in the articles of the prominent journals. The ideas and methods outside the canon are referred to as heterodox economics, in contrast to the mainstream or orthodox canon. There have been articles and organizations about the mainstream and alternative canons, but they have not laid out what the canons consist of. Here is my attempt.
The canon of orthodox neoclassical economics consists of 1) supply and demand; 2) graphical curves of equal utility, inputs, and output; 3) marginal analysis (additional amounts of utility, inputs, outputs); 4) the factors or input variables of capital goods and labor; 5) the price level; 6) equations of production and utility; 7) the government-influenced money supply and the market-based velocity of the circulation of money; 8) economic and accounting profit; 9) market failure and government corrections; 10) equilibrium; 11) maximizing and minimizing within constraints; 12) the premises of subjective values, self-interest, scarcity, unlimited desires, and the uncertainty of the future; 13) the “time preference” for present day good relative to future goods; 14) the trade-off between goods and leisure; 15) the trade-off between equity and efficiency; 16) diminishing marginal utility; 17) diminishing marginal products; 18) theory from mathematical models; 19) econometric testing of hypotheses; 20) the producer and consumer surplus.
Neoclassical economics is divided into several sub-schools for macroeconomic theory. The major schools and their canons are:
1) Keynesian or demand-side economics, with the canons of the consumption function, spending multiplier, and the determination of output from autonomous spending and the multiplier.
2) The Monetarist school, its canon being the equation of exchange: Money times velocity equals the price level times real output, hence monetary inflation generally causes price inflation.
3) The New Classical school with its canon of rational expectations, which makes inflationary policy ineffective.
4) The New Keynesian school with its canon of wages, prices, and interest rates stuck above equilibrium; it accepts New-Classical rational expectations but claims that contracts and other rigid conditions make expansionary policy effective in increasing output.
The heterodox Austrian economic school of thought accepts these elements of neoclassical economics:1, 3, 4, 7, 8, 12, 13, 14, 15, 16, 17, 20. Austrians reject the excessive emphasis on 6, 9, 10, 11, 18, 19. The canons of the Austrian school that have not been absorbed into the mainstream are: 1) the time and interest-based structure of capital goods; 2) market dynamics rather than equilibrium; 3) dispersed knowledge; 4) discrete marginal utility based on diminishing importance; 4) axiomatic-deductive theory (praxeology); 5) entrepreneurship as both discovery and creative reconstruction; 6) free-market money and banking; 7) roundabout production; 8) the market as spontaneous order; 9) the failure of government intervention; 10) the evenly rotating economy that illustrates the role of entrepreneurship in the real world of uncertainty and change.
The Marxist school canon includes 1) class struggle, 2) the labor theory of value; 3) the surplus from labor taken by the capitalists who dominate labor; 4) benefits from socializing wealth.
The Georgist or geo-classical school has these canons: 1) land and its rent as major elements of the economy; 2) the margin of production as the least productive land in use; 3) land speculation and the movement of the margin raising rent and reducing wages; 4) the creation of land rentals from public goods; 5) depressions resulting from land-value bubbles; 6) economic effects of replacing market-hampering market-hampering taxes and subsidies with land-value taxation; 7) the surplus as land rent; 8) the ethics of labor and land; 9) harmony between equity and efficiency, and 10) the social behavioral effects of economic justice.
There is also a school of thought called “public choice,” which has been accepted by neoclassical economics as well as by other schools, as a side branch. Its canon includes: 1) self-interest in politics; 2) the rational ignorance of voters; 3) transfer-seeking and getting due to concentrated interests and spread-out costs; 4) vote trading by representatives; 5) bureaucrats maximizing their power and comfort; 6) the primacy of the median voter; 7) constitutional versus operational choice; 8) clubs that provide collective goods to their members.
The classical economics canon, before it turned neoclassical, included these elements: 1) Say’s law, that production pays factors that enable effective demand; 2) the division of labor; 3) economic growth from unhampered production and free trade; 4) the margin of production as the least productive land in use; 5) population growth pushing the margin to less productive land; 6) the three factors of production as land, labor, and capital goods.
A problem in economics today is that each canon excludes the useful elements of other schools. Economics needs a universalist canon that integrates the best elements from all schools of thought. However, economists disagree on what the canon should be. In my judgment, the most glaring omission in the mainstream canon is the neglect of the Austrian-school time-structure of capital goods, its neglect of the creation of land rent by public goods, and its neglect of the benefits of a prosperity tax shift, the replacement of market-hampering taxes with market-enhancing payments of land rent and pollution charges.
These 2013 excerpts on public revenue progress are from the UK press:
(1) The Guardian, Spt 13, on alternatives by Phillip Inman, economics correspondent;
(2) Express and Star or the Shropshire Star, Spt 14, and
(3) The Telegraph, Spt 15, on GB Business Secretary, by Tim Ross and Patrick Hennessy;
(4) Property Week, Spt 16, on LibDems by Rhiannon Bury;
(5) Financial Times, perhaps the world’s foremost business publication, Spt 27, on the perfect tax by Merryn Somerset Webb, editor-in-chief of MoneyWeek;
(6) Tax Research, Spt 30, on a joint letter by Richard Murphy;
(7) Financial Times, again, Nov 22, on the old can saving the young by Chris Cook; and
(8) ResPublica, undated but probably late Nov, on solving housing woes by David Fagleman.
Alternative to Council Tax Freeze is Out There
We are repeatedly suckered by the easy riches to be gained from joining the property pyramid scheme at an early stage. We need a brake on the investment bloodlust that overtakes buyers and sellers when house price inflation gets going. A property boom is about persuading the next generation of buyers to pay inflated prices in the expectation they will become super-creditworthy borrowers.
A tax on land, subsuming council tax, would force us all to pay a little of the inflationary gain each year from rising land prices in the form of a tax. In most land tax schemes, the money is used to reduce income tax and transaction taxes like stamp duty. This means the only losers would be those people who rely on rental income and rising prices for their standard of living.
A land tax promotes many good things. To limit property inflation we would all be in favour of new building. It would also encourage investment in more productive assets, like start-up companies, manufacturing businesses and export-led services firms.
Vince Cable, the UK Business Secretary, said the Government should look at plans for a land value tax.
Vince Cable said there were many potential problems with the idea, which taxes land itself rather than the property or people on it — but told a fringe event at the Liberal Democrat Party Conference the idea should be examined.
He said it was one of the options “floating around at quite a high level”.
How a Levy Based on Location Values could be the Perfect Tax
What gives a piece of land its value? Why is a 500 sq ft spot in London worth more than 500 acres of land in Angus? The value of a bit of land is not in the land itself but in the location of that land. And what gives the location value? That comes down to what is going on around it. Think good transport links, good schools (a house in the UK by a good school is worth anything from 5 to 20 per cent more than one near a bad school), hospitals, and the infrastructure to provide jobs.
If it is the state that gives land some of its value — clearly there is also value in non-state provided things, such as beauty and mineral rights — why is it that all of that value generally accrues to individual landowners, rather than to the state?
A land or location value tax (LVT) is levied not on the value of a property but on the value of the land that property sits on. It is not the bricks and mortar that make a flat in, for example, London’s One Hyde Park worth £6m-plus, it is the land on which it sits. So the LVT is just an attempt to collect the value of a property that has nothing to do with the actions of the owner and everything to do with the actions of the community.
In theory, it is not just an excellent tax but the best of all possible taxes. It discourages speculation and stops in its tracks the endless cycle of investment in land and property purely to rent it out. It promises no more property boom and bust. But, as it is not collected on any improvements made to land or to buildings on land, it does not discourage productive activity. Instead, it encourages people to bring idle land into use, to improve land they own and to be as productive as possible (when you have a pure LVT, earned income isn’t taxed at all).
Time for Land Value Taxation – in the Independent this morning
I am co-signatory of a letter in the Independent this morning that says:
The compulsory purchase of land banks proposed by Ed Miliband puts Labour’s housing policy in line with the supporters of land value tax (LVT). We believe that the present taxation system is flawed and unfair. When the value of UK land increases due to increased demand, the owners, including UK and international speculators, have done nothing to increase their personal wealth.
Renters gain nothing while their rents increase. The issue is how to make some of the increase in land value available to all. LVT taxes some of that increase in land value.
It should result in the abolition of the regressive council tax and business rates. It should cover all land, used and unused, so bringing land banks and empty homes into use, making investors look for income from renting, building and creating jobs to cover the tax. HMRC would spend less chasing tax-free money parked in overseas accounts; banks have yet to find a way of moving land into their vaults.
John Lipetz Coalition for Economic Justice
Richard Murphy Tax Research UK
Dr Stephen Battersby Pro-Housing Alliance
Rev Paul Nicolson Taxpayers Against Poverty, London N17
There is no doubt LVT has to be a part of any reasonable taxation policy in the future. That future should start now.
The Young are Doomed – and Only the Old can Save Them
If the only people who can afford to buy housing are the children of people who bought housing, it creates an unbridgeable divide between the haves and the have-nots. How about a land value tax levied on house prices? It would hit the older harder, the younger less, and cut dwelling costs by encouraging the cash-poor and asset-rich elderly to move into more modest accommodation.
Land Value Tax: The radical solution to the housing crisis
Land Value Tax, taking the form of an annual levy on the rental value of unimproved land, is the radical solution to the housing crisis. By taxing the value of land as opposed to the value of the property, land will be taxed whether it is built upon or not, which will encourage a more efficient use of land by making it economically efficient to develop where appropriate.
A surge of available land would lower the price, enabling smaller developers and housing associations (who in the face of declining government grants, are becoming increasingly dependent on income from construction), to join established house builders in providing a plentiful supply of affordable housing. Creating greater competition will see a reduction in rent and house prices, stabilising the housing market and creating a more equal relationship between landlords and tenants.
Either working simultaneously with reduced property taxes, or outright replacing the outdated and regressive Council Tax, Stamp Duty Levy, and Business Rates, a locally collected Land Value Tax would have to be phased in gradually and under the right blueprint.
This 2013 excerpt of CNBC, Nov 25, is by Diana Olick.
A lot of Asians are buying as an investment, but their kids are going to school here, so kids live in the home. They are looking at it more as an investment in education also.
While American secondary schools and universities are a big draw for the majority of Chinese buyers in California, Chinese are also concerned about China’s political instability, inflation, even pollution. They are paying all-cash for real estate in California, using it as a safe-haven for their wealth.
More than 20,000 attended an opening in Irvine CA, according to developers. The vast majority of lookers were Asian. Hoping to cash in on this new wave of investors, the builders are incorporating multigenerational floor plans and even Feng Shui designs.
The homes range from the mid-$700,000s to well over $1 million.
While no one would say specifically why certain families were shying away from the media, some alluded to the fact that many of the buyers don’t want any questions about where the cash is coming from. Some are buying multiple homes as investments, while others are moving their families to the U.S., intending to stay at least until their children graduate from college.
Ed. Notes: So Americans spend their money on cheap Chinese imports then the insider Chinese spend that money on pricey American homes-plus-home-sites. Americans think they’re saving money buying cheaper goods but actually they’re pushing up land values. Land has a way of always absorbing economic advantages.
Of course pricier land would not matter to buyers and citizens if they also had to pay Land Dues or a land tax or land-use fee or deed fee. Having to pay such a charge would make a bad investment for speculators, so they’d shy away and the price of land and homes would not inflate.
Further, such a charge would suck high land values into the public treasury. Ideally the government would spend the funds in ways that benefit society better than now how banks and other lenders spend the funds. Government could cut its counterproductive taxes, or subsidize a program that a majority might want such as socialized medicine, or pay citizens a dividend, or actually do all three, the value of sites and resources being so sky high.
Food shortage? Who says? One-third of food worldwide gets wasted.
A 2013 excerpt of the AP, Spt 11.
The U.N. food agency says one-third of all food produced in the world gets wasted, amounting to a loss of $750 billion a year.
The Rome-based Food and Agricultural Organization said that food in developing countries is wasted mostly due to poor harvesting techniques, while in high-income areas the primary cause of waste is careless consumer behavior.
The report said food waste hurts the environment by causing unnecessary carbon emissions, extra water consumption, and the reduction of biodiversity as farming takes over more land. The most serious areas of waste are of cereals in Asia and meat in wealthy regions and Latin America.
Ed. Notes: Hungry people, obviously, could use that food. They’d be happy to take it off the producers’ hands. If the hungry had more money, like getting a Citizen’s Dividend, then they could create some demand for that surplus food.
On the producer side, what’s needed is owner occupancy. An absentee owner getting government subsidies might not care about wasting some harvest — if he’s not there to see what’s happening, it’s hard for him to care. But an owner occupant not getting subsidized who had to work the land himself would have every incentive to put to good use every bushel of the harvest.
So how can we increase owner occupancy? We can charge land owners rent (or tax the land or institute land dues). When owners must pay rent, they lose the reason to keep land that they rent out to tenants; there’s no longer any reason to be a middle man. So the owners sell out, often to former tenants, and at prices that the former farm worker can afford. This geonomic recipe has worked before and can work again.
This 2013 excerpt of Op-Ed New, Nov 24, is by Fred Harrison, a graduate of University College, Oxford, where he read Politics, Philosophy & Economics.
How much does society spend for the nature it uses? For the land and resources? In the jargon, how much “ground rent” is produced in the economy? There is no answer in the economic literature.
But if America was a tax-free zone, the tax base would become this natural rent. People would use the money to bid up the price of locations when they buy homes and sellers would jack up their asking price to the greatest amount anyone would be willing to pay. In the US in 2013, tax revenue was $5.3tn (GDP: $16.2tn).
How much of a nation’s revenue currently is visible as land rent? This is rent that is not collected by government. The prudent estimate is that rents in private pockets amount to about 20% of national income.
If we take a random selection of 10 rich nations, ranging from Australia through the US to Sweden, Germany, and Japan, the average tax-take as a percent of GDP is 37%. If we add to this the rent that is not collected by government, of around 20%, we find that rent exceeds 50% of national income.
This first approximation of rent needs to be adjusted.
1. Taxes distort total income. They encourage the
- Under-use of urban land (which artificially raises rents). and they
- motivate behavior that damages the environment, as when polluters do not have to pay for dumping waste into the atmosphere (which artificially reduces rents).
2. A small part of tax revenue may actually fall on wage earners, rather than being shifted (ultimately) onto rent. People with no bargaining power are particularly vulnerable.
Such considerations add to, and subtract from, rent. Further assessment is required, but the outcome would not significantly modify the conservative estimate that rent is about 50% of total income. This is more than sufficient to cover existing government financial commitments.
On what terms would that revenue be raised? Through the land market, the people themselves negotiate the rents they are able to pay for the use of services available at each location. By this process of free negotiation, who paid, and how much they paid, would be settled by citizens, not politicians or the servants of the State.
Want a real overhaul of the tax code? Here’s an elegant way to reduce inequality and mitigate poverty — in one tax.
This 2013 excerpt of Salon, Nov 22, is by Jesse Myerson. It was republished in Alternet.
At present, neither party advocates the tax code so elegant it can reduce inequality, mitigate poverty, stimulate productivity, prevent asset price bubbles, stem community-shredding gentrification and drain the distended Wall Street cabal of its ill-gotten gains – in just one tax.
Land value. If we want a real overhaul/simplification of the tax code, the way to do it is to tax land value. It might be the only tax we need. No sales tax. No income tax. No payroll tax to fill a Social Security trust fund. No corporate income tax that, as we can plainly see, offshores profits. No need to tax labor and industry at all. Just tax the stuff that humans had nothing to do with creating, and therefore have no basis to claim ownership over at all. You’ll find that almost all of it is “owned” by the fabled 1 percent.
And boy are they sucking a lot of money out of it. By far the most valuable asset form in the U.S. is real estate, and the majority of that is the value of the land, as distinct from the value of the human-made buildings. Economist Michael Hudson has assessed that the land value of New York City alone exceeds that of all of the plant and equipment in the entire country, combined. No owner put any enterprise or cost into producing the land’s value – they simply bought it when it was cheap, sold it when it was dear, and waited for the check. “They” are the Finance, Insurance and Real Estate (FIRE) sector, and they capture 40 percent of the United States’ profits, despite the complete passivity of their profit-accumulation method.
Not only would a land value tax (LVT) drastically shrink that Wall Street bloat, it would have prevented the housing bubble in the first place. Land, after all, was the speculative commodity at play, not the houses themselves, which, as “Arrested Development” incisively suggested, were a bunch of crap. With an LVT, the cookie-cutter McMansions in suburban housing developments would only be worth the cost of their cheap paneling, artificial marble and the rest of it. Without one, they were wrongly assessed as being worth the value of the land they stood upon, which speculators bid up and up and up.
An LVT would stimulate urban property development without incurring the socially catastrophic ethnic displacement pattern we call “gentrification.” As that noted far-left rag the Economist notes, “Property developers … would be less inclined to hoard undeveloped land if they had to pay an annual levy on it.” Despite this, the new developments wouldn’t push rents up throughout the rest of the neighborhood, because the increased land value would be taxed. The rest of the apartment buildings in the area didn’t get any nicer. So why should they cost more? Urban land, scarce by definition, is very valuable. There is no reason to let a small group of rich landlords extract its value, when what created the value are parks, subways, local restaurants, and other things the landlords didn’t provide.
Nothing could simplify and demystify the taxation experience for Americans like making sure that the vast majority of us who don’t own the resources, who don’t collect rent and capital gains, who have to work to get our paychecks, wouldn’t ever have to mark April 15 on the calendar again.
The amount of revenue that can be raised by taxing the land is huge. Enough, for example, to support truly liberatory social spending, like a universal basic income, without risking inflation.
Ed. Notes: The reform to raising public revenue can get even simpler still. If you don’t like taxes at all, don’t use any. You can still recover the socially-generated value of land. You can charge land-use fees or require Land Dues, plus lease public land at full market value. You can record deeds and titles at full market value of the location, too. No need to tax.
Plus, land is not the only thing of value that was not created by anyone providing their labor or capital. There’s also government-granted privilege, such as corporate charters, patents and copyrights, utility franchises, and the power to print new money. These little official pieces of paper don’t require work (excluding lobbying) nor investment (unless you mean campaign contributions). Charge full market value — that’s the principle: quid pro quo — for those little pieces of paper, too, as you did to leases and deeds. Your public treasury will be stuffed to bursting.
And to make it yet simpler for everyone, collect the rents from owners monthly and pay the citizenry a dividend monthly from surplus public revenue. Most people would come out a little ahead. The poor would really do well. And those who’ve been calling the shots for so long would finally pay for the privilege of having lorded it over everyone else for so long.
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 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!
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.
an alternative to conventional land trusts. Just as it seems some functions should not be left to the market – private courts and cops invite corruption (while private mediation is fine) – just so some land should not be left in the market. That said, sacred sites do not make much of a model for treating the vast acreage of land that we need to use. So the usual trust model, which is anti-use and counter-market, can not apply where it’s needed most. Trust proponents worry about ownership and control – two very human ambitions – but they’re not central. Supposedly, we the people own millions acres – acres that private corporations treat as private fiefdoms – and conversely, the Nature Conservancy owns wilderness the public can some places use as parks. So, the issue is not who owns but who gets the rent – ideally, all of us.
an answer to a rarely asked question. If price is a reward for production, why do we pay for land, never produced by any of us? What is land price a reward for? Good behavior? How much money do we spend on the nature we use? Who gets it? What do they do with it? (If you answer all these correctly, you’re not a genius but a geoist.) The worth of Earth is enough that were we to collect and share it, we could abolish taxes on the goods we do produce. For example, San Francisco’s Redefining Progress has calculated that Cali-fornia could abolish all state and local taxes were it to collect the values of resources and of using na-ture as a dump. By exorcising the profit motive from depletion and pollution, rent collection could replace bossy regulation. Economies could self-regulate, as the rest of the eco-system does. See how big problems yield to big answers when we ask the right questions?
shaped by reality. In the 1980′s, the Swedish government doubled its stock transfer tax. Tax receipts, however, rose only 15%, since traders simply fled to London exchanges. Fearing a further exodus, the Swedish government quickly rescinded the tax altogether. (The New York Times, April 20) That willingness to tax anything leads us astray. Pushing us astray is that unwillingness to pay what we owe: rent for land, our common heritage. Assuming land value is up for grabs, we speculate. We cap the property tax on both land and buildings and the rate at which assessments can go up; while real market values rise quicker, assessments can never catch up. Our stewards, the Bureau of Land Management, routinely sell and lease sites below market value, often to insiders, says the Government Accounting Office. Once we grasp that rent is ours to share, we’ll collect it all, rather than let it enrich a few, and quit taxing earnings, which do belong to the individual earner. That shift is geonomic policy.
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.
not a panacea, but like John Muir said, “pull on any one thing, and find it connected to everything else.” Recall last month’s earthquake in El Salvador. We felt it and its formidable after-shocks in Nicaragua. Immediately afterwards, my host nation, one of the poorest in the Western Hemisphere, sent aid to its Central American neighbor. The Nica newspapers carried photos of the devastation. They showed that the cliff sides that crumbled had had homes built on them while the cliffs left pristine withstood the shock. Could monopoly of good, safe, flat land be pushing people to build on risky, unstable cliffs? If so, that’s just one more good reason to break up land monopoly. What works to break up land monopoly, history shows, is for society to collect the annual rental value of the underlying sites and resources. That’d spur owners to use level land efficiently, so no one would be excluded, forced to resort to cliffs. To prevent another man-induced landslide is yet another reason to spread geonomics.
the annoying habit of seeing the hand of land in almost all transactions. In geonomics we maintain the distinction between the items bearing exchange value that come into being via human effort — wealth — and those that don’t — land. Keeping this distinction in the forefront makes it obvious that speculating in land drives sprawl, that hoarding land retards Third World development, that borrowing to buy land plus buildings engorges banks, that much so-called “interest” is quasi-rent, that the cost of land inflates faster than the price of produced goods and services, that over half of corporate profit is from real estate (Urban Land Institute, 1999). Summing up these analyses, geonomists offer a Grand Unifying Theory, that the flow of rent pulls all other indicators in its wake. Geonomics differs from economics as chemistry from alchemy, as astronomy from astrology.
an answer for Jonathan of the Green Party (Nov 7): “What does ‘share our surplus’ mean?”
Our surplus is the values that society generates synergistically. It’s the money we spend on the nature we use: on land sites, natural resources, EM spectrum, ecosystem services (assimilating pollutants). It’s also the money we pay to holders of government-granted privileges like corporate charters. We could share it by paying for the nature we use and privileges we hold to the public treasury then getting back a fair share of the recovered revenue. Used to be, owners did owe rent (“own” and “owe” used to be one word). And presently, some lucky residents do get back periodic dividends: Alaska’s oil dividend and Aspen Colorado’s housing assistance. Doing that, instead of subsidizing bads while taxing goods, is the essence of geonomics.
Jonathan: “Is local currency what you mean?”
Editor: It’s not. Community currency is a good reform, but every good reform pushes up site values. That makes land an even more tempting object of speculation. Now, any good will eventually do bad by widening the income gap – until you share land values.
What is the use of a house if you haven’t got a tolerable planet to put it on?
Henry David Thoreau
If a man does not keep pace with his companions, perhaps it is because he hears a different drummer. Let him step to the music which he hears, however measured or far away.
Henry David Thoreau
Because things are the way they are, things will not stay the way they are.
Labor is prior to, and independent of, capital. Capital is only the fruit of labor, and could never have existed if labor had not first existed. Labor is the superior of capital, and deserves much higher consideration.
Everything should be made as simple as possible, but not one bit simpler.
Baseball is ninety percent mental and the other half is physical.
Man – a being in search of meaning.
The difference between the right word and the almost right word is the difference between lightning and a lightning bug.
Be careful about reading health books. You may die of a misprint.
Even if you’re on the right track, you will get run over if you just sit there.