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Economics According To George (Henry George, that is...)

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JasonPSorens:

--- Quote from: JasonPSorens on August 23, 2003, 06:18:48 pm ---In my view, Georgism has some fundamental flaws that are responsible for relegating it to crank status in economics for more than a century.

The first flaw is the idea that the value of unimproved land can be separated from the value of improved land.  A piece of land with improvements on it has a certain market value: for the land and the improvements.  It has no market value for the land itself, because the land and the improvements are inseparable.  David Nolan's suggestion that the land owner put a selling price on his land, and have that selling price taxed, is self-evidently ridiculous: you can't sell land by itself without the improvements on it.  You can guess at what the value of the "unimproved portion" of the land is by looking at nearby unimproved plots, but this isn't possible in many places (Manhattan), and is very imperfect everywhere.

--- End quote ---
...


--- Quote ---All of the above reasons combine when one considers the disturbing possibility that government could arbitrary set land value assessments, as RhythmStar suggests could be done in time of war.  If gov't arbitrarily reassesses land at higher values when it wants, then market distortions are bound to result.  An extreme case is the assessment of 1 ha of swampland at the same value of 1 ha of prime pastureland (BTW, does clearing forestland to make pasture count as an "improvement" for SLT purposes?  If so, how do you assess the value of a given piece of land "as if it had never been cleared, centuries ago"?  If not, aren't you providing incentives against productive use?  Maybe that's where an environmentalist might hop on board the SLT program).  In that event, the swampland owner is expropriated for the benefit of the pastureland owner, and the value of swampland falls well below its market value, which might be low anyway but include the possibility of finding rare wildlife or flora - in which case the SLT again promotes the destruction of wild habitat.

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I just discovered that F.A. Hayek agreed with me!  :D

"There still exist some organized groups who contend that all these difficulties [of externalities in land use] could be solved by the adoption of a 'single-tax' plan, that is, by transferring the ownership of all land to the community and merely leasing it at rents determined by the market to private developers. This scheme for the socialization of land is, in its logic, probably the most seductive and plausible of all socialist schemes. If the factual assumptions on which it is based were correct, i.e., if it were possible to distinguish clearly between the value of 'the permanent and indestructible powers of the soil,' on the one hand, and, on the other, the value due to the two different kinds of improvement--that due to communal efforts and that due to the efforts of the individual owner--the argument for its adoption would be very strong. Almost all the difficulties we have mentioned, however, stem from the fact that no such distinction can be drawn with any degree of certainty. In order to give the necessary scope for private development of any one piece of land, the leases that would have to be granted at fixed rents would have to be for such long periods (they would also have to be made freely transferable) as to become little different from private property, and all the problems of individual property would reappear. Though we might often wish that things were as simple as the single-tax program assumes, we will find in it no solution to any of the problems with which we are concerned."

The Constitution of Liberty (1960), pp. 352-53

Gabriel:
The improved vs unimproved problem is why many geos advocate a land area tax rather than a land value tax: If you tax everything at the same rate you don't have to worry about splitting out that value.

This doesn't help with situations like your swamp-and-farm scenario where land has widely disparate undeveloped values within the same taxing jurisdiction, but other solutions could be found. One that springs readily to mind would be a reverse auction on low-value land: If the land-area tax rate is such that nobody wants to own the swampland, step the tax on that land downwards until somebody is willing to buy it.

Mike Lorrey:

--- Quote from: Gabriel on May 31, 2006, 07:39:52 pm ---The improved vs unimproved problem is why many geos advocate a land area tax rather than a land value tax: If you tax everything at the same rate you don't have to worry about splitting out that value.

This doesn't help with situations like your swamp-and-farm scenario where land has widely disparate undeveloped values within the same taxing jurisdiction, but other solutions could be found. One that springs readily to mind would be a reverse auction on low-value land: If the land-area tax rate is such that nobody wants to own the swampland, step the tax on that land downwards until somebody is willing to buy it.

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Ah, the old "all the market can bear" form of coercive taxation. Just another way to figure out the highest price at which someone is willing to enserf themselves to a bully.

RalphBorsodi:

--- Quote ---Almost all the difficulties we have mentioned, however, stem from the fact that no such distinction can be drawn with any degree of certainty
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you would think that Hayek would know the difference personal utility values and a market valuation...

one is subjective and the other is objective.

JasonPSorens:

--- Quote from: RalphBorsodi on May 31, 2006, 11:25:35 pm ---
--- Quote ---Almost all the difficulties we have mentioned, however, stem from the fact that no such distinction can be drawn with any degree of certainty
--- End quote ---

you would think that Hayek would know the difference personal utility values and a market valuation...

one is subjective and the other is objective.

--- End quote ---

But we can never know what the market valuation of a totally unimproved piece of land is, b/c there is no market for such pieces of land (they don't exist, except maybe in Antarctica).

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