Please Try This at Home!

It is sometimes said that the endeavor of teaching political economy using no more modern a tool than simple deductive logic is so outdated as to be practically useless. Without numbers, they say, what can we say for sure?

For instance: some of our academic colleagues are exceedingly impatient with our public-education efforts. Instead, they call for urgent, heavily-funded research on the amount of land rent in our national (or even global) economy. "Our theory is all about the public collection of land rent," they cry, "so how can we be taken seriously until we can point to its exact quantity on expert-devised, impeccable charts?"

Now, scholarly research is needed, to be sure -- and a well- planned, sensible commitment to research can do nothing but help to illustrate the fundamental truths that we are trying to make clear. But let's not fall into the trap that academic economists have always sought to lead us, against which Henry George urgently warned his followers in Social Problems: "We cannot safely leave politics to politicians, or political economy to college professors. The people themselves must think, because the people alone can act."

So, people, let's think before we act. No statistics now exist on the aggregate rental value of land. The economy is not accustomed to treating land as a distinct factor in the economy. We have local real-estate assessment rolls which estimate (often rather poorly) the value of land; expensive reference works put out by the real estate industry do quite a bit better. But such things leave out the value of minerals and other natural resources; they don't notice the increasing value of clean air, water, and the preservation of natural diversity; they ignore the huge amount of land rent that is swallowed up by mortgage interest and finance- industry legerdemain. Yes, it's complex out there. Decoding all this mess, and coming up with an accurate quantification of the share of land rent in national income, would be an expensive task. But very worthwhile, no?

Well, perhaps. But I believe that we can use logic -- not expensive at all, in fact it's free to anyone willing to use it - - to devise a model of aggregate land rent that is just as useful. In some ways, our "thought experiment" model might even be better (certainly it's more economical). To see how this could work, let's consider three points: 1) The magnitude of land costs to individuals and businesses is readily apparent; 2) The public collection of land rent would be self-quantifying; 3) Aggregate land rent would be drastically affected by public rent collection and elimination of taxes on labor and capital.

1) The magnitude of land costs to individuals and businesses is readily apparent. Hard as it is to come up with a solid number for this, we have a very good idea of the enormity of its effect. Consider, for example, a two-bedroom apartment (or a 1500 square foot storefront). Take the identical improvement, same building, same general level of public amenities, etc., and place it in different locations. Place it in the center of New York City, then in the depressed South Bronx, then in rural Virginia, then in the Nevada desert. It's the same identical improvement, remember. The difference in its rental value in those various places can only be due to land rent.

2) The public collection of land rent would be self- quantifying. It would certainly be, that is, if land assessments remained public information as they are in the United States and many other places. Reliance on land rents for public revenue would create an irresistible incentive for rents to be accurately assessed and fairly collected. Rents set too high would create a drag on the overall economy (just as speculative rents do today); rents set too low would encourage land speculation. And if assessment rolls were published and made easy to obtain, abuses on individual parcels would not long be tolerated by neighbors.

3) Aggregate land rent would be drastically affected by public rent collection and elimination of taxes on labor and capital (which, for those of you who are just joining us, is what we are proposing). The switch to public rent collection would so alter the economy that even if we were able to come up with an accurate estimate of aggregate rent today, it would tell us very little indeed about the shape of the economy after our reform were enacted! Public collection of rent would remove the "speculative bubble" of land values which so interests real estate analysts; it would also remove the greatest source of volatility (not to mention unearned income) in the "financial sector". Certainly such a sweeping reform would have profound and unpredictable effects on stock and bond markets. Couple that with the nearly-simultaneous removal of taxes, direct and indirect, from labor and productive capital. Is anyone proposing to accurately model that many variables?

No: we cannot quantify the probable effects of the single tax. But we can, using our wits and logic, make some confident statements about the positive directions in which it would lead society, and the seemingly intractable problems it would solve. Scholarly research is important and useful; indeed it should be supported. But let us not be persuaded that we cannot understand the structural problems in our economy without placing numbers on them. Clear logic tells us what must be done, on a fundamental level, to solve those problems. By all means, let's keep our wits about us.

-- Lindy Davies, June 16, 1997

Here's what folks have been saying:

Agree with your analysis. When the U.S. Government considers the factors of production as Labor and Property (rather than Land.Labor & Capital) and academic economists have downplayed Land for more than a century, you have only confusion worse confounded. A barrage of governmental statistics can never be a substitute for fundamental analysis. That said, some attempt to quantify the amount of economic rent (or ground rent) might be useful to at least demonstrate that far from being less important than at the time Henry George wrote, it's even more important today. Admittedly, anything close to the full collection of economic rent by the community would be the deathknell of speculative rent. The magnitudes would eventually greatly increase for those sites most desirable or closest to the center of the market while the sites awaiting future development with the rents being capitalized into the hereafter would have little or no market value remaining. Thus, considering all the complex factors involved, any quantitative study would certainly be far off the mark.
Roy Davidson <[email protected]>
Green Valley , Az U.S. - Thursday, June 19, 1997 at 13:45:03 (EDT)

someone said the optimum global human population is 500 million...sounds like *lvt* would accomodate 50-500 billion people...this isn't what you folks have in mind is it
- Friday, June 20, 1997 at 16:09:30 (EDT)
Well, opinions differ on this to be sure (is that you, *?) But I would say: NOT 50-500 billion in poverty and squalor, and NOT 50-500 billion at the expense of all natural diversity. I keep making the point that human population will -- does -- brake itself at sustainable levels if an acceptable standard of living is maintained, and people stop having children for economic reasons. Malthus's theory is, in my view, merely an apology for the status quo. But were we discussing Malthus again?

If we are going to sponsor research, btw, I'd like to see it take a more local focus -- because we have assessment and local real estate data available. We could, I htink, construct very accurate models of the flow of rent at the local level.
Lindy <[email protected]>
- Saturday, June 21, 1997 at 09:31:34 (EDT)

Henry George takes two approaches to persuasion: one logical -deductive in which he derives ethical principles about injustice of land ownership from first principles, the other a semi-empirical approach in which he reasons from the observable social damage caused by private collection of rent. In ethics, the former argument is similar to a deontological argument (Don't allow private collection of rent because it is bad per se.), while the latter is a utilitarian argument (Don't allow private collection of rent because the consequences are bad.)

Some people are more persuaded by the former approach, others by the latter. For those who are likely to be persuaded by utilitarian rather than deontological arguments, the question of the approximate magnitude of potential land rent in the United States is a pretty fundamental question. The fact that there is a speculative premium that is added to true rent is not especially signficant when one is trying to derive an order of magnitude estimate, which is all that would really be required to begin the process.

The single biggest obstacle I have found to a serious consideration of HG's ideas is the notion that they are anachronistic, and the presumption that land is of no value today is a major part of that point of view. So, I strongly support a variety of efforts to provide better approximations of land value in the U.S. At the same time, we need people engaged in a variety of other conversations on ethical (deontological) grounds to persuade people that absolute private property is as terrible as slavery.
Cliff Cobb
CA - Wednesday, June 25, 1997 at 12:21:34 (EDT)

It's certainly true that H.G's ideas are considered anachronistic today particularly in the academic world. The Lincoln Foundation seems to have taken this position. After all, who believes in NATURAL LAW anymore? There is ample evidence that about a century ago a conspiracy of the "scholars" whether called Marginalists, Neo- classicals, the Austrian School-resulted in a transition from POLITICAL ECONOMY to ECONOMICS. As indicated in Book II of the Science of Political Economy, Henry George clearly saw where it was heading. Although critical of Adam Smith and J.S. Mill, he could at least speak the same language. When the "scholars" abandoned the analysis of WEALTH (as a strictly defined term) and the laws of its production and distribution, they, in effect, abandoned POLITICAL ECONOMY. Not too many today would be interested in LAND as a factor of production (other than land use or ecological problems) and certainly few academics are aware of all the ramifications of ECONOMIC RENT in the distribution of wealth. an estimate of the magnitude involved (even if far off the mark) would be helpful at least in stimulating interest
Roy Davidson <[email protected]>
Green Valley, Az US - Wednesday, June 25, 1997 at 18:38:39 (EDT)
1) Is rent too high in NYC or too low in the Nevada desert? Why aren't all Washington businesses as successful as Microsoft if low land-rent is the reason for its "profitability"? Low land-rent purely means the communtiy isn't receiving its portion of Microsoft's income; why does income tax fail? 2) So, what canwe do to ensure the public information is available to the public? Perhaps you'll put it all on your Web Page, or at least provide the "how to" for others to create local Pages around the country/world. 3) How do we convince communittee leaders (and voters) to increase land tax so we can decrease other taxes; or do we decrease other taxes first? I think the public education system has failed itself; failing to teach politcal economics that supports education through a well founded relationship between individual self-interest and commual-interest. We are taught that government is bad and tends to unjustly tax us. The most fundamental freedom we have, and must diligently protect, is the "right" to own land - actually a priviledge afforded us by government. Oh, my, what the Manhattans and Pocahontas tried to teach us. But I'd be hard pressed to convince the populace that the pre-European natives were better off than we - my carriage provides heat in the winter and coolness in the summer, I can send messages to a billion of people, eat food from all over the world, and have a place I can call my own. Can a single state survive under a single-tax plan? How does this affect "foreign" exchange - especially with some agricultural products which must be imported? How do you replace suburban sprawl with reforestaion of the land for future generations? At what level can or must this be done - State, National, or Global - to be effective.
Sam <[email protected]>
Beaverton, OR USA - Thursday, July 10, 1997 at 10:41:46 (EDT)
Well, Sam, I can't help but bring to your attention that this web site offers a free course that is designed to answer the questions you raise here.
Lindy, the Program Director
- Saturday, July 12, 1997 at 16:55:52 (EDT)
low land rent is not the reason for its profitability...proper land rent will bring down the cost of living
- Monday, July 14, 1997 at 15:52:44 (EDT)
Yes, Lindy. And where shall we discuss the rants? Can you provide additional guidance for moving society to a single Land Tax? How do we make the information readily available to the public? As member's of the press? Let's get to it! I suggest in our daily lives we refer to taxes (Income, Sales, Property) as Rent. This would help focus the issue that taxes, excuse me Rent, collected at the time I buy something is absurd. In Oregon, the Income Tax was implemented to offset the burden of the Property Tax. Collecting Rent when I am paid makes sense, provided it is accounted to my Land.
- Wednesday, July 16, 1997 at 20:25:52 (EDT)
I like it, Sam! For that is of course what taxes are, indirectly; we know that their removal would result in higher rents.

But have we much chance of convincing many people of this, correct though it be? Your comment points out the unfortunate fact of our situation: to advance this cause, we must get people to understand it! That's why we offer this course.
Lindy <[email protected]>
Waldo County, ME - Friday, July 18, 1997 at 10:26:06 (EDT)