The Henry George Program Ep. 6 – Economy of Cities with Kedar

In this May 16, 2017, episode of The Henry George Program, Kedar is back to talk about mobility. We have depressed economies and cities with excess demand. Why? Mark and Kedar discuss whether the desire to move to cities is still justifiable and necessary, and whether everyone should have the same opportunity to move into high-value urban areas. What are the best policies for making this available to all?

The discussion also hones in on the need to alter the incentives of the current building consent system, wherein it is in the interest and within the reach of communities to be as obstructive as possible in the face of development.

“It’s kind of a zero-sum game in our old systems of looking at things. Why shouldn’t you fight? If you say ‘hey, you’re going to block my view’, ‘hey, your neighbor will be worse off…’ Right now, the people who fight for it, they get rewarded and it’ considered to be a righteous thing. You’re defending your tribe, you’re defending your people in your neighborhood, you are keeping it pure. And I’d say there isn’t really considered to be a good alternative to this and I would say there is one valid alternative to NIMBYism and it’s George’s.”

Starting in 2017, EarthSharing.org has been collaborating with KZSU Stanford 90.1 FM to create a weekly hour-long radio show. The Henry George Program is a platform for interviews, roundtable discussions, and debates on economic justice and policy.

Tune in for challenging content on the housing crisis in the Bay Area and beyond, economic stagnation, widening wealth inequality, and environmental degradation ― can Henry George’s ideas offer a path forward that unfettered capitalism and incremental socialism lack?

An archive of the Henry George Program can be found here.

Featured photo: Always Shooting Best place to watch sunset in Phoenix via photopin (license)

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Virtual Meet And Greet: January

Georgist literature, nonprofit strategies, and economic theories were among the topics of discussion in January’s EarthSharing.org Social Call. We were joined by Edward Miller, Lawrence Bosek, Frank Ortiz, and Andrew Winters for this iteration of our monthly free-for-all conversation. You can listen to the audio below.

Interested in talking with us about Georgism and economic justice? Earthsharing.org hosts a monthly social call for anyone who would like to get more involved, ask questions, or simply meet friendly people interested in similar issues. Space is limited to 5 people. Sign up now to hold your spot for this event. If you can’t make a particular call, sign up for the next one and tell us your availability.

Follow this link to sign up to the current social call. We will call you at the scheduled time. The call is free, no matter where you are in the world.

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Event Monday in Queens, NY

Henry George and the Crisis of Inequality
Speaker: 
Professor Edward T. O’Donnell

College of the Holy Cross

Professor O’Donnell’s presentation will be based on his book on the topic, published by the Columbia University Press in 2015. Henry George played a key role in popularizing some of the foundational ideas of progressivism that shaped U.S. social and economic policy in the 20th century. This topic has tremendous relevance for contemporary U.S. society as it confronts similar questions about poverty, inequality, corporate power, etc in what some have taken to calling a Second Gilded Age. In addition to several books and articles, Professor O’Donnell has lectured widely and has been the featured presenter of several history programs in the widely acclaimed The Great Courses.

Monday, April 24, 2017
1:50-3:15 pm
The Little Theater (next to Carnesecca Arena)

St. John’s University, Queens Campus
8000 Utopia Pkwy, Jamaica, NY 11439

This lecture is partially funded by a grant from the
Robert Shalkenbach Foundation.
For additional information, contact Dr. Joseph A. Giacalone, Henry George Chair.

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Monthly News Digest – April

EVENT: Register now!

Friday, May 19th, 9:00 am – Noon
22 East 30th Street, New York, NY 10016

We would like to invite you to an exciting event in New York City on how natural resource policy has created enormous environmental and social problems. Don’t miss the chance to be a part of this vital ethical and economic debate that will shape policy dialogue for years to come. You can also register to join the event via livestream. For further information email: alanna@centurylink.net


EARTH SHARING CLASSIC

Economic History Timeline

EarthSharing.org has compiled an interactive record of economic thought over the course of the past 500 years, from John Locke to Jeffrey Sachs on sharing the value of the earth.


IN THE NEWS

SNP conference backs call for land taxation to transform Scotland #SNP17

“In a historic step forward for the land reform movement in Scotland, the party’s spring conference unanimously backed calls for a tax on ownership to end the feudal ownership system that has endured in the country for centuries.”

“The amended motion said the government “must include exploring all fiscal options including ways of taxing the value of undeveloped land” in its gradual land reform programme.”

Mainstream Economics Has Become a Celebration of the Wealthy Rentier Class

“These views largely depend on whether they view the One Percent as innovative, smart and creative, making wealth by helping the rest of society – or whether, as the great classical economists wrote, the wealthiest layer of the population consist of rentiers, mak
ing their income and wealth off the 99 Percent as idle landlords, monopolists and predatory bankers.”

“A case in point is the Scottish economist Angus Deaton, author of The Great Escape: Health, Wealth, and the Origins of Inequality. (2013). Elected President of the AEA in 2010, he was given the Nobel Economics Prize in 2015 for analyzing trends in consumption, income distribution, poverty and welfare in ways that cause no offense to the wealthy, and in fact treat the increasingly inequitable status quo as perfectly natural and in its own kind of mathematical equilibrium.”

‘Universal Basic Assets’ A new economic model that could save the other 99%

“The social instability caused by vast economic disparities is likely to only grow deeper under the pressures of climate change and automation.”

“We urgently need to design a new framework that delivers greater social and economic equity. Some economists and activists are proposing Universal Basic Income, a guaranteed minimum payment for everyone, as a way to ensure a guaranteed minimum for people to live on. We believe that a universal basic income is only the first step in making our economic system more equitable.”

“In designing Universal Basic Assets we take into account access to traditional physical and financial assets like land and money, as well as the growing pools of digital assets (data, digital currencies, reputations, etc.). We also recognize and assign value to exchanges we engage in as a part of maintaining the social fabric of our society but that do not currently carry with them monetary value (caring, creative output, knowledge generation, etc.).”

How to Fix San Francisco’s Housing Market

“The real problem is an emasculated housing market unable to absorb the new arrivals without shedding older residents. The only solution is to take supply off its leash and finally let it chase after demand.”

“Discretionary permitting limits how quickly the housing stock can grow. Land use restrictions can increase the price of housing by as much as 140% over construction costs. Relaxing–if not abolishing–these types of restrictions would be hugely beneficial.”

“The most realistic plan would be to retire San Francisco’s property tax in favor of a land tax and
make the change revenue-neutral. Considering the city’s property tax rate is barely over 1%, a revenue-neutral land tax probably wouldn’t deliver the sun, the stars, and the moon like it would at much higher levels. That said, it would still be an improvement over the existing property tax.”


Economist Josh Ryan-Collins: How Land Disappeared from Economic Theory

“Anyone who has studied economics will be familiar with the ‘factors of production’. The best known ‘are ‘capital’ (machinery, tools, computers) and ‘labour’ (physical effort, knowledge, skills). The standard neoclassical production function is a combination of these two, with capital typically substituting for labour as firms maximize their productivity via technological innovation.”

“But there has always been a third ‘factor’: Land. Neglected, obfuscated but never quite completely forgotten, the story of Land’s marginalization from mainstream economic theory is little known. But it has important implications. Putting it back in to economics, we argue in a new book, ‘Rethinking the Economics of Land and Housing’, could help us better understand many of today’s most pressing social and economic problems, including excessive property prices, rising wealth inequality and stagnant productivity.”

“Today’s economics textbooks – in particular microeconomics – slavishly follow the tenets of marginal productivity theory. Even progressive economists such as Thomas Piketty have fallen in to this trap. Once you strip out capital gains (mainly on housing), Piketty’s spectacular rise in the wealth-to-income ratio recorded in advanced economics in the last 30 years starts to look very ordinary.”


Utopian thinking: to ‘take back control’ of England, we must find out who owns it

“Understanding who owns this country has been a utopian project for at least a century and a half. In 1872, in an effort to disprove radicals’ claims that only a tiny elite dominated the landed wealth of the nation, Lord Derby – a major landowner himself – asked the government to undertake a proper survey. The Return of Owners of Land – or “Modern Domesday”, as it became known – was the first comprehensive assessment of land ownership in Britain since William the Conqueror’s swag list after the Norman conquest. But far from dousing the demands of the radical land reformers, the survey lit a fire under the issue.”

“So if the answer to who owns England isn’t available from existing public data, how to find out? Well, the Victorian land reformers did leave us one other legacy: the Land Registry, whose job it is to gradually register who owns all land in England and Wales. Yet 150 years after it was founded, it’s still not completed its task – around a fifth of all land remains unregistered. And though the Land Registry has thankfully just survived a government attempt to privatise it, it remains a very closed public service: you have to pay £3 just to find out who owns a single field. Paying to find out who owns the whole country would cost a fortune.”

“The government’s recent housing white paper heralded some welcome steps in this direction – announcing that the Land Registry would soon make freely available its datasets on land owned by UK companies and offshore firms. But that’s only a fraction of the total. Aristocratic families, who almost certainly still own the great majority of England, will be exempt – since their huge estates are invariably registered in an individual’s name, if they’re registered at all.”

Tax land, not labour – Dominic Frisby

“Each parcel of land in the UK is assessed for its potential annual rental value. Remote, rural farmland will have a low rental value. Prime city centre real estate will have a much higher rental value. A tax is then levied based as a percentage of the annual rental value of that land (in its unimproved state).”


GLOBAL EVENTS

Sacred Water, Profane Markets

Friday, May 19th, 9:00 am – Noon
22 East 30th Street, New York, NY 10016

Sponsored by the Robert Schalkenbach Foundation, the International Union for Land Value Taxation, & the American Journal of Economics and Sociology

This is an exciting event in New York City on how water and other resources have been poorly managed. Don’t miss the chance to be a part of this vital ethical and economic debate that will shape policy dialogue for years to come.

Seminar: Dog-Eat-Dog is Overvalued: Debunking the Wages Fund and Malthusian Theories

April 18 6:30pm
Henry George School of Social Science
5 W 19th Street Suite 2C
Organized by the Henry George School of New York

Bridging the Right-Left Divide

Thursday, July 27 to Monday, July 31, 2017
Hilton Garden Inn, O’Fallon, Illinois
Organized by the Council of Georgist Organizations

The 37th Conference of the Council of Georgist Organizations is sure to be an unmissable event. The conference is focused on networking, meeting old friends, recharging and enriching understanding. Speakers include Don Killoren, Andrew Theising, Erich Jacoby-Hawkins, Ted Gwartney, Gordon Abiama, Jeff Graubart, Nic Tideman, Karl Widerquist, Vitnarae Kang, Anthony Werner, Bill Batt, Brendan Hennigan, Dan Sullivan, John Kelly, Mike Curtis, Josh Vincent and Lindy Davies.

Housing Markets and the Fiscal Health of US Central Cities

April 17, 2017
2100 M Street NW, Washington D.C.
Organized by the Lincoln Land Institute

Cosponsored with the Urban Institute, this event will offer insights from two recent research projects funded by the John D. and Catherine T. MacArthur Foundation that explore the links between shocks to urban housing markets and central cities’ finances.

2017 Urban Economics and Public Finance Conference

May 5, 2017
Lincoln Institute of Land Policy
113 Brattle Street, Cambridge, MA

The economic growth and development of urban areas are closely linked to their revenue sufficiency and fiscal prospects. This research seminar offers a forum for new academic work on the interaction of these two fields.

Walking tour: Land, villains, and revolutionaries: a social movement history

Saturdays 9:00pm  
American Youth Hostel, 312 Mason Street 
Organized by the Henry George School of San Francisco

EVERY MONTH, SECOND TUESDAY

May 9: Illinois Is Not Broke
Organized by the Henry George School of Social Science Chicago


Join our Facebook discussion group.

To start discussing Land Value Tax (LVT), and other ways of making a difference in the world, join our discussion group on Facebook. Here, you can ask questions about Earth Sharing, LVT, ending poverty, and protecting the environment. You will be able to talk with professors and regular people in the larger Earth Sharing community. It is also a gateway to other discussion groups, a market place of ideas for making the world a better place.

We don’t necessarily endorse any of the viewpoints in these discussions on Facebook, but they are sure to make you think.


PROGRESS IN MARCH

EarthSharing.org website hits in March
32,235

Total email subscribers to date:
20,722

Dear Earth Sharers,

We hope you’ve enjoyed all of the content we’ve been producing. It’s truly a labor of love. We’re making a lot of progress, with 600-700 new newsletter subscribers each month. More than 20,000 of you have graciously allowed us into your lives.

Next month, we will be including links to our new segment on Stanford University Radio, KZSU, entitled The Henry George Program. We look forward to getting your reactions to the show and increasing your involvement in the cause to give everyone equal rights to the bounty of nature, something we believe is fundamental to ending poverty, saving the environment, and unleashing human progress.

Sincerely,

Jacob Shwartz-Lucas
EarthSharing.org
Robert Schalkenbach Foundation

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Monthly News Digest – February

IN THE NEWS

The short life of Pennsylvania’s radical tax reform

The town of Altoona began trying out the land value tax in 2002 on the recommendation of the Center for the Study of Economics. From 2011, land value tax completely replaced taxes on buildings.

Nevertheless, five years later, land value tax advocates don’t have clear examples to point to of projects or investments in the city that would have been made without the tax system in place, and the reform has been undone.

The incentive created by the city’s land value tax was limited because the county and the school district imposed property taxes. Another major problem was that the tax system was so unusual that potential residents and businesses struggled to understand the potential benefits of moving to or investing in the city.

In some cases, businesses might have been turned off by the relatively high rate of tax on land, not understanding that there was no rate of tax on structures.

Britain has enough land to solve the housing crisis – it’s just being hoarded

The UK’s biggest house building firms are sitting on 600,000 plots of land that have planning consents – four times the number of new builds in the UK last year.

Land is often bought and sold many times over before construction goes ahead, and many owners have no intention of every building. The result is speculation and very expensive housing.

The average price of agricultural land in England is £21,000 per hectare, whereas land that has residential building consent is valued at close to £6 million per hectare.

Narendra Modi has made it extremely unappealing to be a landlord in India

The Modi government is introducing measures to encourage first-time home buyers, introducing tax incentives for self-occupied properties and rentals.

In the past, these tax incentives were capped for owner-occupied houses but not for rentals. Therefore, a landlord could book the loss they suffered on lower rent, which helped in reducing their overall taxable income. 

It is expected that this will bring new real estate to the market in turn bringing the prices down, which have already fallen by 30 percent after the demonetisation.

Mayor positive about a Land Value Tax trial

With the release of the London Finance Commission report, Assembly Member Tom Copley called for a Land Value Tax to replace the three basic property taxes: council tax, business rates and stamp duty land tax.

Copley said a Land Value Tax would discourage land banking, where developers sit on land waiting for its value to rise without building on it. This would incentivize the building of news homes quickly while raising much needed funds for investment.

Congress moves to give away national lands, discounting billions in revenue

Republican lawmakers have quietly laid the foundation to give away 640 million acres of national land to state governments. Critics fear this could eliminate mixed-use requirements, limit public access and turn over large portions for energy or property development.

The oil-rich Arctic National Wildlife Refuge could soon be up for sale. States with small budgets may be unable to invest in the management of these lands and decide to sell them off.

Areas at stake are managed by the Bureau of Land Management (BLM), National Forests and Federal Wildlife Refuges, and contribute to more than $600 billion each year in economic stimulus from recreation and 6.1m jobs.

Not Dirt-Cheap: 10 Cities Where Land Is Worth More Than the Home on It

A home for sale last year in San Francisco’s Sunset District came perilously close to redefining the very concept of a “fixer-upper.”

The place was not inhabitable in any way, and yet it sold for just under $1 million last February after just a short time on the market. In space-strapped San Francisco, the real value of real estate lies in the land.

Could Land Value Tax reduce the tax bill for 99% of us?

Calculated based on a total land value in England of £1.842 trillion, residential properties would pay 79.5 percent of the tax, businesses 15.5 percent and agriculture 4.8 percent. Current Council Tax is unfairly distributed because it uses property bands.

On this basis, the top 1% of property wealth owners would be liable for 54% of the residential part of the tax assuming the tax is introduced at a flat rate for all. Land Value Tax, unlike Council Tax, is not a residency tax it is an ownership tax, so people in rented accommodation do not pay the tax. 

Infrastructure Australia says tax land not property to capture value

Infrastructure Australia recommends that governments gradually get rid of stamp duties and tax land values over the long term, arguing it is the “fairest” way of raising money for new infrastructure.

A new train line that makes it faster for people to get to work will typically attract people to buy houses nearby, increasing land values. IA’s report said “there are serious challenges for any form of value capture based on property prices rather than underlying land values.”

Why Falling Home Prices Could Be a Good Thing

Instead of looking at homes as investments, what if we regarded them like a TV or a car or any other consumer good? They would be somewhat cheaper in most places, where population is growing slowly. But they would be profoundly cheaper in places like San Francisco. That was the conclusion of a recent paper by the economists Ed Glaeser of Harvard and Joe Gyourko at the Wharton School of the University of Pennsylvania.

The paper used construction industry data to determine how much a house should cost to build if land­ use regulation were drastically cut back. Since the cost of erecting a home varies little from state to state — land is the main variable in housing costs — their measure is the closest thing we have to a national home price.

SOCIAL MEDIA HIGHLIGHTS

We don’t necessarily endorse any of the viewpoints in these discussions on Facebook, but they are sure to make you think. Tell us your thoughts, and feel free to submit images that more accurately reflect some of the concepts generated by the Land Value Tax Facebook community.


Since most of the economic rent in the world is actually captured by the wealthy, Charles D Allison attempted to construct a more accurate image showing how the rich capture a greater proportion. Exactly how much and what the standards for some of these terms are is unclear. It is clear however that rent privatization is much more stratified than either of these conceptual images would indicate. So, if you can create a more accurate image, reply with it or tell us what else you would improve about this one.



TREND SPOTLIGHT

EarthSharing.org in January:

 Wikipedia interest in ‘Henry George’:

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Next Recession Will Be in 2026

Fred Foldvary EarthSharing.org

An 18-year cycle of real estate and land values has been the cause of every major recession, and without a radical shift in taxation structures, the U.S. economy will be in for another shock around 2026.

EarthSharing.org had the opportunity earlier this month to speak with Fred Foldvary, professor of economics at San Jose State University and board member of the Robert Schalkenbach Foundation. Foldvary predicted the last recession in his 2007 book ‘The Depression of 2008’, and said real estate bubbles in general can be predicted using an 18-year cycle model developed by early-20th-century economist Homer Hoyt.

“[Hoyt found that] in Chicago there was an 18-year real estate cycle with very astonishing regularity, and that also coincided with the general business cycle of the United States,” he said.

Foldvary used the same methodology as Hoyt, swapping in the most up-to-date numbers from today’s real estate sector.

“I brought it up to date with current data on both construction and land data… The data is out there for the last 50 years,” Foldvary said.

A combination of low interest rates and high land values was the key warning signal for recession, Foldvary said, a kind of hybrid between the Austrian and Georgist schools of economic thought.

“The major recessions have all been closely related to the real estate cycle,” he said. “In each case the real estate prices and construction peaked shortly before becoming a recession.”

Without any unprecedented changes in government policy, there was no immediate risk of another recession for the next decade, Foldvary said. But the other side of the coin is that, without new ways of thinking about land values and controlling speculation, the U.S. economy should be prepared for another recession in around 2026.

“The federal debt will be that much higher, and if the government is all tapped out and it can’t borrow any more money in the next financial crisis, it could be even worse than 2008,” he said. “The economy has the same structure as it’s had for the last 200 years. The basic problem is massive subsidies to real estate – both fiscal subsidies and monetary subsidies.”

Even newer financial regulations like Dodd-Frank would be ineffective, because they failed to address the core reason for the business cycle, Foldvary said.

“They don’t touch the fact that land values absorb the benefits of progress, and then speculation carries them to a height that makes real estate unaffordable, and then you have the collapse.”

The potential for a system of land value taxation to break this 18-year cycle is enormous. Taxing land and natural resources instead of incomes and investment would act to discourage real estate speculation, keep the market accessible for wage-earners, and stimulate the construction of centrally-located real estate that promised the best value for the public and the greatest amount of space in which to work and live.

There will come a time in the next ten years when we will begin to see the signs of another impending recession in the U.S., one with the potential to be the worst this country has ever seen. Knowing the precipitating factors of a future crisis, and as the economy experiences slow growth, now is the critical time for land value taxation to be seriously considered.

 

Fred Foldvary is on the board of the Robert Schalkenbach Foundation (RSF), a non-profit organization established in 1925 to spread the ideas of the social and economic philosopher Henry George (1839-1897). Foldvary received his B.A. in economics from the University of California at Berkeley, and his M.A. and Ph.D. in economics from George Mason University. He has taught economics at the Latvian University of Agriculture, Virginia Tech, John F. Kennedy University, California State University East Bay, the University of California at Berkeley Extension, Santa Clara University, and currently teaches at San Jose State University. Foldvary is the author of The Soul of Liberty, Public Goods and Private Communities, and Dictionary of Free Market Economics. He edited and contributed to Beyond Neoclassical Economics and  The Half-Life of Policy Rationales. Foldvary’s areas of research include public finance, governance, ethical philosophy, and land economics.

 

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EarthSharing.org on Stanford Radio KZSU 90.1 FM Promoting the Recession Generation Event

WKZSU 90.1 FM Stanford University Radio Interviews EarthSharing.org

 

July 5th, 2016, Edward Miller and Jacob Shwartz-Lucas were invited onto Stanford University Radio to discuss an event they would organize in Oakland a few days later. The event was titled BIL Oakland 2016: The Recession Generation.

14365289_870977433164_151705472_n

The discussion revolved around the event’s aim of helping young adults to navigate the challenges of living in our harsh economic climate and rapid technological disruption.

Jacob and Edward discussed their motivations for putting on the conference. This included explaining their backgrounds, and what changes they want to see in the world.

photo credit: Jane Says via photopin (license)
photo credit: Jane Says via photopin (license)
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Chinese Investment in US Real Estate Tops $110bn

The lessons of the 2008 financial crisis are quickly being forgotten. That market collapse was precipitated by an extraordinary rise of US land values, which was driven by the emergence of subprime lending on a mass scale.

Prices of residential and commercial real estate are once again on the rise. A major driver of this astounding rebound has been Chinese real estate investment. Chinese investors, seeking promising investments and a way to move their money out of the slowing Chinese economy, have poured $110 billion dollars into US real estate in the past five years. By contrast, the Chinese real estate market, which is putting a drag on the Chinese economy, has been called by many the largest land bubble in history. Chinese investments in the US market are inflating housing prices across the country and placing home ownership further out of reach of many Americans.

Over the past several years, Chinese investment in commercial properties has captured headlines. For example, in 2015, the Anbang Insurance Group purchased the Waldorf Astoria Hotel for $2bn and attempted to purchase Starwood Hotels for $14bn. However, the vast majority of Chinese speculative investment has been in the residential market, to the tune of over $93bn. Cities with the most rapidly rising housing costs–San Francisco, New York, Los Angeles, and Seattle–are popular markets with Chinese buyers. But as housing stock across the country continues to gain value, buyers are now turning their speculative intents to Chicago, Miami, and regions of middle America.

Chinese buyers are eager to speculate in the US real estate market. Not only because they see a lucrative investment opportunity, but because of concerns about the slowing Chinese economy. As the economy continues to slow and the value of the Yuan falls, citizens are eager to move wealth abroad and into dollar-backed assets, particularly in the form of land speculation. Despite efforts by the Chinese government to encourage domestic investments, speculation in US real estate by Chinese nationals is expected to exceed $200bn over the next 5 years.

photo credit: IMG_0953 via photopin (license)
photo credit: IMG_0953 via photopin (license)

When people speak of rising real estate prices, they certainly aren’t talking about bricks, they are talking about land. As a consequence of all this land speculation, Americans are finding it harder to obtain affordable housing and commercial space, and not only because of rising prices. Close to 70% of Chinese buyers pay cash, which is more appealing to sellers because deals can close much faster. This puts US residential buyers who require a mortgage at a disadvantage. Bidding wars with deep-pocketed foreign speculators also has the effect of pressuring US buyers with more limited liquid assets to sign off on larger mortgages than they can financially handle.

Prospective home buyers are not the only ones feeling the crunch. As homeownership becomes more unaffordable, the number of people in the rental market increases, driving up rents across the country. In 2016, rent increases are expected to outpace wage increases by about one percentage point. Faster than the general rate of inflation.

The periodic bubbles in real estate markets are a symptom of this rush to pocket the rising value of land, whether by foreigners or citizens. So far, the United States is not taking steps to curb either domestic or foreign speculation in real estate. Instead, Congress is going in the opposite direction by encouraging foreign “investment” in US property.

However, other countries are taking a stand. Hong Kong and Singapore have instituted a 15% tax on properties purchased by foreign buyers, a move that has slowed the rise in housing costs. Citing decreasing affordability of homes, Australia has instituted a similar tax. The Australian government also used legal means to intercede in the attempt by Chinese investment group Dakang Holdings to purchase the Kidman Farm empire, which controls 1.3% of the Australian landmass.

photo credit: Lavender Valley 2407 via photopin (license)
photo credit: Lavender Valley 2407 via photopin (license)

An alternative to such measures, which numerous eminent economists recommend, is a tax on land values. Land value taxation (LVT) is a twist on conventional property taxation, whereby improvements to the land are not taxed, but the land itself is taxed. Proponents argue that we ought to shift as much taxes as possible away from productive activity and onto land values. While other strategies would serve to limit foreign land purchases, taxing land values would actually halt idle landholding in general by making the speculative ownership of raw or underdeveloped real estate unprofitable.

When markets are operating correctly, profits are simply a return for productive activity, not a windfall that is achieved by excluding others as with the landed gentry in the feudal era. With LVT in place, Chinese or other foreign investors who wanted to make money by purchasing land would have to actually develop that land. They would need to attract residential or commercial tenants by providing desirable amenities and reasonable rents, and shouldering the risks involved in any sort of productive activity.

This would result in a growth of construction activity and an increase in US housing supply. Increased construction activity and decreased cost for commercial and residential real estate would stimulate the rest of the US economy, simultaneously decreasing unemployment and raising wages.  In effect, taxation of land values would convert the current Chinese desire for US land into a sustainable means of growth for the US economy.

Featured image photo credit: Light River via photopin (license)

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We’ve got a climate agreement. Now what?

This weekend, the Paris Climate Summit marked more diplomatic progress on the issue than ever before. China, the United States, and other key nations pledged unanimously to greatly reduce their emissions. Of all the solutions discussed, there really is only one reform that has the chance of being a game-changer, and that’s heavily taxing pollution. Even if you don’t believe in global warming, or whether it is man-made, you can’t deny that pollution is harmful in lots of other ways and that we ought to reduce it. The most common objection to this is that it would somehow hurt the economy. The truth is, a tax on carbon and other pollutants would would actually give the economy a great boost. Just ask the Republicans; taxing carbon was the Bush administration’s official policy.

Tax Pollution

Whether you’re a conservative or a liberal, for higher taxes or lower taxes, it doesn’t matter. If we collected the same amount of revenue we do now, it would be better if it came from pollution than wages, sales, etc. By removing taxes from hard work and exchange, business would get a boost, and polluting would become expensive. Therefore, people’s behavior and technological innovation would shift to be more in line with the environmental cost of their actions.

bretweinsteinpollution

President Obama said the following in Paris:

“I have long believed that the most elegant way to drive innovation and to reduce carbon emissions is to put a price on it. This is a classic market failure. If you open up an Econ101 textbook, it will say the market is very good about determining prices and allocating capital towards its most productive use — except there are certain externalities, there are certain things that the market just doesn’t count, it doesn’t price, at least not on its own. Clean air is an example. Clean water — or the converse — dirty water, dirty air.In this case, the carbons that are being sent up that originally we didn’t have the science to fully understand — we do now. And if that’s the case, if you put a price on it, then the entire market would respond.”

Green Technologies

The agreement calls for rich countries to invest in clean energy infrastructure in poor areas of Africa and other regions, but who knows whether it will actually be spent well. That doesn’t make it a bad idea per se. One shouldn’t have a zero rule for misappropriation if the overall aim of the spending is achieved and these results are more beneficial than alternative investments. However, it would make more sense to take the pollution tax revenue and just give it to everyone as a global citizen’s dividend, or basic income as some call it, like Alaskan citizens get when companies extract oil from their state.

Government can be effective in the realm of basic research, but when it comes to creating final products that reduce pollution, the private sector is likely to do a better job. I’m not saying this because I’m some kind of crazy Ayn Rand fanatic, I’m just a pragmatic nerd who wants a clean planet with high living standards and lots of technological innovation. We don’t need to depend on government to come up with clean technologies if we simply give businesses the right incentives. There is no way that even the smartest in government can beat out the collective ingenuity of billions of people actively looking for ways to reduce their carbon footprint in avoidance of paying pollution taxes.

Take Tesla Motors for example. They have beautiful, fast, and completely electric cars already on the market. Sure, most people can’t afford a Tesla at present, but Elon Musk’s long term business strategy is to progressively make less and less expensive models at higher sales volumes, once Tesla’s costs are lower that is. If taxes were shifted off of companies like Tesla who make clean cars, and on to big polluters like Ford, it would naturally lead to more demand among consumers for cleaner vehicles, and car manufactures would need to follow suit to remain competitive. If you’re concerned about raising productive employment in the United States, providing such incentives would enable the US to compete with Asian car manufacturers. The problem at present is that not only do we not tax pollution, we actually subsidize a host of industries involved in a supply chain latent with pollution. If we end the subsidies and start taxing pollution, you’ll see lots of clean economic growth. They taxed energy in Denmark, a way to approximate taxing pollution, and the results have been greatly beneficial.

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