For what it's worth, I find the "landlords" explanation here extremely compelling. In the last year, I've happened upon the works of the 19th century economist Henry George (who identified landlordism as the root cause of poverty) and found his distinction between land and capital to explain many of the "paradoxes" we have in modern economics.
I recommend checking out his work, but if anybody is curious about details of his economic theories, AMA.
Interesting line of thought. What’s your take on Henry George? (Arguing for distributing land rent equally, which would counter your concerns somewhat)
Henry George thought that land was our common inheritance, but was in favor of free markets. He did not support rent control. He thought of rent as a fact owing to the value of the location, and the question is not how to make the rent lower. The question is who gets to profit off the fruits of nature.
Rent control, in effect, converts tenants into pseudo-landowners with less fungible rights.
If locations are valuable, and by extension the rents, that is good. But to whom does the rent belong?
If rents are unaffordable, it is because wages are too low and the rent is not shared... which comes back to bargaining power and the overall health of the economy.
Taxing production, for instance, harms economic health.
But allowing speculators to hold the land for ransom creates stagnation, sprawl, and harms the bargaining power of labor... by worsening everyone's best available options for living and working.
Georgism is deeply rooted in the Law of Rent and David Ricardo's work on the matter. So to say Henry George was a crank is sorta like saying Ricardo and the law of rent is bunk. The reality is that all land (be it physical land, IP, or some other natural or non-natural monopoly) always leads to its owners extracting surplus value in the form of rent. Be that rent coming in it's literal form or as something masquerading as fees.
I think the worse problem is that some Georgists are bad at explaining that integral point which leads to confusion as to what their contention is all about.
Plus banks have a monopoly on money creation and can create it with zero cost, ramping up land prices and soaking up all productivity gains into land. All the rentier need do is kick back and wait for the state to add value so they can charge more rent. Henry George knew it but it seems today nobody has the faintest idea how money works:
This is a very old problem. In 1879, Henry George called it the paradox of progress and poverty. Prosperity causes land values to go up, and this inevitably creates a class of winners and losers. Some of the losers can't afford rent at all.
Cudos for mentioning the godfather of this line of thought, Henry George. However, limiting the theory to housing is too restrictive, and land for non-housing productive purposes follow the same laws of monopolistic supply and inelastic demand.
That was a relevant passage indeed - hadn't heard of George before:
> George was in a position to discover this pattern [mere land possession harms the poor, and can be discouraged through a land tax], having experienced poverty himself, knowing many different societies from his travels, and living in California at a time of rapid growth [1870s]. In particular he had noticed that the construction of railroads in California was increasing land values and rents as fast as or faster than wages were rising.
Henry George predicted that these exact conditions would worsen as societies grow richer, as a product of the economics of land speculation. If you're interested the what Georgism recommends to remedy this crisis and create the conditions for broad prosperity, I strongly recommend checking on this primer:
Yes, Henry George had some good ideas, but nobody is perfect. His ideas about the business cycle were also rubbish.
The supply of land is fixed. We can make more capital.
If you tax land or labour, you get less of them. If you tax land, it's still the same amount. Land is also hard to hide [citation needed], so tax evasion is harder.
Henry George was more or less opposed to our current conception of capitalism. He believed all land and narual resources should be held in common. He stated that a person should be entitled to the product of their personal labor and that was about it.
But being a practical man he realized the horse was well out of the barn on private ownership of land and felt that a land value tax was essentially the next best thing. He maintained collective ownership of natural resource beside land though.
The economic literature on the morality of land ownership is surprising thorough. Imo Henry George had it right. The land belongs to society, land ownership is immoral, all land should be rented out by the government at market rates through a land value tax.
Henry George recognized that there were benefits to private control, security of tenure, productivity, etc. These ideas were well recognized by classical economists/liberals, Locke, etc.
There is ultimately no -perfect- solution to the land problem because 2 objects cannot exist in the same place at the same time so -any- solution will be somewhat arbitrary.
However, the advantage one plot of land has over another manifests in its rental value. Therefore, you pay everyone else according to the natural advantage your location has. If only marginal land is left for me, then that reflects in the fact that I pay nothing and receive a share of the differential advantage in return.
Nothing in society will ever be perfect, but compared to alternatives and also recognizing that other forms of land control are also problematic, the solution in the article makes quite perfect sense.
If the full rental value of land were collected then its selling price would be $0. That is a far cry from the tax system we have today. Urban locations are the most relevant for society, but all the same there would be benefits to farmland use as well. The selling price of land is recognized as the primary barrier to entry for new farmers.
Ah, now we’re getting somewhere! No modern landlord would support the demise of rents on lands, which is why they the same as the parasitic feudal dullards Smith elsewhere decries. Modern, urban landlords want to reap what the do not sow, i.e. the value derived from the productive activity of cities where they buy up houses to maintain an (individually partial, collectively large) monopoly on the availability and use of land. They generally in fact go one step further and leverage this monopoly to obtain loans, premised on the inflated valuations derived from the constraint of supply, and extend it even further. In a Georgist arrangement, they would be forced to reinvest rents on properties into making said properties more economically productive…which is why no modern landlords are Georgists!
> As both the Vienna model and Henry George[1] would suggest, the problem is forever and always the cost of land. Burdensome land costs, and the rentiers who gain massive wealth by passive land speculation, are the real enemies — not developers, not our homeowners, not our public officials.
EDIT: From the looks of it Vienna's policy isn't purely Georgist, but it has a few policies (namely land tax, particularly on vacant lots) out of Henry's playbook.
It's true that I'm talking about all different types of rents in the article. I've written about land rents and land taxes here, if you're interested: http://esoltas.blogspot.com/2012/06/on-land-taxes.html. Also, as old as the Henry George analysis of land rents is, it is still quite relevant. If you look at some of the rebuttals to Piketty's capital (eg., this one: https://ideas.repec.org/p/spo/wpecon/infohdl2441-30nstiku669...), what you see is that most the growth in capital/income ratios comes from increases in the value of land capital. That would suggest George is still relevant to our world, and that conversations about IP might be secondary.
I recommend checking out his work, but if anybody is curious about details of his economic theories, AMA.
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