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.
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.
As much as I am a fan of Henry George's basic take on things, I also have an issue with the fundamental concept of "productive use of land". To require that any use of a piece of land generates sufficient income to pay taxes on that land which reflect the highest financial value it could have ... just seems wrong to me.
I don't want all land in its most productive use, and neither, I suspect, does the rest of the world.
Interesting line of thought. What’s your take on Henry George? (Arguing for distributing land rent equally, which would counter your concerns somewhat)
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.
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.
Land is capital. And the importance of land in economies have lessened quite a bit from the 19th century.
And even Henry George wasn't really a Geoist. He criticized all forms of unearned income, and called for e.g. abolition of intellectual property and nationalization of banks.
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.
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.
I think Georgism has a calculation problem, and furthermore I don't believe one can model the supply of land as a perfect vertical supply curve.
I don't think that it is possible to fairly assess the value of a location separately from the permanent improvements to the land. And I don't like systems that produce scenarios wherein a hostile party could potentially make adversarial plays to force a disadvantageous sale onto a cooperating person and profit from it.
I'm not entirely sure that the problem George was trying to tackle is even fixable. A human as an economic entity is a bundle of connections that are sometimes dependent upon distance, and sometimes dependent upon time, and other times dependent on information. These threads tangle in a way that cannot be easily unraveled. And frankly, I'm not convinced that land value is even the most significant keystone factor in modern economies any more. The new land rush seems to be in intellectual property. Having already perfected the extraction of rents from the biological necessities of breathing, drinking, eating, and sleeping, the rentiers have climbed higher on the hierarchy of needs by establishing privileged positions in education, social connections, and entertainment.
I think this is what they were referring to[0] in part:
"Mason Gaffney, an American economist and a major Georgist critic of neoclassical economics, argued that neoclassical economics was designed and promoted by landowners and their hired economists to divert attention from George's extremely popular philosophy that since land and resources are provided by nature, and their value is given by society, land value – rather than labor or capital – should provide the tax base to fund government and its expenditures.[90]"
I suspect that "productive use" of capital has simply worn away. What's left is buy and hold of property.
Henry George is credited with land rents taxation as a theory. He built on Ricardo's work to posit a complete theory of taxation based purely on land rents.
Georgism is specifically about land, not housing. The theory is that land value isn't much affected by investment of the landowner. Housing is, and that can be owned by individuals who then have a strong incentivize to take care of it.
> "A simple pen" is a nice example, but the real interesting question is what to do about common goods like natural resources and land.
This very question is what is addressed with Henry George's concept of private property in land (aka Georgism, aka Geolibertarianism, aka geoism).[0]
To quote the Wiki page to tie this into the article: "Austrian economist Friedrich Hayek credited early enthusiasm for Henry George with developing his interest in economics."
Now, it's another matter for people in the modern day to actually know about and use these theories, instead of the reductive "land = capital" model...
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