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Re: Rack-rent

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  • mattbieker
    ... ... What equilibrium? Supply is fixed, and thus values scale with demand. Whatever the values are, they define equilibrium. However, the price
    Message 1 of 25 , Feb 7, 2011
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      --- In LandCafe@yahoogroups.com, "Harry Pollard" <henrygeorgeschool@...> wrote:

      <snip>


      > There is a continual demand for locations. The effect of this is to raise
      > their prices above equilibrium (Rent).

      What equilibrium? Supply is fixed, and thus values scale with demand. Whatever the values are, they define equilibrium.

      However, the price mechanism cannot
      > produce more locations and rush them to market. When downtown Los Angeles
      > Rents zoom astronomically, it is not possible to bring in some cheap Mohave
      > desert land to compete and bring land costs down to equilibrium (Rent).

      Again, what? Down to equilibrium? What equilibrium do you imagine there to be, other than what land exchanges for?


      So,
      > costs keep going up. Indeed, the reaction of this monopoly market will be to
      > keep pushing land costs up until they bang against a ceiling. This ceiling,
      > I suggest, is the highest cost that can be charged while maintaining
      > production. If landholders try to charge more, the sites will remain vacant,
      > or underused.

      Right. That's land rent: what the market will bear.


      > To call this monopoly cost Rent seems to me to be ridiculous.

      Well, that's the definition.


      > Rent is the
      > value of the advantage provided to a location by the surrounding community.

      And, consequently, that's all people will generally give to use the land; landowners who ask more can't sell/rent their location to anyone, because purchasing/renting the land would be a losing proposition for the buyer/renter.

      > A tenant in the present economy must pay much more than Rent to gain access
      > to land.

      How do you figure? Why would they do that? The fact is, land is still priced relative to the margin. Some land is needlessly withheld from production, and that does indeed reduce aggregate production, but what force do you imagine compels people to pay more for land than it's worth, relative to marginal land?


      > I call this excessive cost rack-rent, a label I regard as being fully
      > appropriate. (Any label will do. As you will recall, the label affixed to a
      > defined concept is the least important part of definition. I prefer
      > rack-rent an ancient term.)

      I agree with Roy that rack-rents generally imply some other force which compels people to pay more than standard rent. This force can take a variety of forms, but unless you can pinpoint some particular force compelling people to pay more, I don't see why you assume they do/would.


      > Collecting Rent for the public purse has the important economic effect of
      > placing Rents under control of the price mechanism.

      They are now.


      It does this by making
      > unused or underused landholding too expensive to maintain. Land will come on
      > the market in quantities. Land prices and Rents will topple until the
      > equilibria equal Rents¶.

      It will make production more efficient by allocating land more efficiently. It likely will make the colloquial "rents" people pay for apartments cheaper by increasing the incentive to make improvements, but it won't change the market conditions that determine land value.
    • walterhorn
      ... The term has been around for ages, of course. The question is whether it s a technical term or just means something like painfully high rent.
      Message 2 of 25 , Feb 7, 2011
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        --- In LandCafe@yahoogroups.com, "Edward Dodson" <ejdodson@...> wrote:
        >
        > Jason wrote:
        >
        > Harry,
        >
        > From what I can tell, I don't think I would disagree with the essence of
        > what you're trying to get at. It just seems like the concept of "rack
        > rent" is just excessive verbiage that creates some unneccessary
        > confusion.
        >
        > Ed Dodson here:
        > The term "rack rent" does have an historical heritage. Read Cecil
        > Woodham-Smith's books about Ireland, particularly "The Reason Way," which
        > examines the connection between absentee landlordism in Ireland and how
        > British military regiments sent to the Crimea were funded out of
        > "rack-rents" charged Irish peasant farmers.
        >


        The term has been around for ages, of course. The question is whether it's a technical term or just means something like "painfully high rent." (Everybody knows that rents can be high to the point of starvation-
        inducing.) As is usual here, the arguments are often a result of people using words differently. In his last post, Harry takes "rent" to mean "economic rent" while Matt takes it to mean "market rent." Thus, for Harry, "rack-rents" can be any rents higher than the economic rent, while for Matt, there can be no such thing as "rack-rent."

        W
      • Harry Pollard
        Well said, Walter. Harry ****************************** Henry George School of Los Angeles Box 655 Tujunga CA 91042 (818) 352-4141
        Message 3 of 25 , Feb 7, 2011
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          Well said, Walter.

           

          Harry

           

          ******************************

          Henry George School of Los Angeles

          Box 655  Tujunga  CA 91042

          (818) 352-4141

          ******************************

           

          From: LandCafe@yahoogroups.com [mailto:LandCafe@yahoogroups.com] On Behalf Of walterhorn
          Sent: Monday, February 07, 2011 3:52 PM
          To: LandCafe@yahoogroups.com
          Subject: [LandCafe] Re: Rack-rent

           

           



          --- In LandCafe@yahoogroups.com, "Edward Dodson" <ejdodson@...> wrote:
          >
          > Jason wrote:
          >
          > Harry,
          >
          > From what I can tell, I don't think I would disagree with the essence of
          > what you're trying to get at. It just seems like the concept of "rack
          > rent" is just excessive verbiage that creates some unneccessary
          > confusion.
          >
          > Ed Dodson here:
          > The term "rack rent" does have an historical heritage. Read Cecil
          > Woodham-Smith's books about Ireland, particularly "The Reason Way," which
          > examines the connection between absentee landlordism in Ireland and how
          > British military regiments sent to the Crimea were funded out of
          > "rack-rents" charged Irish peasant farmers.
          >

          The term has been around for ages, of course. The question is whether it's a technical term or just means something like "painfully high rent." (Everybody knows that rents can be high to the point of starvation-
          inducing.) As is usual here, the arguments are often a result of people using words differently. In his last post, Harry takes "rent" to mean "economic rent" while Matt takes it to mean "market rent." Thus, for Harry, "rack-rents" can be any rents higher than the economic rent, while for Matt, there can be no such thing as "rack-rent."

          W

        • Harry Pollard
          Jason, Under present conditions, the returns to the Factors of Production are Wages, Interest, and rack-rent. With the full collection of Rent, the returns
          Message 4 of 25 , Feb 8, 2011
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            Jason,

             

            Under present conditions, the returns to the Factors of Production are Wages, Interest, and rack-rent.

             

            With the full collection of Rent, the returns would be Wages, Interest, and Rent. The payment for a location would be reduced even as the amount going to Wages would increase.

             

            I would suggest that the non-recognition of the defined concept of rack-rent blurs the Georgist message.

             

            Rack-rents and collectible prices make the total possible collection of “rent” very high, which leads to the belief that all the present huge taxation revenue can be replaced by a land-value tax.

             

            In fact, I would expect the highest source of Rent – urban locations – to do little more than pay for the infrastructure of their city.

             

            Perhaps, as the present urban messes are cleaned up in a Georgist economy, all the Rent wouldn’t be needed for our “self-supporting” cities and a Citizen’s dividend could be provided. However, at first I suspect that we would need it all to maintain and improve infrastructure.

             

            However, revenue is less important than the economic effects of collecting Rent.

             

            We should see a new and much improved economy rising quickly from our present shambles.

             

            Harry

             

            ******************************

            Henry George School of Los Angeles

            Box 655  Tujunga  CA 91042

            (818) 352-4141

            ******************************

             

            From: LandCafe@yahoogroups.com [mailto:LandCafe@yahoogroups.com] On Behalf Of Jason
            Sent: Monday, February 07, 2011 4:59 AM
            To: LandCafe@yahoogroups.com
            Subject: [LandCafe] Re: Rack-rent

             

             


            Harry,

            From what I can tell, I don't think I would disagree with the essence of
            what you're trying to get at. It just seems like the concept of "rack
            rent" is just excessive verbiage that creates some unneccessary
            confusion.

            If someone is paying more than rent for access to land, then that
            someone is simply paying rent PLUS some of their wages and/or interest
            for access to a particular piece of land.

            Put another way, the concept of "rack rent" seems to blur the
            distinctions between the various types of returns on the factors of
            production, (i.e., rent, wages, & interest), and by extension, the
            factors themselves, (land, labor, & capital).

            ---Jason

            --- In LandCafe@yahoogroups.com, "Harry Pollard" <henrygeorgeschool@...>
            wrote:

            >
            > I use the following example in the InterStudent High School Program to
            make
            > the point that you will pay Rent - and a high Rent - to get the right
            site
            > for your particular expertise.
            >
            > A woman who is a world class milliner lives in Banning in the
            California
            > desert. Many places have car license plates touting their great
            tourist
            > attractions. This town's license plate is "Where the hell is Banning?"
            >
            > She has a low rent shop in the town and makes a fair income selling to
            the
            > local ladies. Then, she is persuaded to take a little place on Rodeo
            Drive
            > in Beverly Hills. There she pays a huge rent, but has an immediate
            clientele
            > who will pay high prices for her hats. She retires a millionairess.
            >
            > She would have been stupid to stay in Banning where she pays just a
            low
            > rent.
            >
            > In similar fashion, if your shoe shop locates in a good part of the
            High
            > Street with plenty of traffic, your rent will be higher, but you will
            be
            > able to put your particular skills to work and earn a lot more money.
            In a
            > lower rent area, those skills will mostly be unused. The Rent
            advantage does
            > not increase your profits as Roy suggests. It provides you with the
            > opportunity to make a good income from your exertion - your labor.
            >
            > When rents rise to become rack-rent, the extra you pay comes out of
            your
            > wages. This makes it harder to prosper and may even stop production.
            >
            > People are not "willing" to pay high rents, or rack-rents. They must
            pay
            > them.
            >
            > If I owned the air, how much would you pay for enough to breathe?
            >
            > If I owned the land, how much would you pay for enough to survive on?
            >
            > If land no longer had the characteristics of a monopoly, the value of
            a
            > location would be rent (the advantage given to a location by the
            surrounding
            > community).
            >
            > A major economic effect of full rent collection by the community would
            be to
            > end rack-rent and return location values to rent.
            >
            > Harry
            >
            > ******************************
            > Henry George School of Los Angeles
            > Box 655 Tujunga CA 91042
            > (818) 352-4141
            > ******************************
            >
            > From: LandCafe@yahoogroups.com [mailto:LandCafe@yahoogroups.com] On
            Behalf
            > Of Jason
            > Sent: Sunday, February 06, 2011 11:05 AM
            > To: LandCafe@yahoogroups.com
            > Subject: [LandCafe] Re: Incentives to maintain rural property
            >
            >
            >
            > Hi Harry,
            >
            > This concept of "rack-rent" seems self-contradictory to me, (at least
            as
            > you're describing it).
            >
            > For one, who would pay a $1000 a day for a site that only gives a
            $1000
            > a day advantage? A person who did that would be breaking even.
            >
            > If a person pays $1500 a day for a site then that would be its market
            > rental value simply by virtue of someone willing to pay $1500 a day
            for
            > such a site. Who would pay $1500 a day for a site in which they lost
            > $500 a day?
            >
            > But perhaps I'm misunderstanding you :-)
            >
            > ---Jason
            >
            > --- In LandCafe@yahoogroups.com <mailto:LandCafe%40yahoogroups.com> ,
            "Harry
            > Pollard" henrygeorgeschool@
            > wrote:
            > >
            > > Charging $1,000 a day for a location that provides an advantage of
            > $1,000 a
            > > day is not rack-rent. Of course many people would not be able to pay
            > it.
            > > Only the able producers who are best suited to such an excellent
            > location
            > > would be able to pay it - which is the way it should be - and I
            > guarantee
            > > there would be competition for such a site from top producers.
            > >
            > > While the above payment would be rent, charging $1,500 a day for a
            > location
            > > that provides an advantage of $1,000 a day is rack-rent. An
            > entrepreneur who
            > > would easily be able to pay rent for the advantage of the location
            > might
            > > find himself on the edge of bankruptcy if he had to pay rack- rent.
            > >
            > > Rack-rent is the highest amount that can be charged to a tenant
            while
            > > maintaining production - a perfectly valid defined concept and part
            of
            > > Georgist theory. When rent is collected, one of the important
            effects
            > is
            > > that rack-rent will disappear as rents take their place. This
            economic
            > > effect doesn't seem to be accepted by a couple of posters, but it
            will
            > > happen.
            > >
            > > The label rack-rent is an old one and using it in this fashion is
            > valid. If
            > > you don't like the label, call it Rumpelstiltskin.
            > >
            > > Harry
            > >
            > > ******************************
            > > Henry George School of Los Angeles
            > > Box 655 Tujunga CA 91042
            > > (818) 352-4141
            > > ******************************
            > >
            > > From: LandCafe@yahoogroups.com <mailto:LandCafe%40yahoogroups.com>
            > [mailto:LandCafe@yahoogroups.com <mailto:LandCafe%40yahoogroups.com> ]
            On
            > Behalf
            > > Of walto
            > > Sent: Friday, February 04, 2011 11:43 AM
            > > To: LandCafe@yahoogroups.com <mailto:LandCafe%40yahoogroups.com>
            > > Subject: [LandCafe] Re: Incentives to maintain rural property
            > >
            > >
            > > My problem is with your first premise, David--I agree that if
            > something is
            > > "rack-rent" when charged by A, it's likely also "rack-rent" when
            > charged by
            > > B.
            > >
            > > I've also already indicated that I think LVT would be very unpopular
            > (and,
            > > arguably, unfair) if implemented suddenly and without warning. But
            in
            > my
            > > view, gradual implementation seems to me a much better solution to
            > that
            > > problem, than your approach [allow unfair privileges to continue
            > forever].
            > >
            > > But this bit:--
            > >
            > > --- In LandCafe@yahoogroups.com <mailto:LandCafe%40yahoogroups.com>
            > <mailto:LandCafe%40yahoogroups.com> ,
            > David
            > > Reed dbcreed@ wrote:
            > >
            > > "If the locational advantage of a site is worth $ 1,000 a day and
            the
            > > landlord charges the tenant $I,000 a day that is rack-rent."
            > >
            > > Is the thinking here that, $1000 a day is a lot of money (in fact,
            too
            > much
            > > for most people to pay in rent), and whatever is too much for most
            > people to
            > > pay in rent is thereby [the hated] "rack-rent" (which must be
            opposed
            > by all
            > > decent human beings)?
            > >
            > > It seems to me that if the locational advantage of a site is worth
            > $1000 a
            > > day, that advantage should not have been monopolized, and the
            > community has
            > > a right to the money. The whole purpose of this (in my view, silly)
            > term
            > > "rack-rent" seems to me simply to help produce the desired: [boo,
            > > hiss--evil--must oppose it!].
            > >
            > > W
            > >
            >

          • Harry Pollard
            Matt, Below. Harry ****************************** Henry George School of Los Angeles Box 655 Tujunga CA 91042 (818) 352-4141 ******************************
            Message 5 of 25 , Feb 8, 2011
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              Matt,

               

              Below.

               

              Harry

               

              ******************************

              Henry George School of Los Angeles

              Box 655  Tujunga  CA 91042

              (818) 352-4141

              ******************************

               

              From: LandCafe@yahoogroups.com [mailto:LandCafe@yahoogroups.com] On Behalf Of mattbieker
              Sent: Monday, February 07, 2011 11:50 AM
              To: LandCafe@yahoogroups.com
              Subject: [LandCafe] Re: Rack-rent

               

               

              --- In LandCafe@yahoogroups.com, "Harry Pollard" <henrygeorgeschool@...> wrote:

              <snip>

              > There is a continual demand for locations. The effect of this is to raise
              > their prices above equilibrium (Rent).

              What equilibrium? Supply is fixed, and thus values scale with demand. Whatever the values are, they define equilibrium.

              However, the price mechanism cannot
              > produce more locations and rush them to market. When downtown Los Angeles
              > Rents zoom astronomically, it is not possible to bring in some cheap Mohave
              > desert land to compete and bring land costs down to equilibrium (Rent).

              Again, what? Down to equilibrium? What equilibrium do you imagine there to be, other than what land exchanges for?

              If land could be produced and moved to market there would be an equilibrium – as there is with goods that react to supply and demand in the market. So, as land can’t be produced and moved, it’s ‘market’ price moves upward. That’s all. Just taking one thing at a time.

              So,

              > costs keep going up. Indeed, the reaction of this monopoly market will be to
              > keep pushing land costs up until they bang against a ceiling. This ceiling,
              > I suggest, is the highest cost that can be charged while maintaining
              > production. If landholders try to charge more, the sites will remain vacant,
              > or underused.

              Right. That's land rent: what the market will bear.

              > To call this monopoly cost Rent seems to me to be ridiculous.

              Well, that's the definition.

              That’s what George said too about the concept I call rack-rent. However, although he kept the term Rent, instead of saying that it was the highest amount that could be exacted while maintaining production, he said any higher would mean death.

              > Rent is the

              > value of the advantage provided to a location by the surrounding community.

              And, consequently, that's all people will generally give to use the land; landowners who ask more can't sell/rent their location to anyone, because purchasing/renting the land would be a losing proposition for the buyer/renter.

              Rent is certainly the value of the advantage provided by  the community – the equilibrium. However, If I charge you 10% more, would you refuse the location? The answer is no.  You want to survive. Then 20%? Then, if I raise it to the highest I can, may you refuse? The alternative is being unable to produce, or live.

              You must have land to do anything. He who controls land controls you.

              > A tenant in the present economy must pay much more than Rent to gain access

              > to land.

              How do you figure? Why would they do that? The fact is, land is still priced relative to the margin. Some land is needlessly withheld from production, and that does indeed reduce aggregate production, but what force do you imagine compels people to pay more for land than it's worth, relative to marginal land?

              Where is this ‘marginal land’ of which you write? Where is this rent-free land?

              You cannot live without land. How much will you pay to gain access?

              Some people do hold land from use. Back in the 50’s, the Regional Plan Ass. of New York City checked out the land “unimproved for urban use” in the large metropolitan area of New York City – the most densely populated area of the US.

              Roads, parks and suchlike were considered improved as were slums and blighted buildings. They found 79% of the usable area was unimproved for urban use (86% of the gross area). I doubt a lot has changed over the last 55 years – except the buildings are 55 years older. Cahill, in his “Who Owns Britain” said only 8% of country was developed.

              Yes, people do withhold “some” land from production.


              > I call this excessive cost rack-rent, a label I regard as being fully
              > appropriate. (Any label will do. As you will recall, the label affixed to a
              > defined concept is the least important part of definition. I prefer
              > rack-rent an ancient term.)

              I agree with Roy that rack-rents generally imply some other force which compels people to pay more than standard rent. This force can take a variety of forms, but unless you can pinpoint some particular force compelling people to pay more, I don't see why you assume they do/would.

              > Collecting Rent for the public purse has the important economic effect of
              > placing Rents under control of the price mechanism.

              They are now.

              This is a major mistake. The price mechanism works properly when there is no restriction on production and movement of goods to the marketplace. Land doesn’t qualify so the price mechanism cannot work..

              It does this by making

              > unused or underused landholding too expensive to maintain. Land will come on
              > the market in quantities. Land prices and Rents will topple until the
              > equilibria equal Rents¶.

              It will make production more efficient by allocating land more efficiently. It likely will make the colloquial "rents" people pay for apartments cheaper by increasing the incentive to make improvements, but it won't change the market conditions that determine land value.

              I’m sorry, but it will. That’s why Rent should be collected.

              Harry

            • Harry Pollard
              Jason, Thomas Campbell Foster reported to the London Tines about the pre-famine rack-rented condition of the Irish. Here is some of it. I have no hesitation is
              Message 6 of 25 , Feb 8, 2011
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                Jason,

                 

                Thomas Campbell Foster reported to the London Tines about the pre-famine rack-rented condition of the Irish.

                 

                Here is some of it. I have no hesitation is affirming that without a welfare state the condition of those at the bottom of the wage pyramid would be something like this – but hopefully not quite so horrendous..

                 

                Here is what he wrote.

                 

                //////////////////////////////


                “This nobleman, himself, bears the character of a kind-hearted,
                generous
                man--fond of yachting and amusement, and having an excessive
                distaste for every kind of business or trouble. From one end of his
                large
                estate here to the other, nothing is to be found but poverty,
                misery, wretched cultivation, and infinite subdivision of land. There
                are
                no gentry, no middle-class,-- all are poor--wretchedly poor."

                "Every shilling the tenants can raise from their half-cultivated
                land
                is paid in rent, whilst the people subsist for the most part on

                potatoes and water....Every rude effort that they make to increase
                the amount of the[ir] produce is followed immediately by raising
                their rents in proportion--as it were, to punish them for improving;
                they are, naturally enough, as discontented and full of complaints as
                they are wretched in their condition."

                Foster reported in minute detail what he found when he visited some
                of
                the homes, if such they could be called, of the noble marquis's
                tenants.

                "Into these cottages I entered. They were stone-built and well-
                roofed
                , but the mud-floor was uneven, damp, and filthy. In one corner
                was
                a place for the pig, with a drain from it through the wall to
                carry off the liquid manure, like a stable. Two chairs, a bedstead of
                the
                rudest description, a cradle, a spinning-wheel, and an iron-pot
                constituted the whole furniture. An inner room contained another rude
                bedstead
                ; the mud-floor was quite damp. In this room six children
                slept
                on loose hay, with one dirty blanket to cover them...The
                father, mother, and an infant slept in the first room, also on loose
                hay, and with but one blanket on the bed. The children were running
                about
                as nearly naked as possible, dressed in the cast-off rags of
                the father and mother; the father could not buy them clothes.”

                 

                ////////////////////////////////

                 

                Couldn’t happen now?

                 

                Perhaps.

                 

                Harry

                 

                ******************************

                Henry George School of Los Angeles

                Box 655  Tujunga  CA 91042

                (818) 352-4141

                ******************************

                 

                From: LandCafe@yahoogroups.com [mailto:LandCafe@yahoogroups.com] On Behalf Of Edward Dodson
                Sent: Monday, February 07, 2011 8:50 AM
                To: LandCafe@yahoogroups.com
                Subject: RE: [LandCafe] Re: Rack-rent

                 

                 

                Jason wrote:

                Harry,

                From what I can tell, I don't think I would disagree with the essence of
                what you're trying to get at. It just seems like the concept of "rack
                rent" is just excessive verbiage that creates some unneccessary
                confusion.

                Ed Dodson here:
                The term "rack rent" does have an historical heritage. Read Cecil
                Woodham-Smith's books about Ireland, particularly "The Reason Way," which
                examines the connection between absentee landlordism in Ireland and how
                British military regiments sent to the Crimea were funded out of
                "rack-rents" charged Irish peasant farmers.

              • roy_langston1
                ... It does if increased profit is why you are paying the rent. The context of my comment was a retail tenant: i.e., an entrepreneur seeking profits. The
                Message 7 of 25 , Feb 8, 2011
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                  --- In LandCafe@yahoogroups.com, "Harry Pollard" <henrygeorgeschool@...> wrote:

                  > The Rent advantage does not increase your profits
                  > as Roy suggests.

                  It does if increased profit is why you are paying
                  the rent. The context of my comment was a retail
                  tenant: i.e., an entrepreneur seeking profits. The
                  only reason such a retail tenant is willing to pay
                  a higher rent is because the economic advantage of
                  the location enables him to earn higher profits.

                  > It provides you with the opportunity to make a
                  > good income from your exertion - your labor.

                  As usual, Harry has made a false generalization by
                  telling only part of the truth. The economic
                  advantage of a superior location may afford a worker
                  the opportunity to earn the full wage of his labor,
                  or it may afford an investor the opportunity to make
                  the full profit of his investment, or it may -- and
                  usually will -- afford an opportunity for some
                  combination of the two.

                  > When rents rise to become rack-rent, the extra you
                  > pay comes out of your wages.

                  If for some reason you cannot just deal with a less
                  greedy landowner.

                  > This makes it harder to prosper and may even stop
                  > production.

                  Which rather contradicts Harry's claim that rack-rent
                  does not reduce production...

                  > People are not "willing" to pay high rents, or
                  > rack-rents. They must pay them.

                  But only if, like serfs, they are legally bound to
                  the land, or if by reason of some other constraint
                  they are deprived of the option of just dealing with
                  a less greedy landowner.

                  > If I owned the air, how much would you pay for
                  > enough to breathe?
                  >
                  > If I owned the land, how much would you pay for
                  > enough to survive on?

                  The rent, because any exaction in excess of that
                  amount would reduce your revenue. That is the nature
                  of the land monopoly: rent does not change if one or
                  many people own the land. The owner CAN'T get any
                  more for it, because people will just use less rather
                  than take a guaranteed loss by over-paying for it.

                  > If land no longer had the characteristics of a
                  > monopoly, the value of a location would be rent
                  > (the advantage given to a location by the
                  > surrounding community).

                  That is impossible, as land inherently and immutably
                  has the characteristics of a monopoly.

                  > A major economic effect of full rent collection by
                  > the community would be to end rack-rent and return
                  > location values to rent.

                  Or at least, it would in Harry's imagination.

                  -- Roy Langston
                • roy_langston1
                  ... There is an equilibrium in any case. As the supply of land is fixed -- it can t be produced and moved to market -- its equilibrium price is determined
                  Message 8 of 25 , Feb 8, 2011
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                    --- In LandCafe@yahoogroups.com, "Harry Pollard" <henrygeorgeschool@...> wrote:

                    > If land could be produced and moved to market
                    > there would be an equilibrium – as there is with
                    > goods that react to supply and demand in the
                    > market.

                    There is an equilibrium in any case. As the supply
                    of land is fixed -- it can't be produced and moved
                    to market -- its equilibrium price is determined
                    exclusively by demand.

                    > So, as land can't be produced and moved, it's
                    > `market' price moves upward.

                    No, it CANNOT move upward unless demand increases,
                    because it is already at the monopoly price.

                    > That's what George said too about the concept I
                    > call rack-rent.

                    Except that Henry George, correctly, called it rent.

                    > However, although he kept the term Rent, instead
                    > of saying that it was the highest amount that
                    > could be exacted while maintaining production, he
                    > said any higher would mean death.

                    If there is no less greedy landowner to deal with.

                    > Rent is certainly the value of the advantage
                    > provided by the community – the equilibrium.
                    > However, If I charge you 10% more, would you
                    > refuse the location? The answer is no.

                    No, the answer is Yes. People refuse to pay
                    excessive rents all the time, which might be why
                    land sits vacant for decades at a stretch.

                    > You want to survive.

                    And can do so elsewhere.

                    > Then 20%? Then, if I raise it to the highest I can,
                    > may you refuse?

                    Yes, and will, like billy-o.

                    > The alternative is being unable to produce, or live.

                    No, the alternative is another landowner who isn't so
                    greedy.

                    > You must have land to do anything. He who controls
                    > land controls you.

                    Only if he controls ALL the land.

                    > Where is this `marginal land' of which you write?
                    > Where is this rent-free land?

                    Out in the boonies, in the desert, on mountainsides,
                    in swamps, etc., which is why wages are so low.

                    > You cannot live without land. How much will you
                    > pay to gain access?

                    The rent, as a landowner who tries to get more will
                    be doing without a tenant.

                    > The price mechanism works properly when there is
                    > no restriction on production and movement of goods
                    > to the marketplace. Land doesn't qualify so the
                    > price mechanism cannot work.

                    Harry's view of the price mechanism's operation is
                    false because it is too narrow. The price mechanism
                    works fine when goods cannot be produced and moved
                    to market. It just generates monopoly prices that
                    depend solely on demand.

                    -- Roy Langston
                  • Harry Pollard
                    Roy, The difference between us is that you label the highest amount that can be extracted from a tenant while maintaining production as Rent. I label this
                    Message 9 of 25 , Feb 16, 2011
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                      Roy,

                       

                      The difference between us is that you label “the highest amount that can be extracted from a tenant while maintaining production” as Rent. I label this defined concept rack-rent.

                       

                      In discussing urban rents, I would use the label “Rent” for the free market value attached to a site by the surrounding community. If this Rent is (say) $100 a week, it means that someone producing on it will – with the same exertion and capital – receive $100 a week more than someone working on marginal land, that is, the best available rent-free land.

                       

                      I wonder where is this “best available rent-free land”?

                       

                      It is a zero-sum situation. The producer gets $100 a week in advantage and pays $100 a week back to the community. There appears to be a lack of understanding from some posters about this rent. It’s claimed that if the advantage provided by the community (say $100 a week) is fully collected, there is no point in anyone working there. Yet, if less is collected, it means that community created rent is given to the user of the site. Why should he get it?

                       

                      The error here is that a high rent site provides opportunities for labor to use his abilities. The best producers will fight to get the highest rent sites. This was the point of my ‘world-class milliner’ example. Her fantastic hats would get little in Banning where she pays little rent. When she moves to Beverly Hills she pays a high rent but becomes rich for in Beverly Hills people will pay hugely for her ‘world-class’ hats.

                       

                      However, there is no “best available rent-free land”. Further, land cannot be produced and cannot be moved to take advantage of a higher price. Used, or unused, land comes reluctantly to market. Large amounts are unused or underused. Yet demand is intense and constant for nothing can be done without land. Inevitably with constant demand, but no increased supply – even reduced supply – the rent that must be paid for land rises. It really doesn’t matter how much it increases because it must be paid. Nothing can be done without land. The idea that has been offered that there are “willing buyers”, but this is fantasy. People must pay what is demanded or they die. (The Welfare State confuses this by keeping people alive who might otherwise perish. When subsidies to the poor keep increasing but are never enough is likely to bemuse the advocates of the system – but they keep asking for more anyway.)

                       

                      Equating a free market established rent with a monopoly rent is ridiculous. They are two different values and should have two different labels.

                       

                      So we come to full land-value taxation or full Rent collection.

                       

                      An effect of this will be to throw masses of land on to the market, Land presently unused or underused cannot continue to be held if it is not used to its capacity. The rigid monopoly that presently produces rack-rent will end.

                       

                      This is a major error of yours, Roy. You don’t think the full collection of rent will change things. You believe that rack-rent will continue even with full collection. You are wrong and it leads to your needless exemption hypothesis.

                       

                      It should be understood that when rent rises to rack-rent, the increased payment comes out of wages – where else? When rack-rent ends and rent is restored to the market, the saving goes back to the wages from which it came.

                       

                      Those who wonder why although the power to produce has increased exponentially it hasn’t managed to raise wages need look no further. Henry had the reason back in 1879.

                       

                      Harry

                       

                      ******************************

                      Henry George School of Los Angeles

                      Box 655  Tujunga  CA 91042

                      (818) 352-4141

                      ******************************

                       

                      From: LandCafe@yahoogroups.com [mailto:LandCafe@yahoogroups.com] On Behalf Of roy_langston1
                      Sent: Tuesday, February 08, 2011 5:45 PM
                      To: LandCafe@yahoogroups.com
                      Subject: [LandCafe] Re: Incentives to maintain rural property

                       

                       

                      --- In LandCafe@yahoogroups.com, "Harry Pollard" <henrygeorgeschool@...> wrote:

                      > I have defined my use of rack-rent as the highest
                      > rent that can be paid while maintaining production.

                      But that amount is, in fact, rent.

                      > However, because of the monopoly characteristic of
                      > land - something that is essential to everything
                      > we do - landholders can ask for more than Rent and
                      > this extra will be paid so long as it isn't too
                      > much - that is so long as it leaves enough to labor
                      > for survival. This I dub rack-rent.

                      No, because labor has no motive to pay it, and won't
                      pay it unless it is somehow bound to the land,
                      whether by law, tradition, family ties, investment in
                      fixed improvements, or whatever. Absent such
                      strictures, labor will just move, and use land owned
                      by less greedy owners.

                      > Check out Henry George's quotes I posted.

                      As expected, they do not support Harry's claims.

                      > Whenever an advance in productive abilities takes
                      > place, so do rack-rents advance to mop up the
                      > higher wages that should be the result of the
                      > advance.

                      No, it is rent that increases, exactly according to
                      the Law of Rent that Ricardo stated 200 years ago
                      and Harry somehow still fails rightly to apprehend.

                      > Rack-rents - the highest amount that can be
                      > extracted from the tenant while maintaining
                      > production.

                      Rack-rent - another perfectly useful term rendered
                      incomprehensible and useless by Harry's unnecessary,
                      idiosyncratic and incompetent redefinitions.

                      -- Roy Langston

                    • Harry Pollard
                      Roy said: The only reason such a retail tenant is willing to pay a higher rent is because the economic advantage of the location enables him to earn higher
                      Message 10 of 25 , Feb 16, 2011
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                        Roy said:

                         

                        “The only reason such a retail tenant is willing to pay
                        a
                        higher rent is because the economic advantage of
                        the location enables him to earn higher profits.”

                         

                        Exactly! He “earns” higher profits. The profits come from his labor not from rent.

                         

                        Harry

                         

                        ******************************

                        Henry George School of Los Angeles

                        Box 655  Tujunga  CA 91042

                        (818) 352-4141

                        ******************************

                         

                        From: LandCafe@yahoogroups.com [mailto:LandCafe@yahoogroups.com] On Behalf Of roy_langston1
                        Sent: Tuesday, February 08, 2011 6:16 PM
                        To: LandCafe@yahoogroups.com
                        Subject: [LandCafe] Re: Rack-rent

                         

                         

                        --- In LandCafe@yahoogroups.com, "Harry Pollard" <henrygeorgeschool@...> wrote:

                        > The Rent advantage does not increase your profits
                        > as Roy suggests.

                        It does if increased profit is why you are paying
                        the rent. The context of my comment was a retail
                        tenant: i.e., an entrepreneur seeking profits. The
                        only reason such a retail tenant is willing to pay
                        a higher rent is because the economic advantage of
                        the location enables him to earn higher profits.

                        > It provides you with the opportunity to make a
                        > good income from your exertion - your labor.

                        As usual, Harry has made a false generalization by
                        telling only part of the truth. The economic
                        advantage of a superior location may afford a worker
                        the opportunity to earn the full wage of his labor,
                        or it may afford an investor the opportunity to make
                        the full profit of his investment, or it may -- and
                        usually will -- afford an opportunity for some
                        combination of the two.

                        > When rents rise to become rack-rent, the extra you
                        > pay comes out of your wages.

                        If for some reason you cannot just deal with a less
                        greedy landowner.

                        > This makes it harder to prosper and may even stop
                        > production.

                        Which rather contradicts Harry's claim that rack-rent
                        does not reduce production...

                        > People are not "willing" to pay high rents, or
                        > rack-rents. They must pay them.

                        But only if, like serfs, they are legally bound to
                        the land, or if by reason of some other constraint
                        they are deprived of the option of just dealing with
                        a less greedy landowner.

                        > If I owned the air, how much would you pay for
                        > enough to breathe?
                        >
                        > If I owned the land, how much would you pay for
                        > enough to survive on?

                        The rent, because any exaction in excess of that
                        amount would reduce your revenue. That is the nature
                        of the land monopoly: rent does not change if one or
                        many people own the land. The owner CAN'T get any
                        more for it, because people will just use less rather
                        than take a guaranteed loss by over-paying for it.

                        > If land no longer had the characteristics of a
                        > monopoly, the value of a location would be rent
                        > (the advantage given to a location by the
                        > surrounding community).

                        That is impossible, as land inherently and immutably
                        has the characteristics of a monopoly.

                        > A major economic effect of full rent collection by
                        > the community would be to end rack-rent and return
                        > location values to rent.

                        Or at least, it would in Harry's imagination.

                        -- Roy Langston

                      • Harry Pollard
                        Roy said: No, it CANNOT move upward unless demand increases, because it is already at the monopoly price. I suggest you call that monopoly price rack-rent.
                        Message 11 of 25 , Feb 16, 2011
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                          Roy said:

                           

                          No, it CANNOT move upward unless demand increases,
                          because it is already at the monopoly price.”

                           

                          I suggest you call that “monopoly price” rack-rent. If that gets your knickers in a twist, call it Rumpelstiltskin.

                           

                          Harry

                           

                          ******************************

                          Henry George School of Los Angeles

                          Box 655  Tujunga  CA 91042

                          (818) 352-4141

                          ******************************

                           

                          From: LandCafe@yahoogroups.com [mailto:LandCafe@yahoogroups.com] On Behalf Of roy_langston1
                          Sent: Tuesday, February 08, 2011 7:37 PM
                          To: LandCafe@yahoogroups.com
                          Subject: [LandCafe] Re: Rack-rent

                           

                           

                          --- In LandCafe@yahoogroups.com, "Harry Pollard" <henrygeorgeschool@...> wrote:

                          > If land could be produced and moved to market
                          > there would be an equilibrium – as there is with
                          > goods that react to supply and demand in the
                          > market.

                          There is an equilibrium in any case. As the supply
                          of land is fixed -- it can't be produced and moved
                          to market -- its equilibrium price is determined
                          exclusively by demand.

                          > So, as land can't be produced and moved, it's
                          > `market' price moves upward.

                          No, it CANNOT move upward unless demand increases,
                          because it is already at the monopoly price.

                          > That's what George said too about the concept I
                          > call rack-rent.

                          Except that Henry George, correctly, called it rent.

                          > However, although he kept the term Rent, instead
                          > of saying that it was the highest amount that
                          > could be exacted while maintaining production, he
                          > said any higher would mean death.

                          If there is no less greedy landowner to deal with.

                          > Rent is certainly the value of the advantage
                          > provided by the community – the equilibrium.
                          > However, If I charge you 10% more, would you
                          > refuse the location? The answer is no.

                          No, the answer is Yes. People refuse to pay
                          excessive rents all the time, which might be why
                          land sits vacant for decades at a stretch.

                          > You want to survive.

                          And can do so elsewhere.

                          > Then 20%? Then, if I raise it to the highest I can,
                          > may you refuse?

                          Yes, and will, like billy-o.

                          > The alternative is being unable to produce, or live.

                          No, the alternative is another landowner who isn't so
                          greedy.

                          > You must have land to do anything. He who controls
                          > land controls you.

                          Only if he controls ALL the land.

                          > Where is this `marginal land' of which you write?
                          > Where is this rent-free land?

                          Out in the boonies, in the desert, on mountainsides,
                          in swamps, etc., which is why wages are so low.

                          > You cannot live without land. How much will you
                          > pay to gain access?

                          The rent, as a landowner who tries to get more will
                          be doing without a tenant.

                          > The price mechanism works properly when there is
                          > no restriction on production and movement of goods
                          > to the marketplace. Land doesn't qualify so the
                          > price mechanism cannot work.

                          Harry's view of the price mechanism's operation is
                          false because it is too narrow. The price mechanism
                          works fine when goods cannot be produced and moved
                          to market. It just generates monopoly prices that
                          depend solely on demand.

                          -- Roy Langston

                        • mattbieker
                          ... Nope. The land market is a monopoly by its very nature. It s return is a rent precisely for that reason. ... And sub-marginal production will suddenly
                          Message 12 of 25 , Feb 16, 2011
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                            --- In LandCafe@yahoogroups.com, "Harry Pollard" <henrygeorgeschool@...> wrote:
                            >
                            > <snip>
                            >
                            > Equating a free market established rent with a monopoly rent is ridiculous.
                            > They are two different values and should have two different labels.

                            Nope. The land "market" is a monopoly by its very nature. It's return is a rent precisely for that reason.

                            > So we come to full land-value taxation or full Rent collection.
                            >
                            > An effect of this will be to throw masses of land on to the market, Land
                            > presently unused or underused cannot continue to be held if it is not used
                            > to its capacity.

                            And sub-marginal production will suddenly be super-marginal, which will in turn increase demand for land.


                            > It should be understood that when rent rises to rack-rent, the increased
                            > payment comes out of wages - where else? When rack-rent ends and rent is
                            > restored to the market, the saving goes back to the wages from which it
                            > came.

                            The savings come from the abolition of other taxes, not the institution of the land value tax. Rents may temporarily dip as land owned for speculative purposes comes onto the market, but I see no reason to believe there'd be any long-term diminishment of rent.


                            > Those who wonder why although the power to produce has increased
                            > exponentially it hasn't managed to raise wages need look no further. Henry
                            > had the reason back in 1879.
                            >
                            > Harry

                            Right, but it's because the government taxes income to pay (in effect) landowners, thus compelling production to pay twice. The rents themselves are market-driven.
                          • roy_langston1
                            ... And from capital invested in his use of the site. Right. Obviously his profits don t come from rent, because profit is net OF rent. Like any other
                            Message 13 of 25 , Feb 16, 2011
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                              --- In LandCafe@yahoogroups.com, "Harry Pollard" <henrygeorgeschool@...> wrote:

                              > Roy said:
                              >
                              > "The only reason such a retail tenant is willing to pay
                              > a higher rent is because the economic advantage of
                              > the location enables him to earn higher profits."
                              >
                              > Exactly! He "earns" higher profits. The profits come
                              > from his labor not from rent.

                              And from capital invested in his use of the site. Right.
                              Obviously his profits don't come "from" rent, because
                              profit is net OF rent. Like any other expense incurred
                              in pursuit of profits, rent comes OFF OF those profits.

                              > "No, it CANNOT move upward unless demand increases,
                              > because it is already at the monopoly price."
                              >
                              > I suggest you call that "monopoly price" rack-rent. If
                              > that gets your knickers in a twist, call it
                              > Rumpelstiltskin.

                              I know what you suggest, Harry, and _I_ suggest you find
                              a willingness to call it what it is, and what I will, I
                              promise you, consequently continue to call it: rent.

                              -- Roy Langston
                            • bruno moser
                              I can t believe we are still talking rack-rent... was it Godfrey who threw in a word of Wisdom? VICKREY! second best bid! End of discussion. point. period.
                              Message 14 of 25 , Feb 16, 2011
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                                I can't believe "we" are still talking rack-rent...

                                was it Godfrey who threw in a word of Wisdom?  VICKREY! second best bid!  End of discussion. point. period.

                                stop babbling about non-important details, get the job done!  Help the folks in Egypt to figure out where to go from here... (pls, pls, pls help the Swiss to grasp HG's thought and leadership.

                                thanks, god bless,

                                b.  the_reLOVEution

                                p.s. one thing I don't get, is why I don't get all the msgs I send to landcafe? censorship? who cares... shame/missed opportunity for the venue.







                                On Wed, Feb 16, 2011 at 10:41 PM, mattbieker <agrarian.justice@...> wrote:
                                 



                                --- In LandCafe@yahoogroups.com, "Harry Pollard" <henrygeorgeschool@...> wrote:
                                >
                                > <snip>

                                >
                                > Equating a free market established rent with a monopoly rent is ridiculous.
                                > They are two different values and should have two different labels.

                                Nope. The land "market" is a monopoly by its very nature. It's return is a rent precisely for that reason.


                                > So we come to full land-value taxation or full Rent collection.
                                >
                                > An effect of this will be to throw masses of land on to the market, Land
                                > presently unused or underused cannot continue to be held if it is not used
                                > to its capacity.

                                And sub-marginal production will suddenly be super-marginal, which will in turn increase demand for land.


                                > It should be understood that when rent rises to rack-rent, the increased
                                > payment comes out of wages - where else? When rack-rent ends and rent is
                                > restored to the market, the saving goes back to the wages from which it
                                > came.

                                The savings come from the abolition of other taxes, not the institution of the land value tax. Rents may temporarily dip as land owned for speculative purposes comes onto the market, but I see no reason to believe there'd be any long-term diminishment of rent.


                                > Those who wonder why although the power to produce has increased
                                > exponentially it hasn't managed to raise wages need look no further. Henry
                                > had the reason back in 1879.
                                >
                                > Harry

                                Right, but it's because the government taxes income to pay (in effect) landowners, thus compelling production to pay twice. The rents themselves are market-driven.




                                --
                                International Land Economics
                                Philadelphia, Hanoi, Les Prés-d'Orvin

                                TWO THOUGHTS FOR TODAY:
                                A man can't ride on your back unless it's bent. -Martin Luther King, Jr., civil-rights leader (1929-1968)

                                Wer die Wahrheit nicht kennt, ist nur ein Dummkopf. Wer sie aber kennt, und sie eine Lüge nennt, ist ein Verbrecher.
                                -Galileo Galilei, Italienischer Physiker und Astronom,(1564 - 1642)
                              • roy_langston1
                                ... No, the difference between us is that I accept and use the established and very useful concept of rent that economists have found fits the relevant
                                Message 15 of 25 , Feb 16, 2011
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                                  --- In LandCafe@yahoogroups.com, "Harry Pollard" <henrygeorgeschool@...> wrote:

                                  > Roy,
                                  >
                                  > The difference between us is that you label "the
                                  > highest amount that can be extracted from a tenant
                                  > while maintaining production" as Rent. I label this
                                  > defined concept rack-rent.

                                  No, the difference between us is that I accept and
                                  use the established and very useful concept of rent
                                  that economists have found fits the relevant
                                  real-world phenomena, while Harry believes he has
                                  discovered a different phenomenon whereby land rent
                                  recovery can somehow make the supply of land not be
                                  fixed, and the characteristics of its market
                                  consequently not that of a monopoly.

                                  > In discussing urban rents, I would use the label
                                  > "Rent" for the free market value attached to a
                                  > site by the surrounding community.

                                  It might be useful for Harry to clarify exactly what
                                  he means by "attached," and specify how this value
                                  is measured in practice -- other than by peering
                                  intently at Danish land value maps from the 1960s.

                                  > If this Rent is (say) $100 a week, it means that
                                  > someone producing on it will - with the same
                                  > exertion and capital - receive $100 a week more
                                  > than someone working on marginal land, that is,
                                  > the best available rent-free land.

                                  But only if the use on the $100/week land is the same
                                  as the most productive use on the marginal land --
                                  i.e., if the user who is willing to pay $100/week for
                                  the good land is WILLING TO USE the marginal land for
                                  the same purpose, but not to pay any rent for it.

                                  > I wonder where is this "best available rent-free
                                  > land"?

                                  For what purpose? Land is only rent-free when no more
                                  than one person is willing to pay to use it. It is
                                  MARGINAL when EXACTLY one person is willing to pay to
                                  use it. People who have productive uses for very
                                  large amounts of poor land -- ranchers, trappers,
                                  ecotourism guides, etc. -- ensure that the best
                                  available rent-free land is so poor that almost no
                                  one can survive on it, let alone make a profit from
                                  using it.

                                  > However, there is no "best available rent-free land".

                                  As there is certainly rent-free land, some of it must
                                  be the best available. We just don't know which it is.

                                  And in practice, it doesn't matter because people's
                                  rent bids are not based on comparisons with marginal
                                  land but with other land reasonably suited to their
                                  purposes. The milliner won't pay any rent for land in
                                  Banning, because no one in Banning is interested in
                                  her hats. The rent she is willing to pay in Beverly
                                  Hills is utterly unconnected to marginal land. It is
                                  based on how much more she thinks she can make there
                                  than in other potentially advantageous locations for a
                                  milliner. She knows she must pay rent if she is going
                                  to operate a functioning millinery business at all,
                                  and a substantial rent if she is going to earn a wage
                                  close to what she could obtain at the best site for
                                  her business. And the same goes for almost anyone
                                  looking for land to use for almost any purpose.

                                  > Further, land cannot be produced and cannot be moved
                                  > to take advantage of a higher price.

                                  The higher price is the MEASURE of the advantage it
                                  gives ALREADY.

                                  > Used, or unused, land comes reluctantly to market.

                                  Land has nothing to say about it. It is the reward to
                                  speculative hoarding that keeps land off the market.

                                  > Inevitably with constant demand, but no increased
                                  > supply - even reduced supply - the rent that must
                                  > be paid for land rises.

                                  No. As supply is fixed, price is determined
                                  exclusively by demand, so constant demand CANNOT
                                  cause rents to rise -- and supply cannot be reduced.

                                  > It really doesn't matter how much it increases
                                  > because it must be paid.

                                  No, it needn't, as proved by all the vacant land
                                  whose owners are asking excessive rents.

                                  > Nothing can be done without land.

                                  But almost everything can be done without any
                                  particular parcel of land, and it is particular
                                  parcels that command rent, not "land" per se.

                                  > The idea that has been offered that there are
                                  > "willing buyers", but this is fantasy. People
                                  > must pay what is demanded or they die.

                                  That is self-evidently and indisputably false, as
                                  the survivors of every "Vacancy" sign prove.

                                  > Equating a free market established rent with a
                                  > monopoly rent is ridiculous.

                                  No, it merely shows a willingness to know the fact
                                  that free markets include natural monopolies.

                                  > They are two different values and should have two
                                  > different labels.

                                  There is no non-monopoly land rent, and never can be,
                                  so there is no other value.

                                  > So we come to full land-value taxation or full Rent
                                  > collection.
                                  >
                                  > An effect of this will be to throw masses of land on
                                  > to the market, Land presently unused or underused
                                  > cannot continue to be held if it is not used to its
                                  > capacity. The rigid monopoly that presently produces
                                  > rack-rent will end.

                                  As the supply of land is immutably fixed, the monopoly
                                  character of land markets will not and cannot be
                                  altered by land rent recovery. All that will happen
                                  is that good land held vacant or underused will become
                                  available for more productive uses, and will be more
                                  productively used. This may well reduce rents for
                                  some kinds of land that are currently being pressed
                                  into use to substitute for the better land being held
                                  off the market for speculation, but it will increase
                                  rents in city centers where population and the
                                  attendant economic opportunities will increase. The
                                  historical evidence is unambiguous: land rent recovery
                                  causes rents to skyrocket along with economic growth.
                                  Kiaochow's 6% land value tax was sufficient to
                                  eliminate land speculation, ensuring that all land was
                                  available for use just as effectively as full rent
                                  recovery could; and rents still soared.

                                  > This is a major error of yours, Roy.

                                  No, the error is of course Harry's.

                                  > You don't think the full collection of rent will
                                  > change things.

                                  I have identified many things it will change, but
                                  the fixity of land's supply will not be one of them.

                                  > You believe that rack-rent will continue even with
                                  > full collection.

                                  I am aware of the fact that rack-rent has a specific
                                  meaning different from the one Harry ascribes to it,
                                  that it does not coincide with current market land
                                  rents in more than a relative handful of cases, and
                                  of the fact that recovering the full market rent of
                                  land for public purposes will not change the fixity
                                  of land's supply nor, consequently, the essential
                                  monopolistic character of land markets.

                                  > You are wrong and it leads to your needless
                                  > exemption hypothesis.

                                  I am certainly and indisputably correct, and have
                                  proved that a flat, universal individual land tax
                                  exemption is necessary not only logically and
                                  economically, but socially and morally.

                                  > It should be understood that when rent rises to
                                  > rack-rent,

                                  Which doesn't and can't happen except in the special
                                  circumstances I have described elsewhere.

                                  > the increased payment comes out of wages - where else?

                                  The historical evidence indicates that true rack-rents
                                  suppress production, and it is the profits of capital
                                  investment that the landowner appropriates, even more
                                  than wages.

                                  > When rack-rent ends and rent is restored to the
                                  > market, the saving goes back to the wages from
                                  > which it came.

                                  Which it didn't.

                                  > Those who wonder why although the power to produce
                                  > has increased exponentially it hasn't managed to
                                  > raise wages need look no further.

                                  ...than the Law of Rent.

                                  -- Roy Langston
                                • Joshua Vincent
                                  Agreed on all counts, plus many of my posts have been lost too. Joshua Vincent, Executive Director Center for the Study of Economics 413 South 10th Street
                                  Message 16 of 25 , Feb 17, 2011
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                                    Agreed on all counts, plus many of my posts have been lost too.
                                    Joshua Vincent, Executive Director
                                    Center for the Study of Economics
                                    413 South 10th Street
                                    Philadelphia, PA 19147
                                    215.923.7800 Extension 1
                                    www.urbantools.org
                                    www.ourcommonwealth.org

                                    The Center for the Study of Economics is a 501 (c) 3 non-profit educational foundation.
                                    Our mission is to research land value taxation, to assist governments in implementation and to study the effect of land based property taxation where used. We suggest implementation where appropriate but do not support political candidates or become involved in the electoral process.



                                    On Wed, Feb 16, 2011 at 5:34 PM, bruno moser <bruno.moser@...> wrote:
                                    I can't believe "we" are still talking rack-rent...

                                    was it Godfrey who threw in a word of Wisdom?  VICKREY! second best bid!  End of discussion. point. period.

                                    stop babbling about non-important details, get the job done!  Help the folks in Egypt to figure out where to go from here... (pls, pls, pls help the Swiss to grasp HG's thought and leadership.

                                    thanks, god bless,

                                    b.  the_reLOVEution

                                    p.s. one thing I don't get, is why I don't get all the msgs I send to landcafe? censorship? who cares... shame/missed opportunity for the venue.







                                    On Wed, Feb 16, 2011 at 10:41 PM, mattbieker <agrarian.justice@...> wrote:
                                     



                                    --- In LandCafe@yahoogroups.com, "Harry Pollard" <henrygeorgeschool@...> wrote:
                                    >
                                    > <snip>

                                    >
                                    > Equating a free market established rent with a monopoly rent is ridiculous.
                                    > They are two different values and should have two different labels.

                                    Nope. The land "market" is a monopoly by its very nature. It's return is a rent precisely for that reason.


                                    > So we come to full land-value taxation or full Rent collection.
                                    >
                                    > An effect of this will be to throw masses of land on to the market, Land
                                    > presently unused or underused cannot continue to be held if it is not used
                                    > to its capacity.

                                    And sub-marginal production will suddenly be super-marginal, which will in turn increase demand for land.


                                    > It should be understood that when rent rises to rack-rent, the increased
                                    > payment comes out of wages - where else? When rack-rent ends and rent is
                                    > restored to the market, the saving goes back to the wages from which it
                                    > came.

                                    The savings come from the abolition of other taxes, not the institution of the land value tax. Rents may temporarily dip as land owned for speculative purposes comes onto the market, but I see no reason to believe there'd be any long-term diminishment of rent.


                                    > Those who wonder why although the power to produce has increased
                                    > exponentially it hasn't managed to raise wages need look no further. Henry
                                    > had the reason back in 1879.
                                    >
                                    > Harry

                                    Right, but it's because the government taxes income to pay (in effect) landowners, thus compelling production to pay twice. The rents themselves are market-driven.




                                    --
                                    International Land Economics
                                    Philadelphia, Hanoi, Les Prés-d'Orvin

                                    TWO THOUGHTS FOR TODAY:
                                    A man can't ride on your back unless it's bent. -Martin Luther King, Jr., civil-rights leader (1929-1968)

                                    Wer die Wahrheit nicht kennt, ist nur ein Dummkopf. Wer sie aber kennt, und sie eine Lüge nennt, ist ein Verbrecher.
                                    -Galileo Galilei, Italienischer Physiker und Astronom,(1564 - 1642)

                                  • roy_langston1
                                    ... I can t believe anyone still talks about the Biblical creation myth. But ignoring errors won t make them go away. ... Errors in seemingly non-important
                                    Message 17 of 25 , Feb 17, 2011
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                                      --- In LandCafe@yahoogroups.com, bruno moser
                                      <bruno.moser@...> wrote:

                                      > I can't believe "we" are still talking rack-rent...

                                      I can't believe anyone still talks about the Biblical
                                      creation myth. But ignoring errors won't make them
                                      go away.

                                      > stop babbling about non-important details, get the
                                      > job done!

                                      Errors in seemingly non-important details can STOP
                                      the job from getting done. I am here to identify,
                                      refute and correct such errors so those whose talents
                                      run more to getting the job done can get it done.

                                      > Help the folks in Egypt to figure out where to go
                                      > from here...

                                      It's too late for that. We can have no influence
                                      on where they go from here. I'm helping the FUTURE
                                      folks in Egypt -- and Tunisia, and Greece, and
                                      Japan, and the USA, and every other country -- go
                                      to a better place from where they will be once they
                                      have learned and accurately understood the facts
                                      about land.

                                      > (pls, pls, pls help the
                                      > Swiss to grasp HG's thought and leadership.

                                      I'm more interested in promoting liberty, justice
                                      and truth than HG, sorry.

                                      And FWIW, I can't believe "we" are still talking and
                                      acting like members of the Henry George Fan Club.

                                      -- Roy Langston
                                    • Harry Pollard
                                      I marked some February posts but didn t get round to answering. Here is one from Matt, who wrote: HP: Equating a free market established rent with a monopoly
                                      Message 18 of 25 , Apr 14, 2011
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                                        I marked some February posts but didn’t get round to answering. Here is one from Matt, who wrote:

                                         

                                        HP:> Equating a free market established rent with a monopoly rent is ridiculous.

                                        > They are two different values and should have two different labels.

                                        Nope. The land "market" is a monopoly by its very nature. It's return is a rent precisely for that reason.

                                         

                                        HP: This is something that separates Roy, Matt, and perhaps Walter, from Georgists. Because land is a monopoly, its cost is determined by the suppliers. As we can do nothing without land, we must have it. The suppliers do not have to relinquish it. So, we are prepared to pay anything up to what I call rack-rent to get it. (Rack-rent is the highest payment a tenant can make while maintaining production.)

                                         

                                        George suggested that any higher would mean “cessation of life”.  

                                         

                                        So, what would happen if Rent was collected? The three above believe that it would make no difference to rack-rent. Matt asserts that Rents “may temporarily dip” but then would rise again (back to my rack-rent). He says that any saving for labor would come from the abolition of taxes. Yet, should the wages of labor be increased by ending taxation, would not this relief simply go back into higher rack-rents? Would not the monopoly rack-rents simply rise to swallow the tax relief – leaving those at the bottom in the same state as before the collection?

                                         

                                        Our friends appear to think so. This leads Roy into his advocacy of an Exemption so that poor people will get help to pay the rack-rent. I suppose the income from rack-rent collection will be used to fund a welfare state. (Guess what happens when you improve the conditions of the poor? – Yep, rack-rents increase, and the welfare that seemed to be fine last year doesn’t look so good this year.)

                                         

                                        At least the rack-rent would be going to the State instead of private individuals. Would the State be a kinder landlord when it needs funds for important policies like warfare, or jobs for the boys?

                                         

                                        I think that if this picture were true, I would not be a Georgist, I’m not much interested in arguing about the “least bad tax”. I am an advocate for a society with “Liberty and Justice for All”.

                                         

                                        I think that a full collection of Rent will be the first step in achieving that goal. Just the first step - there is much more to be done, none of which will be successful without that first step.

                                         

                                        What will really happen with a full collection of Rent I’ll leave to another post. This one is just to point out that the vision held by Roy, Matt, and Walter is incorrect and should be repudiated.

                                         

                                        Harry

                                         

                                        ******************************

                                        Henry George School of Los Angeles

                                        Box 655  Tujunga  CA 91042

                                        (818) 352-4141

                                        ******************************

                                         

                                        From: LandCafe@yahoogroups.com [mailto:LandCafe@yahoogroups.com] On Behalf Of mattbieker
                                        Sent: Wednesday, February 16, 2011 11:41 AM
                                        To: LandCafe@yahoogroups.com
                                        Subject: [LandCafe] Re: Rack-rent

                                        --- In LandCafe@yahoogroups.com, "Harry Pollard" <henrygeorgeschool@...> wrote:

                                        >
                                        > <snip>
                                        >
                                        > Equating a free market established rent with a monopoly rent is ridiculous.
                                        > They are two different values and should have two different labels.

                                        Nope. The land "market" is a monopoly by its very nature. It's return is a rent precisely for that reason.

                                        > So we come to full land-value taxation or full Rent collection.
                                        >
                                        > An effect of this will be to throw masses of land on to the market, Land
                                        > presently unused or underused cannot continue to be held if it is not used
                                        > to its capacity.

                                        And sub-marginal production will suddenly be super-marginal, which will in turn increase demand for land.

                                        > It should be understood that when rent rises to rack-rent, the increased
                                        > payment comes out of wages - where else? When rack-rent ends and rent is
                                        > restored to the market, the saving goes back to the wages from which it
                                        > came.

                                        The savings come from the abolition of other taxes, not the institution of the land value tax. Rents may temporarily dip as land owned for speculative purposes comes onto the market, but I see no reason to believe there'd be any long-term diminishment of rent.

                                        > Those who wonder why although the power to produce has increased
                                        > exponentially it hasn't managed to raise wages need look no further. Henry
                                        > had the reason back in 1879.
                                        >
                                        > Harry

                                        Right, but it's because the government taxes income to pay (in effect) landowners, thus compelling production to pay twice. The rents themselves are market-driven.

                                      • Harry Pollard
                                        ... RL: No, the difference between us is that I accept and use the established and very useful concept of rent that economists have found fits the relevant
                                        Message 19 of 25 , Apr 14, 2011
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                                          I said to Roy:

                                           

                                          > The difference between us is that you label "the

                                          > highest amount that can be extracted from a tenant
                                          > while maintaining production" as Rent. I label this
                                          > defined concept rack-rent.

                                          RL: No, the difference between us is that I accept and
                                          use the established and very useful concept of rent
                                          that economists have found fits the relevant
                                          real-world phenomena .  .  .

                                           

                                          This “useful concept” of rent eliminates rent as a return to land and makes it a return to capital, and labor.

                                           

                                          They have messed it up so it doesn’t fit “the relevant real-world phenomena”.

                                           

                                          No wonder you accept and use it.

                                           

                                          Harry

                                           

                                          ******************************

                                          Henry George School of Los Angeles

                                          Box 655  Tujunga  CA 91042

                                          (818) 352-4141

                                          ******************************

                                           

                                          From: LandCafe@yahoogroups.com [mailto:LandCafe@yahoogroups.com] On Behalf Of roy_langston1
                                          Sent: Wednesday, February 16, 2011 10:33 PM
                                          To: LandCafe@yahoogroups.com
                                          Subject: [LandCafe] Re: Rack-rent

                                           

                                           

                                          --- In LandCafe@yahoogroups.com, "Harry Pollard" <henrygeorgeschool@...> wrote:

                                          > Roy,
                                          >
                                          > The difference between us is that you label "the
                                          > highest amount that can be extracted from a tenant
                                          > while maintaining production" as Rent. I label this
                                          > defined concept rack-rent.

                                          No, the difference between us is that I accept and
                                          use the established and very useful concept of rent
                                          that economists have found fits the relevant
                                          real-world phenomena, while Harry believes he has
                                          discovered a different phenomenon whereby land rent
                                          recovery can somehow make the supply of land not be
                                          fixed, and the characteristics of its market
                                          consequently not that of a monopoly.

                                          > In discussing urban rents, I would use the label
                                          > "Rent" for the free market value attached to a
                                          > site by the surrounding community.

                                          It might be useful for Harry to clarify exactly what
                                          he means by "attached," and specify how this value
                                          is measured in practice -- other than by peering
                                          intently at Danish land value maps from the 1960s.

                                          > If this Rent is (say) $100 a week, it means that
                                          > someone producing on it will - with the same
                                          > exertion and capital - receive $100 a week more
                                          > than someone working on marginal land, that is,
                                          > the best available rent-free land.

                                          But only if the use on the $100/week land is the same
                                          as the most productive use on the marginal land --
                                          i.e., if the user who is willing to pay $100/week for
                                          the good land is WILLING TO USE the marginal land for
                                          the same purpose, but not to pay any rent for it.

                                          > I wonder where is this "best available rent-free
                                          > land"?

                                          For what purpose? Land is only rent-free when no more
                                          than one person is willing to pay to use it. It is
                                          MARGINAL when EXACTLY one person is willing to pay to
                                          use it. People who have productive uses for very
                                          large amounts of poor land -- ranchers, trappers,
                                          ecotourism guides, etc. -- ensure that the best
                                          available rent-free land is so poor that almost no
                                          one can survive on it, let alone make a profit from
                                          using it.

                                          > However, there is no "best available rent-free land".

                                          As there is certainly rent-free land, some of it must
                                          be the best available. We just don't know which it is.

                                          And in practice, it doesn't matter because people's
                                          rent bids are not based on comparisons with marginal
                                          land but with other land reasonably suited to their
                                          purposes. The milliner won't pay any rent for land in
                                          Banning, because no one in Banning is interested in
                                          her hats. The rent she is willing to pay in Beverly
                                          Hills is utterly unconnected to marginal land. It is
                                          based on how much more she thinks she can make there
                                          than in other potentially advantageous locations for a
                                          milliner. She knows she must pay rent if she is going
                                          to operate a functioning millinery business at all,
                                          and a substantial rent if she is going to earn a wage
                                          close to what she could obtain at the best site for
                                          her business. And the same goes for almost anyone
                                          looking for land to use for almost any purpose.

                                          > Further, land cannot be produced and cannot be moved
                                          > to take advantage of a higher price.

                                          The higher price is the MEASURE of the advantage it
                                          gives ALREADY.

                                          > Used, or unused, land comes reluctantly to market.

                                          Land has nothing to say about it. It is the reward to
                                          speculative hoarding that keeps land off the market.

                                          > Inevitably with constant demand, but no increased
                                          > supply - even reduced supply - the rent that must
                                          > be paid for land rises.

                                          No. As supply is fixed, price is determined
                                          exclusively by demand, so constant demand CANNOT
                                          cause rents to rise -- and supply cannot be reduced.

                                          > It really doesn't matter how much it increases
                                          > because it must be paid.

                                          No, it needn't, as proved by all the vacant land
                                          whose owners are asking excessive rents.

                                          > Nothing can be done without land.

                                          But almost everything can be done without any
                                          particular parcel of land, and it is particular
                                          parcels that command rent, not "land" per se.

                                          > The idea that has been offered that there are
                                          > "willing buyers", but this is fantasy. People
                                          > must pay what is demanded or they die.

                                          That is self-evidently and indisputably false, as
                                          the survivors of every "Vacancy" sign prove.

                                          > Equating a free market established rent with a
                                          > monopoly rent is ridiculous.

                                          No, it merely shows a willingness to know the fact
                                          that free markets include natural monopolies.

                                          > They are two different values and should have two
                                          > different labels.

                                          There is no non-monopoly land rent, and never can be,
                                          so there is no other value.

                                          > So we come to full land-value taxation or full Rent
                                          > collection.
                                          >
                                          > An effect of this will be to throw masses of land on
                                          > to the market, Land presently unused or underused
                                          > cannot continue to be held if it is not used to its
                                          > capacity. The rigid monopoly that presently produces
                                          > rack-rent will end.

                                          As the supply of land is immutably fixed, the monopoly
                                          character of land markets will not and cannot be
                                          altered by land rent recovery. All that will happen
                                          is that good land held vacant or underused will become
                                          available for more productive uses, and will be more
                                          productively used. This may well reduce rents for
                                          some kinds of land that are currently being pressed
                                          into use to substitute for the better land being held
                                          off the market for speculation, but it will increase
                                          rents in city centers where population and the
                                          attendant economic opportunities will increase. The
                                          historical evidence is unambiguous: land rent recovery
                                          causes rents to skyrocket along with economic growth.
                                          Kiaochow's 6% land value tax was sufficient to
                                          eliminate land speculation, ensuring that all land was
                                          available for use just as effectively as full rent
                                          recovery could; and rents still soared.

                                          > This is a major error of yours, Roy.

                                          No, the error is of course Harry's.

                                          > You don't think the full collection of rent will
                                          > change things.

                                          I have identified many things it will change, but
                                          the fixity of land's supply will not be one of them.

                                          > You believe that rack-rent will continue even with
                                          > full collection.

                                          I am aware of the fact that rack-rent has a specific
                                          meaning different from the one Harry ascribes to it,
                                          that it does not coincide with current market land
                                          rents in more than a relative handful of cases, and
                                          of the fact that recovering the full market rent of
                                          land for public purposes will not change the fixity
                                          of land's supply nor, consequently, the essential
                                          monopolistic character of land markets.

                                          > You are wrong and it leads to your needless
                                          > exemption hypothesis.

                                          I am certainly and indisputably correct, and have
                                          proved that a flat, universal individual land tax
                                          exemption is necessary not only logically and
                                          economically, but socially and morally.

                                          > It should be understood that when rent rises to
                                          > rack-rent,

                                          Which doesn't and can't happen except in the special
                                          circumstances I have described elsewhere.

                                          > the increased payment comes out of wages - where else?

                                          The historical evidence indicates that true rack-rents
                                          suppress production, and it is the profits of capital
                                          investment that the landowner appropriates, even more
                                          than wages.

                                          > When rack-rent ends and rent is restored to the
                                          > market, the saving goes back to the wages from
                                          > which it came.

                                          Which it didn't.

                                          > Those who wonder why although the power to produce
                                          > has increased exponentially it hasn't managed to
                                          > raise wages need look no further.

                                          ...than the Law of Rent.

                                          -- Roy Langston

                                        • roy_langston1
                                          ... Perhaps I should have been clearer (though even being absolutely clear rarely does any good where Harry is concerned): I use and accept the classical
                                          Message 20 of 25 , Apr 15, 2011
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                                            --- In LandCafe@yahoogroups.com, "Harry Pollard" <henrygeorgeschool@...> wrote:

                                            > I said to Roy:
                                            >
                                            > > The difference between us is that you label "the
                                            > > highest amount that can be extracted from a tenant
                                            > > while maintaining production" as Rent. I label this
                                            > > defined concept rack-rent.
                                            >
                                            > RL: No, the difference between us is that I accept and
                                            > use the established and very useful concept of rent
                                            > that economists have found fits the relevant
                                            > real-world phenomena . . .
                                            >
                                            > This "useful concept" of rent eliminates rent as a
                                            > return to land and makes it a return to capital, and
                                            > labor.

                                            Perhaps I should have been clearer (though even being
                                            absolutely clear rarely does any good where Harry is
                                            concerned): I use and accept the classical definition
                                            of rent that economists like David Ricardo, Henry George
                                            and Adam Smith accepted and used, not the definition
                                            neoclassical "economists" use, which does suffer the
                                            deficiencies Harry identifies and I have also often
                                            identified.

                                            > They have messed it up so it doesn't fit "the relevant
                                            > real-world phenomena".

                                            Much like Harry's redefinitions of "rent" and "rack-rent."

                                            > No wonder you accept and use it.

                                            Misapprehension corrected above.

                                            -- Roy Langston
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