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Re: Spot the land taxer /find a rack renter

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  • roy_langston1
    ... False. While the presence and access of the surrounding community is no doubt almost always the major factor in determining urban land rents, it is not
    Message 1 of 64 , May 8, 2011
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      --- In LandCafe@yahoogroups.com, "Harry Pollard" <henrygeorgeschool@...> wrote:

      > If locations acted in the normal supply/demand
      > market place like other goods, their rents would
      > reflect the value given to these locations by the
      > presence and access of the surrounding community.

      False. While the presence and access of the
      surrounding community is no doubt almost always the
      major factor in determining urban land rents, it is
      not the only factor, and obviously becomes a less
      important factor the farther one gets from that
      presence and access.

      > If this was $100 a week, the payment to the
      > community would be $100 a week. This is a zero
      > sum situation and the user of the location pays
      > nothing from his wages in his contribution to
      > the community.

      This is true as far as it goes, but it must be
      borne in mind that wages are determined in the
      first place by labor's productivity on marginal
      land. As Henry George demonstrated in "Progress
      and Poverty," when population pressure and the
      accumulation of capital and technology push the
      margin outward, wages are pushed downward. So
      while the $100/week in rent does not "come from
      wages," wages are lower in the first place
      because the worker is deprived of his liberty to
      use good land without paying rent for it.

      > So, if price mechanism rent is taken by private
      > landholders, we would lose some revenue, but
      > labor would not be forced down to subsistence.

      False. Wages are determined by labor's
      productivity on marginal land. Whether they are
      above, at, or below subsistence depends on how
      good the marginal land is.

      > Rent payments would be controlled by the "price
      > mechanism" the reaction in a free market to
      > changes of price, supply, and demand. If demand
      > increases, the price rises. This stimulates
      > production and movement of goods to market.

      Except in the case of goods that are fixed in
      supply, such as land. In such cases, increased
      demand simply increases price to the market
      clearing or equilibrium level.

      > Their arrival supplies the demand and price
      > returns to an economic equilibrium.

      Except in the case of goods in fixed supply,
      such as land, whose price simply rises enough to
      reach a new equilibrium.

      > What fixes the economic equilibrium? In the case
      > of wages, Georgist theory suggests it depends on
      > the best available rent-free land - the margin of
      > production.

      More accurately, Ricardian rent theory implies this,
      and George explored and described the implications
      of that relationship.

      > However, the scenario described doesn't happen
      > because location costs (land costs) are not
      > controlled by the price mechanism.

      They certainly are. The price mechanism just
      doesn't provide for any increase or decrease in
      supply, because supply is fixed.

      > Necessary to optimum price mechanism control is
      > that there will no restriction on free movement
      > of goods in response to price changes.

      False. Fixed improvements can't be moved, yet
      they are under price mechanism control, as is land.

      > Unfortunately, locations can neither be produced,
      > nor can they be moved to take advantage of rising
      > prices. So, when demand warms or heats and prices
      > rise, there is no way to bring them down.

      Correct. When supply is fixed, price can only be
      reduced by reducing demand.

      > So, given a demand that is constant and intensive,
      > the cost of getting a location rises higher and
      > higher, breaking loose from its price mechanism
      > control.

      No, it simply rises until the demand curve
      intersects the vertical line of supply, then stops.

      > As community created rent doesn't rise,

      That is most certainly and obviously false. What
      else could cause demand to rise but increased rent?

      > where does this extra payment come from? There is
      > only one place - from wages. As 'rent' rises, so
      > do wages fall.

      False. Wages are determined at the margin, not by
      whether rent is rising or falling.

      > How high does this 'rent' rise? Simply, as high
      > as it can. The rent demand can go no further,
      > when any further raise would stop production.

      No. It can rise no farther when it is equal to
      the economic advantage obtainable by the user.
      Any attempt by the landowner to exact more than
      that amount, and the tenant will simply leave and
      deal with a less greedy landowner.

      > This is when no enough would be left after rent
      > collection to provide a subsistence wage.

      No, when there is a better opportunity elsewhere.

      > This would lead to a "cessation of life" as
      > George put it.

      Would that Harry paid more attention to George's
      central thesis in "Progress and Poverty," and
      less to an uninformative bit of rhetoric.

      > I call this highest amount that can be collected
      > "rack-rent", I think an appropriate term.

      "Rack-rent" already has a perfectly good meaning.
      In fact, two.

      > The 100% of rent I want to collect is 100% of
      > the community created value that attaches to a
      > location - not 100% of rack-rent.

      But how can this amount be measured other than by
      competing bids in the market?

      > Roy wants to collect 100% of rack-rent, or the
      > amount now collected by landholders.

      I want to collect the full rent of land, less a
      flat, universal individual exemption. This
      amount might, coincidentally, be the same as what
      the current landholder collects for a given site.
      It might be more, it might be less, depending on
      how land use patterns change under rent recovery,
      how land users react to the lifting of taxes that
      burden production, etc. Almost certainly it will
      rise rapidly as economic growth takes off with
      rent recovery.

      > He apparently believes that the 100% collection
      > of rack-rent would keep the poorest at
      > subsistence level,

      I believe the full collection of RENT would not
      significantly increase market wages, and the
      least productive would consequently remain BELOW
      subsistence level.

      > whereupon he would help them out with his
      > exemption notion.

      The exemption is equal for all. The poorest
      obviously need it more, as they would otherwise
      be unable to afford to use enough good land to
      sustain themselves on. That does not mean it is
      provided primarily as a means to relieve poverty.
      That is a fabrication on Harry's part, and simply
      assumes a motive on my part that I have neither
      stated nor implied. The exemption would be
      morally just as necessary if no one was poor.

      > There are massive amounts of land unused and
      > underused in cities and elsewhere. They exist
      > because the normal increase in land-values
      > compensates for any small taxes and other
      > charges that burden the locations.

      What "normal increase in land values"? According
      to Harry, land values have all already risen to
      the point where the user is left with nothing but

      > It should be noted that 100% collection is not
      > necessary to turn under improved land on to the
      > market. This will occur at some tipping point
      > less than 100%.

      It will occur no later than the point where rent
      owed exceeds expected value increase.

      > Far more good land will hit the market than can
      > be used.

      Harry seems to be very sure he knows how much
      land people can use. I suspect they could, and
      would want to, use a great deal of it if their
      production and consumption were not taxed.

      > The effect of the deluge will be to raise the
      > margin of production (the alternative that
      > decides wages). The highest available rent free
      > land (the margin of production) would come
      > galloping in, bringing with it higher wages. It
      > should be noted that this would reduce rents,
      > even as fully built central cities would raise
      > rent collection.

      Has this happened ANYWHERE rent collection has
      been high enough to eliminate the speculative
      holding of land out of production? Kiaochow?
      Meiji Japan? Altoona? Anywhere? Harry's
      assumption has no basis in either historical
      fact or economic theory.

      > An important point is that we cannot know how
      > much rent there is until we collect it. The
      > calculations that Georgists and others make of
      > total rent is of course total rack-rent.

      What Harry calls, "rack-rent" is in fact rent.

      > Further, capital calculations of land prices
      > include collectible values. These are the
      > anticipated future value of land.

      I agree current exchange values of land are not
      proportional to rent, as tax rate, growth rate
      and speculative momentum are also key factors
      in determining market prices.

      -- Roy Langston
    • walto
      ... I take it that Harry is considering a place with a limited number of parcels where landowners can basically take all that isn t needed to keep their
      Message 64 of 64 , Jul 22, 2011
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        --- In LandCafe@yahoogroups.com, "roy_langston1" <roy_langston1@...> wrote:

        > > If prices drop, so does rack-rent increase,
        > > maintaining wages at subsistence.
        > There is no rack-rent involved, as land users
        > are perfectly at liberty to just deal with less
        > greedy landowners. What would stop them? The
        > position of the margin is unaffected, so Harry
        > has to invoke some sort of mystical landowner
        > rack-renting power to keep wages at subsistence.
        > -- Roy Langston

        I take it that Harry is considering a place with a limited number of parcels where landowners can basically take all that isn't needed to keep their tenants alive. Imagine, e.g., an island with one landlord. The residents need to live someplace, so they'd be at this owner's mercy. In such a place, if the prices of tenant-consumed goods dropped, nothing would prevent the owner from raising rents to take the difference, would it?

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