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Source link: http://archive.mises.org/11446/property-the-great-problem-solver/

Property: The Great Problem Solver

January 13, 2010 by

When a man is required to “rent” his own property from the government by paying property taxes on it, he is being forbidden to fully exercise his right of ownership. Although he owns the property, he is forced into the position of a lessee. FULL ARTICLE by Morris and Linda Tannehill

{ 47 comments }

Gil January 13, 2010 at 9:33 am

Geez, landlords better make sure they’re not going to get a Libertarian for a tenant! Similarly, how many parents of Libertarians risk losing their basements because someone dwelling there long enough gets the title to it?

On the other hand, there something be said that if you can fence it off and keep others out then you’re the owner. Suppose an environmental consortium escaped a hypothetical terribly polluted Earth and found another life-bearing planet with no sentient beings (hence no “Avatar” issues) and erected a planet-enveloping energy shield because they don’t want this new planet to go the way of the Earth? Did they homestead this new planet or did they engage in cheap territoriality?

Jeffrey Tucker January 13, 2010 at 9:46 am

This is an excellent piece but it is wrong about IP. You can see the authors struggling with the notion:

Intangible property may also be marked in various ways. For example, a man may claim a certain radio wave length by broadcasting his claim to ownership on that frequency (provided, of course, that no one else has beaten him to it). Ideas in the form of inventions could also be claimed by registering all details of the invention in a privately owned “data bank.” Of course, the more specific an inventor was about the details of his invention, the thought processes he followed while working on it, and the ideas on which he built, the more firmly established his claim would be and the less would be the likelihood of someone else squeezing him out with a fake claim based on stolen data.

The inventor, having registered his invention to establish his ownership of the idea(s), could then buy insurance (from either the data bank firm or an independent insurance company) against the theft and unauthorized commercial use of his invention by any other person. The insurance company would guarantee to stop the unauthorized commercial use of the invention and to fully compensate the inventor for any losses so incurred. Such insurance policies could be bought to cover varying periods of time, with the longer-term policies more expensive than the shorter-term ones. Policies covering an indefinitely long time period (“from now on”) probably wouldn’t be economically feasible, but there might well be clauses allowing the inventor to re-insure his idea at the end of the life of his policy.

The point is not intangibility. It is scarcity and the possibility of conflict over claims. Radio waves are scarce. Ideas are not. In fact, earlier the article said that something cannot be private property if it generates contradiction: one person’s rights come at another’s expense. This is always the case with IP: you are not permitted to independently discover the same idea that I discovered and claimed, even though the possibility for infinite reproducability exists.

The Tannehills were amazing but they hadn’t the benefit of new IP theorizing. The only thinker I know of who was 100% correct about IP at that time was Hayek.

Voluntary January 13, 2010 at 10:17 am

That’s why I will never want to buy “property” in my entire life. I will always rent from someone else. That way I am not bonded to a large mortgage and I can save more money immediately and invest it.

I will buy property when I am the absolute owner of this property and can do what I want with it.

Not only aren’t you really owner of your “property” but the government gets to say what you can and cannot do with it.

Let’s say you buy some raw land and want to start growing some crops on it, no can do. You need to make an impact study, provide plans, provide aerial plans, you need a permit etc.

Go Eff yourselves, then I won’t purchase land. And I won’t purchase a large house either and when my car breaks I’m not even sure I will buy one either.

Because buying a car, you still have to pay the driver’s license tax, you still have to pay the license plate tax, you still have to pay the fuel taxes, you still have to submit yourself to intrusive and abusive cop searches, seizures, tickets etc.

Owning “property” in the USA makes you an easy, vulnerable and standing target for the government to put lien on you and controlling you.

I will buy property only when I am sure I OWN it. Until then I am very happy to have everything in the name of somebody else.

I am sure that more and more libertarians think that way and that more and more people think that way and that the real estate market is going to stay grim for a whole lot of years to come.

Nelson January 13, 2010 at 10:57 am

Radio waves are scarce. Ideas are not.

Good ideas are indeed scarce. Are are you claiming that all ideas are equivalent? Is the idea to paint your house blue equivalent to the ideas behind making a more efficient jet engine? Or a movie that entertains millions of people?

Voluntary January 13, 2010 at 11:07 am

“Good ideas are indeed scarce. ”

I would rather say that good minds are scarce.

Once a good mind has produced a good idea, any dimwitt can copy it at will.

It’s producing the good idea in the first place that is difficult. But once the scarce good mind has produced his good idea, how can he live off it if he can be leeched by copycats ?

I will keep my good ideas for myself and I could not care less about the world. Since I can’t sell my good ideas, I will keep them for myself.

Rob Ross January 13, 2010 at 11:11 am

This analysis’ stunning detachment from reality and, more importantly, any economic theory developed after the turn of the eighteenth century, renders it little more than fanciful yearning. There are a number of economic phenomenon, some of which are nearly unique to the land market, that make ultimate private ownership of land not only unhelpful in solving economic problems, but actually deleterious to the progress of civilization itself. In fact, land is arguably unique in this regard – private ownership rights are beneficial to society in almost all other goods and markets.

Other’s have written many pages on this topic, but I will highlight some fundamental errors and omissions in the logic presented above to give readers a taste of what others have said. First, let’s look at the Tanhill’s notion that arbitration, binding or otherwise, is sufficient to efficiently settle property disputes.

This claim would be accurate in an economy free from transaction costs and informational asymmetry. In such an economy, property owners can seek arbitration without cost, and they have full access to all information regarding their property and their neighbor’s property. In a real economy, however, seeking arbitration can sometimes be extremely expensive. Furthermore, because information is not free, some landowners have more of it than others (consider the case where one landowner knows where the oil is, but the other does not).

Under these circumstances, property owners with more wealth, or even simply a higher cash flow (for example, a copper mine is more valuable than a hot spring, but the latter might have a higher cash flow) will be more willing and able to engage in arbitration. This means that property owners will receive arbitration in proportion to the value of their property and its ability to generate cash flow. This sort of society, where one receives justice in proportion to his or her income & assets, is not a just society – it is a plutocracy.

Second, let’s look at these authors’ implicit claim of excludability, i.e. if I fence off my property nobody else can use it. This is so obviously wrong that it almost need not be refuted. The value of every parcel is, in fact, determined by its proximity and access to other parcels and “goods,” things that people want to be close to. There is no way a landowner himself can improve the real value of his land (if he “mixes his labor with the land,” he isn’t improving the value of the land, he’s simply adding land and labor together to make a product). Instead, his land appreciates by the actions of others, and their lands appreciate by his actions. Thus, land is the medium through which all actions are visited upon the society. Lets look at some examples:

-If I build a shopping mall on my land, that will increase the value of all the surrounding land, but the value of my own land will remain constant (cet. par.),
-If I build a structure that obstructs my neighbors’ view of the ocean, I have lowered the value of his property without infringing on his physical property’s boundaries,
-If I discover oil on my land (information asymmetry), the value of that information is passed on to my neighbors, who likely also have oil under their land. In fact, natural resources are an excellent example of the problems of applying this articles philosophy to land. You end up with the Oil Baron explaining how he sucked the oil right out from under the Church’s feet (that’s a movie reference).

I could go on, but the point is that the framework presented by the Tanhill is about as useful as a rubber chicken when it comes to addressing society’s problems. I does absolutely nothing to address the real problems of information asymmetry, transaction cost, not to mention non-excludability and non-transferability. For a much more in-depth understanding of how property rights in land increases social ill, I direct your attention to Henry George.

Mike January 13, 2010 at 11:14 am

“I will keep my good ideas for myself and I could not care less about the world. Since I can’t sell my good ideas, I will keep them for myself.”

Of course, this makes them all but useless. But then again they probably were anyway: if your idea doesn’t make you want to spontaneously share it, if only with those closest to you, it’s probably not that great an idea anyway.

This is why I don’t buy the whole “nothing will get done without IP” line. Any time I come up with something really creative, I am far more concerned that it come to fruition than being compensated for it. Real genius wants to get out, and won’t let a little thing like monetary compensation stand in its way. If anything, IP just results in a proliferation of “noise” making it hard to find the “signal”.

Mike January 13, 2010 at 11:15 am

“I will keep my good ideas for myself and I could not care less about the world. Since I can’t sell my good ideas, I will keep them for myself.”

Of course, this makes them all but useless. But then again they probably were anyway: if your idea doesn’t make you want to spontaneously share it, if only with those closest to you, it’s probably not that great an idea anyway.

This is why I don’t buy the whole “nothing will get done without IP” line. Any time I come up with something really creative, I am far more concerned that it come to fruition than being compensated for it. Real genius wants to get out, and won’t let a little thing like monetary compensation stand in its way. If anything, IP just results in a proliferation of “noise” making it hard to find the “signal”.

Mike January 13, 2010 at 11:17 am

Rob,

So what sort of collectivist utopia do you propose to solve these problems?

Rob Ross January 13, 2010 at 11:38 am

Mike, I’m glad you asked.

I propose that we accept and apply this fundamental principle: a person is not entitled to any value he or she did not create. Thus, people are entitled to wages and interest, because both are payments to inputs that are created by the hand of man. (The IP discussion above occurs because it is very difficult to discern how much value is created by the original conceiver of an idea).

The rent of land is not created by the actions of any single individual, but is the cumulative effect of the entire activity of the society. I would propose a heavy tax on the rent of land to recapture the value created by the society. The decision of HOW to use land would still rest primarily with the landowner (I would advocate abolishing all but the simplest zoning ordinances and other land-use restrictions. In fact, I wrote a paper about how the market would operate efficiently IN THE PRESENCE of a land value tax to allocate flood protection in New Orleans). The high tax on land would encourage landowners to use their land to its most productive potential, thus maximizing cash flow and covering the high tax on land.

This sort of system would actually DECREASE the net tax burden on many families, and, if coupled with a decrease in the tax rate on productivity, i.e. wages and sales, it would encourage more economic activity. This one of the very few taxes that actually help the economy.

Voluntary January 13, 2010 at 11:39 am

Mike,

“Of course, this makes them all but useless. But then again they probably were anyway:”

I agree, I never pretended to be a good mind, LOL ! ;-)

cheers.

Voluntary January 13, 2010 at 11:56 am

Mike,

“Real genius wants to get out, and won’t let a little thing like monetary compensation stand in its way.”

I disagree. People who were abused by their relatives, the government, other people, police officers etc. might be inclined to keep their genius for themselves as a form of revenge.

You know the old saying, garbage in garbage out ! I’ve been fed with garbage all my life so even though I might have some good to share, I won’t let the good come out unless you are ready to eat my garbage. You can’t have it both ways.

Inquisitor January 13, 2010 at 12:30 pm

Let’s dissect the barrage of garbage Rob has put forward:

“This analysis’ stunning detachment from reality and, more importantly, any economic theory developed after the turn of the eighteenth century, renders it little more than fanciful yearning. There are a number of economic phenomenon, some of which are nearly unique to the land market, that make ultimate private ownership of land not only unhelpful in solving economic problems, but actually deleterious to the progress of civilization itself. In fact, land is arguably unique in this regard – private ownership rights are beneficial to society in almost all other goods and markets.”

Assertion.

“This claim would be accurate in an economy free from transaction costs and informational asymmetry.”

Nope, it’d be accurate in any one.

“In a real economy, however, seeking arbitration can sometimes be extremely expensive.”

Because information is a good and takes time and money to produce. Still doesn’t vitiate their point…

“Under these circumstances, property owners with more wealth, or even simply a higher cash flow (for example, a copper mine is more valuable than a hot spring, but the latter might have a higher cash flow) will be more willing and able to engage in arbitration. This means that property owners will receive arbitration in proportion to the value of their property and its ability to generate cash flow. This sort of society, where one receives justice in proportion to his or her income & assets, is not a just society – it is a plutocracy.”

None of this even makes sense. Arbitration in proportion to the value of their property? What are you on about? And btw, your latter assertion is just that: an assertion.

“Second, let’s look at these authors’ implicit claim of excludability, i.e. if I fence off my property nobody else can use it. This is so obviously wrong that it almost need not be refuted.”

No, it isn’t. Or else prove it.

“There is no way a landowner himself can improve the real value of his land (if he “mixes his labor with the land,” he isn’t improving the value of the land, he’s simply adding land and labor together to make a product).”

OK, then they get value for the “product”. No one cares what you call it.

“Instead, his land appreciates by the actions of others, and their lands appreciate by his actions.”

You do not own the land because you produce ‘value’ but simply by virtue of first-use homesteading. Go and find people who believe in the labour theory of value as applied to appropriation if you want to peddle this argument…

“-If I build a shopping mall on my land, that will increase the value of all the surrounding land, but the value of my own land will remain constant (cet. par.),”

Nope, it’ll increase.

“-If I build a structure that obstructs my neighbors’ view of the ocean, I have lowered the value of his property without infringing on his physical property’s boundaries,”

Tough shit, he doesn’t own the view nor does he own the market value of the property, barring any sort of agreement with you to the effect that you do not impede on their view.

“You end up with the Oil Baron explaining how he sucked the oil right out from under the Church’s feet (that’s a movie reference).”

OK, so… why is this an issue? Did they own the oil under the land? Yes? No? No, not until they exploited it, unless you’re assuming land rights that extend all the way beneath the earth. Otherwise the oil “baron” is putting it to first use.

“I could go on, but the point is that the framework presented by the Tanhill is about as useful as a rubber chicken when it comes to addressing society’s problems.”
Assertion.

“I does absolutely nothing to address the real problems of information asymmetry, transaction cost, not to mention non-excludability and non-transferability.”

A pity the market already does. I guess in the perfect competition la-la land of some people though, such things are inexcusable, THUS WE MUST PLAN AND HAVE SOCIALISM OF LAND!

“I propose that we accept and apply this fundamental principle: a person is not entitled to any value he or she did not create. ”

Got a better one: do not tie appropriation to subjective value…

“The rent of land is not created by the actions of any single individual, but is the cumulative effect of the entire activity of the society.”

Same with any product’s value…

” I would propose a heavy tax on the rent of land to recapture the value created by the society.”

I would say be prepared to meet your end if you try tax me. ;)

Rob Ross January 13, 2010 at 12:38 pm

Inquisitor, since you made not a single point against me, I can only thank you for republishing the key points of my article. This gives me some good insight into which parts stick out in your mind, and which parts I need to explain better. Thanks for the feedback.

Inquisitor January 13, 2010 at 12:42 pm

Since you didn’t make a single point of substance and only airy assumptions, there isn’t really much I can do aside from the above without exerting more effort than is necessary (opportunity costs.) Those were just the most unsubstantiated bits… anyone here up to date with Austrian property theory could see the flaws I did. As I said, find an audience more conducive to Georgist rhetoric if you expect to make any converts, not one that’s been immunised to it…

Rob Ross January 13, 2010 at 12:56 pm

I’m banking on the perhaps idealistic presumption that many of this blog’s readers have not been immunized to new ideas. If you are looking for a free course on land economics and market failures, I suggest sneaking into your state university. Obviously, I cannot provide in depth analysis here. However, I would be happy to email you my paper “Land Value Taxation as a Tool for Floodplain Management in New Orleans,” to give a specific case study on the effects of transaction costs on the market for flood protection in New Orleans.

For those special folks who believe themselves immune to ideas that challenge their beliefs, I have only words of caution: sometimes inoculations have hazardous side effects.

Ace January 13, 2010 at 1:58 pm

Rob,

It’s is not so much the case that we are “immune” to the ideas that challenge our own beliefs. It’s more about the fact that these ideas, or relatives of them, have already been tried many, many times through history. You can call it “land value taxation” but all that it translates to is another regulation to add to the book of regulations. And, in any case, I believe what you may be proposing would have far more detrimental effects than of being “inoculated” with the ideas of liberty

Guard January 13, 2010 at 2:08 pm

What is most disturbing about renting land from the government is the fact that, without any land, you cannot own anything else, since you have no place to put. Bottom line is that you yourself are owned by the government since, without land on which to live, your very existence is at the pleasure of the landowner.
All it boils down to really is that criminals exist. We knew that.

Cosmin January 13, 2010 at 2:22 pm

The article is wrong about more things than just intellectual property.
The argument is not coherent. A damning phrase is: “With no public property and no public dole, such undesirables would quickly “shape up or ship out.”"
Ship out to where? The previous phrase talks about “a state in which all potential property was actually owned.” So the “ship out” comment was just a token choice given to the “undesirables”, but their only real choice is to “shape up”. Isn’t that advocating changing human nature? How did the effort to create a new man work for the communists?

Guard January 13, 2010 at 2:34 pm

I have to agree with voluntary also. I have deliberately greatly reduced my financial output simply because most of what I produce is taken from me. I will always be able to produce something, but the people who take may well run out of suckers.

Cosmin January 13, 2010 at 3:16 pm

Also, disputes over land property wouldn’t necessarily start from the assumption that the article’s authors want it to.
Let me posit this scenario: Two people are shipwrecked on a desert island. They wake up at the same time. Person A (let’s say Alex) goes to rescue some water bottles from the ship, catch some fish and build a shelter. Person B (let’s say Bob) runs around the island planting signposts from time to time. They meet again after 3 days. Alex, having satisfied his immediate want for sustenance and shelter, wants to go see what other opportunities the island might offer to him.
Bob says that he can’t do that, for he would be trespassing on his property. As per the article, Bob was “ambitious, quick and intelligent enough to acquire the property before anyone else”.
Why would Alex agree that “bordering” is an acceptable way of acquiring property? Three days earlier, he was free to roam the island, and now he’s not.
Bob, meanwhile, acquired capital not by savings, but by defining his actions as “acquisition of capital” and, through circular reasoning, decreeing the rest of the island as his property (since he performed on it the act that “acquires property”).

The Tannehills’ arbiters rule on disputes in bordering, but the article did not establish that bordering is a legitimate way of procuring property, never mind establishing the legitimacy of land property.

After all, even if Bob and Alex agree amongst themselves to split the island and own half each, what happens when Charlie washes ashore a week later? Is he destined to be their slave? Or ship out?

I will read Rob’s links and look into this George character, but it seems to be intriguing and not hugely dissimilar to my own continuously evolving understanding of property rights.

Russ January 13, 2010 at 3:52 pm

Rob Ross wrote:

“For a much more in-depth understanding of how property rights in land increases social ill, I direct your attention to Henry George.”

Please. Georgist taxation is simply socialism in sheep’s clothing. Land is like any other property in one respect; it is economically scarce. As such, the market is the best way of allocating it, just like with any other scarce resource. End of discussion.

Rob Ross January 13, 2010 at 4:47 pm

Cosmin, your Island description is astoundingly similar to George’s analysis of private property in land. He said “Place one hundred men on an island from which there is no escape, and whether you make one of these men the absolute owner of the other ninety-nine, or the absolute owner of the soil of the island, will make no difference either to him or to them.
In the one case, as the other, the one will be the absolute master of the ninety-nine – his power extending even to life and death, for simply to refuse them permission to live upon the island would be to force them into the sea.”

– Progress and Poverty by Henry George. Book VII, Chapter 2.

Silas Barta January 13, 2010 at 6:37 pm

@Jeffrey_Tucker: I want to point you to my past thorough refutations of the attempt to distinguish IP rights from radio wave rights. Your latest comment also fails to distinguish the two:

The point is not intangibility. It is scarcity and the possibility of conflict over claims.

And people can’t come into conflict over who has the right to instantiate Harry Potter stories? Sure, you can certainly favor one party in the dispute, and consider one party’s to be illegitimate. But your’e going further here and saying that the conflict completely doesn’t exist, which is false.

Radio waves are scarce. Ideas are not.

As I repeatedly ask people on this issue: what exactly are you claiming is scarce, and what are you claiming is not? When you cut through the ambiguity and talk in clear, precise terminology (like Stephan_Kinsella asks of us), here’s what you get:

- Radio waves are NOT scarce in the sense that infinite people can transmit all at the same frequency.
- Radio waves ARE scarce in terms of how much information can be transmitted at a given frequency.
- Ideas are NOT scarce in the sense of how many times they can be re-instantiated.
- Ideas ARE scarce in terms of how man people can have exclusive rights to use them.

Radio waves are more useful when people don’t have unlimited rights to blast away at a given frequency. The “ideasphere” or “noosphere” as it’s called, can be more useful when people don’t have unlimited rights to instantiate them.

What makes one of them justify property rights and the other not? You’re making a subtle jump when you claim radio waves are scarce, and you need to understand exactly what you are claiming is scarce. Please read my above link.

In fact, earlier the article said that something cannot be private property if it generates contradiction: one person’s rights come at another’s expense. This is always the case with IP: you are not permitted to independently discover the same idea that I discovered and claimed, even though the possibility for infinite reproducability exists.

This is a confused position. All property rights come at the expense of someone else’s right to use that property. All rights come at the expense of other claimed rights.

If you only meant that property can’t come at the expense of another’s *valid* rights, well, your argument has become circular.

Bala January 13, 2010 at 7:24 pm

Silas,

” Radio waves are NOT scarce in the sense that infinite people can transmit all at the same frequency. ”

Right.

” Radio waves ARE scarce in terms of how much information can be transmitted at a given frequency. ”

Right.

” Ideas are NOT scarce in the sense of how many times they can be re-instantiated. ”

Right and wrong.

” Ideas ARE scarce in terms of how man people can have exclusive rights to use them. ”

Wrong. The whole concept of “scarcity” is fundamentally that there is only 1 of a particular existent. You therefore guilty of using an outcome of scarcity for the definition of scarcity itself.

So, your analogy fails.

J & C January 13, 2010 at 10:51 pm

This relatively old article is still exceedingly relevant and crisp in style and substance. It is a pleasure to read and makes very good points about the importance of private property and the truly small part that government needs to play in society.

Although we are so far away from the ideal circumstances it advocates that it is almost certainly impossible for us to realize in our lifetimes, it makes for an excellent intellectual exercise.

Outstanding reading, Mises Institute. Keep it coming.

P.S.
Rob Ross makes no sense but his assertions are still valuable to the discussion. Keep those coming, too!

Inquisitor January 13, 2010 at 11:22 pm

“I’m banking on the perhaps idealistic presumption that many of this blog’s readers have not been immunized to new ideas.”

By immunised I mean not easily fooled…

Cosmin, if you want them to write an entire dissertation on an ethical question in a book that is outlining for Objectivists how market anarchism might work a) I suggest you get real b) I suggest you look to other sources, such as Hoppe or Kinsella.

Gil January 13, 2010 at 11:59 pm

“What is most disturbing about renting land from the government is the fact that, without any land, you cannot own anything else . . .” – Guard.

How is that ‘disturbing’? If you don’t own land in Anarchotopia then you’ll be renting land from a private landowner – i.e. you’re back to square one and you can’t (apparently) own anything else either.

Kerem Tibuk January 14, 2010 at 2:26 am

It is amusing to see a land socialist debating Ip socialists.

Welcome Rob Russ. Don’t get irritated by the attacks of the IP socialists. They are very similar to you in regards to arbitrary assertions on what is property and what is not.

Peter Surda January 14, 2010 at 4:55 am

Dear Kerem,

actually it is you and not the IP opponents that are IP socialists. Because on one hand, you assert that immaterial goods are property, but only recognise ownership of certain types of them. With regards to the others, such as patents, you are an IP socialist.

Voluntary January 14, 2010 at 7:42 am

Gil,

In anarchotopia, you can work hard, save and buy land.

In your governmentopia, you can never own the land you buy, you must pay rent to government.

I conclude that you enjoy being the property of the government and would like the rest of us to share your fate.

KevinC January 15, 2010 at 12:13 am

The radical concept here is that you own your property with taxation. A property tax implies lack of ownership and so few people understand this concept it is mindboggling. The rest of the article gets in the way of explaining this simple fact.

JoanB January 15, 2010 at 12:16 am

The use tax is right out of the communist manifesto. The document that everyone pretends is not being followed. Of course the ideas of use taxes are built on the concept of fiat currency and the idea that you are the property to be regulated.

Prakash January 15, 2010 at 3:43 am

In the spirit of looking at our commonalities rather than differences, let me try to bring to the austrians the commonalities they have with Henry George’s ideas.

First of all, let us recognise that for better or worse, governments of the earth are sovereign over large parts of the earth. They are strong and can very effectively remove any opposition if they have the will.

Now, in this circumstance, to have a new market order, you will have to establish a seastead of some kind or a flotilla of “pirate” ships. If you have a seastead, how would you attract new talent? You are the sovereign over your ship. Will you sell parts of it out or will you give them on lease? The answer is of course subjective. It is totally upto you. If you were seeking to migrate into a seastead, what policies would you choose, what deals? That is also totally upto you.

So, in the situation where people are either creating new jurisdictions or shopping for new jurisdictions, georgism is just one of the flavours that can be offered in the market.

So, what might be a correct policy for the situation we already exist in? People are being taxed already. Given that, from the perspective of long term capital growth, a land tax is better than a VAT which is better than a general income tax which is better than taxing capital gains which is better than taxing dividends. Admit it. A land tax keeps people honest about the amount of land that they really need. It does not penalise enterprise if the “mixing” rules are defined correctly. There is no scope for corruption if you go in for a self-assessment system. Isn’t that just better than the great complexity of income tax?

newson January 15, 2010 at 5:35 am

silas says:
“Radio waves are more useful when people don’t have unlimited rights to blast away at a given frequency.”

why? how can you possibly come to this utilitarian conclusion?

Kerem Tibuk January 15, 2010 at 8:04 am

Prakash,

“So, what might be a correct policy for the situation we already exist in? People are being taxed already. Given that, from the perspective of long term capital growth, a land tax is better than a VAT which is better than a general income tax which is better than taxing capital gains which is better than taxing dividends. Admit it. A land tax keeps people honest about the amount of land that they really need. It does not penalise enterprise if the “mixing” rules are defined correctly. There is no scope for corruption if you go in for a self-assessment system. Isn’t that just better than the great complexity of income tax?”

If you are going to be taxed the fairest would be the one that would mimic the free market expenses regarding the basic government service (the protection of property), the closest.

And that would actually be a wealth tax, since the expense of “insuring” property would be proportional to the wealth that is being insured, or protected.

Of course in a free society the percentage of this wealth tax would be very small relative what is being paid today, but that is another matter.

Sea steading analogy doesn’t fit, because that is not really a natural outcome of homesteading but a force major situation brought about the current statist system. In a free society no one could homestead a big chunk of land and carve out pieces.

Prakash January 15, 2010 at 9:13 am

Kerem,

Wealth tax is fair. definitely fairer than income tax. Most fair.. I don’t think so. Most people in a georgist world would have more or less worked for their wealth. So, it wouldn’t be fair to tax them extra and more importantly, less competitive in an international sense. When you tax wealth, it does leave your jurisdiction.

Cosmin January 15, 2010 at 1:12 pm

Land property diminishes the freedom to act of others. In that sense, it is theft.
Today, I am free to climb that mountain I see in the distance. When I get there in 3 weeks, I realize you got there 2 days before me and fenced it off. I’m no longer free to climb it.
Why should I then accept that bordering is a valid way of acquiring land property?
And even if I accept it, someone else might not. The situation may create disputes where none need be.
Don’t delude yourselves. Land property can and often is used as a form of control, by creating artificial scarcity. In my island example, Bob doesn’t homestead as much as he can because he wants to exploit the resources. He does it because he knows that when Alex runs out of water reserves, Bob can sell some to him for a price that will put him in debt for the rest of his days.
When the goal is to control through created scarcity, the hand-waving, theoretical solution of “other men, operating within the framework of the free market, [...] bid it away from him and put it to work producing wealth.” no longer applies.

Now, the facile solution would be to have a government collect the land tax. While that tax would still be fairer than any other, I think a solution can (and would) arise in an anarchic system.
Since one person’s holding of a disproportionate amount of land creates conflict, where other’s would attempt to make use of that land, the owner has to buy protection for his land holdings. What if he were to pay off potential invaders (by paying into a fund set up independently), rather than beat them off? The price might be higher, because there would be more of them, so that would be a natural incentive for him to decrease his land possession. At the same time, the guards he would have employed are free to pursue more productive occupations. That means the society he sells the produce from the part of land he exploits to is richer, so he can get more in return.
The landowner would be compelled to adhere to this alternative if he were simply withdrawn the immunity of prosecution for causing bodily harm to a trespasser on this land (which would follow directly from this land not being property).
Furthermore, since this “tax” would be closely related to the number of “potential invaders”, it would rise in step with population density and their valuation of that particular area in an awesome example of supply and demand on the free market and would provide an actual, effective way to “bid it away from him and put it to work producing wealth.”

Inquisitor, your suggestion that I “get real” does not advance the debate others and I raised about the assumptions and assertions that form the basis of the present article. If you do not desire to engage in such a debate, perhaps silence on your part would be a more appropriate course of action.

Old Mexican January 15, 2010 at 5:51 pm

Re: Cosmin,

Land property diminishes the freedom to act of others. In that sense, it is theft.
Today, I am free to climb that mountain I see in the distance. When I get there in 3 weeks, I realize you got there 2 days before me and fenced it off. I’m no longer free to climb it. Why should I then accept that bordering is a valid way of acquiring land property?

How do you know he just homesteaded the mountain? How do you know it did not belong to him before he fenced it? What if he fenced it because he was seeing a trespasser climb his mountain without his permission?

Don’t delude yourselves. Land property can and often is used as a form of control, by creating artificial scarcity. [...] When the goal is to control through created scarcity, the hand-waving, theoretical solution of “other men, operating within the framework of the free market, [...] bid it away from him and put it to work producing wealth” no longer applies.

You are assuming that scarcity is created when people homestead. You have it exactly backwards – resources are homesteaded because they ARE scarce.

Now, why do you conclude that holding private property stops the process of trade (i.e. free markets)?

Now, the facile solution would be to have a government collect the land tax.

That’s not a solution – what was the problem that the tax is purported to solve?

Since one person’s holding of a disproportionate amount of land creates conflict, where other’s would attempt to make use of that land, the owner has to buy protection for his land holdings.

You’re begging the question – what’s “disproportionate”? Compared to what? According to whom?

Old Mexican January 15, 2010 at 6:10 pm

Re: Cosmin,

Let me posit this scenario: Two people are shipwrecked on a desert island. They wake up at the same time. Person A (let’s say Alex) goes to rescue some water bottles from the ship, catch some fish and build a shelter. Person B (let’s say Bob) runs around the island planting signposts from time to time. They meet again after 3 days. Alex, having satisfied his immediate want for sustenance and shelter, wants to go see what other opportunities the island might offer to him.
Bob says that he can’t do that, for he would be trespassing on his property. As per the article, Bob was “ambitious, quick and intelligent enough to acquire the property before anyone else”.
Why would Alex agree that “bordering” is an acceptable way of acquiring property?

Interesting that you would describe a situation were person A satisfies his needs for shelter and food while B was just walking around the island pushing signposts into the ground. Was B also satisfied for his food and shelter needs?

One of the easiest traps the uninitiated in economics falls always is assuming people value the same things the same way in every situation. In this case you posit a scenario where A just has to wait until B starves to death so that A can resume his visits around the island. Your mistake is thinking that facing such a dire situation, Person B would still find it more profitable to carve the island up into territories, FIRST, before his immidiate physiological needs are met (i.e. food, water and shelter.)

Bob, meanwhile, acquired capital not by savings, but by defining his actions as “acquisition of capital” and, through circular reasoning, decreeing the rest of the island as his property (since he performed on it the act that “acquires property”).

He did nothing of the sort. What he did was to waste resources – his time – that he could have used to also garner food and shelter.

The Tannehills’ arbiters rule on disputes in bordering, but the article did not establish that bordering is a legitimate way of procuring property, never mind establishing the legitimacy of land property.

The legitimacy stems from two prerequisites: One, the land is not claimed by anyone else who can demonstrate ownership, and two, demonstrate that the homesteader used his labor to modify the land. Saying “I claim this land in my name” and then going away would not constitute homesteading, otherwise the Moon would be American territory.

After all, even if Bob and Alex agree amongst themselves to split the island and own half each, what happens when Charlie washes ashore a week later? Is he destined to be their slave? Or ship out?

If Bob and Alex agreed on something, it would be logical to assume Charlie could also make an arrangement with both Bob and Alex.

Cosmin January 15, 2010 at 6:59 pm

Old, did you even read the article we’re commenting on here?

You said: “How do you know he just homesteaded the mountain? How do you know it did not belong to him before he fenced it? What if he fenced it because he was seeing a trespasser climb his mountain without his permission?”
The article went on and on about fencing being the way to acquire property title to a portion of land. By which novel mechanism do you propose that he acquired the mountain as property before even fencing it? Also, way to miss the point of the thought exercise.

You also said: “You are assuming that scarcity is created when people homestead. You have it exactly backwards – resources are homesteaded because they ARE scarce.”
I already referred to an island example that I posited higher in this thread. Going back to it, we can see that fresh water sources are indeed scarce on the island. However, they provide more than enough water to satisfy the needs of our stranded islanders. By homesteading most of the island, Bob can create an artificial scarcity of drinking water for Alex. I don’t see how you can still refer to that as a free market.
I’m curious, how do you see the island scenario play out? I would imagine that Alex would start by paying for drinking water by building a shelter for Bob. Then, he would exchange caught fish for drinking water. Bob would soon realize that he wouldn’t even need to go pick fruits. He can simply increase the price of water, so that Alex has to bring him more fruit and more fish and more everything. In fact, he can set the price of water so high that Alex needs to go into debt to afford paying for his water. After a while, Alex would get sick of working to support Bob and decide to not pay for water but simply go get his own, even trespassing on Bob’s land. Bob would then “defend his property” and they would become locked in a fight to the death. As you see, conflict is inevitable. And you still ask what the problem is?

Lastly, you said: “what’s “disproportionate”? Compared to what? According to whom?”
It would be disproportionate compared to the amount of land that same person would be able to hold under a true free market system.

Cosmin January 15, 2010 at 7:24 pm

Your second message hadn’t appeared when I started writing mine, so I’ll answer it here.

“Was B also satisfied for his food and shelter needs?” He decided to forgo shelter and subsisted on bananas during his homesteading trek.

“What he did was to waste resources – his time – that he could have used to also garner food and shelter.” No, he was what the Tannehills call “ambitious, quick and intelligent enough to acquire the property before anyone else”.

“The legitimacy stems from two prerequisites: One, the land is not claimed by anyone else who can demonstrate ownership, and two, demonstrate that the homesteader used his labor to modify the land.”
The article goes into detail about how “modifying the land” is not a requisite. Just bordering. As much as you can grab through the virtues of intelligence, quickness and ambitiousness.

“If Bob and Alex agreed on something, it would be logical to assume Charlie could also make an arrangement with both Bob and Alex.”
They didn’t agree to splitting the island, half each, after Bob homesteaded it. That was an alternate scenario, where their conflict was resolved (maybe they both raced to homestead before worrying about shelter). It was meant to show that the base issue still isn’t resolved, since a new conflict arises when a new arrival appears.

Logic? January 16, 2010 at 11:46 pm

the man who seeks the unearned is a parasite,
it is said, so then that makes us all parasites, because we seek to live, and life is not something we earned.
Should all humanity be suppressed then?
Or think of babies, what is it that they earned? Or in not yet born babies. Are they parasites? Or think in how so many of the commercial transactions we make are compasive with the seller, how we constantly forget our benefit for the benefit of other. Free from serfdom, but also from serfdom to this hell, please.

Rob Ross January 18, 2010 at 2:28 pm

Cosmin, you’re on exactly the right track. Keep thinking on these issues, and I’m sure you will arrive at the correct conclusions.

Cosmin January 18, 2010 at 10:17 pm

I thought I already did.

jefferson thomas January 19, 2010 at 10:43 pm

Prakash said:

People are being taxed already. Given that, from the perspective of long term capital growth, a land tax is better than a VAT which is better than a general income tax which is better than taxing capital gains which is better than taxing dividends.

Or as Milton Friedman memorably put it, property tax is the “least worst tax” economically speaking.

And the land-only tax (or user fee) championed by Henry George actualy is beneficial, in part due to its market-freeing action. Speculation applied to land — a unique, inelastically supplied factor of production — gums up the wheels of the market. It holds land non-productively off the market and jacks up prices. Land tax, uniquely, removes the profit from speculation.

Untax improvements, thereby converting the property tax to a pure land tax (more accurately, a user fee). Remove all the other taxes on production and trade, and what do you begin to have? An actual free market. Now we’re talkin’!

jefferson thomas January 19, 2010 at 11:36 pm

mike said:

This is why I don’t buy the whole “nothing will get done without IP” line. Any time I come up with something really creative, I am far more concerned that it come to fruition than being compensated for it. Real genius wants to get out, and won’t let a little thing like monetary compensation stand in its way. If anything, IP just results in a proliferation of “noise” making it hard to find the “signal”.

YES! People who say that without IP monopoly there isn’t enough “profit incentive” to create, appear not to understand that true creatives create out of an inner drive and the joy they derive from doing it.

IP rewards mediocrity more than the lack of it would dissuade excellence, since the real inventors, innovators and artists would do what they do in most cases even without any pay!

Some things cannot be reduced to the drive for more money.

That’s what the management at the sales job that I left last year simply did not understand. They thought everyone just wanted to be a sales drone with no life except making money, money, and more money. I told them, in so many words, that that’s not my idea of a life.

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