Mid-East Views, Land and Resources.

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YouTube has an excellent six minute video that show many of the difficulties of Palestians living under Israeli occupation. Many of el-jays resident libertarians show themselves to be against freedom (for Palestinians). On topic, homais says some very sensible and balanced things about the current conflict in Lebanon, which are quite similar to the concerns of Johnathan Steele. How could both sides have blundered so badly?

A certain trouble maker has been warbling on about land and housing issues. The fundamental claim is correct; well meaning legislators who ration land are just as much to blame for rising house costs as a taxation system that does not capture the unearned increment in rising land prices. In other resource related news, the ALP is set to ditch their uranium policy, an action will undoubtably lose more votes than what they'll gain. Professor Emertius Ian Lowe has a different idea about energy. Further on-topic (from soulvessel Exxon is still avoiding payouts from the Valdez oil spill of 1989. You can email the CEO here.

claudine_c's speech at the Unitarians on rural health work in India was excellent. Noted the particular difficulties of dealing with an entrenched caste system and the inappropriateness of "western" medical mores. Followed by Brent McAuslan's discussion on the history of war at the philosophy group. Discussion tended towards the psychological motivations. Then the Cybernoia game which imajica_lj has summarised. In rodent news, Vagabond has hurt his spine, probably following a fall. Every dozen steps he lets out a sharp squeak of pain. He's currently drugged up on metacam and sleeping soundly ;-). Well done to dr_nic for providing the worst company URLs.

Comments

[peachik.livejournal.com]

Hey there, found your journal through the Libertarianism community.

I don't claim to be a real estate expert (especially not as it relates to the Australian markets), I was wondering if you could clarify why someone would have an incentive to let a building go derelict rather than convert into something that generates revenue - unless they lacked the funds to make the improvements, in which case higher taxes will not help that process.

If land owners are sitting on the land speculating that it's value will rise, why should they not be allowed to do so? I don't know how I feel about the government punishing low time preference to increase supply. But perhaps I misunderstand you...

[tcpip.livejournal.com]

Hey there, found your journal through the Libertarianism community.

Oh goodness ;-)

Anyway, WRT to land...

Firstly, if the speculated increase in land improvements is greater than revenue gains from improvements then it is better to let the land remain idle and allow others around you to do the work in improving land values.

Secondly, unlike all other taxes, taxes on land ('land' being the economic term, i.e., all natural resources) actually decrease the price of a good because it removes said speculative component from the equation leading to a price more based on use-value.

Thirdly, ownership of land is a bit of an iffy one in economics. Recognising the right to own products of their labour (and of investments in human-made machinery etc) is not the same as recognising the right to own land. Land existed a priori to any of this; a gift of Providence if you will. So what one really buys in their title deed (among the "bundle of rights") is the right to possess in exclusion to others.

As Milton Friedman (from one side of the economics world) once wrote:

"There's a sense in which all taxes are antagonistic to free enterprise -- and yet we need taxes. ...So the question is, which are the least bad taxes? In my opinion the least bad tax is the property tax on the unimproved value of land, the Henry George argument of many, many years ago."

And from the other, William Vickery

"Economists are almost unanimous in conceding that the land tax has no adverse side effects. ...Landowners ought to look at both sides of the coin. Applying a tax to land values also means removing other taxes. This would so improve the efficiency of a city that land values would go up more than the increase in taxes on land."

There's a geolibertarian FAQ out there if you want a primer on the subject.

http://members.aol.com/_ht_a/tma68/geo-faq.htm

Finally, welcome to the journal. Hope it provides much interesting reading.

[peachik.livejournal.com]

Thanks for being rational and patient. Unfortunately those are rare qualities these days... As you've clearly studied this more than I, forgive me if some of my questions seem elementary. But when I find someone such as yourself who is willing to share insight and knowledge freely and without pedantry I try to take advantage. SO-

With regard to you first point: agreed. But this is a risky and protracted venture. I think we need to consider the time involved. Idle land always has a hefty opportunity cost, especially in a rising market. I may misunderstand your argument but it seems as though you are positing that a property is worth X in 1998, Joe Landowner has an interest in leaving it idle until 2006 when he (hopes he) can sell for X+2. However, Joe has to consider the money he could have made with the property in the intervening 8 years had he made improvements or leased to someone willing to do so, that revenue might very well be greater than X+2. For these reasons I question the actual prevelance of this sort of speculation. It's my understanding that derelict buildings tend to come about so that they can be counted as an investment loss for the purposes of reducing other taxes of the land owner (income tax, capital gains, etc) when such taxes outweigh the amount the owner might make from improving or selling the property, at least in the short run.

With respect to your third point: again I agree you are basically buying exclusivity. I think if anything this undermines your contention for a land-valued tax. It doesn't make sense that your right to exclude should become more costly (i.e. more public resources are required to ensure that right) just because the market is going up, you're still using the same amount of government services / protections to maintain your exclusivity as you were before.

If Vickery's point were true I don't see how the taxes would encourage more effecient use or increase market liquidity: which if I'm not mistaken was the stated goal of the tax (I'm not even sure if that's an appropriate purpose for taxation, but that's another issue). If the value of the land is still appreciating faster than the tax then one might still have an interest in a speculative hold-out. Moreover, my personal observation finds his assertion to be is false. Maybe it's just because I live in New York City, but I have NEVER seen a municipal government propose: "Because we're now raising money with Tax A, we can now eliminate/reduce Tax B". Even if they use that argument to sell the new tax, somehow it rarely, if ever, comes to pass that the old tax is phased out or reduced. But that's just my anecdotal experience and perhaps not valid in this discussion...

I will definitely check out the link, thanks!

Mark

[tcpip.livejournal.com]

But this is a risky and protracted venture. I think we need to consider the time involved. Idle land always has a hefty opportunity cost, especially in a rising market.

It is true that it has an opportunity cost, but it is most certainly not risky as land prices will always increase in an environment of positive economic growth and positive population. As for being protracted that demands on the rate of economic or population growth.

you're still using the same amount of government services / protections to maintain your exclusivity as you were before.

Actually, you would have to be using more; either excluding a greater number of people or excluding services to greater value. Otherwise land price wouldn't increase.

I don't see how the taxes would encourage more effecient use or increase market liquidity

It most certainly increases more efficient use on the assumption (and empirically confirmed) that people want to pay less taxes. So if land is what attracts taxation, owners engage in minimising their use of land and maximising investments in other places.

Vickery's point is further confirmed by yet another Nobel Memorial Prize winner Paul Sameulson..

"The striking result is that a tax on rent will lead to no distortions or economic inefficiencies. Why not? Because a tax on pure economic rent does not change anyone's economic behavior. Demanders are unaffected because their price is unchanged. The behavior of suppliers is unaffected because the supply of land is fixed and cannot react. Hence, the economy operates after the tax exactly as it did before the tax--with no distortions or inefficiencies arising as a result of the land tax."

"Because we're now raising money with Tax A, we can now eliminate/reduce Tax B".

There's plenty of evidence of this. Pittsburgh (and twenty other cities in Penn.) for example was faced with the problem of whether they tax land or tax buildings for their city council. Most ended up choosing a split-rate system; say 5% for land and 1% for buildings.

Further, in Victoria, Australia there were plenty of referenda among councils over whether to have capital improved value or site value as the basis for Council rates. Most chose site value.

[peachik.livejournal.com]

Well put. Lots to chew on: Thanks for the food for thought...