not entirely true, as its a matter of demand and supply.
Or more importantly, the relative elasticity land demand and supply to other goods and services, which explains why economists (since Adam Smith onwards) have all universally recognised the efficiency of land tax. As Paul Samuelson remarks.
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.
The problem with Alan Moran's remark:
"Much of the wealth represented by housing is illusory. It is created by government rationing of land. This causes inflation in land prices."
.. is that public and private landholders reduce supply. Thus his 'solution' is to take land out of democratically-controlled management in favour of private landlords. This too will increase the price of land by reducing supply. So it's not a solution at all - worse still, Alan Moran knows this. I am astounding by his dishonesty in this issue. It's not as if he needs the extra money that the IPA provides.
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Re: fere libenter homines id quod volunt credunt
Date: 2008-09-25 01:13 am (UTC)Or more importantly, the relative elasticity land demand and supply to other goods and services, which explains why economists (since Adam Smith onwards) have all universally recognised the efficiency of land tax. As Paul Samuelson remarks.
The problem with Alan Moran's remark:
"Much of the wealth represented by housing is illusory. It is created by government rationing of land. This causes inflation in land prices."
.. is that public and private landholders reduce supply. Thus his 'solution' is to take land out of democratically-controlled management in favour of private landlords. This too will increase the price of land by reducing supply. So it's not a solution at all - worse still, Alan Moran knows this. I am astounding by his dishonesty in this issue. It's not as if he needs the extra money that the IPA provides.