Archive for the ‘Georgist/geoist’ Category

Putting government pension costs into perspective

Wirepoints recently issued a helpful report showing state and local government pension debt per Chicago household.  They estimate the burden at $144,000 per household.  This is a big number, but one could suppose that a prosperous household, over decades, could bear such a burden.  Some could, but probably not those below poverty level.  Take them out of the picture and the per household amount rises to $172,000.  Excluding households with incomes below $75,000, or below $200,000, and the per-household amount rises further, to $393,000 and $2,022,000 respectively.

Here’s their chart: pension debt chart

Of course this doesn’t consider land values, nor businesses.  If prime Chicago land is worth $1,000/sq ft, that’s 5.38 sq miles.  But more typical land value is much less, probably no more than $25/sq ft. (it seems that nobody has tried to estimate citywide values). That would be 112 square miles.  Once we subtract land owned by governments, churches and other exempt nonprofits, we might be approaching the total value of all land in Chicago. And that’s just for pensions, not bonded debt, nor needed capital improvements.  Real estate buyers know, or certainly should know, about these encumbrances.

Of course money can be raised from business taxes, but that’s hardly a way to grow economic opportunity for Chicagoans. I would consider any tax revenue from “gaming” as a kind of business tax.

The lesson Wirepoints draws from this is that pensions have to be downsized somehow, which required amending the state constitution.  And they go further, comparing government salaries to those of the private sector:

some local gov't salaries compared to average workers

So it looks like we’re going to have to confront a large number of people with guns and firehoses and control over our children, who have been getting a lot of money from us for years and may prefer not to moderate their demands.

Tho I don’t know how, this problem will be solved. Maybe MMT will yield a continuing stream of funds to bail us out.  Maybe inflation will accelerate such that the fixed 3% compounded pension increase isn’t a burden.  Maybe Chicagoans will decide that they just don’t want so many government “services.”  Maybe politicians will decide to remove all taxes from productive economic activity, taxing only the value of land and other privileges (such as the private monopoly over street parking fees), which will grow the economy (while reducing the need for emergency services) sufficient to make pensions a non-issue.

And when it is solved, those who own land and other privileges will benefit most.

“Chicago’s growth spurt” part of expanding Gaffney trove

Michigan Avenue around 1912.

As Polly Cleveland continues her project posting Mason Gaffney’s works, we find “Chicago’s Growth Spurt, 1890-1900.”  It’s not very long, and worth reading today as a contrast to our current stagnation. Most importantly, Gaffney deduces circumstantial evidence that during the era of growth, land values were significantly taxed.  As he notes in conclusion, “More research into Chicago’s political history is needed.”

The whole trove contains dozens of working papers, class notes, and publications, in Gaffney’s concise and understandable style.  (You’ll find it linked here as well as above; depending on your screen size and magnification you might need to scroll over to the right to see it.)

 

Ideas from Jeff Smith

Jeff Smith has provided some interesting ideas for achieving geoist progress, and enumerated a bunch of them in a February 15 2018 email to many geoists with subject line “Re: LT: Re: Trump Infrastructure Plan Calls for Value Capture Financing“.  Previously and subsequently, Jeff has suggested that geoists should act in accordance therewith. Possibly because of the subject line, or the nature of internet discussions, some of us may have forgotten or never seen this message. Jeff’s text is reproduced below:

Never forget reading is part of the problem. Doing is part of the solution.
 
The fact that I’m the only Georgist with the curiosity to research what’s known about social change is a very telling fact. I should not be your gatekeeper to this world of fascinating information. Every or at least dozens of
 
people with the dream of changing society should want to know how society changes!
 
To not want to know is a constant reminder that I’m a member of a mad species — just like most people don’t want to know how to make economies work right.
 
Here are some efforts of others who know paradigm shifts follow principles:
 
Kuhn is the classic. “Old minds don’t change; they just die out, replaced by young open ones.” So appeal to the young. Learn to dance, you stiff fuddy-duddies. Our problem: Georgist elders attract youth exactly like themselves—conservative, conformist, obedient, not your classic profile for agents of change. https://www.ted.com/talks/derek_sivers_how_to_start_a_movement
 
More recently, Reich’s 4 buttons: Rot at top, Barbarians at gate, Self-made, Group identity. Even though by a Dem (Clinton’s Labor Sec), only Trump was savvy enough to use them, unlike us and other ideologues: http://changingminds.org/disciplines/storytelling/plots/reich_narrative.htm
 
Lakoff, one of my grad school contemporaries, is also ignored for urging do-gooders to learn how to frame: “Frame yourselves before others frame you.” You framed yourself as a taker (taxist), not a sharer, like basic income, which has far more innate appeal: https://medium.com/indivisible/george-lakoff-on-indivisible-36931ee03c5
 
Use unique language, like “geonomics” not boring code like “LVT”: https://www.bustle.com/p/9-genius-ways-to-change-someones-mind-according-to-science-2307178
World Bank: To measure progress, count (John Berger made the same point):  http://blogs.worldbank.org/voices/5-tips-on-starting-a-social-movement
 
Develop empathy, lose British classism and academic snobbery: “Strong beliefs, loosely held.”  https://heleo.com/facts-dont-change-peoples-minds-heres/16242/
 
Harvard: Engagement, not rhetoric—interact with real people on their terms:  https://hbr.org/2016/11/what-successful-movements-have-in-common
Leadership—suggestions for everyone, even non-alpha rats: http://nclp.umd.edu/resources/social_change_model
Source of millions of volunteers, an enormously valuable resource for Georgists to ignore: https://www.dosomething.org
 
 
But don’t limit yourself. Google. Yet balance mere reading with actual doing.
 
I have my own that worked to start several cutting-edge groups: How to Make a Movement in 5 Easy Steps:
1 Message
2 Members, including celebs
3 Money
4 Media, including star power
5 Maintenance—every other meeting should be a party. Seriously.
6 aMass the Multitudes—demonstrate—and Meet the Minions of the Moguls—i.e., lobby.
7 Make Merry your victory
 
Georgists fail at Step 1, so they can’t get out the gate. They must redo Step 1 and translate their message into the language of their intended audience. To know what to say, they’d have to use focus groups, polls, and surveys. But that’s too rational for ideologues, so far.
 
“We cannot become what we need to be by remaining what we are.”
 
You can’t reform by conforming. You just lose the respect of both reformers and conformists.
 
If there is a mistake to be made in shifting paradigms, Georgists have made all of them.
 
Thanks, Fred, the opportunity to feel nostalgic for old, ignored, powerful ideas. You did not offer to quit doing what does not work and devote that time to doing what does work. Hence, most likely, you asked me to waste my time. 
 
“The dog barks but the caravan moves on.” Into the desert.
 
I should stop barking now.

Jeffery J. Smith
Author, Perfect Timing. 503/568-5889
Co-founder, principal, DocTours. 707/355-3002
https://www.medicaldentaltourism.net

Notes on farmland from the 2017 Census of Agriculture for Illinois

wind turbines in a farm field

1009 Illinois farms have leased wind rights to others. (“Farms” by jopaha is licensed under CC BY-ND 2.0 )

The 2017 Census of Agriculture Illinois report was issued earlier this month, and here are a few statistics of interest:

Total value of land and buildings for the 72,651 farms in the state was $196,542,978,000. This amounts to $2.7 million per farm, and $7,278 per acre. Real estate taxes paid were $431,625,000, implying an effective tax rate of 0.22%.

58% of the acreage is tenant-farmed.  However most (44,378) of the farms are owned by the operator, whereas 6,021 are farmed by tenants.  The remainder (22,252) combine owned and rented acreage. The rent may be cash, or a share of crop, or other arrangement. Cash rent was reported to total $1,956,402,000.

Remember that whereas Georgists are concerned about who receives land rent:

  • The above figures may be mostly land, but do include buildings
  •  Even farmland may have some improvements, for example drainage tiles, and the value added by these is not “land” for purposes of political economy.

Illinois contains 7,992 very small farms of 1-9 acres (Anything smaller than 1 acre isn’t counted in this census,)  Most have less than $2500 revenue, but 64 of them report $1,000,000 or more.  3122 are operated by people who say farming is their primary occupation.

The report contains a huge amount of detailed information gathered from farm operators.  That may help explain why the actual response rate (nationally) was just 71.8%, with systematic estimates covering the remainder. This rate is down from 74.6% in 2012, and 78.2% in 2007.  Much of the data is reported at the county level as well as statewide.

 

 

 

“The hero turns out to be Henry George”

Ray Kroc’s first McDonalds in Des Plaines, IL, is now a historic site. Image credit: Matt Thorpe CC BY-NC-ND 2.0

I’ve complained before about Russ Roberts’ Econ Talk failing to note the importance of economic rent and land costs.  So I was pretty pleased to hear his guest Philip Auerswald say

I think the hero in all this, and I talk about this in The Code Economy, turns out to be Henry George. I mean, I think he really, you know, the 19th century U.S. economist–and he really anticipated these phenomena more clearly than anybody.

Pleased enough to read Auerswald’s new book. And he does get a lot of what George wrote about.

Auerswald’s main point seems to be that an economy doesn’t just have inputs and outputs, but what’s more important is the methods by which the inputs are used to produce the outputs. That’s “code,” and folks have been using it for 40,000 years.  In recent centuries, standardization and automation of various kinds have increased productivity — the amount of stuff which a given amount of inputs could produce.

And, as we see computers and machine-driven processes increasingly capable of replacing human labor, what will humans do?  He endorses Henry George’s analysis that, as productivity increases, rents will increase.  And he supports the citizens’ dividend (tho he does not use the term), to be funded by a land value tax.

But his concluding pages seem to assume that, of course everyone will have a guaranteed income from land rent, no problem there, but what will people do with their time? To George, the problem was to get a fair distribution (not redistribution, because by right the rent belongs to everybody) of wealth, which he expected would result, over time, in social progress and a more constructive community. When I look at Wikipedia, Flickr, some blogs and a bunch of other internet resources, I tend to agree with George. Auerswald assumes the wealth distribution, but doesn’t assume that people and the community will improve.  If I looked at Facebook or some other sites I might agree with him.

Auerswald also makes interesting use of the concept of comparative advantage, applying it to humans exchanging work with machines. Machines can do certain kinds of work millions of times faster than humans, so logically machines should do such work.  In other tasks the difference might be much less, so those tasks would remain with humans (tho I would guess at much lower wages than currently.) And then there are some “low-volume, high-price” tasks which might remain human monopolies.

*****If you’re not the editor of Auerswald’s book, stop reading here*****

This book is full of irritating errors.  On page 2 is a list of ingredients for chocolate chip cookies, comprising butter, sugar, water, salt, and chocolate chips — but no flour. Page 92 says “slavery was abolished in the British Empire in 1807,” while Wikipedia provides various dates, depending on your definition, in the 1830s or 1840s. Page 120 places Ray Kroc’s first McDonalds in “Desplaines, California.”  Page 175 calls Zipcar a “ridesharing” platform, corrected on page 213 to “car-sharing.”   “As Henry George understood nearly a century ago” on page 232 doesn’t seem likely regarding a man who died in 1897 mentioned in a 2017 book. There are probably more, that historians or various kinds of geeks would notice.

 

Tribune exposes one scandal and misses a bigger one

Property tax needs attention

credit: From Sovereign to Serf (CC BY-ND 2.0)

The Chicago Tribune, or what’s left of it, has issued a pretty good report on inequities and corruption at the Cook County Assessor’s office. Of particular note, they’ve included a lot of detailed statistics looking at assessment/sales price ratios, as well as a lot of details of recent history.  I think it’s fair to describe their main points as:

  1. Less expensive homes typically are assessed at a higher percentage of market value than more expensive homes, and therefore pay more taxes than they would if assessments more accurately reflected market prices.
  2. Sophisticated homeowners are more likely than unsophisticated ones to appeal their assessments, and a large percentage of appeals are successful.  This is one cause of the problem in (1).
  3. The quality of assessments in Cook County doesn’t meet professional standards of accuracy.  The MacArthur Foundation funded development of new mass appraisal methods which may provide more accurate results, but the Assessor has made little or no use of them.
  4. The Cook County Assessor’s office suffers from some combination of corruption and incompetence.

(more…)

Can a citizens dividend reduce violence?

Wikimedia Commons

Wikimedia Commons

The Washington Post says that Richmond, CA has reduced shootings by paying violent offenders up to $1,000 per month to be less violent. The murder rate declined by 50%.  Even tho the cost of this program is less than the cost of adding one cop to the force, isn’t it wrong to bribe criminals to not commit crimes?

Of course it’s wrong, but it seems to work.  So what if, instead of giving money to violent criminals, we gave money to everybody, thru a citizens dividend?

The Richmond program also hires mentors to help the beneficiaries stay out of trouble, which is an additional necessary component of a program like this.

 

More stuff that’s still true about location and “intellectual” “property”

 

Photo by Jimmy Emerson, DVM, (cc) via flickr

Photo by Jimmy Emerson, DVM, (cc) via flickr

Anyone reading this blog might get bored with the number of times I say that Henry George was right, and is even more right today than in his own time.  But that’s what I do, and part of the reason for this blog is to provide a place where I can record show up.

Location is [still] everything, says the new book by Prof David R. Bell.  When I saw the title, I thought it was about land value and real estate, but no, it’s actually about marketing on the Internet and evidence that location matters, a lot, to marketers working in that [virtual] space.  For example, the best initial customers for your Internet business might be those who are relatively isolated and haven’t any local sources for your product.  Subsequent customers might be those nearby to these customers, who learn of you thru conversation or by observing distinctive shipping boxes.  And, for some reason which Bell does not try to explain, even for virtual goods people are most likely to turn to the geographically closest sources.

It’s a nice book for anyone who studied economic geography and marketing in the dark ages, bringing a few things up to date, but quite accessible to every interested reader.

Then there’s the matter of monopoly over text, part of what’s sometimes called “intellectual property” by those who seek to profit by restricting it. This comes from a fascinating interview with writer Poe Ballantine, well worth a listen in its entirely.  Ballantine has found it difficult making a living as a writer, drifting geographically and among relatively menial jobs, mainly in food service it seems. He says that after four books he was still known mainly as “the cook.” But now he has reached the point where he can actually earn a living as a writer.

[starting about 45:35 into the audio]

Q: So your writing is sustaining you financially?

A: The writing is not quite enough, but the appearances, the invitations from colleges and universities are what cover my expenses right now. They pay very well. That’s where the money is; the money is not in selling books, the money is in the universities where people go to get their writing degrees.

So maybe the fighting over copyrights doesn’t benefit the writer? But, at least, sometimes the education monopoly brings about something useful.

 

Low wages mean low productivity

source: Wikimedia Commons

source: Wikimedia Commons

source: Wikimedia Commons

source: Wikimedia Commons

[L]abor is most productive where its wages are largest. Poorly paid labor is inefficient labor, the world over…. The efficiency of labor always increases with the habitual wages of labor—for high wages mean increased self-respect, intelligence, hope, and energy.

–Henry George (Progress & Poverty, Book IX, Chapter 2)

George gives plenty of examples from his time, but modern examples abound too.  I happened on a 2006 article (pdf) by Wayne Cascio comparing how Sam’s Club and Costco treat their labor.  The short answer is: Costco treats their workers much better, including higher wages, better benefits, and more job security. And, the article continues, the results are consistent with Henry George. Based on 2005 data,

 Costco’s hourly labor rates are more than 40 percent higher than those at Sam’s Club ($17 versus $10.11), but when employee productivity is considered (sales per employee), Costco’s labor costs are lower than those at Sam’s Club (5.55 percent at Costco versus 6.25 percent at Sam’s Club).

Similar differences are cited in sales per square foot, and operating profit per employee.  Obviously, the figures nearly a decade later would be different, but I suspect the comparison would be similar.

Retiring regional leader on how to fund infrastructure

from Wikimedia

from Wikimedia

From Marni Pyke’s interview in the Herald:

One way to pay involves value capture — establishing special taxing areas that assume that development like a new road benefits landowners by growth in sales, rents or property values, he said.

“I’m a developer,” Ranney said. “I think developers need to pay more for the value that is generated (by the project). Value capture makes sense. That is something that the real estate community isn’t too keen on — but let’s get real. If you use public dollars to generate private wealth, you can darn well pay for it.”

And an observation regarding transit progress in the region:

Noting he takes the same train from Libertyville that his father took, Ranney added that “nowhere else in the world do they have complacency about exactly the same level of service.”