The Resnicks who, according to Forbes, own 70,000 acres of pistachio and almond trees in California’s central valley, and entitlements to “at least 120 billion gallons of water per year” (enough to supply nearly 2 million households, by my estimate), and additional privileges. Their assets total $4.3 billion, estimates Forbes, including not only California properties but also Fiji Water. At least the government of Fiji manages to collect some tax on the water exported. In the U S, they’re well-connected with major politicians, and how much tax they pay is not reported.
Just another example of how fortunes are accumulated by control of natural resources, facilitated and supplemented by political favors (and, yes, a lot of hard work).
UPDATE December 27 2015: Not for the first time, the Resnicks have shared a tiny bit of their fortune with the Aspen Institute, which is thus funded by water taken from Fiji and California. Silly me, I always assumed the Aspen Institute was in Colorado, but of course for optimal influence and convenient participation by the influential it is in Washington, DC. And, yes, among the Institute’s concerns is water supply.
Another Andro Linklater book, Measuring America, certainly worth the read especially if you’ve not read John C. Weaver’s The Great Land Rush. Not only some history of America’s Public Land Survey System and how it facilitated prosperity (at least for a while), but also some discussion of how the new nation almost adopted the metric system. But, as with Owning the Earth, Linklater commits a big error which makes me wonder how sound the rest of the book is.
In 1830 James Thompson, a surveyor and engineer, was commissioned to lay out a town in Illinois, in the square mile of Section 9, Township 39, Range 14, Second Principal Meridian…[page 181]
No! Not the Second Principal Meridian, and even if it was, there would have to be an “east” or “west” specified (as there should be a “north” after the “39.”) This is not an obscure fact and is referenced commercially as well as by surveyors, assessors, real estate attorneys etc. As this is wrong, how much else in the book might be incorrect?
[I]n Bill Clinton’s encapsulation of political strategy, “It’s the economy, stupid.” But the success of an economy can only be measured by its growth. Since growth requires the accelerated consumption of limited natural resources, it is not a sustainable model in the long run.
If you concentrate on how a place is owned, however, the perspective changes. As this book demonstrates, matters of laws, of rights and of politics become crucial, taking precedence over economics. From that point of view… “It’s the neighborhood, stupid.”
…Around the world and throughout history, neighborhoods have succeeded in a million different ways. It all depends on how the earth is owned.
That, the conclusion of Andro Linklater’s Owning the Earth, illustrates what is right and what is wrong with the book. Our quality of life does does depend on how the earth is owned, and Georgists are aware of the importance and practicality of recognizing each individual’s right to what no one produced. But must a sound economy necessarily use more of the earth’s limited resources? Is there no practical way to use resources more efficiently? And is there no possibility that economic improvement could be measured by anything other than economic growth?
The book is wide-ranging and (mostly) well-written, making connections in place after place between how the right to use nature is recognized, and how well the community developed. It draws some connections that I hadn’t seen before, such as how the growth in mortgages on American farms followed logically from the end of homesteading.
And Linklater does devote a couple of pages to Henry George, but seriously misunderstands why George’s proposals weren’t widely adopted, saying “[I]t is notoriously difficult to arrive at a valuation system that can clearly separate earned from unearned capital appreciation.” Here he means “separate improvement value from land value,” and he is wrong. Practical methods of doing so on a mass basis were described back in 1970 in TRED #5 (outline), which is not posted on line to my knowledge, and in this more recent paper by Ted Gwartney, MAI. And, of course, land values are routinely estimated by appraisers and are a component of almost every U S income tax return that involves commercial or investment real estate.
It is true that, with limited exceptions, George’s proposals weren’t adopted, but for a different reason. Mason Gaffney has provided a compelling and well-sourced explanation (also available in a book), and it is unfortunate that Linklater seems to have been unaware of it. One wonders what else he did not know.
March 1 2015 update: I just discovered that Ed Dodson has produced a more thoughtful and detailed review of Linklater’s book.
Blueseed plans to start operation next year of a floating city, safely outside the twelve-mile limit of U S jurisdiction, where a thousand innovators can work pretty much without the immigration hassles imposed on domestic companies. The “land” of the ocean is of course free to anyone who wants to use it, but there are big expenses in building and operating the platform. Still, they estimate living costs comparable to those of pricey San Francisco (albeit for much smaller living space.) If land in Silicon Valley was cheap, the ocean site would seem expensive, but it isn’t, so it doesn’t.
They’re entirely legal, or so it appears, and don’t seem to avoid Federal income tax altho California taxes might not apply. Blueseed “will work closely with the U.S. Customs and Borders Protection towards an agreement that follows all applicable US laws and regulations,” and it appears access will be from the California mainland so everyone not a legal U S resident will need some kind of U S visa.
But being outside U. S. territory, flying a flag of convenience, what defense has Blueseed against whoever might want to attack them? Not to worry, “pirates … don’t exist near California…” and presumably attacks by government authorities are no more likely at sea than within the country.
Peoria Georgist John L. Kelly has produced a three-titled book making the theological case for economic justice:
I am the second-least-qualified person to review this book. That’s because it takes for granted that the reader is a believing Christian, and that the reader has an Amazon Kindle or other proprietary software (or hardware) with which to read it. I claim neither qualification; what I review here is a text which I was told is the text of this book.
An earlier version of this book is the basis for the course Economics as if God Cared, offered by John Kuchta once or twice each year at the Henry George School of Chicago.
…who spoke for over an hour about cities, development, migration, and density, and asserted that America would be more productive if our cities were denser, and did not mention economic rent nor land value?
They did it here, on econ-talk, and you can download the podcast or just read a pretty good text summary (I do not recall them using the word “land” either, but it appears several times in the text summary so I must have missed it). The book itself seems to be available only on Amazon Kindle, which as I understand it means I cannot buy it, but only license a copy to read. But from the interview I gather that author Ryan Avent has determined that American cities (and some suburbs too) are not as densely developed as they “should” be, and that this is due to local governments’ reluctance to allow development at optimal densities.
Now certainly there’s no question that local governments, usually reacting to neighborhood concerns, often refuse to allow development at densities which are physically workable. I recall one suburb where a proposal would have had single-family houses on lots of 9000 square feet. Community reaction was that the kind of people who would live on such small lots would not be desirable neighbors, even tho in many other cities such a lot would be considered oversize. These concerns are often stated as “property value” arguments, and perhaps they really are. That’s an expected consequence of an economic system where ordinary people cannot expect to accumulate much money by working and saving, and must hope to profit from rising prices of the real estate they occupy.
And it’s not unknown for the politicians whose approval is needed for major developments to take advantage of the opportunity for personal gain, legal or otherwise but surely wrong.
So how is it to be decided what the optimal density is? In Science of Political Economy, Henry George observes that, for each kind of production, there is an optimal density at which to work. That density depends on what is being produced, the technology applied, the number of workers available, their skills, the quantity to be produced, etc., so it will change over time. Avent may be correct that we would be better off if higher densities were permitted in some already-dense desirable places, but he certainly didn’t offer much evidence in this podcast.
But let us assume that higher density would be a good thing (and I am certain that in some places it would be), how is it to be achieved? Avent seems to assume that a reduction in land use regulation would be the proper method, because the market is efficient and so density would rise to the appropriate level.
But communities are more complicated than that, and you can’t, or at least shouldn’t, ignore externalities. The first builder to put a high-rise in a desirable townhouse neighborhood may profit nicely. However, not only does the character of the community start to change, but different infrastructure is needed. Can the streets handle the traffic, or can acceptable public transport be provided? Will the sewer and water system handle the load? What are the other effects on the larger community, and how can they be dealt with? There are loads of reasons why it makes sense for the community, acting thru its local government, to have a major say in its development.
But to really irritate those who understand political economy, Avent says:
[I]f you had a sort of density charge–I hate to tax density in that way but in terms of being realistic about the distribution of cost–you could channel some of that into investing in local amenities: could be parks, could be transit, something to try to convince local stake-holders that density is going to be in their interest. So normally we think of taxes as discouraging an activity–which it would. It would make it more expensive for developers to make urban areas more dense.
Yes, some way for the community to share in the benefits of increased density. Can you say “land value tax?” It doesn’t tax development, it taxes development potential. It pressures landowners to build at appropriate densities, but doesn’t punish them for doing so. Supported by competent and realistic zoning, it guides density to the places where is works.
Somebody told me once that the Economist, for which Avent is a correspondent, is a pretty good source of economic news except that it refuses to acknowledge the possibility, let alone the benefits, of a land value tax. I still haven’t seen anything that contradicts this assertion.
I am back to the blog, after a series of computer difficulties and travel distractions. I could have resumed earlier, but had (still have) too many things to write about, so I waited for something simple and outrageous. And here it is.
What two products, planned for the 2007 U S Census of Agriculture, have been cancelled? One is a report on acquaculture. The other? Land Economics and Ownership. One inclined to conspiracy theory might say TPTB are trying to prevent folks from learning the truth. I would tend more to think it’s a product of ignorance, no need for conspiracy. I wonder what the report would have said.
I have previously discussed Hong Kong’s land tenure system, under which the land is publicly owned, but improvement owners have security of tenure in exchange for paying significant land rent. One result is that most working people don’t have to pay any sales or income taxes. Another is that land is efficiently used.
But there are a couple of concerns:
- Since Hong Kong doesn’t collect all the economic rent, speculation can still drive up the cost of housing as well as any activity which uses land (and they all do).
- Wealthy mainland residents are moving to Hong Kong to take advantage of the increased liberties which HK residents get, further driving up costs for local people.
Now we read that every HK has declared a sort of citizens’ dividend, every permanent resident will get HK$6,000 (US$773, currently). Bloomberg calls it a “handout,” but I think “share of economic rent” might be more appropriate. Opponents of the move say it will be inflationary, and certainly it could lead to higher economic rent, with speculation driving land costs even higher. Of course, if people expected the government to collect all the economic rent, speculation would not occur. While the cost of living might still increase, giving an equal dividend to every resident would tend to flatten the income distribution, helping the poor much more than the wealthy.
Former banker Rudolf Elmer, opposed to use of Swiss bank secrecy to aid evasion of taxes by non-Swiss, has provided Wikileaks with two CD’s of (apparently incriminating) data. Who is right here? Customers were assured the data would remain secret, now it will be revealed. But aren’t governments entitled to collect taxes which they impose on their citizens? If not, why should anyone pay? If so, how can anyone’s financial affairs be private?
The answer is, none of this would be an issue under Land Value Taxation. When revenue comes from the land, government does not even need to know who the owner is. Government need only know sales prices and a few readily-observable characteristics. The tax has been paid or it has not been paid, and in the latter case a process starts which eventually will result either in the tax (plus late fees) being paid, or the land being taken by the government. (And remember, the government is necessarily the ultimate custodian of land records, a natural monopoly.)
Only land value taxation permits financial privacy.