Sinai Summit (credit: Wikimedia)

Peoria Georgist John L. Kelly has produced a three-titled book making the theological case for economic justice:

The Other Law of Moses:
God’s Remarkable Plan for Prosperity:
What 21st-Century Nations Can Learn from Ancient Israel’s Economics

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.

As a believer in economic justice, with an understanding of how that can be achieved, I can deal with the issue of how well this book presents the case.  As to whether it is persuasive, well, you’ll just have to ask the 78% of Americans who claim to be Christian, or the 40% who claim to attend church regularly, or  the 20% or so who actually do so, or the ones– and I have no idea how many there are– who take their theology seriously.  I was already persuaded, and seeing the Biblical support that Mr. Kelly has compiled did nothing to unpersuade me.

Kelly’s basic point is that God gave the Jews His Law at Mt. Sinai.  If they would just respect and behave according to the Law, no further intervention by God would be necessary. The Law, if properly observed, brings peace, freedom, and prosperity to the people.  When kept, it worked well, making Israel in 1200-1000 B C the first “middle-class country” ever.

And what is “the Law?” The main elements are:

• Equal Rights, no special privilege for royalty or anyone else, everyone gets land of equal productive potential.
• Sabbath and Sabbatical Year.  During the latter (every seventh year), all debts cancelled and all slaves freed.
• Jubilee every 50th year. All land returned to living descendants of its original holder.
• Tithe, equivalent to land rent, given to “God”, used for religious purposes but also (apparently) community needs.  No taxes on production.
• Special rules for widows, orphans, etc. who couldn’t support themselves

Sounds pretty geoist to me.  Whereas Henry George’s proposal was for the community to collect land rent from those holding formal title, Kelly’s God keeps ownership of the land (after all, He made it) and sets up rules for allocating its use. George’s system strikes me as more flexible, because folks have different numbers of descendants and different abilities and interests, but God at least takes a big step in the right direction. George didn’t treat jubilees specifically, but clearly his proposal would limit debt (and therefore debt-slavery) and make underwater mortgages extremely unlikely.

(Unfortunately the book doesn’t deal with the post-Sinai concept of usury, whereby lending money at interest is permissible only if the lender bears some of the risk. )

Kelly describes the “tithe” as being 10% of the land’s “productivity” (productive potential?)., and goes on to assert that “ten percent of a parcel’s productivity is still, today, a reasonable and customary rent.”  In today’s world, productivity of land isn’t always straightforward to estimate, but Illinois farmland data here (pdf) gives the impression that the actual land rent is more like 20% to 35% of what the land produces.  If the value of labor were excluded, counting only the natural productivity of the land, of course this percentage would be much higher, theoretically up to 100%.

Starting with arrival in the promised land, Kelly takes us thru the various Biblical periods, including Judges, Kings, the two kingdoms, Babylonian captivity and return to the Promised Land, Hellenism, Roman dominance, and the time of Jesus. He sees Jesus as seeking to restore the Law, which was still well-known if little-observed during this era.

One significant portion concerns the meaning of “Give Caesar what
belongs to Caesar.”  When Jesus said this in the context of taxes, according to Kelly, he really was saying “Don’t give Caesar anything because he has no right to collect taxes from you,” but had to avoid this straightforward statement because it would have got him in trouble with the rulers.

The final section of the book reviews some subsequent developments, particularly the origins of the United States as a place where the essential elements of the Law were still practiced until relatively recent times.  This part includes useful information about some other modern countries where aspects of the Law have been implemented, much of it taken from Land Value Taxation Around the World.

The Other Law of Moses could be quite useful to thinking Christians who are actually concerned about the poverty and totalitarian trends seen today. Provided of course that they have the necessary proprietary software and/or hardware to read it. I hope someday soon to read a review written by one of them.

For the rest of us, it’s reassuring to see the Bible interpreted as an endorsement of geoism (of course, many clergy, including Edward McGlynn and  Preston Bradley, have done this over the years.).

UPDATE 2012 February 8: Yesterday I was informed that a hardcopy version of this book is now available at: https://www.createspace.com/3779298

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.

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.

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.

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.

The solution? Smith (and others) expect the federal authorities to move in,

Now that judges in some states are starting to take these dubious, potentially fraudulent measures seriously, the next line of attack is to get the more bought and paid for Federal government to intercede on behalf of the banks.

Which I suppose would be consistent with the way they’ve handled other aspects of the financial breakdown.  Smith also makes the point that this is in fact a states’ rights issue, real estate records are one of the legitimate functions of state and local governments. And back in the old days, before real estate finance became efficient, loans typically stayed in the same state as the property that secured them.  Some still do.

By all means read Smith’s original post, and the links from there to her (and others’) earlier writing.

Of course this mess illustrates geoist principles.

• It never could have happened if land was not an object of speculation.  If folks expected housing prices to remain more or less stable, nobody would buy a house they couldn’t afford just because they feared being even less able to afford it in the future, nor because they saw it as a good investment.
• And it will happen again, in a similar but different way, a few decades from now, unless policies are changed to use land rent as the main source of public revenue.
• It also illustrates the dangers of complex financial arrangements.  Not that they could never be legitimate, but usually they are not. Rather, they represent a way for “the smartest guy in the room” to enrich himself, at the unwitting expense of the rest of us less smart guys.

It also renews my curiousity about Torrens title.  This is an alternative system of land titles, where the government keeps all the records and guarantees all the titles.  Originating in Australia, it was tried in some U S jurisdictions, notably Cook County where it collapsed under the weight of government corruption.  Elsewhere it is still in use, apparently working well.   Of course it would put the title insurance companies out of business, and reduce legal costs, which may help explain why it’s little used here.

“All I care now is how much compensation we will end up getting after layers and layers of government officials get their share,”

I don’t see why Disney should get government help in assembling land for their project– it’s not infrastructure–, tho such assistance is routinely provided in the US too. Under a geoist system, where the community collects the land rent and uses it to fund governmental services, landowners would have strong incentive to sell and little incentive to hold out.  Disney could buy land cheaply but would pay substantial rent (in the form of land tax) to retain it. Those relocating could buy land cheaply elsewhere, and if in a less desirable location would find their land tax reduced.  Folks would also, of course, have no other taxes to pay and would receive a share of the rent collected in excess of governmental needs.

“Most counties in Africa are selling fishing rights to industrialised nations which catch large amounts of seafood, effectively out-competing local fisherman,”

according to New Scientist. It’s not stated, but presumably the revenue received for the rights goes to elites, not to the working fishermen displaced. Well, they can become pirates.

This information comes from farmlandgrab.org (“Governments and corporations are buying up farmland in other countries to grow their own food – or simply to make money”), via Alanna Hartzok.