Category: Georgist/geoist

Capital Market Dysfunctionality

It’s not the way a Georgist would describe our main economic problems, but it doesn’t fit badly. Paul Woolley, a former (reformed?) investment manager and IMF official, has established his Centre for the Study of Capital Market Dysfunctionality.   One way he states the problem:

By most measures finance has become the dominant industry sector accounting, for example, for between 30% and 40% of the aggregate profits of the quoted corporate sector in the US, UK and globally, compared with only around 10% forty years ago

Not only does this mean a lot of money is being paid for a service which isn’t really central to our economy’s purpose, but also that much of the best talent in many fields is diverted to playing financial games rather than useful work.

Of course, in his talk he did not mention land.  Since his background is in finance, I guess he looks at the problem as a capital market problem rather than a land speculation problem.  As a Georgist, I tend to think that the problem can only be solved by making speculation in natural resources unprofitable.  Woolley however will probably show many ways in which the problem can be reduced, or at least postponed.   His site shows many papers related to the subject, many worth a look I think. (Of course quite a few of the papers are not available free.)

One reason I am inclined to think this is a serious effort to address the issue is that Woolley is apparently funding the work personally.

Legitimate academic to study transit funding

Lincoln Institute reports that they have granted a fellowship for work on Sustaining Mass Transit through Land Value Taxation: A Case Study of Chicago. Lincoln requires registration (free) to read the article that says the project will focus on the South Chicago USX site but will also “estimate the impact of transit accessibility on land values in the Chicago metropolitan area.” MIT Graduate student Shan Jiang will work with Prof. P. Christopher Zegras on the project.

From what I can find, Zegras has done quite a bit of work on transport funding, mainly in Latin America, and doesn’t seem to have any particular interest in land value. Although I have already estimated that RTA-funded rail transit alone generates something over $1.3 billion land rent annually, Zegras will have greater financial and technical resources and should be able to develop a better estimate. We shall see.

Bundi prospers pleasantly with site value charge

All I know, of course, is what I read in the papers, in this case the excellent Aussie journal Progress (which has no on-line presence afaik).

Bundi seems to be a pleasant and well-touristed town in contrast to the general squalor of India, and yes, it has a land tax. Or more precisely, a site rent, based on the area of land and distance from town center. Progress’s Mr. Ed says that this amounts to 1000 Rs/year, 2% of the typical salary, and is sufficient to provide good local services. I for one would be very happy to earn 50 times my real estate tax, an amount which the local governments to which I am subject find entirely inadequate to meet their needs, or at least their desires.

I’d like to verify the Bundi information with some other source, but I can’t find an accessible link in English with any information about Bundi’s tax system. There seems to be some information in Hindi.

Probably a lesson for Georgists in here somewhere

[S]tudies…[show that] people are more likely to show empathy and altruistic behavior when they see an image of one suffering person rather than many, or when they know a single relatable fact about a victim rather than the entire story.  And… the more pain/sadness/despair one must endure to help…the more one gives.

–Jamie Friddle, in December ’07 Conscious Choice

Transit funding will cost >80,000 jobs

That’s the estimate I came up with in the revised and quite enhanced version of HGS Research Note 5a. I’m using parameters estimated several years ago in a study of the Washington, DC, metropolitan area. Maybe the actual number here would be a lot more; I wish someone would do the analysis. This loss is expected to occur by 2014; further losses would follow.

If RTA really needs the funding, I estimate we could do it with a land tax that would cost the typical homeowner maybe $40/year, with renters essentially paying nothing. For $290/year, the homeowner could do away with all transit taxes, and fares too. No jobs would be lost; some would be gained.

By comparison, Chicago Metropolis 2020, in their surprisingly thoughtful study Time is Money, estimate that fully funding all the transit spending that RTA wants, plus some “smart growth” changes in land use arrangements, would add 22,307 jobs by 2020. They do not discuss how the funds would be obtained, although the study does note that a doubling of gasoline prices– which might be achieved thru taxation– would have great benefits for transit use.

Cost of living index vs. consumer price index

I should have known about this, but I just discovered that BLS has been publishing a C-CPI-U index. I had seen the term “chained index” around but didn’t realize what it means. This index has a direct month-to-month link to what consumers report that they’re actually buying, rather than using a fixed marketbasket as the conventional CPI’s do. Thus the chained index measures the cost of living– what people actually spend to live– rather than consumer prices. BLS says the chained index is expected to generally be lower than the conventional index, and that has been the experience since it was introduced. However, it seems to me that when the chained index is lower than the conventional index, that means people are finding ways to live cheaper (presumably because their real incomes are declining). If people’s incomes were increasing, relative to the cost of living, wouldn’t the chained index rise faster than the conventional one, as they choose more luxuries?

If I am correct, and the indexes are correct, then real incomes are declining.

BLS explains their chained index here. Actual data seem to appear only in the detailed reports, which are here.

Freyfogle on land rights

About a year ago U of I law prof Eric Freyfogle spoke on “two visions of private land” at APA. The session was recorded and the podcast is finally available (it may have been available for some while, but I just tonight found it.) It’s 97mb (Freyfogle doesn’t begin until about eight minutes in) and is here. (this link goes directly to the download. ) Some other APA podcasts are listed here and can be downloaded, with a bit of cut & paste, from here. (It is also possible to subscribe to these things but apparently that requires downloading the whole series, which is just slow)

update December 12: The link to Freyfogle’s talk should be correct now.  Thanks Bill Batt for the alert.

Ending "a sea of indebtedness"

Thanks again to Dan Sullivan of Saving Communities for locating Henry George’s advice on preventing excessive debt (government, corporate, individual) without constraining economic growth. George’s straightforward solution: take government out of the business of collecting debts. People could still lend and borrow money, but you can be sure lenders would be careful, relying heavily on the reliability of the borrower. As for public debts, if the government needs money for a defensive war or public improvements, let it levy taxes to collect what’s needed. The logic of this becomes clear when one reflects that in wartime everyone should sacrifice, the rich no less in proportion to their assets than the rest, and that public improvements have the effect of increasing land values and therefore generate their own financing.

The article Sullivan quotes is from The Standard, Feb 11, 1888, and apparently isn’t posted in its entirety anywhere, so I reproduce Sullivan’s extensive extract below. Continue reading Ending "a sea of indebtedness"

It might not pay to save

That’s the conclusion of a new study by by Laurence J. Kotlikoff and David S. Rapson. Problem is that as you gain more savings you become ineligible for more means-tested assistance programs. Acknowledging that the complexities of the tax code and the programs makes it impossible to perform a complete analysis, they estimate that “A 30-year-old single parent earning $15,000 a year faces an effective marginal tax on saving of 260 percent; for each additional dollar saved, the parent loses $2.60 in additional taxes and foregone government benefits.”

Although the study does not go further than to describe the problem, the next question is what to do. Although one may fiddle with the details, this problem can’t be solved as long as means-tested taxes or subsidies are an important factor in the economy affecting the poor.  But clearly a Georgist reform could alleviate it by increasing wages in general, and perhaps solve it completely if resource rents were distributed equally to everyone thru a citizen’s dividend.