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.
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.
[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.
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.
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.”
In order to fund community needs from a tax on land value, assessors need to estimate what that land value is. Conceptually the task need not be difficult (Ted Gwartney outlines some options here, but a more complete and still-valid examination is in this book.) Basically, you look at sales prices for actual land transactions, and make adjustments for parcels which haven’t sold recently or where land comprises only a small part of the value. But what happens if the buyer pays something additional, “off the books,” for the land?
According to Peter Katz, that seems to be what often happens. This presentation at APA last March starts off slow (and self-promotional), but moves along thru some interesting territory. Regarding the price of vacant land, he asserts that, in many desirable areas, developers have to first buy (or option) the land, then negotiate with local authorities to get permission to build. Getting that permission might require agreeing to donate money (or land) for public use, or perhaps less savory expenditures, and to the developer this is part of the cost of land. If an area of any size is subject to such constraints, all the land sales are below market prices by the amount of such costs, and all sites, whether sold or not, receive assessed land values that are lower than what developers actually pay to get a buildable site. This results in less public revenue, implying a need for other taxes, as well as a tendency to develop at lower densities than might be appropriate, when developers choose to settle for existing zoning rather than what they might be able to negotiate. Katz suggests that a formal study of this effect should be done, and nominates Lincoln Institute to make it happen.
Katz’s remedy seems to be a combination of form-based zoning codes, plus a sophisticated (and presumably accurate) fiscal impact analysis that might show denser development to actually be more “profitable” to governments. But, responding to a question about 65 minutes into (and near the end of) his talk, he acknowledges that funding government from a land value tax would be a good way to obtain the desired development pattern, and that Henry George was a great guy. His observation that Georgists tend to be wacky has been made before, and I can’t say it’s wrong.
In an urban context, absent special environmental issues or legal constraints, land value and location value are pretty much the same thing. So we read in Crains that the Drake Hotel is on a 63,000 square foot parcel valued at $150 million, implying this land is worth about $2381/square foot. But no, the location probably isn’t worth that much. Rather, the land is leased by the owner of the structure, and the lease document says that, every five years, the land value is to be estimated and the annual rental set at 10% of the land value.
Possibly 10% was a reasonable return in the past, but in today’s zero-interest-rate world no safe investment would yield that much. Rather, the owner of the land actually owns two things: (1) the land, and (2) the privilege of requiring the building owner to pay an above-market rental rate. Were we to value the land “as vacant,” which is the correct way to estimate land value for taxation purposes, then (2) would disappear and the land would be worth, more or less, the same per square foot as other land in the very prestigious immediate neighborhood.
It would be interesting to see what the lease says specifically about how the land value is to be estimated, and to read the (certainly confidential) document describing how the $150 million value is justified.
The Internet doesn’t make the earth economically flat. Some locations are still worth many times as much as others. But technology can affect the criteria for “most valuable site,” as most recently illustrated by the sale of One Wilshire Blvd in Los Angeles for more than twice the price per square foot of a mostly similar office building nearby. It also commands about twice the rent, per square foot.
The difference: One Wilshire is ” the primary terminus for major fiber-optic cable routes between Asia and North America,” and is therefore is a location prized by telecommunications firms.
“You can’t reproduce the connectivity,” said real estate broker Kevin Shannon of CBRE Group Inc. “It’s telecom gold.”
Of course the buyer thinks it’s a fine investment that will only become more valuable in the future. Presumably the seller thinks different. The only thing certain is that technology will change, and the pattern of valuable sites will likely be affected.
UK Geoists are crowdsourcing a film about the nature and benefits resulting from a tax on the value of land. You needn’t be a UK resident nor have a UK charge card in order to support this. Seeking a total of £9000, they’ve already got £2188 with 18 days to go. Join the 46 funders so far, or find out more, here.
Entrenched U S carrier Delta Airlines complains that their foreign competitors can buy Boeing jets cheaper than Delta can. Why? Because the federal Export-Import Bank offers loan guarantees, intended to make Boeing’s products more cost-competitive in the international marketplace, particularly against Airbus.
Of course this is a case where we might be better off allowing the “free market,” whatever that is, to set the cost of financing. Abolish the ex-im bank, let manufacturers offer subsidized financing from their own resources if they wish, and don’t worry about the “balance” of trade. But Boeing has sufficient political power that is unlikely. Perhaps some favors will be offered to Delta, who doubtless also has political friends, in order to get them to drop the suit or minimize its practical impact.
As some indicator of the likely outcome, Influence Explorer says that Delta spent $4,154,382 on lobbying during the most recent reporting period, whereas Boeing spent $24,120,000.
A nice series of threeshortarticles (h/t Gloria Picchetti) in Salon by Michael Lind, explaining the difference between an entrepreneur — who may become wealthy by providing goods and services people want — and a rentier — who seeks to become rich by exacting a toll or tax on productive work.
Lind mentions, in a positive way, the land value tax, and also notes that this isn’t a left/right issue, as labor unions and professional associations can be just as monopolistic as bankers. The negative effects of “intellectual” “property” are noted, altho Lind seems to think that those who profit from patents are “inventors.” Of course there’s no mention of Henry George, but maybe changing our name to “Institute for the Study and Extirpation of the Useless Rich” would be a helpful step.
The remedies Lind suggests are quite centralized, such as changing federal tax laws, and maintaining financial repression with the object of moving people from private savings to social programs. Not what I would propose, but what does a geoist in flyover country have to contribute to this discussion?