Ships Abandoned in Yerba Buena Cove San Francisco during the California Gold Rush 1849 (public domain image from Wikimedia)
…as to the cause which so suddenly and so largely raised wages in California in 1849, and in Australia in 1852. It was the discovery of the placer mines in unappropriated land to which labor was free that raised the wages of cooks in San Francisco restaurants to $500 a month, and left ships to rot in the harbor without officers or crew until their owners would consent to pay rates that in any other part of the globe seemed fabulous.
…Henry George; Progress & Poverty Book V Chapter 2
George goes on to describe how gold mining was organized, and why it was the form of tenure rather than just the availability of gold that raised wages:
[I]t was by common consent declared that this gold-bearing land should remain common property, of which no one might take more than he could reasonably use, or hold for a longer time than he continued to use it. This perception of natural justice was acquiesced in by the General Government and the Courts, and while placer mining remained of importance, no attempt was made to overrule this reversion to primitive ideas. The title to the land remained in the government, and no individual could acquire more than a possessory claim. The miners in each district fixed the amount of ground an individual could take and the amount of work that must be done to constitute use. If this work were not done, any one could relocate the ground. Thus, no one was allowed to forestall or to lock up natural resources. Labor was acknowledged as the creator of wealth, was given a free field, and secured in its reward.
— Progress & Poverty, Book V, Chapter 2
And now I tripped over a 2002 paper (From Commons to Claims: Property Rights in the California Gold Rush by Andrea G McDowell) that provides a lot of detail and background supporting George’s assertion. A particular mining claim might be 100 to 900 square feet. A miner would work it for a few weeks, then expect to move on to another one. Thus the first miners to arrive had an incentive to avoid land monopoly, because they’d be looking for land again in a short while. “[The miners’] position can be summed up as a rejection of a fee-simple interest in mining claims on the grounds that this would result in the monopoly of the diggings by capitalists and the exclusion of individual miners from the chance to strike it rich.”
There’s a lot about how various mining districts managed their operations — certainly not all the same and often poorly documented, with a lot of the information coming from personal journals and correspondence rather than official sources.
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.)
Christopher Flavelle’s recent Business Week article looks at how rising sea levels can affect ownership of newly-submerged land. Part of the problem, of course, is that owners of these parcels want the government (Corps of Engineers, local authorities, somebody!) to use expensive artificial means to preserve or recover their properties, but of course don’t particularly want to pay for the service. Complicating the situation is the public trust doctrine, as applied in the various coastal states, which prohibits private ownership of submerged land. So if the land is recovered, who owns it?
A land value tax won’t prevent land from being submerged, and won’t clarify ownership, but it will importantly change the incentives. The article cites one case where the landowner continues to pay real estate tax [presumably a modest amount, but the article does not say] on the submerged parcel. ‘“It’s Gulf-front property,” says Levenson, who now lives in Tennessee. “Someday it will be valuable.”’
Suppose, instead, that the rental value of land was the sole source of public revenue. The land might someday be very useful, and might have a large rental value, but could never be sold for a high price. End of controversy. The water rises, the owner avoids the taxes by relinquishing the land. Unless the rest of us are obligated to pay to enrich a few coastal owners, this is the just and efficient way to proceed.
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’sOwning 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 concept proposal, one of several at their site
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.
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.
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