a brief review of the important bits, the primary importance of Economics and the root of its dysfunction
Economics, what is it? What does it do? Among the myriad issues the world faces, right in the middle of it, running through everything that happens, is this thing we call Economics. Conventions and assumptions made in this field have a defining influence on how the world works, how they guide public agents in the decisions they make. The choices made in this realm affect everything about the way we live.
So, it may generally be thought to be the study and analysis of the mechanisms behind how the world makes a living; how people produce and exchange the things which make up our economic lives, and who gets what, pays what, and why, and the effects of all of that. It might be said to be the study of the most important subject, the stuff of living, that which comes before everything else, that which brings about everything else. These are the kinds of things that Economics is widely presumed, outside of the discipline itself, to be about.
Sadly, despite being perhaps the most important subject, it is considered by all to be far beyond the reach of ordinary people, those who live within the systems formed by economic ideas and understandings. It is a subject strictly left to experts. There may be lay preachers, lay mathematicians, lay physicists who come up with 14-dimension space-time models1; lay practitioners in all sorts of fields who often make useful contributions to them; but never lay economists.
Of course, lay folk must continually make choices about how to spend their money, they must budget, and the ancient Greek origin of the word, oikonomos, roughly means housekeeping. But big Economics, as it has become, seems quite unapproachable.
This may be presumed to be because it is such an arcane, complex subject, wrapped in mists of dancing mathematical hieroglyphs, as esoteric as modern art and requiring a high and deep level of understanding.
So, when, in 2008, the panic started to spread from the most recent global financial crisis, it was puzzling that it seemed to take everyone, especially economists, by surprise. This reportedly puzzled the Queen, who may have assumed that it was the business of Economics to understand what keeps happening, or even just to be able to warn that it is going to happen. The Telegraph of 5th November, 2008 reported that the Queen had asked: Why did nobody notice it?
Four years after the crisis, The Financial Times of April 12th, 2012, was bemoaning that there had still been no real account of the global financial crisis, and the editorial that day took the form of a letter from Dr Hugh Goodacre, a senior lecturer in Economics. He explained that British economics departments selected and promoted staff based on their ability to profess abstruse economics, since this was the kind of work that US academic journals liked, highly technical with lots of advanced maths.2
Later that year, The Guardian reported that the Queen had received an answer to her question posed four years earlier; during a visit to the Bank of England, she was told that financial crises were a bit like earthquakes.3
So, the 2008 event did leave the impression of an economics discipline which is highly technical and complex, painfully mathematical, but not actually much concerned with the tectonic movements that had shattered the actual economy that people need to make a living in. The nature of this and other such crises will be returned to.
How did the discipline become so apparently distracted, where it doesn’t even seem to be looking at what many assumed that it was looking at, apparently uninterested in the actual workings of the actual world? How did things become this way?
How Economics was Changed
As a subject, Economics underwent a fundamental change the end of the 19th and into the 20th century, before which it wasn’t called Economics. Before then, what has since been referred to as Classical Economics, had developed out of Renaissance moral philosophy; a set of principles had developed over a couple of centuries.
The new development was formulated in and disseminated from certain universities in the USA.4 It would called Neoclassical Economics, a name suggesting continuation and development of existing ideas. In actual fact, it was a quiet revolution.
For one thing, Neoclassical Economics is focused more on microeconomics, individual behaviour, things like modelling consumer behaviour, things tending to mathematical analysis. Classical Economics, on the other hand, had been concerned with what’s called Political Economy; macroeconomics, the big themes of what happens in the whole of economic society, the Wealth of Nations5, as Adam Smith’s6 celebrated book has it. The new teaching gradually prevailed and by around 1910, use of the term economics had supplanted political economy.
But beyond this different focus, a vital and fundamental departure was made from the Classical principles, meanings of words changed, furniture was moved around, a vital redefinition was made; and in the process, the root was torn out of economic understanding.
An understanding of where this vital root was extracted requires a brief look at the basic elements of classical economic thinking. It is important to have the full set of these elements to see how they work together.
Factors of Production
So, in the pre-20th century age of classical political economy, three factors of economic production were recognised: Capital, Labour, Land. Three distinct factors which combine to produce wealth:
Capital: Tools, seed corn, full nets of fish, shopfronts, that which can be used to produce goods which have exchange value or provide a service. There’s different kinds of capital, with different life durations (replacement rate, turnover); there are pies ready to be sold, there’s the shelves the pie stand on, the oven they were baked in and, most durable capital of all, the building the kitchen is in.7 There is fixed capital and mobile capital. When a flood sweeps a bridge away, that is a loss of fixed capital, which was providing the service of facilitating access past an obstacle.
Labour: The input of human energy, skill, sweat, expertise, imagination, learning, ingenuity, creativity, in the production of goods and services.
Land: Everything which is natural, not produced by human labour. Land, the air, the airwaves, minerals in the ground, the sea, fish in the sea, everything that was not created by humankind. Everything in the observable material universe, naturally occurring opportunities, everything that comes as a gift from nature. But especially, in terms of human need, land; Land as producer, Land as space, Land as location. Nature and natural.
These elements in concert produce wealth, as material things, actual stuff, as services; all that which is produced for the satisfaction of human desires. These three distinct interacting factors form a coherent whole.
Classically, in production, the returns to that part of production which was due to Labour is called Wages: the returns to that part that was due to Capital is called Interest; the returns to that part that was due to Land is called Rent.
The vital root torn from Economics by the Neoclassical reformation was to remove Land as an element in Economics. Like illusionists, the authors of this new orthodoxy made Land disappear – magicked it away. Despite the many, varied and obvious differences between land and other capital commodities, such as Land being finite, inelastic in supply, that it is not made, is not consumed, etc.,8 by some weird alchemy, Land is transformed into just another form of Capital. And it’s here that history turned because this has the profoundest manifestation in the world.
The consideration being made here is strictly in terms of hard economics, the production of wealth. If it were not so limited, and in terms of what economics is supposed to be for, there would be much that strained to be said about natural rights, human dignity and security, stewardship of nature, about what justice would demand even if9 it wasn’t so that understanding the role of Land, the invisible element, clarifies the hard economics being considered and gives full perspective to the choices economists are bound to. So, considerations of justice put aside for now to consider whether, even if unseen and unnoted, economic laws seem to carry on operating.10
So, with three elements of production in place, Capital, Labour and Land, further enquiry may be made into the forbidding world of economics; and a truly dismal word to hit it head on hard is tax.
Tax
Tax is not an interesting word, it’s not a beguiling subject to be asked to contemplate, but it is absolutely central to everything. Tax is a repelling word, but it is an honest word, as just about everyone would agree that there have to be public funds, and, though it can take different names, tax is the generally understood term for how it’s raised, by agents of the public, AKA governments, local councils.
Tax really matters. Tax dictates, shapes and moulds society. Over the course of the 20th century, during which the tax burden has fallen on wages to an increasing degree, this is so much more the case.
How tax is done is social engineering, whatever choices are made. Tax policy engineers society in every way, even influencing which kind of goods and services are produced, unknowingly, because insights from before the 20th century – like the Mill effect11 – seem lost in obscure considerations.
Tax, the way it is done, and most critically, what is taxed, and why it is taxed, and what isn’t taxed, has a defining effect on everyone’s lives and the whole world. If affects the way people are incentivised, how they act in society, people’s relationship to each other, to other generations, to other creatures and their common planetary home. It has a scarcely believable effect on the total wealth a nation produces, and, of course, it has a decisive effect on the distribution of wealth and power. Tax defines the nature of civilisation. Tax rules the world. Tax decides who gets what, who gets to keep what from their efforts, who gets to pay what towards the services and benefits received from public funds. Tax is supposed to be justice. What is and what isn’t taxed decides everything.
So, tax is a very important thing to be thinking about. There are choices about how tax is done, and there is more choice that is generally considered.
In the UK particularly, with its long undisturbed political history, there is a bewildering system of taxes and allowances, myriad streams of income, the whole picture is a morass that nobody except a tax professional can safely step into it. Such professionals crawl all over tax policies, seeking loopholes, searching for subtleties, developing strategies to avoid paying tax. Then more tax legislation comes along to close a loophole or two, so the avoidance strategies get ever more sophisticated and, of course, not generally available. Huge amounts of professional energy are expended on this arms race and ever more complication is added to the system. Much is in the dark; the fact that the top 1% of UK earners are receiving 17% of all UK earned income only came to light recently when previously confidential HMRC data became available and analysis could be made about how the tax system is being gamed again.12
The raising of public funds seems to be such a complicated subject. It’s a complicated labyrinth with many hiding places, and what gets lost – and what should really be clear from a tax system – is a clear link between taxes paid and benefits received. Amidst this tangled mesh, the reader should be reassured that actually, tax, and what follows, is very simple.
Across the world, principally what is taxed is:
Labour: The taxing of people’s wages/payroll, well established elsewhere, didn’t even really get going in the USA until 194113, and within a few decades it had eclipsed all other taxes. But there’s a problem with taxing people’s earnings; people have less money to spend, so, these taxes have the effect of decreasing demand for products. This area of taxation thus distorts the workings of a market economy.
Capital: In the form of sales taxes and, in modern times, (nearly everywhere except the USA), national VAT, Value Added Tax. Sales taxes, taxes on trade, are a historic source of revenue, and a significant part of the modern mix. But, again, there’s a problem with taxing capital: It makes things cost more, thus depressing demand for them. Sales taxes and VAT can also have the effect of skewing investment towards durable capital and penalising turnover, thus taxing labour. Sales taxes thus distort the workings of the market in many ways. The EU are particularly sold on VAT, (though VAT didn’t feature in the Brexit arguments.)
It is no secret that these taxes on Capital and Labour produce the well-understood and well-named effect of excess burden, and carries also another very illustrative name, deadweight loss. And it is that, a loss, and this effect is acknowledged to cause huge loss to society; and it is really huge.
Economists differ widely as to what the net loss is, but agree on its significance; even at the very least, at least 50p is wasted for every £ raised in tax, with some economists putting it as high as €1.50 per € of tax raised, and some even as high as 1:2, two apples wasted for every apple collected. Professor Mason Gaffney studied all of this for a very long time, and he gave a ratio of 1:1, every $ raised costs society another $, every £, another one is wasted, wealth which was never made.14
So, in the UK, somewhere around £493 billion a year in 2016, deadweight loss?15 That is dysfunctional. A sum roughly equivalent to bailing the banks out every year is the wealth that could be produced without the burden of damaging taxation.
It seems obvious that an efficient market economy would not choose to tax human energy and intelligence, or to tax the trade in the product of that investment, because of the recognised detrimental effect to the economy, which then works much less effectively and makes everybody a lot poorer. It would not seem to be a rational choice, if only there were a better choice.
But in the classical view, there remains another element to consider taxing; the one that strangely disappeared from view:
Land!: Among the many positive benefits of taxing land value, the gleaming point here is that such a tax has no distortive effect on the market. This point had been picked up by Adam Smith during his travels in France.16 Smith is now virtually a patron saint of modern capitalism, most famously known for giving the world the memorable insight of The Invisible Hand of the market price mechanism, that, ideally, naturally arrives at optimal prices, efficiently allocating resources. And that’s a very important observation. It’s an effect that happens naturally, without any human calculation but is the sum of all human calculations.
What he also said, prescriptively, in The Wealth of Nations,17 and most importantly:
The annual produce of the land and labour of the society, the real wealth and revenue of the great body of the people, might be the same after such a tax as before. Ground-rents and the ordinary rent of land are, therefore, perhaps, the species of revenue which can best bear to have a peculiar tax imposed upon them.
[boldness added, since he had to whisper it.]
Adam Smith is talking about the wealth of the great body of people being the same as before, and, though the term wasn’t current, he’s talking about what’s now called deadweight loss, about the damage to the economy brought about by taxing trade. So, what does he mean by rent?
Rent
Adam Smith wrote of an annual ground rent. With land comes a natural surplus, a gift of nature. The surplus which arises from the fact that Land is not made, it’s already a given, its service – in economic terms – natural and perpetual. He felt this was the natural source of public wealth.
Further developing classical economics, David Ricardo18, in 1809, described the Law of Rent.19
The term economic rent was subtly and crucially altered in the 20th century neoclassical economic texts and the classical meaning was obscured (though it still describes a surplus.) In modern times, rent means what someone may pay for the use of something, like a house, but the word meant something else in classical times; rent means a surplus, a surplus of something over something else. If classical economic rent were to be referred to in economics today, it would be called Ricardian rent.
Much can unfold from the simplest of root statements. In 1809, David Ricardo stated that:
The rent of land is determined by the excess of its product over that which the same application can secure from the least productive land in use.
This means that if the exact same application of labour, and capital (tools, seeds) is given to Field X as is applied to a field of the same size but where it’s barely possible to eke a living, a field on the very margin of production, the extra production thus secured from the more fertile Field X is economic rent. The extra production gained from the greater fertility of a field is a gift from nature, it is a natural excess.
Of course, these fields don’t exist in a vacuum; there is another gift of natural circumstance, which is the field’s location; how close it is to markets, and to the services of a town. These natural advantages of location, this natural excess, is economic rent.
Talking about fields puts the scene in a long-gone agricultural economy, and emphasising Land in terms of its fertility, but Land is also vital to existence as space, and derives value from particular locations; thus economic rent is particularly generated in cities, where the proximity of people generates a concentration of economic activity.
So, two identical houses, one in a city somewhere, maybe near a chemical plant, and another elsewhere in the city, with, say, the benefits of better transport links, open space, better access to markets; the difference in the value of these is economic rent.
The identical houses have identical value as constructions, as works of labour and capital. News reports talk of house prices, but as bricks and mortar constructions, the value of houses starts falling the moment they’re built; their market value comes from the location of the land they stand on and all the circumstances around that.
Locations have greater value because of the greater benefits they receive – from natural circumstance, from the existence of the community around them, from public investment.
As people come together in close proximity in towns and cities, as both producers of and consumers of wealth, the value of the location increases. When the public pays for roads and lighting and sewers and utility supplies, schools, libraries, police and fire protection, health services, the benefits these investments bring create extra value. This created value, if collected, would pay for the public investments.
Nobel economist, Joseph Stiglitz, demonstrated that public investment in infrastructure pays for itself if the increased rents arising from the investment are collected.20 An example of this is the rise in property values in areas adjacent to the Jubilee Line extension in London,21 which, like all railways, could pay for itself.
The surplus value of a location is value which is created by the active existence of the community. In production of goods, the value of production which is due to land comes without cost; it is surplus value, a perpetual gift from nature, from natural circumstance. Gifts from nature can only be a gift for all. Value which arises from the proximity and investment of a community can only be for the community.
Rational Choice
Among many other hugely positive effects that could be considered, as far as economic efficiency is concerned, it seems clear that the taxing of land value, i.e., the collection of economic rent, is the natural source of public finance. As the taking of this surplus value has no distortive and negative effects on the market, then, if only from the point of view of market efficiency, the natural element to draw public funds from appears, on all counts, to be a tax on the value of land, collection of user-fees for what has been provided by nature.
Indeed, it would appear to be obvious sense, very much the least bad tax.22 Surely the worst thing to tax is people’s productive energy, or the capital that, combined with labour, and with the catalyst of land, produces everything; to tax that which is the actual economy. People’s energy and ambition should be the very last thing to tax, it’s an blatantly unnatural source of public finance.
A tax on land value provides a clear link between tax paid and benefits received, with transparency, simplicity and clarity. A tax on land value neatly separates earned and unearned wealth. Land value cannot be hidden in tax havens or by expensive accounting. It is the only tax compliant with all four of Adam Smith’s canons of taxation23 or even coming close to complying.
In an upside-down world, the modern dominance of wage/payroll taxes and sales taxes, current tax orthodoxy socialises what should be private, and privatises what should be social. Because the naturally obvious thing to tax isn’t the focus of taxation24, everything else has to be, with the enormous costs of that. There is felt to be wisdom in spreading tax out as far and wide, so that the acknowledged damage of taxation is distributed as far as possible. A claimed virtue of VAT is felt to be that it is broad-based, but a closer look reveals that, as well as being highly regressive, they are highly discriminatory against higher turnover, mobile capital, like pies.25
Economics is said to be a study of choices, and usually fundamentally grim choices. For example, there’s a general assumption that inflation and unemployment are choices that society must choose between. Are such choices really inescapable? These are iron assumptions, there is not considered to be any other way of looking at it.
Marginalised People
Taxing Labour and Capital means that sections of the population are frozen out of the economy, marginalised; unemployment is a permanent feature of how modern evolved capitalism works. Removing the tax from Capital and Labour would greatly extend the margin of worthwhile, economically viable work. Being locked out of the party, people must be supported to live, suffering the indignities which come with that. In what we can still call the UK, this represents a large proportion of the spending of the public funds raised, funds raised with the damage to the overall economy of the deadweight loss which comes with this. Seen this way, clearly, the inefficiencies of our current tax arrangements are staggering.
These weird distortive taxes, rendering everyone poorer, creating a confused and ineffective discipline of economics, excluding people from the productive economy, perhaps scapegoating them for it, always resenting them, are the lengths that have to be gone to, to avoid the obvious, natural source of public income. It becomes ever more obvious with consideration.
Is Economics a Newtonian Level Science?
It’s not as if any of this is a mystery in the world, or is it? There is actually a lot of data about this from over a century: Australia, New Zealand, Hong Kong, Taiwan, Pennsylvania, USA, (and other places in lost episodes of American history)26 all have experience of at least partial application of public revenue raised from collecting rents, and of the effects of ceasing to collect it. Data from Australia, which has a historical connection to collecting rent, even suggests that even slight shifts to taxing the land underneath buildings rather than taxing the building produces measurable improvements across all economic indicators, in direct ratio to the degree this change has been made.27 Invisible hands working precisely. Could Economics (Political Economy) be a science, perhaps akin to Newtonian Physics?
Denmark has particularly interesting experience with the question of land going back centuries, forming the Ground Rent Government between 1957-60, and still makes annual calculations of the value of land plots.28 UK politicians are heard talking about the dynamic economy of Singapore,29 excited to note that very low income and sales taxes are, of course, massively pro-incentive; but it’s not clear whether they understand what pays for Singapore’s world class public services.
How Much Rent is There?
Alas, there’s so very much more to the civilizational dysfunction wrought by the taxation design. But first, a diversion for an important question: how much rent is there to collect? To be clear, this is the collection of economic rent but, as noted, tax is the generally understood word for the raising of public funds, and land/location value tax (LVT) is the term in modern usage. But would such a tax raise anywhere near enough to fund a modern state?
An enquirer into these matters will soon find assertions that land value is actually a miniscule proportion of GDP. In fact, when the unplumbed depths30 are explored of a modern industrial nation, economic rent is at least a third and perhaps up to 40% of GDP31 with a great reduction in the need for public funds. It must be remembered that there is a lot more to Land than just land.
Boom and Bust
As said, the distortive, deleterious effects of the tax system by no means end with the effects of taxing what is taxed; there are also dire consequences to not taxing land value. This failure leads to what would once have been thought to be the ultimate economic disaster: the Bust part of what we know as Boom and Bust cycles. Regular system failure; crashes, paralysis, vast value being wiped out. The events of 2008 are yet to be recovered from (unless recovering from them isn’t actually the plan.) History shows a regular rhythm of these crashes and financial catastrophes.
In the highly connected world, these are global events, and suffering can be widespread. Companies go out of business, people lose their jobs, lose their homes. When it’s really bad, governments are obliged to step in to bail banks out, and in various ways, everybody else pays for it; those with least tend to pay by far the most.
These regular cycles of boom and bust are felt to be part of a business cycle but, actually, the world is tripping over it; it’s a cycle of very clearly observable bubbles of inflated land values. Over and over again.
Land value isn’t the only thing speculative bubbles can be built on; now and again things like tulip bulbs and tech start-ups have caused excitement for a while. But land value is the bubble that can be banked on to keep repeating because of unchangeable, unassailable facts:
Land is not produced and there is only so much of it
Land is the primary element which is essential for mere existence, never mind economic activity
The price of land will tend to increase faster than wages, it cannot help but do so; as land values keep rising, this cuts into the earnings of Labour and Capital. Any increase in economic activity means an increased demand for Land, which, being fixed, inelastic in supply, must then increase in value. And when that happens, a strange chemistry starts fizzing.
The value of land is, naturally, expected to rise, because this is what it does, and that’s often part of the pitch of selling it. This builds a premium into its price. Because values are expected to rise, more money is available from banks for property investment, which then inflates the value of land, which makes more money available from banks, who will happily lend on the collateral value which their lending has created. This inflates the value of land further, the value rises because the value is rising, how can anyone resist investing in land? The returns are very good, and so easy, until the day they’re not.
It really is that simple, because land prices are expected to rise, they do. A kind of mass psychology manifests itself, an irrational exuberance.32 It’s apparent success, good times are rolling. Nothing is being produced, but all of this big money is changing hands, it must be good business. How could banks possibly stand by and not pour finance in, and collect guaranteed profits? They have shareholders to account to. But because they don’t stand by, these bubbles are blown, which always burst. Banks need to be saved from this opportunity and get back to proper banking, real business instead of real estate.
Future civilisations may look back with wonder at this repeated, almost childlike behaviour, of exuberantly blowing bubbles. There are times that conspiracy theorists seem plausible.
In the period before the crash, the dysfunction this creates for the general economy is that, as the bubble inflates, land takes an ever greater share of investment, it’s irresistible. Torrents of investment which could be flowing into productive industry are instead poured into the cold storage of inflated land value.
Values keep rising, until the spell is broken; a certain point is reached where fictitious values become too fictitious, repayments start failing, people start waking up from a dream, panic spreads like wildfire. The flimsy structure crashes, blame is thrown around, nothing ever seems to be learned; the cycle resumes.
Lots of people lose their shirts, and some people do very well. Huge damage to society can result, cuts in public budgets which have reverberating unseen effects and future costs, generally inflicting misery on people, and whatever the economic cost of that is.
The bail-outs in the wake of the 2008 crisis caused outrage, as eye watering sums of public money – taxpayers’ future tax payments, taxpayers’ future public services, future youth clubs – were raised to save the global banking system from an unthinkable meltdown. The language around such a disaster is dramatic, yet if all the money in the world were to suddenly disappear, the mess would doubtless be vast, but there would still be the same amount of capital in the world.
Amidst the anger directed towards banks, the term banksters, first used in the 1920s, was heard again. Conspiracy theories abounded on the WWW, with quotes, real and fake, from long dead bankers. Many people have an uneasy feeling that there’s something we’re missing here somewhere, people often feel confused these days.
Some egregious economy-wrecking behaviour came to light, and generally reckless financial behaviour was common across the board. Questions were raised about what disincentive there is not to indulge in stoking unsustainable bubbles of debt again.
The focus on the seemingly unaccountable, untouchable banking sector is understandable, but the root issue isn’t banking itself, it’s the conditions in which banking operates, i.e., the absence of rent collection, which would remove the irresistible incentives of land speculation and redirect investment funds to productive trade and industry.
Certainly the financial world amplifies the injurious effect of the underlying problem. The years leading up to the crash were full of exotic financial vehicles, the sector had been hyper-creative in financial engineering, slick design and presentation and sales of flashy financial products. And underneath it all was land eternal: simple, obvious land speculation, wrapped up in a whirl of spinning numbers and words and concepts. But no longer was the seller of the loan the one bearing the risk of the loan, all that risk was packaged up and passed on around the world, rated as Triple A stock.
Behind and beyond mathematical mysteries and conspiracy theories, this is what actually happens, it’s a repeating pattern of unhinged, self-feeding, irresistible land speculation. It’s that simple and it’s that fixable.
The word simple seems to recur, and natural, and assertions throughout sound so simplistic, yet the basics of what happens are simple, and perhaps the world has been conditioned to assume complexity.
The cycle resumes; already by 2011, 65% of bank lending was being invested in the property market with only 15% going into the productive economy.33 The printing money response to the crisis, with its funky new name, quantitative easing, was largely soaked up in land value, sucking life out of the rest of the economy.
This might have been the explanation that was offered to Her Majesty at the Bank of England, but economists insist on seeing Land as being the same as any other capital good. Land really is not Capital, it really is an element on its own. It’s the thing we live on, live from, do everything on, come from, and there’s only so much of it. Taxing its value removes the fantastical incentives that generate these ruinous bubbles.
Investing in real things is risky, making and selling things to people can go wrong; but that is what banks traditionally did, before they increasingly got hooked on mortgages over the last few decades. The degree to which they are hooked on land value is that, by mid 2020, of £1.7tn of British bank lending, £1.45tn is on real estate, over 85%. £10bn had been loaned out to small and medium-sized manufacturers, the real economy.34
There actually were a handful of economists, who could see the 2008 financial crash coming, who have in common understanding of the role Land plays.35 Is orthodox Economics taking a scientific approach to its brief? Examining evidence?
A discernible rhythm of land value rising and falling has been shown to be repeating at least as far back a couple of centuries. Peaks in land value appear to work, on average, to an 18 year cycle.
This started to come to light in 1928, though not very bright light, in a study of a century of land values in Chicago.36 Further data has been accumulated building on this, from diverse parts of the world and from different times and an unmistakable pattern has emerged.37
A quick search on the web shows that property experts are well aware of this 18 year cycle,38 even if publicly employed economists aren’t. Can that really be true? It must be so, because what public agents, governments, fail to tax is the direct cause of cycles that end in financial crashes, which the public bear the costs of.
Out into the Country: Urban Sprawl
But the damage to civilisation doesn’t end with distorting the creation of wealth and its distribution, and the regular blood-letting of financial crashes. It goes on.
Another major dysfunction in the way the world works, and a direct effect of how these tax choices work, is the enormously inefficient way that land is used in the world and the whole issue of urban sprawl. Sprawling cities are a major threat to the future sustainability of the planet with the loss of fertile land and of wildlife habitats. Increases in urban population are an obvious driver of this, but there is another crucial factor.
Because land value is not taxed, a highly profitable market for speculation in land is created and, naturally, these opportunities will be exploited. Growth leads inexorably to an increase in land value, which provides the incentive for plots of land being held, to ripen, as the term is, in the certain knowledge that the value will increase significantly.
The long-term holding of idle or low-use land plays a major role in causing leapfrog development, where urban expansion is forced out to the next available and eligible sites, causing cities to sprawl outwards. Increasingly, people who serve cities, and contribute to the land values in the city, find themselves priced out of living in the city, out to satellite towns and, in the US, exurbs.
The other driver of sprawl is public investment, through subsidies, through the process by which idle land outside of the city is urbanised, the long stretched tethers of urbanness are laid: roads, water pipes, gas pipes, electricity, sewers, drains, street lighting. The whole bundle of urban experience comes along, the dismal street furniture and signage, carving its way into the countryside, coating the land with tar.
Land values at a new urban site then soar, bringing a significant return for long-term investments in land plots outside of the city. Money can be readily borrowed on this new land value to develop the new satellite of urbanness.
For the people pushed out of the city, this brings extra costs, longer journeys, the strain of hours spent travelling, consuming more energy, generating more pollution. Of increasing relevance, sprawl means more residential areas to protect from flooding.
City dwellers will be familiar with empty plots of land behind hoarding. Much land is held idle in cities, boarded up sites and vacant, mothballed buildings, parts of the world held hostage from the world. The extent of this is surprising.
The Campaign for the Protection of Rural England’s 2019 State of Brownfield report identifies enough suitable brownfield land for more than 1 million homes within cities in England.39 There are shovel-ready areas of brownfield land within London which lie idle, and land lies idle because it can lie idle.
This wouldn’t be the case if rent collection lit a fire underneath the situation, as when San Francisco rose from the ruins of a real earthquake in 1906.40 Land value taxation would greatly stimulate infill development and ensure efficient use of land, reduce the cost of living in urban areas, while making funds available for enhancement of urban life.
Another effect can expected to be that because every place and locality will have access to its own rents, and will become locally more prosperous with a taxation policy that encourages labour and capital, economic opportunities will become equalised between areas and there will be less of an effect of cities sucking in populations, which then relieves the population pressure in the cities.
Sadly, further sprawl is the global trend. In 2010, about 1 million sq km of the world’s surface area had been coated in the concrete and clay of urbanness, roughly the size of France and Germany combined. By 2050, this is set to spread past 3 million sq km, destroying critically productive farmland, rolling over habitats.41
Sustainability calls for compact urban living, at high densities of population. People could balk at this notion, but, actually, many cities considered to be among the world’s most liveable places have high densities of population. Amsterdam, 12,710 per square mile; London, 14,670; Vancouver, 13590; Copenhagen 18,000. And then it gets really apparently dense, San Francisco, 15,000 per square mile, more than half of which in non-residential use, so 30k; Barcelona, 42,000; Paris 54,000 per square mile; In New York, on Manhattan’s East Side, people pay a lot of money to live 100,000 per square mile.
The important thing to understand about sprawl is that it’s not actually urbanness itself, houses, factories, offices, which is occupying the land sprawled into. The USA is an interesting place to look at urban sprawl, continental sprawl, for here it is extreme, and some extraordinary calculations have been made about Urban USA.42
Taking a population density of 10,000 per square mile, the same as Washington, DC, the entire US population would fit into 25,000 square miles, which formed into a circle has a radius of just 89 miles, or a circle of 13 miles radius per individual state. That’s how much land is needed for actual urban use, 0.7% of the wide land of the USA.
A circle of 89 miles radius could contain all actual urbanness, so it illustrates well the problem when considering that, on its own, the urban price influence of Los Angeles stretches south-east over 89 miles, where it starts bumping into the urban prices rising up from San Diego further south. As Mason Gaffney points out:
urban valuation fever affects much more land than can ever actually be developed for urban use
Linking it all together, the USA has thousands of miles of highway and thousands of crumbling bridges that are not being maintained at anywhere near the required rate. It is forgotten history now that much of America’s infrastructure was originally paid for, at least partly, by economic rent.43
Beyond the City
And once finally beyond the city, the dysfunction out in the countryside itself runs rife due to the failure to collect what Adam Smith called the annual ground rent. Indeed, funds flow in the opposite direction. There has been a reverse land value taxation going on, rewarding subsidies, payments received merely for possessing land!
70 plus years after the end of WWII, when food security was certainly an issue in Europe, the subsidising of agriculture has still been 40% of the EU budget. The Common Agriculture Policy (CAP) has been distributing about £42bn to land holders. A vicious aspect of this has been that to qualify for a payment, the land has to be made ready for agriculture. Areas of pristine wild land are senselessly ruined for this payment. There is no requirement to actually grow any food, just to have some bare, empty land. It’s really not clear that CAP has been about food for a very long time. £3bn of this has been coming to Britain, and though the payment is for agriculture, only a small proportion goes to people engaged in farming.44
Naturally, this subsidy attracted rich people from around the world to own a piece of European land and qualify for an uncapped, non-means tested benefit.45 Free money just from owning land! And in the UK with policies centred on the health of the property market, a guaranteed return on investment. Because, naturally, the subsidy pushed up the value of land in the UK, making it very difficult for all but the already wealthy to get into farming. This has led to large scale consolidation in agriculture.
It’s possibly not well understood that money is transferred from people from their production of wealth or from the trade in their produce, and transferred to others by the mere qualification of their ownership of land. Land, that invisible element of Economics. But for the UK, for better or worse, that’s all over now. And what now? Take back control?
The recent legislative direction46 is a huge improvement and sets out some worthy goals, but is taking an approach of rewarding landowners for good behaviour, an approach which has been characterised as payments for not mugging old ladies.47 And these payments are to be instead of regulation, reducing support for environmental agencies and reducing farm inspections, etc, which will, like a lot of things, surely find some revision in a post-pandemic age. But there is certainly political support behind retaining agricultural subsidies – strangely, the excesses of CAP didn’t feature in the Brexit debate – and it seems likely that the ownership of enough land will continue to be a qualification for receiving these handouts.
Language has been developing over recent years, arising from well-meant attempts to protect nature by putting a value on it instead of treating it as if it had no value.48 The idea is to make the business case for nature, to make nature make sense in the language of marketeers and financiers. This has produced terms such as ecosystem services – and the prospects for unbundling these! – and biodiversity offsetting. Concepts have arisen whereby owners of land are seen as ecosystem service providers, apparently ascribing divine powers upon landowners, and taking land occupancy full circle – it is now not for landowners to yield the economic rent from the land, now productive taxpayers are required to pay landowners for the right for animals to exist on their land.
The idea of placing any kind of value or price to nature, which for many is far beyond any such consideration, has long been in contention among naturalists. Conservationist Peter Smith argues that the problem is that it isn’t valued enough, feeling that leaving the rent from land uncollected has made his efforts to protect wildlife utterly futile.49
Smith argues that collecting the rent from land and natural sites would make people value and protect nature and prevent its exploitation, encourage proper stewardship of nature and would soak up the land value-inflating effects of subsidies and grants, which have hampered conservation projects. Smith argues that such taxation would be the best way to protect wildlife in the UK, and at the least cost to the public.
The perverse outcome of subsidies and absence of rent collection is inefficient and promotes a destructive use of land, and degradation of areas which could be left natural, wild. Crucially, subsidies bring marginal land into production, which would naturally have been left to nature, and these areas could be left untaxed. To consider rewilding upland catchment areas may seem to be veering from the subject of Economics but beavers should be heralded for the significant economic contribution of their labour. The industry they contribute, for free – from an ungrateful human point of view – creates a sponge of uplands, gradually releasing water, so that heavy rainfalls don’t flash over land and into people’s homes. If that wasn’t enough, beavers create peaty soils that suck carbon out of the air.
Dysfunction
Land management would be best left to beavers. Their skills of assessment and planning seem in great need in the UK countryside, where the Financial Times reported that, driven by subsidies, almost 10,000 new houses a year are being built on flood plains.50 This was in 2015, nothing has changed since. The Telegraph further revealed that year that building on the highest-risk flood areas was happening at nearly twice the rate as elsewhere!51
Dysfunction.
The economic costs of the now regular flooding events are eventually borne by everyone, and the purchases of materials for wall replastering, bridge rebuilding, etc., will make a positive input to the GDP figure, surely a perversely problematic metric. The causes of these costs, and all other avoidable costs, should surely be the business of an Economics discipline which is focused on the wealth of nations.
There is abject dysfunction all round; the tax system, what is taxed, what is not taxed, is the root of all dysfunction, waste and destruction, haemorrhaging costs, wasting wealth, incentivising destructive activity, wasting nature, stifling and wasting the energy and creativity of people, shortening people’s lives. A tax system which makes no discrimination between earned and unearned wealth, that positively rewards unearned wealth.
Economies which tax production and trade operate with a handbrake on, and with wobbly wheels which distort the natural working of markets and distort and stunt societies. What Adam Smith saw as the ideal, free market competition between all producing the greatest prosperity for all, seems now to produce only ever greater concentrations of wealth and power and ever more precarious lives for increasing numbers of people. This is essentially because of a partial and selective understanding of what Adam Smith was saying. This is because of the lost root of economic understanding.
All this is just the bones of it, but the bones are all that’s needed to get an idea of what’s going wrong here. And, commonly, once understood, it’s strangely obvious. It’s felt by very many that, somewhere, somehow, the way the world works is just set up all wrong; this is the place where it goes wrong. Who gets what and why is where it’s at.
There’s a heck of a lot more to say about all this52, but these are the basic mechanisms and effects. And when the clouds of numbers are parted, it can be a surprise to discover that the actual principles which underpin economics turn out to be very simple, that anyone could, with a little attention, grasp. And perhaps that’s why economics had to be mystified53 – disabled as a tool to guide policy makers – protected from the public gaze by an aura of complexity.
The fundamentals of what we tax, is not really a question for debate anywhere, it’s set in orthodoxy, the neoclassical reformation was absolute. The mechanisms supporting the orthodoxy are so accepted that their contradictions hide in plain sight. People, and economists, know what they know, what they have been brought up with, and have to live in the world they were brought into. Everybody has been inducted into the land speculation game, it’s all anyone knows. People buy houses with the expectation of the price increasing, and often depend upon it. Expanding post-war economies did well in sharing the benefits of economic rent among so many. Of course, this runs out in the end.54
Neoclassical economics was largely about entrenching the sanctity of private property in land.55 Drawing everyone into the system is, of course, the greatest bulwark in the protection of that system. These are the rules people were given, and those who have done well from it could be hesitant to embrace such a change in taxation.
They could consider how life would have been if they had never have had to share their wages with the taxman, and if everything they’d ever bought had been a chunk cheaper; if they’d seen and understood a clear link between payment and benefits received; if they hadn’t had to pay so much for a home in the first place.
This is the most truly revolutionary concept in the world, yet there is nothing revolutionary about making these changes to taxation. And this is something that can be introduced piecemeal, even small changes tend to show measurably positive results. Small revenue-neutral changes in local taxation would start to demonstrate the point.
People could consider how life would be living in a society with opportunities for all, community and individual with harmonious shared interests, and well-financed public services; and destructive economic crises didn’t happen; and where there was rational use of land and water, amongst all manner of positive benefits.
They may consider how much wealthier they would have been in an expanded and powerfully pro-incentive economy, and how much more genuinely wealthy societies could be and happier places for people to live in, with all the synergies and creativity that could flow from that, both measurable and intangible.
Happy societies; again, perhaps straying now from hard economics, but actually not. Was that not the point of Economics in the first place? There are certainly grounds to believe that moral philosopher, Adam Smith, would agree.
Conversely, there are dire consequences when the rent is left uncollected, for this leads inexorably to less happy societies, with all the variety of bitter and enormous costs involved there.
Economic rent represents that value which is the gift of nature and is created from the life of the community. If the community does not collect this gift, it will be taken anyway, and this creates injustice and economic apartheid. It is this which is behind the increasing inequality in society.
People are made by what happens to them in the world. At the beginning, and at the end, people are all pretty much the same, all much of an amazing muchness.
The tax system drives wedges between people and makes classes, it creates a section of society permanently shut out of the party and needing support. Over time, the people at the top come to believe that the fact there are people at the bottom, and at the top, is a natural outcome, a natural order. It’s because people make bad life choices or, though maybe not put in these terms, general fecklessness. Some even start seeing the issue in terms of genetics.
None of this is reflective of reality whatsoever. The reality is of a social system that restricts economic opportunity to a tiny proportion and the creative potential of so many is lost to the world, their place decreed at birth. Some will be able to break free of these bonds but most simply won’t be able to.
The UK’s economic apartheid is clearly measurable, mappable, starkly visible in a whole series of studies on the UK’s health and life expectancies.56 It’s mind-boggling to contemplate that life expectancy is 22 years shorter in the poorer end of the London Borough of Kensington than the richer end.
Failure to collect the rent nourishes practises which corrode civilisation and break the link between the people and the land that they’re from. Much has been said about sovereignty recently, but a nation’s sovereignty is most truly forfeited when its economic rent, its natural surplus, is privatised; that is where the public could take back control.
There has been an emerging multi-disciplinary field of Planetary Health,57 to address the current perilous stewardship of the planet. Surely key to understanding the interlocking systems of planetary health must be the fundamental role that taxation has on natural systems and how Land is fundamental to Economics, not to mention Justice and planetary health.
Without this understanding of the essential need for communities to collect the economic rent which arises, it won’t be possible to rescue today’s civilizations from the threats that are posed. The point about all this is that nothing else will work. No balms to address these challenges are going to work without addressing the root of the dysfunction. Nothing else is going to make the world use land rationally, nothing else is going to level up anywhere. This is the only rational tax and any other approach to this is irrational and will serve eventually only to exacerbate current dysfunctions. No other approach will be sustainable.
The ultimate dysfunction in the world is the enduring conflict and violence in the world. 30 years since the end of the Cold War and the expectation of a peace dividend, the global spend of arms in 2018 was $1.8 trillon, this in a world that struggled to find enough PPE in a plague. The arms trade is an astonishing state of affairs, representing enormous technical expertise and capital which could have great effect if redirected at the true adversaries of humanity.
All conflict has, at root, a dispute about who owns what and why, a dispute about what is just. Is it not this incoherence around the central idea of economic justice, who has the right to land and natural resources, that lies behind all our tragedies?
To give way completely to idealistic dreaming – because this should never be abandoned – that when this happens everywhere, that economic agency is widely dispersed, that the gifts of nature, the rent, the heaven sent, is shared, everyone would be so busy with prosperous, convivial life, that the drivers of conflict would melt away. And that fiscal policy makes nations live in careful respect for the phenomenal common heritage of the biosphere, and everybody can find peace and life in their lands. There is a reason for poverty. The world will surely grow beyond this sad situation of greed depleting abundance and look back in wonder.
Footnotes and References
1. Perhaps, with a PhD in mathematical physics from Harvard, it’s a bit of a stretch to describe Eric Weinstein as a lay physicist, but, anyway, he works outside academia.
2. Story related by Fred Harrison in The Traumatised Society, p.153, a book which explores economic history in broad historical and psychological perspective. (Shepheard Walwyn, 2012)
3. Guardian, 13th December, 2012 https://www.theguardian.com/uk/2012/dec/13/queen-financial-crisis-question also: https://www.telegraph.co.uk/news/uknews/theroyalfamily/3386353/The-Queen-asks-why-no-one-saw-the-credit-crunch-coming.html
4. Corruption of Economics, Mason Gaffney, Fred Harrison (Shepheard Walwyn, 1994)
5. An Inquiry into the Nature and Causes of the Wealth of Nations, Adam Smith, 1776
6. Adam Smith, 1723 – 1790 moral philosopher and classical economist
7. Examples of pies, trays, ovens, etc., taken from Europe’s Fatal Affair with the VAT in The Mason Gaffney Reader, HGI, 2013
8. Mason Gaffney, Land as a Distinctive Factor of Production, 1994. In Nicolaus Tideman (ed.), in Land and Taxation. London: Shepheard-Walwyn (Publishers) Ltd., pp. 39-102 (constituting about 1/3 of the book). 1994
9. even if, and general thought, taken from Nicolaus Tideman in The Needed Moral Revolution in Rent Unmasked, Shepheard Walwyn 2016
10. phrase adapted from Dirk Loehr in Corporate Land Bankers as Rent Seekers in Rent Unmasked, Shepheard Walwyn 2016 referencing Ramon Sotelo, 1985
11. John Stuart Mill, (1806-73) classical economist. The Mill Effect is Mill’s neglected observation about sales taxes, explored by Mason Gaffney, where he uses the examples of pies, shelves, ovens, buildings. Simply put, all have widely varying shelf lives. Sales taxes penalise goods with a quicker turnover, and favour fixed, durable capital, like buildings. Discussed in Mason Gaffney’s memorable essay Europe’s Fatal Affair with the VAT in The Mason Gaffney Reader, HGI, 2013
12. Guardian, 21st May, 2020 https://www.theguardian.com/money/2020/may/21/top-1-of-british-earners-get-17-of-nations-income
13. The 16th Amendment of 1913 enabled Congress to tax income, and this duly started in 1916, though at first affecting only high incomes.
14. Fred Harrison, The $14 Trillion Lift-Off From the Great Stagnation and discussed by Roger Sandilands in The Culture of Prosperity both in Rent Unmasked, (Shepheard Walwyn, 2016)
15. Estimate made by Fred Harrison in Beyond Brexit: The Blueprint, Land Research Trust, 2016
16. In 1764, Smith took on the job of tutoring the young Duke of Buccleuch on the European tour that young aristocrats would take. In France, he became acquainted with the ideas of the Physiocrats, the French Economists, and, in particular, with Anne Robert Jacques Turgot, whose 1766 work, Reflections on the Formation and the Distribution of Wealth, would have great influence on Smith’s The Wealth of Nations (see 17.) which he started to write on his return and published ten years later. Mary Cleveland writes about all this and more in Time Travelling Back to Space Age Economics in Rent Unmasked, (Shepheard Walwyn, 2016)
17. Adam Smith, An Inquiry into the Nature and Causes of The Wealth of Nations (1776), Book V, Chap. 2, Art.1
18. David Ricardo, 1772 – 1823, classical economist
19. On the Principles of Political Economy and Taxation, David Ricardo, 1809
20. ^ Stiglitz, Joseph (1977),.The Theory of Local Public Goods. In Feldstein, M.S.; Inman, R.P. (eds.). The Economics of Public Services. Palgrave Macmillan, London.
pp. 274–333. doi:10.1007/978-1-349-02917-4_12. ISBN 978-1-349-02919-8.
21. Land & Property Value Study – Assessing the Change in Land & Property Values Attributable to the Jubilee Line Extension TfL 2004
22. Influential economist Milton Freidman came to call LVT the least bad tax https://www.economist.com/the-economist-explains/2014/11/10/why-land-value-taxes-are-so-popular-yet-so-rare
23. Adam Smith’s four Canons of Taxation were set out in The Wealth of Nations, four tests that the raising of public revenue should pass. Ted Gwartney put Smith’s four principles of taxation as:
- Light on the production of wealth, and does not impede or reduce production;
- Cheap to collect, requiring few collectors, and easy to understand;
- Certain; can’t be avoided, little opportunity for corruption, and provides adequate revenue;
- Equitable and fair, payments for benefits received, impartial, just.
Gwartney points out that land rent is the only public revenue source that passes these tests. (Actually, it’s the only public revenue source that passes any of the tests.) He refers to misconceptions about accurate land value assessment behind arguments that criteria 2, 3 and possibly 4 make it unsuitable, and addresses these misconceptions in the rest of this piece:
Assessment of Land Values in Rent as Public Revenue: Issues & Methods, Ted Gwartney and Dave Wetzel, edited by Lindy Davies (Robert Schalkenbach)
It could be said that Adam Smith’s Canons of Taxation lead ‘straight as a guided missile’ to the collection of land rent, save to mention that this phrase has been stolen from Mason Gaffney, in Europe’s Fatal Affair with the VAT in The Mason Gaffney Reader, HGI, where Gaffney is discussing Arthur Pigou’s reasoning about the Ramsey Rule, and he quotes Pigou.
If there is any commodity for which either the supply or demand is absolutely inelastic, the formula implies that the rate of tax imposed on every other commodity must be nil, i.e. that the whole of the revenue wanted must be raised on that commodity.
And Gaffney says that this reasoning leads straight as a guided missile to levying taxes EXCLUSIVELY on the value of land, because its supply is inelastic.
Arthur Pigou was a Cambridge economist from the first half of the 20th century, also known for Pigovian taxes directed at environmental pollution. Ramsey’s rule was from the work of Cambridge academic from an earlier generation, Frank Plumpton Ramsey, who managed to make major contributions to the fields of philosophy, mathematics and economics before dying at the age of 26.
24. Land Value, along with building value, is taxed in the USA, at city and local levels. The valuation of the land part has been suppressed in many and cumulative ways historically (as set out in The Unplumbed Revenue Potential of Land in The Gaffney Reader). These are unpopular and irritating taxes, up top of everything else. In California, in 1978, after a long period of high property tax dependence in California, particularly focused on the land value element of the property tax, allowing correspondingly lower burdens of sales and income tax – which had produced enormous growth in California – voters in California passed Proposition 13, which reduced property tax rates (buildings and land) on homes, businesses and farms by about 57%. In What’s the Matter with Michigan (The Mason Gaffney Reader), Gaffney refers to the advice he gave to some Michigan officials planning the same change in focus of taxation, at the time with the benefit of 17 years’ experience of the effects of Prop.13. Gaffney set out a long litany of absolutely dire results in California in just about every single indicator both of economics and of civic life, costing California its leading status in the USA, in many indicators of national wellbeing. As he said: It should give one pause for thought. It is, however, if you think about it, the expected result of what the voters did. They turned property from a functional concept to a sacred one. Instead of a commission to be enterprising, hire people, produce goods, and pay taxes, real property became a welfare entitlement. California’s voters (whether they realised it or not) rejected the concept of a tax on inert wealth in favour of taxing liquidity and cash flow. The predictable result is to inhibit economic activity, and encourage building wealth inert and stagnant.
25. See 11.
26. The extensive experience that the USA has of taxing land, (see 25.) is of taxing land value as part of property tax, with variations over time and place in the balance between land and buildings. Its broader experience has been largely airbrushed out of American history. Its greatest expression is in the Commonwealth of Pennsylvania, which, for over a century, has had property taxes that tended to prefer taxing land rather than buildings, the only state granting cities the option to exclusively tax the land element of property tax. Pittsburgh, PA, enjoyed 20 years of such arrangements with great success, including, in 1985 and 1986, winning the title of America’s Most Liveable City. When Pittsburgh changed this policy, construction activity dropped and it doesn’t win that accolade anymore. Many other Pennsylvanian cities have used elements of taxing land value tax to a more or less degree, and it has shown in the development of downtown areas, job growth, wage increases and the reduction of urban sprawl, as this tax bias encourages improvements and discourages land speculation. Yet, as elsewhere in the US, the effect is limited often by the overlay of school districts imposing property taxes including buildings. But despite positive effects which can be demonstrated, this is all small stuff in the scheme of things; the full story is vast in scale and forgotten. The Single Tax movement that grew in the aftermath of Henry George’s seminal Progress and Poverty in 1879 were hugely instrumental in the development of civic USA and there is a wealth of buried history here. Some idea of the significance of this influence was unearthed by Mason Gaffney, writing in The Corruption of Economics about the period when California transformed from a semi-arid desert to become the bread basket of America. He describes how organised irrigation had spread through rural California, financed by land value taxes over decades, then, in 1917, California made all districts exempt improvements from property tax and for this tax to fall solely on land. These taxes from land value built the Don Pedro Dam, then the highest dam in the world. California came to fill America with its specialty produce grown from previously desert or range land. Gaffney quoted Albert Henley, a lawyer involved in Californian municipal politics, who said: The discovery of the legal formula of these organizations was of infinitely greater value to California than the discovery of gold a generation before. They are an extraordinarily potent engine for the creation of wealth. Though this is forgotten history, this was the driver of California’s emergence as the agricultural power in the US. This is one example of Georgist influence that are noted in this text. In conversation in Rent Unmasked Mason Gaffney mentions, in passing, examples of American infrastructure financed by rent.
27. AR Hutchinson, Natural Resources Rental Taxation in Australia, 1978
http://lvrg.org.au/archive/rrt-1978.pdf
28. Denmark has a long awareness of land value, dating back to King Frederick overthrowing his uncle in 1784, impatient to end serfdom and institute land reforms. The reforms he made are still felt in Denmark which has the greatest distribution of individual owners of farmland in Europe. (Michael Silagi, American Journal of Economics & Sociology, 1994 Oct). Denmark still calculates land value separately from building value, and to a degree still taxes it. In 1957-60 the Justice Party formed the Ground Rent government with the Social Democrats, based on collecting land rent and liberalising the economy. Spectacular economic results were achieved in a short time, turning a deficit into a surplus, all but eliminating unemployment. What happened? This is discussed here: https://www.earthsharing.org.au/2006/09/the-danish-experience/ Viggo Starcke, who was a minister in the Ground Rent government puts things well: What is mine is mine, what is yours is yours, and what is ours is ours
29. Singapore is discussed by Roger Sandilands in The Culture of Prosperity in Rent Unmasked, Shepheard Walwyn, 2016
30. Mason Gaffney, The Hidden Taxable Capacity of Land: Enough and to Spare, 2009
31. Fred Harrison, The $14 Trillion Lift-Off From the Great Stagnation in Rent Unmasked, Shepheard Walwyn 2016.
And in The Revenue Potential of Land II. Broadening the Concept of land and its Rent, in The Mason Gaffney Reader, (HGI), Gaffney reminds us that rent is not just about land, as in property taxes. he says:
The term ‘single tax’ has been unfortunate in helping to perpetuate a narrow fixation on property taxes; as a result, even advocates of land value taxation tend to underestimate the revenue potential from rents.
32. Phrase used by Mason Gaffney, The Great Crash of 2008 in The Mason Gaffney Reader, HGI, 2013
33. 2011 sectoral bank lending figures from the Bank of England, cited in Positive Money, How Money Works: How Much Money Have Banks Created? http://positivemoney.org/
34. Will Hutton pointed this out in The Guardian, May 3rd, 2020 https://www.theguardian.com/commentisfree/2020/may/03/the-promise-of-an-oxford-vaccine-reveals-how-a-new-britain-could-thrive
35. Fred Foldvary, The Depression of 2008, 2007; Fred Harrison, Boom/Bust, 2005; Michael Hudson, The New Road to Serfdom, 2007; Bryan Kavanagh, Unlocking the Riches of Oz, 2007
Fred Harrison bried the incoming New Labour govt in 1997, what was coming in 2008.
36. Homer Hoyt, One Hundred Years of Land Values in Chicago: The Relationship of the Growth of Chicago to the Rise of Its Land Values, 1830–1933, 1933
37. Fred Harrison, The Power in the Land: An Inquiry into Unemployment, the Profits Crisis and Land Speculation (1983), Shepheard Walwyn. This book predicted the economic crisis of 1992. Fred Harrison briefed the incoming New Labour government in 1997 about what was coming along in 2008. He wasn’t listened to, for this was a government who felt that they themselves were abolishing the boom and bust cycle and it wasn’t going to happen again.
38. They understand all this at PropertyGeek https://www.propertygeek.net/article/the-18-year-property-cycle/ see also: http://www.georgistjournal.org/2012/08/26/the-eighteen-year-real-estate-cycle/
39. Campaign to Protect Rural England, State of Brownfield Report, 2019
40. Mason Gaffney, Repopulating New Orleans in The Mason Gaffney Reader, HGI, 2013
41. Guardian, Jul 12th, 2016 https://www.theguardian.com/cities/2016/jul/12/urban-sprawl-how-cities-grow-change-sustainability-urban-age
42. Mason Gaffney, Economics in Support of Environmentalism in The Mason Gaffney Reader, HGI, 2013, where he is building on the work of Alfred Sobar.
43. Quest for the Authentic Voice of the People – The Authors in Conversation with Mason Gaffney in Rent Unmasked, Shepheard Walwyn 2016
44. Fred Harrison, Untangling the Perverse Web in Beyond Brexit: The Blueprint, Land Research Trust, 2016
45. Duncan Pickard, Enlightenment’s Food for Thought in Rent Unmasked, Shepheard Walwyn 2016
46. Agriculture Bill, 2020 https://www.gov.uk/government/news/agriculture-bill-to-boost-environment-and-food-production
47. George Monbiot, Guardian, 10oct 2018, The one good thing about Brexit? Leaving the EU’s disgraceful farming system https://www.theguardian.com/commentisfree/2018/oct/10/brexit-leaving-eu-farming-agriculture
48. Ecosystems Market Task Force https://www.gov.uk/government/groups/ecosystem-markets-task-force
49. Peter Smith, Cries of the Wild in Rent Unmasked, Shepheard Walwyn 2016
50. Financial Times, December 28th, 2015
As the BBC reported on 15th November, 2019, Things haven’t changed since: https://www.bbc.co.uk/news/science-environment-50419925.
53. The Telegraph, 29th December, 2015
52. Among all the other things to say is about the much deeper evidence to understand about tax in Mason Gaffney’s thesis of ATCOR, All Taxes Come Out of Rent, and EBCOR, Excess Burden Comes Out of Rent, which the author must confess to not completely grasping yet. These concepts are discussed by Kris Federer in Economics from the Ground Up: Public Revenue as the Structure of Production in Rent Unmasked, Shepheard Walwyn 2016
53. Mason Gaffney, The Corruption of Economics, Shepheard Walwyn, 1994
54. John Locke, 1632-1704, Enlightenment philosopher, right at the beginnings of ideas of political economy, in his Two Treatises on Government, 1689-1694, asserted everyone’s right to life, liberty and estate (that is, land.) The bells that these words ring tell of his influence on the United States Declaration of Independence, and somewhere through the process of drafting of that document, estate became the meaningless pursuit of happiness. Locke also asserted the legitimacy of rebellion if government failed to ensure these rights. Nearly two hundred years later, at the end of the classical political economy era, Henry George extrapolated the ideas of classical political economy into a formula, popularised in the massive sales of Progress and Poverty, 1879, demonstrating how Locke’s ideals could work in the world. Henry George expressed a thought well in Book VII, chapter 1:
The equal right of all men and women to the use of land is as clear as their equal right to breathe the air. It is a right proclaimed by the fact of their existence. For we cannot suppose that some men and women have a right to be in this world and others do not.
55. Property originally meant, as it means in science, the attributes that may be applied to something. One’s talents and abilities were considered to be one’s properties. The word property came to be applied to one’s ownership of land, that it was actually an extension of the self. The medieval concept of sanctity was draped over this.
56. Guardian, May 5th, 2020, various studies mentioned in: https://www.theguardian.com/commentisfree/2020/may/05/poverty-kills-people-coronavirus-life-expectancy-britain
57. The Bigger Picture of Planetary Health, The Lancet, Volume 3, Issue 1, January 1st, 2019
https://www.thelancet.com/journals/lanplh/article/PIIS2542-5196(19)30001-4/fulltext
Guardian, 27th April, 2020, Halt destruction of nature or suffer even worse pandemics, say world’s top scientists
https://www.theguardian.com/world/2020/apr/27/halt-destruction-nature-worse-pandemics-top-scientists
Guardian, 7th May, 2020 ‘Promiscuous treatment of nature’ will lead to more pandemics – scientists
Wake Up: Alarmed Pop Music and Answers 