Wednesday, October 10, 2012

LAND, LABOR, AND INDIVIDUAL LIBERTY

Land, Labor, And Individual Liberty

Wherever, in any country, there are idle lands and unemployed poor, it is clear that the laws of property have been so far extended as to violate natural rights.

All goes back to the land, and the landowner... is enabled with resistless strength to absorb to himself a share of almost every public and every private benefit, however important or however pitiful those benefits may be.

It's good to have land.
~ Stewie Griffin, “Family Guy”, Episode “North by North Quahog”

There is in nature no reason for poverty.



Note:
Boldfaced text denotes my emphasis.
Underlined text denotes important people and terms.
If any links are broken, they have been saved separately.


MURRAY ROTHBARD, HENRY GEORGE, AND ME
Pictured above are economists Murray Rothbard (left) and Henry George (right). Though living in different centuries, both were fervent advocates of free markets and private property rights. However, they differed on the land question, though both acknowledged that there was indeed a land question: Is land properly considered private property? For quite some time, I sided with Rothbard,[4]4 answering in the affirmative, and I saw no reason to consider land to justly be anything other than private property.

Land Value Taxation [5]5 is Henry George's main proposal. Explained below, it is more accurately called Location Value Taxation. Hereafter it will be abbreviated as LVT. It is a radical tax reform with profound implications for socioeconomic conditions. But as a Rothbardian, I did not particularly care what land actually was, as I could not come to support LVT or any tax whatsoever.

This attitude, however, overlooks many particularities that must be understood in this discussion. For one, LVT is not even a real tax in the way that should infuriate Rothbardians and other libertarians. In fact, noted early 1900's libertarian thinker Albert Jay Nock (Author of “Our Enemy: The State” [6]6) recognized the positive implications for individual liberty that George's policy proposal would have. In his essay “Thoughts on Utopia,” he writes:
The only reformer abroad in the world in my time who interested me in the least was Henry George, because his project did not contemplate prescription, but, on the contrary, would reduce it to almost zero. He was the only one of the lot who believed in freedom, or (as far as I could see) had any approximation to an intelligent idea of what freedom is, and of the economic prerequisites to attaining it....One is immensely tickled to see how things are coming out nowadays with reference to his doctrine, for George was in fact the best friend the capitalist ever had. He built up the most complete and most impregnable defense of the rights of capital that was ever constructed, and if the capitalists of his day had had sense enough to dig in behind it, their successors would not now be squirming under the merciless exactions which collectivism is laying on them, and which George would have no scruples whatever about describing as sheer highwaymanry.[7]7

NAMING AND EXPLAINING THE PHILOSOPHY
The labeling of the entire philosophy as Georgism is far too restrictive. The better label is Geoism, because we are dealing with land, because these ideas did not truly start with Henry George, and because the ideas have been further developed since his 1897 death. [8]8

Geoism, put simply, is a socioeconomic philosophy which asserts that everyone owns the product of their labor, but land is rightly treated as common property.

To assure this, the rental value of land (explored further below) must accrue (through LVT) not just to private landowners, but to all in the society, as we all use some land, particularly in the form of public goods (police, fire, courts, education, roads, utilities, etc). In fact, it is in large part due to those public goods that the rental value of land exists at all. [9] [10] [11]9 10 11

If anyone thinks this issue is too complex to grasp, do not despair. If you have ever played the Monopoly board game, you have a good foundation already. That game was developed by Elizabeth Magie, a follower of Henry George and was originally known as The Landlord's Game.[12]12

It is important to elaborate on the notion of common property in land. Rothbard and his followers would balk at the suggestion, though it's really not so silly even in the Rothbardian view. [13]13 The notion of common property refers to an equal right of all individuals. [14]14 This is not synonymous with collective property. In a collective property scenario, the use of the land is decided largely by those who do not actually occupy and use it. This is typically the State, or an entity operating with State approval (and the most powerful of those entities are actually very obvious, as will be explored later). And if the order is not followed, there can be criminal and civil penalties. For more on the distinction, see reference 15.15

The taxation and regulation of government at present decides the use of land, due to the countless incentives/disincentives that such taxation and regulation create. The Geoist solution is to toss aside those policies which so distort economic activity, hamper production, reward special interest groups, and burden progress to the detriment of the individual worker and individual consumer.

Essential to understand is that in asserting a common right to land, this is not some arbitrary restriction on one or another landowner's rights. Rather, it is a logical, natural, and necessary restriction on all of us. The basis for this restriction is the unavoidable fact that, on one hand, there exists a fixed and immobile supply of land (i.e., locations) and on the other hand, there exist other people (and in ever-increasing numbers) with the same common right to that same fixed and immobile supply.

LVT preserves that common right to land as no one would pay for land desired by others that they do not use (and if they did, then there is no conflict here). More importantly, it leaves production and service private and priced in a free market. Thus, Rothbard's complaint that this would amount to the nationalization or socialization of land itself is quite unfounded. Indeed, George discussed this very issue, specifically rejecting the socialization of land itself, recognizing its totalitarian potential, in favor of LVT. The difference is simple. LVT does not give the government any say in how the land is used, the extent of its power is only to ensure that the LVT is paid.

To even be collected, clear and settled claims to land are prerequisites. If there are ambiguous or contradictory claims to a plot of land, who could be levied the location tax in the first place? The land title system (private 
holding of land) that we are used to will and indeed must continue. This is the socialization of the rental value of land, which is value that no one landowner had anything to do with. This is what makes it not a real tax.

No one who has read George’s work with honesty can glean from them anything other than praise for free markets, free exchange, and private property. For example, his "Protection or Free Trade?" [16]16 is an impassioned defense of free trade and an absolute excoriation of protectionism. So what sets land apart from other material things which may justly be private property?

THE BARE NECESSITIES
The answers come in understanding the three Factors of Production (not to be confused with the vague Marxist notion of the Means of Production, which problematically and illogically conflates all three factors, as explained later). “Production” here refers not only to producing goods, but to providing services, typically with goods (i.e., tools). Thus another name could be Factors of Provision. These factors are what is needed to produce goods or to provide services:
  • Labor is obvious, as no good can be produced nor can any service be provided without someone doing something. Whatever form it takes, the product of labor is wealth.
  • Capital is wealth that is used in the production of further wealth, and may be categorized into:
    • Capital goods are the finished goods (tools, machines, factories, and so on) which aid in the production of:
      • Other capital goods (such as an automobile factory, which is capital, producing a work van, which is also capital, to be used in the provision of some service or the delivery of some good),
      • Consumer goods, such as durable goods (like refrigerators and ovens, which can also be capital goods if used by a business in it's revenue-generating operations) and consumable goods/consumables like food and toiletries),
      • Or the provision of services (such as landscaping or vehicle repair).
    • Financial capital is money i.e., the funding of production. The important thing to realize here is that the money itself is not actually wealth. And since all capital is wealth, neither is money actually capital. Rather, it represents the ability to acquire wealth/capital. The issue of money in Geoism is quite an interesting one with many view points. [17] [18] [19] [20] 17 18 19 20 However, Robert De Fremery makes the best case in reference 21. [21] 21
  • Land, in economics, refers to all natural resources. For a look at how Geoists view mineral deposits and other natural opportunities such as metal ore and petroleum, see references 22, 23, and 24. [22] [23] [24]22 23 24 But with regards to LVT, “land” specifically refers to location, i.e., the ground upon which we work, stand, travel, build, fight, play, love, and, indeed, live. Without land, we could do nothing, not even merely exist, as we would be nowhere. Therefore, as mentioned above, the more precise name for Land Value Taxation would be Location Value Taxation.

Each of these factors have a return or a payment that is due to them:
  • Wages are the payment received for labor. This can refer to an hourly wage, an annual salary, overtime pay, etc. But it does not need to refer to money. If I pick apples for John Doe and he allows me to keep some, those apples are the payment for my labor i.e., my wages.
  • Profit and interest are the payments received by the owners of capital (tools, machines, factories, and invested funds) which go beyond the wages that were necessary to put that capital to use. The distinction between profit and interest is simple: Interest-seekers lend capital to profit-seekers. These interest-seekers are contractually guaranteed regular payments of predetermined amounts. While the most obvious example of interest would involve the interest rate on monetary loans, with such a definitional framework, we could also count as interest the payments due from a profit-seeker to a firm that rents out tools and machinery (like Home Depot). Profit-seekers, on the other hand, endeavor to put the borrowed capital to use in such a way and at such a price that it gains them more than what is due to their lender, the interest-seeker. Further subtracted would be any wages due to workers, mandatory insurance premiums, office utilities, taxes, etc. Thus, the difference between total revenue and all those various obligations (including, of course, repayments to his interest-seeking lender) would be the profit-seeker's profit. Another feature of interest is that even if no profit is made, indeed even if the profit-seeker lost money, these payments to the lender are still due. Good luck with that.
  • Economic Rent is a very complex topic. There is an important distinction to be made between the economic rent of land and the contract rent of capital. It is this contract rent that we refer to as renting-for-use with such things as heavy equipment, storage containers, automobile leases, and apartments. All those things are capital, not land, and thus the "rent" paid for them is in fact interest. Economic Rent originally referred to the payments to landowners due only to their supposed ownership of the land. Today, Economic Rent is the payment which goes beyond the payment needed to produce a given good or provide a given service at its market price. Put another way, it is a payment received due to the establishment and exploitation of barriers to entry. [25] [26]25 26

ELABORATING ON ECONOMIC RENT
With land, that barrier is literal, often in the form of a fence, wall, or other divider. No one could work, nor even exist, on the landowner's land without their permission at their price. And since there is a fixed amount of land, most people will be deprived of the opportunity to own land that goes to those fortunate enough to have been born earlier and their heirs (though also to those willing to resort to violence to seize a plot of land, and then their heirs.). Thus, the former shall be the landlords of the latter, and the latter shall be the tenants of the former in perpetuity. It is difficult to imagine anyone, other than landowners and prospective landowners, seriously denying that there is an inherent injustice in this situation.

Today the term landlord has the connotation of referring not only to the owner of the location itself but also to the owner of the buildings upon the land which are rented out for use. Oftentimes, but not necessarily, this is indeed the same person/entity. However, the roles of location owner and building owner are separate. Therefore, a rental payment from a tenant combines the amount due from both land rent and contract rent (in reality, an interest payment).

The modern definition of economic rent has come to include income received due to legal fictions the government creates. One such legal fiction is occupational licensing,[27]27 which is a barrier to entry into whatever market [28]28 the license is for. An issuing authority will erect barriers to entry not only in the form of prerequisites to getting a license, but even in restricting the number of licenses that can be issued at once. Thus, occupational licensing treats various industries as if they were land/locations, i.e., in fixed and immobile supply (immobile except within the jurisdiction of the license, that is). George's analysis regarding locations and tax policy therefore transforms into an even more profound critique of the injustice of the economic and regulatory status quo. Tutor2U's economics section states:
Barriers to entry are designed to block potential entrants from entering a market profitably. They seek to protect the monopoly power of existing (incumbent) firms in an industry and therefore maintain supernormal (monopoly) profits in the long run. Barriers to entry have the effect of making a market less contestable. The economist Joseph Stigler defined an entry barrier as "A cost of producing (at some or every rate of output) which must be borne by a firm which seeks to enter an industry but is not borne by firms already in the industry.[29]29

Again, note that these “supernormal (monopoly) profits” are in fact more accurately referred to as Economic Rent. This situation is enforced by the government's inspectors and police who punish violators. This makes economic rent incalculable in many circumstances, as there is no way to know exactly how much more a license-holder makes solely due to their license. But what is certain is that dismantling these barriers (the licenses) would mean a cut in the unearned income to these license holders who suddenly have to compete with a greatly expanded market of workers who were without the license beforehand.

Economic rent is unique income, though today, the owners of capital are often also the recipients of economic rent, which blurs the distinction between profit/interest and rent. Its receipt does not mean the recipient, a rentier (pronounced rahn-tee-eh), has added new value in the form of a good or service in a free market. Rent-seeking behavior [30]30 refers to the pursuit of this type of income typically involves the manipulation of the political and legal environment. The Military-Industrial Complex (one component of which comprises the firms which supply the military with everything from bullets to warships to cruise missiles) is the most obvious, and perhaps most malicious instance, as it is in their financial interests to ensure that armed conflicts begin and continue. [31]31 For a tamer example, take the plumbing industry in New Jersey (Or the entire occupational licensing system of New Jersey [32]32).

Government-instituted licenses were established at the behest of existing businesses. In order to do plumbing work, a person must possess this license. All unlicensed workers must be employed by one of these licensed plumbers. The prerequisites for just taking the plumbing exam are four years of night schooling and five years of working. If a laborer fails the exam, they must wait another six months to try again. If a laborer is discovered to be working without a license, they may face severe fines and the possibility of never being allowed to receive the license anyway. The property owner may also face penalties for using unlicensed labor.

What is this situation? It is called a carteldefined by dictionary.law.com as:
[A]n arrangement among supposedly independent corporations or national monopolies in the same industrial or resource development field organized to control distribution, to set prices, to reduce competition, and sometimes to share technical expertise. [33]33

Again, when the government approves a cartel like the Board of Master Plumbers, a legal fiction is created which restricts the availability of plumbing labor and treats it as though it were land, i.e., in fixed and immobile supply. Since there is now an artificially finite market for plumbing labor, those who wish to enter it must, so to speak, pay rent to the plumbing lords in the form of lower payments as wages being employees than the unlicensed worker would have otherwise received working for themselves and not as an employee.

Consumers are also punished by occupational licensing. When there are fewer competitors, prices may be raised to further enrich the established businesses. Of course, the prices demanded by licensed construction firms are totally absurd.

There is indeed nothing wrong with being either an employee or an employer. The issue at hand is the current law and the results of that law: an unjust unbalancing of labor markets enabling wealth concentration. Without the licenses, i.e., these artificial barriers to entry, one would only become an employee if the employer actually offered pay and benefits enough to entice a laborer to forgo self-employment (hopefully a venture with as few taxes, fees and legal prerequisites as possible) and become an employee in the first place.

Licensing has little to do with ensuring public safety and guaranteeing quality. It exists primarily to punish workers without it with lower wages and punish consumers with fewer choices and higher prices.

The abolition of occupational licensing by no means entails the abolition of certification, credentials and quality control entirely. There would be (and are now [34]34private certification agencies through which workers could apply for that agency's seal of approval. 

Assuming that occupational licensing were abolished, if consumers value the experience and reputation of their plumber/doctor/whatever, they would have to be insane to not look into it. Likewise assuming that occupational licensing were abolished, if plumbers/doctors/whatever value their reputation, they too would have to be insane to not attach their names to some kind of reputable certification.

Consider also Underwriters Laboratories and the fact that their “UL” seal of approval is stamped onto almost every piece of electronic equipment. That is private sector quality control. [35]35

The issue is that of legal reprisal against those who work without a license or those who hire unlicensed labor. When people are punished for not using the "right" service, that is economic totalitarianism and the only beneficiaries are the managers of the established businesses, i.e., the rent-seekers. The benefits they receive as a result of such manipulations, monetary or otherwise, measurable or not, is economic rent.

Naturally, unlicensed workers do side work. This is a mutually beneficial economic (or rather: countereconomic [36]36) arrangement. For the consumer, the prices of work are far below the licensed rates. For the worker, it means far better pay, far better than could ever be received in an hourly wage as an employee. On top of that, the State is denied control (regulation) and funds (taxation). It is a strategy that is both lucrative to the worker and beneficial to the consumer.

Who truly owns the wrench in the worker's hand? If they are, by statute, as is now the case, forced to work for someone else, that wrench belongs to their bosses, not to them. But it should belong to the worker, and if they are physically able and mentally willing to use it, then any law that seeks to stop them ought to be repealed or ignored altogether.

At this point, the role of labor unions should be quickly discussed. It is not just the owners of land and capital who engage in rent-seeking and establishing barriers to entry.37 It is not my purpose here to malign the entire labor movement, but the fact of the matter is that many of them need a crash course in Geoism to understand what is truly holding back the worker, and how to truly free them.38 Economic rent is indeed a very complex topic, but one which affects us all.

CONFLATING THE THREE FACTORS OF PRODUCTION: IS THIS SOCIALISM?
Socialism, properly defined, involves the State ownership of capital and the overt direction of production and other economic activity (though there are socialists who call for the system in a stateless paradigm, so an even more precise term would be State Socialism). [37] Henry George adamantly defended the private ownership and free exchange of capital. Indeed, that is something that anyone who claims to support free markets must defend. But land is not capital, and conflating them causes a multitude of problems. Remember that capital refers to produced goods used in further production. Consider if labor and capital were conflated. What would this mean? Slavery! The “production” of slave-capital is the acquisition of those very slaves. Their labor, entirely owned by their master, is what he uses for further production, i.e., his capital. Treating land as capital leads us to a type of slavery as well, but a far more insidious form based on the steady and stealthy concentration of wealth, which many people, like Rothbard, seem to refuse to understand and acknowledge. Some go so far as to even consider it a legitimate function of markets. [38?] https://mises.org/library/defending-slumlord

All economic activity (and any activity whatsoever) depends on land. Even businesses that operate on the internet depend on land. Their capital, i.e., the hardware, wires, housing, etc, needed land to be produced, needed land to be delivered, and need land to operate upon, no matter how small the computers get. You could run your entire internet business by smartphone and still you would require land. Where was your phone produced? Through where did it pass to reach its retail location? Where is this retailer? Through where did you travel to get to this retailer? Once you have your phone, where will you sit in order to conduct business? Where? Where? Where? It is plain that land, in fixed and immobile supply in the face of constant population growth, is essential and always will be. A friend of mine states:
I think, regardless of what the correct answer does happen to be, the question of land ownership is one of the central questions that determines the nature and course of human civilization.
THE LOCKEAN PROVISO
In his labor theory of property, John Locke provides an early defense of private property. However, there is a nuance in the explanation, referred to as the Lockean Proviso. It contradicts and discredits the notion of private property in land. In the Second Treatise of Government, fifth chapter, thirty-third paragraph, he says:
Nor was this appropriation of any parcel of land, by improving it, any prejudice to any other man, since there was still enough and as good left, and more than the yet unprovided could use... For he that leaves as much as another can make use of does as good as take nothing at all. Nobody could think himself injured by the drinking of another man, though he took a good [many gulps of water], who had a whole river of the same water left him to quench his thirst. And the case of land and water, where there is enough of both, is perfectly the same. [39]39

Advocates of free markets should be able to acknowledge that what is traded in markets, free or not, are products produced through labor or services provided with labor using products i.e., tools. This simple fact should intuitively tell us that the laborer owns their product and if the legal and socioeconomic structure of a society interferes with this simple notion, then that structure is unjust. It should also lead us to consider that land is not rightly treated as a product to be bought and sold in a market between market participants because land is not a product at all. It might be useful to consider land (specifically locations) to be the physical representation of markets themselves. There is a reason a marketplace is called a marketplace. If a market's participants are not on an equal footing in the very place transactions occur, which is ultimately every space inhabited by humans, that market could hardly be described as free.


THOSE OTHER TAXES
It is important to understand the uniqueness of LVT. It is a tax (but remember, not really) on the rental value of land. What is meant by this? Another way to describe it is as the unimproved value of land, discounting the value of all buildings and other alterations and additions and any other kind of economic activity which may be happening on the land. Virtually every model of taxation discourages/punishes economic activity and raises prices by adding to the cost of production. But LVT does not, as land has no cost of production. As well, the LVT is impossible to evade, even by the very rich who take advantage of loopholes in current tax policies. No one may hide land in offshore accounts.

Taxing land is unlike taxing businesses. A firm will essentially always pass on the cost of the tax to consumers in the form of higher prices and/or to workers in the form of lower wages. Tax incidence [40]40 refers to the effects of a tax on the wider economy. Under LVT, the incidence is uniquely direct. [41] 41 It is impossible for landowners to pass on LVT to their tenants. The reason for this is simple: landowners are already charging their tenants as much as they can. To deny this implies that landowners are consciously and cooperatively restraining their own income in a legal and socioeconomic environment that greatly favors them in the first place. Were LVT fully implemented and landowners attempted to raise the rent further to offset their tax burden, they will lose their tenants. Thus another unique effect of LVT is to, over time, drive land prices down. [42]42 For more on tax incidence and why the LVT cannot be passed on from landowners to land users, see reference 44. Presently, on the other hand, speculative landowners may in fact benefit from letting their desired land lie idle. The effects of this are the creation of an artificial scarcity and a further rise in land prices, maximizing their return when it is finally rented out. This exorbitant return is called rack rent. [43]43

Finally, LVT collects only publicly created value, unlike other taxation, which collects privately created value. This important point should resonate with libertarians who rightly oppose the taxation of privately created value from labor (wages/salaries) and the use of capital (profits/interest). In contrast, note these taxation models, with example, and their effects:
  • Tax capital gain income from the sale of assets,44 the interest income from taxable bonds and interest-bearing bank deposits, and dividend income (a share of a company's profit) from stocks,45 and then large holders of financial capital are driven into non-taxable46 bonds like municipal bonds. Municipal bonds are very expensive, requiring a large upfront investment, and are out of reach except for the very wealthy who have so much money that they may comfortably accept the extremely low interest rates on municipal bonds in return for the interest income being entirely tax free and paid for by the ordinary municipal taxpayer. It is surely a racket.47 Some propose to tax municipal bonds.48 Of course, this will simply drive financial capital out of the jurisdiction entirely.49 http://www.econlib.org/library/Enc1/CapitalFlight.html With the municipal bond market at over two trillion dollars,50 municipalities across the country depend on this infusion of financial capital to stay afloat. Fortunately, LVT has the potential to make totally unnecessary borrowing from the very wealthy (and then indebting the rest of the population to them) to fund municipal services.51 Consider the arguments of Ronald Burgess in his Public Revenue Without Taxation.52 The widely acknowledged Henry George Theorem states that when land rent is the sole or principle source of public finance, the aggregate land rental values of the jurisdiction is close to the total expenditure on public goods which create and raise the land values in the first place, making the system essentially self-funding.53
  • Tax wages and salaries, and then workers are punished with less income. Identical in effect with higher prices, in an inflationary environment, it is a double hit to them.
  • Tax consumption (sales tax), and then economic transactions are discouraged/punished. Consumption taxes on food are particularly malicious, directly driving up the cost of living to the poorest among us. Now, it is a triple hit to them. Thankfully, food sales taxes have been increasingly abandoned
  • Tax payrolls (Unemployment tax and Social Security tax), and then hiring workers is discouraged/punished, which is obviously insane.
  • Tax production (such as the fuel excise tax, or a corporate tax, or any business taxation), and then production is discouraged/punished. Though typically these taxes are simply passed on to the consumer and act as a consumption tax, both overtly (such as the price of gas, where stations explicitly note that the “tax is included” in the price, originally paid by the distributor, but passed on to individual drivers) and covertly (worked into sale prices at stores, on the internet, etc., which are of course taxed overtly yet again with sales taxes).
  • Tax international trade (tariff), and then international trade is discouraged. The tariff can be thought of as an excise tax on importation firms. The value of their imports is assessed, a tax is applied and paid to some tax agency or another, and the imports are then released into the domestic market. These taxes are then just stealthily passed on to wholesalers, retailers and ultimately, of course, the consumer.
  • Perhaps most important to differentiate, tax improvements on land, and then improvement is discouraged/punished. This is the property taxation54 that most Americans know today, which combines a partial LVT with a tax on improvements. For example, people are penalized with higher property taxes for upgrading their heating and cooling systems. It is difficult to fathom something more asinine than discouraging and punishing improvement.

WE HAVE LVT ALREADY
There is a silver lining to the property tax. Opponents of LVT (like Rothbard) like to warn of economic upheaval were the Geoist plan implemented. But again, the fact is that the modern property tax combines55 LVT with a tax on improvements. All that has to be done is to separately tax land and buildings, known as Split Rate Taxation,56 and steadily lower the taxes on improvements as the tax on land is raised. And, as Geoists are also known as Single Taxers,57 steadily reduce all those other economically destructive and distortive taxes described above (and other ones as well). This has worked and continues to work in proprietary communities 58 59 throughout the world.

WHAT LVT ACCOMPLISHES
LVT brings a profound realization of both justice and prosperity. Opponents of LVT are fond of claiming that there is no injustice in privatized landownership and that one may always work hard and save to acquire land. This just begs the question at hand here because in order for them to work to save up to buy their own land, they must first have access to some land on which to do their work. With the Lockean Proviso in mind, it is not about working hard to acquire land. It's about working hard on the land and losing a massive portion of the fruits of one's labor to a landowner who has done nothing but declared that “their” land is “their” land, a claim backed by the State. And thus with impunity, they may extract for themselves from the fruits of the worker's labor.

Land rent is actually essential to collect in order to reverse these distorted and unjust socioeconomic conditions. It cannot simply be the abolition of the taxes described above (and the many others60 not mentioned). The reason for this is that if the taxation of labor and capital is abolished or greatly reduced, private landowners will still benefit disproportionately, and by the same method. Recall Winston Churchill's words on the cover page. If land rent is still privately collected though taxes on labor and capital are reduced, that simply means that landowners can charge more for the use of "their" land. Geoists call this the all-devouring rent thesis.61 62

The early classical economist Adam Smith said:
As soon as the land of any country has all become private property, the landlords, like all other men, love to reap where they never sowed, and demand a rent even for its natural produce.63

THE INEVITABLE SERFDOM
Above there is a link to the definitions and distinctions of common, collective, and private property. Here is the description of private property:
In a private property system, property rules are organized around the idea that various contested resources are assigned to the decision authority of particular individuals (or families or firms). The person to whom a given object is assigned (e.g., the person who found it or made it) has control over the object: it is for her to decide what should be done with it.

Private property in land is really just a particularly insidious form of collective property. Recall that the latter means that those who do not work the land decide its use. Thus, because land is in fixed and immobile supply, once it is all discovered and claimed (and all land has long since been discovered and claimed. Only moving to another planet would change this), landowners are now the ultimate ruling class. They are the collective, the ones not working the land while still deciding what will happen upon the Earth, as they hold the title to it.

Ultimately, private property in land necessitates nothing except neo-feudalism. Here is the definition of feudalism from American Heritage Dictionary:
A political and economic system of Europe from the 9th to about the 15th century, based on the holding of all land in fief or fee and the resulting relation of lord to vassal and characterized by homage, legal and military service of tenants, and forfeiture.
A political, economic, or social order resembling this Medieval system.64

If the supply of good land were not fixed and immobile (“good” referring not only to soil quality for potential agriculture, but “good” in relation to its natural surroundings, and in relation to its placement among other claimed and developed/developing plots of land i.e., a community), this would not be an issue. But it is fixed and immobile, and so it is an issue. This truth ensures that an elite class of landowners inevitably develops in a society which promotes private property in land.

WHO ARE THE REAL LANDOWNERS?
And who are the largest of these landowners today? Critics of Geoism may complain that the philosophy demonizes even the small landowner who provides his tenants with high quality facilities. But nothing can be further from the truth. To the contrary, as cannot be reiterated enough, Geoists call for the end of all taxation on improvement. This goes for buildings and all the activity that is going on within them (whether it be a commercial or a residential tenant). Consider again the description of private property and apply it to land:
...various contested resources are assigned to the decision authority of particular individuals (or families or firms).

Families: like the Lord in feudal times, who of course would bequeath "his" land to a family member, and this will repeat. And repeat again. Eventually, these "families" became the Monarchs, i.e., the State.

But now, while we certainly still have the State, look around and really think. Who really are the landowners who feed off of value they did not create? The banks. Who does not have a mortgage? Who does not pay rent to a landlord with a mortgage (thus making the bank the landlord's landlord!)? The ties between 65 banking and land are tight. Again I recommend Robert De Fremery's thorough look at that very subject.66

As noted above, interest and rent have become hard to differentiate. Banks make long term mortgage loans (with terms like 15, 20, 30, etc. years), allowing the bank to issue huge loans while ensuring that the regular payments on that loan are manageable (at first). This easy credit drives land prices up (while all the other upward pressure of development also acts on land prices) while interest charges on mortgage loans direct and concentrate those land values (the rent) into the coffers of those banks.67

In order for a borrower to tap into these values, they must either sell the property, thus necessitating first paying off the mortgage loan. And in the case of so many mortgagors (borrowers) in these dire times, their land and homes were not worth the value of their mortgage loan, leaving them with nothing. Subsequently, one must then move to a new property, likely with its own mortgage loan (or a landlord with a mortgage loan) or open a separate home equity account (though it would be better called land equity)68 with the bank, incurring further interest charges.

THE POWERLESS LANDOWNER
What must be realized is that landowners, in their capacity as landowners, cannot affect rental values. These values are based not on the plot itself, but on what is happening around the plot (this includes the banks, since it is not so much the individual loans that drive up land prices, but the fact that banks are engaging in massive lending across a region). As population grows and infrastructure develops, that makes an individual plot of land more desirable and in demand and thus, its rental value rises, because people want to do things in the area. So we can think of the rental value of land being the quantified degree to which the Lockean Proviso's "enough and as good" requirement is being violated, and thus requires compensation to the community.

The landowner can only improve the land he claims. But of course, because Geoists do not want to tax improvement values, that is irrelevant. Remember, in the modern usage the landlord is typically not just the owner of the land, but of the buildings. These buildings are capital, and thus the owner has every right to construct, maintain, improve, and rent them out tax free (that rent from the use of his buildings, his capital, in fact being interest income.

THE MORALITY OF PRIVATE LANDOWNERSHIP
At Geolibertarian FAQ, Todd Altman writes:
[C]ritics will argue [that] a tax on [land] rent involves the use of force, and is therefore wrong. The problem with this argument becomes evident when they are presented with the scenario of a tenant no longer able to pay a titleholder for the value of the land he is using, and then asked whether or not it would be legitimate to use force to remove the tenant from the titleholder's land. They typically answer yes to this question, and when pressed for an explanation, finally concede that yes, there is such a thing as a legitimate use of force when it comes to upholding a rightful debt. The dispute, then, is not over whether force, in and of itself, is right or wrong, but whether the debt in question is right or wrong -- i.e., whether or not the taxation of rent conflicts with the libertarian principle that each person has property in himself and, by extension, in the fruits of his labor. Geolibertarians hold that it does not so conflict, since rent, as mentioned before, is not a return to labor. Rent is in fact a return to land, meaning the percentage of one's income one could receive simply by renting out the land one holds to someone else. Yet to whom does this value rightfully belong? Since land values derive, not from what titleholders do, but from the extent to which "others" (particularly those who make up the surrounding "community") are denied access to land they wish to use, and to which they have an equal right of access, it follows that this value is rightfully owed to these others, while wrongfully owed to titleholders. All individuals have an equal right to land, so all have an equal right to the rental value thereof.69

As to the matter of the State. Rothbardians rightly point to the definition of the State provided by Max Weber, who described it as an entity:
… that (successfully) claims the monopoly of the legitimate use of physical force within a given territory.70

While this is indeed a profound description of the State, it is as well a description of any private landowner who rents out his land. Note that the monopoly on force is one "within a given territory," i.e., a plot of land. Private landowners claim precisely that monopoly on "their" territory. A landowner who rents out the use of "his" land to tenants to enrich himself is, in fact, simply another level of the State (i.e., federal, state, municipal/local).71 And his claim is formalized and protected by the other levels of that same State.

This grave injustice that is inevitably and deeply etched in the socioeconomic fabric of any advanced society with a monetized economy72 73 is due only to the government granting titles to plots of land, securing their so-called "right" and exclusive claim on that plot. 

But there is nothing inherently wrong with this. Indeed, as noted above, for the LVT to even be collected, the land title system must continue, with claims to land settled and formalized. However, when this is done without LVT, i.e., without appropriate compensation to the community for violating the Lockean Proviso, a massive wealth imbalance develops and worsens. The government is forced to raise funds by taxing wages, interest, profits, capital gains, sales, international trade, etc. etc., depressing and distorting economic activity while allowing landowners to acquire and concentrate the rising value that, again, at least not in their capacity as landowners, they had no role in creating.

A challenge for readers. Who said this?
Nowhere and at no time has the large scale ownership of land come into being through the working of economic forces in the market. Founded by violence, it has been upheld by violence and that alone. As soon as the latifundia [J-VICTUS NOTE: LANDOWNING CLASS] are drawn into the sphere of market transactions they begin to crumble, until at last they disappear completely.

I believe one can be forgiven for thinking a Georgist said this. But in fact, it was Austrian economist and hero of Rothbard Ludwig Von Mises.

THE SUBJECTIVITY OF RENT AND ECONOMIC CALCULATION
Another issue that Rothbard and his followers assert is the Subjective Theory of Value (STOV), which states that:
...the value of a good is not determined by any inherent property of the good, nor by the amount of labor required to produce the good, but instead value is determined by the importance an acting individual places on a good for the achievement of their desired ends.74

Already, we should notice something about this explanation. It concerns produced goods, i.e., products (or services with labor using products). Land is not a product.

The STOV informs the Economic Calculation Problem (ECP), which posits that since value is subjective, attempts by the government to control production cannot rationally allocate resources.75 But again, even assuming the merit of ECP to begin with (and it does have merit when it is properly applied), land is not relevant to it, since land is not a product the production of which can be controlled. Only the apparent supply and its price may be manipulated. Rothbard insists that the assessment of the value of land to levy the tax would be "arbitrary" and thus this somehow delegitimizes the whole thing. But of course it would not actually be arbitrary, at least not any more arbitrary than any other pricing, all of which is based on supply, demand, and other local conditions/factors. The rental value of land is not hard to figure out. If the land is idle despite its being open to tenants/buyers, then the requested rent is too high and must come down. Once the requested rent is acceptable to a tenant, he will move to use it. There is the rent. Simple as that. A Geoist blogger who writes at “This Is My Chaos,” puts it like this:
It is true that value can only be determined in exchange on the market, but it is in no way interesting when discussing LVT, for one simple reason. In order to understand it, we need to remember a simple truth. It is not the seller of land that performs the ultimate assessment, but the buyer. That the seller may state a price, it is true, but if no buyer actually wants the land at that price, then it will not sell. In a rental situation, the landlord will always be seeking to increase his rent. If he tries, and the tenant stays, then the land is clearly worth what the landlord is charging for it. If he leaves, and no one else takes his place, then the landlord will ultimately reduce the price until someone does. Rent pricing is essentially an iterative process, with the occupied state of the property being feedback. The longer a plot remains unoccupied, the more obvious it is that the rent is too high. More importantly, the longer a plot remains unoccupied, the longer that the landlord is not receiving income.76

As he goes on to say, this does not change with the LVT. If the requested rent, the LVT, is too high for prospective tenants, the assessment of that will eventually have to be reduced because the longer plots are vacant, the longer the government is receiving no LVT revenue.

But the whole complaint ignores the point. The payment on the rental value of land is one that will be made no matter what. The only question is to whom. Private landowners will decide no less “arbitrarily” what to charge their tenants (the amount being as much as they possibly can and still have tenants to pay them rent). But if private landowners are not responsible for the creation of that value, why should it go to them?

So far from acting against the case for LVT, the critiques of government-directed capital allocation and the taxation of laborers' wages and capitalists' profits/interest shows that land values are the most stable and just source of public revenues.

Another approach is to consider the rights to life, to liberty, and to property i.e., the product of one's labor. But those, in fact, presuppose a common and equal right to land. Asserting, exercising, and protecting those rights requires that it be done somewhere. When people are relegated to the margins of society and into low-wage employment or unemployment altogether just because they were not born early enough to claim a fixed and immobile supply of land, can they really be described as free?

There are practical impossibilities in Rothbard's arguments. He attempts to justify private landownership from a moral point of view. The philosophical underpinnings77 of private landownership78 are Original Appropriation and its corollary Allodial Property. In short, Original Appropriation states that the original owners of land decide what to do with it, including who to give it to later. Allodial Property asserts that there is no higher authority beyond the landowner and whoever that landowner chooses as the heir. And then to the heir's heir. Forever. Period. Amen.

According to this view, the original owners are those who first came upon unowned land and "mixed their labor" with it (a concept called Homesteading79). The problem is that no one really knows who that was. Land has been conquered, reconquered, temporarily deserted (refugees, for example), conquered again, acquired through government manipulation, reconquered, and on and on.

If we are to follow the original appropriation doctrine consistently, the only just solution would be to launch a massive (and impossible) effort to find out who is most closely related to an ancestor who may have been the original discoverer and user, and this must be done for every plot of land. Obviously this is absurd (and impossible). But also absurd is to assert the moral superiority of private landownership when it is admitted by Rothbard himself80 that the current land title system is unjust. But how except through the bizarre (and impossible) task described just above does one suggest we apply the concepts of Original Appropriation and Allodial Property?

As noted near the beginning of this piece, Rothbard claims that LVT would be an economic shock. Of course, it is in fact the massive (and impossible) shifting of land titles to their "proper" owners necessary to consistently apply Rothbard's view that would touch off economic chaos (as an impossible absurdity). 

Much to the contrary, since LVT is actually already applied (in combination with taxes on improvements in the well-known property tax most are used to paying to local governments), were other taxes reduced or eliminated and land value collection becomes the principle or sole source of public revenue, all that will change is the speculative and parasitic nature of the land title system as currently structured. Everyone who is actually putting desired land to use (meaning not banks and other land speculators) can stay put and the Original Appropriation doctrine is rendered unnecessary to somehow protect land rights. Being an abstract concept, it could never do so in the first place. But, as an actual tactic and policy tool, that is precisely what LVT does, and it does so without petrifying the economy with a nonsensical (and impossible) endeavor to "honor" private landownership.

To impart some Biblical wisdom, I would cite Leviticus 25:23-24:
The land must not be sold permanently, because the land is mine [God's] and you reside in my land as foreigners and strangers. Throughout the land that you hold as a possession, you must provide for the redemption of the land.81

Consider also the story of Adam. Taken hyper-literally or totally symbolically, it provides an ancient foundation to the concept of the common ownership of land. In noting the doctrines of Original Appropriation and Homesteading the land, Geoist Oscar B. Johannsen writes:
Of course, the Biblical student might wryly point out that Adam was the first user of the earth, as he must have expended his labor on it. Thus, he owned it, as there was no one else before him, not even Eve. As he owned it, he could give it to anyone he wished. Since all the peoples of the world are his heirs, and since presumably he willed the land to his heirs, then all the people of the earth own it. This is the concept which, in effect, is implied in George's thought.82

Thomas Paine echoes the sentiment:
Men did not make the earth. It is the value of the improvements only, and not the earth itself, that is individual property. Every proprietor owes to the community a ground rent for the land which he holds.83 

If the Land Monopoly were broken, and landowners finally were discouraged from the detrimental holding, under-utilization, and speculation of desired land, land would become and remain cheap. Meanwhile, when they were once punished, improvements are now rewarded, by their very nature as improvements. Thus the issue of landowner-tenant negotiation and pricing will have to do solely with the use of capital, enhancing efficiency. 

Some would object and say that low land prices will hurt many ordinary homeowners and investors into mortgaged backed investments. Without question, yes, but the collapse of this unsustainable system is a fate which is sealed. Land, and especially residential land, should have never been seen as a store of wealth or collateral for borrowing for the homeowner and an asset for gambling and speculation in financial markets in the first place.84 Again, unlike the petrifying Rothbardian endeavor of land title shifts to "proper owners," most who call for a shift to LVT call for its gradual adoption, raising land taxes as others are cut, allowing investors to reposition their capital slowly and homeowners to adapt and anticipate higher land taxes, and lower taxes on their economic activity, followed by the inevitable and desirable fall in land prices. This precipitous fall will leave banks with little choice but to renegotiate their loans with their mortgagors. If banks truly want to make loans on real estate, they, like all landowners, must provide for the construction, renovation, and maintenance of high quality facilities, whether residential, commercial, or industrial.  Making and then keeping land cheap is good for home buyers. Instead of resigning to drastic booms and busts and starting the cycle all over, why not implement measures to tame it? Why not at the same time remove the oppressive and counterproductive taxation of labor, capital improvement, and capital investment? 

To close, I will point the reader in the direction85 of further Geoist86 criticism of Rothbard’s remarks.87 Modern Geoist economist Fred Folvary88 has reformulated Geoism into a stateless paradigm. He shows, using a basic economic concept89 that has been smothered, that perhaps even more profoundly than the money monopoly decried by the Rothbardians90 (which actually isn't real, as shown by... guess who? Robert De Fremery!91 It would better be described as a credit oligarchy, with registered banks allowed to create loans on command92) it is the land monopoly that holds back entrepreneurs and workers, to the detriment also of consumers (i.e., everyone). 

Geoist Fred Foldvary has also noted that the Geoist theory of the boom-bust business cycle93 is compatible and complementary to the explanation from the Austrian School of Economics that Rothbard advocated.94 Synthesizing the two theories in 1997 or 199895 (over a decade before the recession we are currently in and have been wallowing in for years), he said with remarkable prescience:
The geo-Austrian synthesis provides a theory of the business cycle with more explanatory depth than conventional theory, is consistent with economic history, and is comprehensive in that it includes both the financial and real elements and their interconnections. It does not provide the only explanation for cycles, but does encompass the major booms and depressions. The Austrian and Geo-economic theories have been incomplete, and the synthesis is mutually complementary, Austrian theory providing the role of interest rates and the capital-goods structure, and Geo-economics identifying the key capital-good malinvestment and the role of land speculation and fiscal policy.
The 18-year cycle in the United States and similar cycles in other countries gives the Geo-Austrian cycle theory predictive power: the next major bust, 18 years after the 1990 downturn, will be around 2008 if there is no major interruption such as a global war. The geo-Austrian synthesis provides a research agenda that can test historical cases in more detail. Much work needs to be done on empirical studies linking the money supply, real estate markets, and business cycle. However, given the evidence as presented here, the Georgist component of the geo-Austrian synthesis is testimony to the insight of Henry George, who originated one of the earliest theories of the business cycle, a theory which has been confirmed by subsequent history as a relevant and important explanation of booms and busts.96
http://www.amazon.com/Governments-Money-Monopoly-Henry-Holzer/dp/0595139663



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