http://en.wikipedia.org/wiki/Georgism
this seems a pretty good discussion of the idea. What do you think Harry? Does it do justice to H. George? arthur From: [email protected] [mailto:[email protected]] On Behalf Of Ed Weick Sent: Saturday, December 11, 2010 8:07 AM To: [email protected] Subject: [Futurework] Ultra-rich get richer while the middle class stagnates The following exchange between Harry Polard and myself was meant to go to the list, but for some reason it didn't. So I'm sending again. Ed Not really sure of how to respond, Harry, but then I've never thought of myself as a Georgist. I happen to live in a part of the city where land and housing values have risen rapidly. Once an outlying part of the city, it's now conveniently located between the centre of town, where most of the jobs are, and the outer burbs. When we moved here some twenty five years ago the area wasn't considered a very classy place to live. But much has changed since then. Many other people have also moved in, many, like us, buying old, worn out housing (built in 1915 in our case) and fixing it up. The city has greatly improved bus service, so getting downtown is very fast and easy. And the main drag through here has become several blocks of trendy shops. Try to find a parking spot along it!! Perhaps there was land speculation when we first moved in, but at that time people like us were just trying to find a good place to live. There certainly is land speculation now -- old houses being knocked down and monsters being put up in their place. So what do we owe to whom? We pay for the services the city has provided via taxes, bus fares and other payments, so I can't really see us owing the broader community much more. We owe a lot to ourselves and to other members of our local community because of the efforts we've made to fix-up our houses and yards. For example, that lovely bungalow just down the road from us was a decrepit little cottage just a few years ago! We also owe a lot to the blocks of trendy shops down on the main drag. Their trendyness has added a special coloration to the area. I don't know how I'd apply economic theory to all of this and I don't think I'll try. There's been growth, yes, the land has become worth much more, yes, but there's also been resident driven change for the better. When it comes to increasing value, we've done much of it ourselves. What we now look upon with increasing apprehension is the coming of monsters. A few streets from ours, three or four houses have been knocked down to permit a monster to arise, and it's not the first or last one. So, while I'm not really sure of the argument I'm making, the basic idea is that what's happened to my part of the city involves much more than the value of land. It involves a large number of things working together, generally supporting each other even if not always doing so. Ed Ed, Why the rich get richer! As you know, the classical use of privilege is to regard it as private law (privi-lege). This is a law designed to benefit some at the expense of others. Politicians appear to spend as much time on privilege legislation as they do on proper legislation -- of course for a price. I would say that great riches on the whole come from privileges properly paid for in our political system. The most important privilege is the legal right to appropriate land rent. Urban land-values are not created by the person who occupies or uses land. Rather, they are extrinsic. They are a result of the presence and access of the surrounding community. It seems fair that we should recapture these values for the community. Importantly, the economic effect of this collection would be to stop land speculation -- an endeavor which raises everyone's costs enormously. The result of speculation in land is nonuse and underuse, a reason for vacant lots and slums. Before the bubble, the land-value under most housing in the US seemed to be between 40% and 70%. (A down-under study placed the average land component of an Australian home at 65%.) When it became fashionable in the first part of the 20th century for economists to remove land as a separate Factor of Production -- and to downgrade Rent from a particular return to a Factor of Production to a generalized description applicable to Land, Labor, and Capital -- it became all but impossible for the neo-classicals to handle the problems we now face, As all the excitement and energy is concentrated on the financial sector, it seems to be forgotten that the crash started with "housing". (It was actually land-values that caused the problem, but the neos are completely ill-equipped to separate out the problem. Other than a small price mechanism movement reflecting the bubble expansion, building improvement prices did not increase -- see manufactured housing.) As banks had foolishly been lending on collateral consisting of volatile land-values, when land values collapsed so did their collateral. The danger of using land-value as collateral has been known for a couple of hundred years, but it hadn't penetrated the thick skulls of neo-classical trained bankers. Financial skullduggery was exposed by the crash. It didn't cause it, but the antics of these idiots has gobbled up all the headlines. (It seems these idiots were 'crazy like a fox'.) Maybe a breakthrough is coming. I've seen reports of a couple of economists who have discovered "space". They are saying that 'if we don't take space into account then our conclusions may be invalid'. I don't know whether they will get anywhere. They face an entire economics profession which believes "space" is part of capital. But, we can be optimistic. Harry
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