Hi Harry, Where you write: <<<< I fear that Stiglitz missed something that is under his nose, or perhaps better, under his feet. This leads him to his discussion of the "imperfect market" that works better with government intervention. >>>>
I agree with your first sentence, though I don't understand the second. Where you set out the case for a free market I also agree with you. You must forgive me, but where you write about the "collectible" aspect of land, I also don't understand. Let me cut down to this section: <<<< The third Factor - Land - is not controlled by the market price mechanism. The price of land is not brought constantly back to an equilibrium by fresh supplies of land arriving at the market. When demand for land increases, prices rise and there is no price mechanism to draw prices down. . . . I've called it the collectible mentality and described the land market as a collectible market as is the frenzy that nobbled the stock market. The participants are called investors, but they are not. They are collectors, expecting their holdings to rise in a continually rising stock market. >>>> Land is a very important factor of production and we're also very strongly (genetically) predisposed to defend it because man and immediate predecessors have been a territory-based species for millions of years. Even when it's not used for production, good land (that is, aesthetically-pleasing land) is still strongly prized. It's not surprising, therefore, that land is a particular type of possession about which people are capable of becoming more obsessed than most other things and that therefore its price usually goes up rather than down. But (I suggest) there is still a market price, however high it might be. But because land is sought after for aesthetic (read genetic) reasons as well as production reasons, and because land was overwhelmingly important in our agrarian past, then it's no wonder that the owners of land and property have, over the centuries, accrued all sorts of special benefits from governments in contrast to the possessors of other sorts of assets. In England, for example, we don't pay capital gains tax on our houses and, if we have a lot of land in the countryside (and can therefore pretend that a proportion of it is a farm business) then we don't pay death duties on most of its value. So land, more than any other type of asset, has a way of accumulating in the possession of rich people. Most habitable and farmable land is of high value and is generally able to be kept that way. Land is important -- very important -- but it's not in a special class, I suggest. To survive, we also need skills, energy (personal and external) and physical resources and all these can go up in price to astronomical levels if they're in short supply. I'm persuaded by the Georgist view that land and property ought to be the main basis of taxation because most of its value is determined by the efforts and circumstances of the whole economy, not necessarily the sole efforts of the owners. And, because property is visible, a land-based tax is one that even criminals can't evade -- which they can so easily do now by disguising their financial transactions. You wrote: <<<< Stiglitz knows the problem. You'll recall the London Observer interview. Said the interviewer: "Stiglitz proposed radical land reform, an attack at the heart of "landlordism," on the usurious rents charged by the propertied oligarchies worldwide, typically 50% of a tenant's crops. So I had to ask the professor: as you were top economist at the World Bank, why didn't the Bank follow your advice? "If you challenge [land ownership], that would be a change in the power of the elites. That's not high on their agenda." >>>> So Stiglitz has feet of clay. Or, to change the metaphor, if he condemns the IMF vis-à-vis the World Bank, then it's a case of the pot calling the kettle black. Instead of the special pleading in his book (in so far as I've reached), he would be better to associate himself directly with Third World economists such as Hernando de Soto who wants to see land reform in the undeveloped countries. It is the lack of this which is a major factor in the cultural resistance to development which I mentioned in my earlier posting today. Keith ---------------------------------------------------------------------------- ------------ Keith Hudson, General Editor, Handlo Music, http://www.handlo.com 6 Upper Camden Place, Bath BA1 5HX, England Tel: +44 1225 312622; Fax: +44 1225 447727; mailto:[EMAIL PROTECTED] ________________________________________________________________________
