Land and Liberty to Build: On Georgism and YIMBYism (2022) | Hacker News Reader

Land and Liberty to Build: On Georgism and YIMBYism (2022)

progressandpoverty.substack.com

15 pointskqr24 comments

Understanding Georgism/economic rents was like a revelation to me. So many of the common complaints against capitalism are actually complaints against rent-seeking, whether it's landlords, Nestlé extracting water for free and making exorbitant profits from it, or internet companies using regulation to create artificial monopolies that reduce consumer choice and product quality.

As someone who loves the idea of economic liberty, YIMBYism and Georgism are natural allies, but unfortunately many supposedly pro-liberty people are ardent defenders of rent-seeking under the guise of "capitalism".

It's a cross-aisle concern, with politicians for and against on both sides. In reality, productive enterprise would blossom under a tax-neutral switch to land value tax, and cities would prosper when combining that with YIMBYism.

Imagine having no income tax, and instead a land value tax. You wouldn't be punished for your labour, and you could afford to buy with your increased income as land values would be greatly suppressed!

More capital would flow to businesses instead of land banking, mortgages, and rent extraction.

Remember, taxes are passed through a political process. Even if a tax is perfect in some ideal form, tax proposals should be evaluated in the light that political processes will use them to benefit their team and punish the others. A great example is income tax, where what was supposed to be a fair and progressive system evolved into a swamp of exemptions and carve outs for special interests - meaning the tax rates have to be higher on everyone else to make the difference.

Because of the huge amount of discretion in how to value land without development, a Georgist tax may be even more vulnerable to political processes than the income tax. Imagine a city where one side of the freeway is wealthy and the other side is poor - to benefit the wealthy side, the city adopts a policy that land on both sides has the same value. Or perhaps the poor side is ascendant politically, so their politician loots the wealthy side by overvaluing the land.

As bad as income taxes are, at least it’s a measurable question of how much money entered your bank account rather that some arbitrary bureaucratic valuation process.

The Georgist argument that land rents are unjust doesn't justify a land tax now. Under his logic, the ones who unjustly benefited were the ones who unfairly claimed the land in the first place. Since then most land has been traded several times, but at the market value, meaning the 'profit' remained with the original holder.

So it would be unjust to now implement a land tax. The value of the land would fall by the discounted sum of future tax, so the entire cost would be borne by the current land owners. They're no more deserving of tax than equally wealthy people who invested in something other than land.

A better argument is that the tax would encourage the owners to make good use of the land. If the government wants to implement a land tax to do that then they should first compensate the current owners.

(In some cases we can still identify the ones unjustly benefiting. The US definitely should be charging Nestlé for the water they pump out of the water table.)

Under your argument 14th century land in Manhattan is worth the same as 21st century land.

Land values are just capitalized land rents. Land in Manhattan is valuable today because the stream of income or potential stream of income that flows from it today. When that potential is lost, land values collapse.

The entirety of that value in Manhattan derives from what is around it - the people who live there. The rents are close to 100% parasitic.

Let's say a nearly identical apartment costs $700 in a cheap town and and $3,700 in manhattan. That means roughly $3000 / month of that rent is parasitically extracted.

In the past you used to be able to purchase the right to tax people - and whatever you could wring out of them you could keep. These people were not very popular. Land ownership is not so very different.

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