Georgist objections
Who really created the wealth?
Is land rent practical?
Might it cause problems?
Georgist objections
This web site does not take a traditional Georgist approach
Georgism is about economics. This site is about the principles that underpin economics. Most people are not economists, so I use everyday language and avoid economic details where possible.
Why we agree and where we differ
I did not set out to create a Georgist web site. I set out to create a web site that had rational answers to big questions. I found that those answers led me to conclusions that were almost identical to what Georgists have been saying, but for different reasons. So I created this secondary site to explore these issues. But experienced Georgists may take issue with some parts.
Georgism starts from two assumptions: First, that all humans have equal rights to land. Second, that land and man-made capital are fundamentally different. In contrast, I derived my theory from first principles. As a result, I had to reject both of those Georgist assumptions, though I accept them as useful (though inaccurate) approximations of some later conclusions.
“Economists don’t define wealth like that”
Words like “value” and “wealth” are used in their everyday sense, and are defined on the FAQ page. Every idea here can be defined and proven from first principles. See the ‘proof’ page for the definition of property. See the ‘complete answers’ page for wider issues.
In contrast, most economists have a foundation of sand. Why, precisely, does a person have a right to land? Where do rights come from? They cannot answer.
Georgism, rights, labor and ownership
On this web site, some other Georgist sacred cows are ignored or rejected:
- Ownership is not based on material things, neither is it based on ‘rights.’ It is based on causality.
- Land rent is pure private property, not state ownership (see the FAQ for details).
- Land is not different from other forms of property. Land rent can be applied to everything. Land is just the most obvious subject.
- Labor is not special. Labor is just another form of causality.
- Land rent is not a romantic idea of ‘natural’ rights. Land rent is ownership. Rent can only be collected if ownership can be objectively proven.
Land and ‘natural rights’
This is where I agree with the critics, and part company with some Georgists. There is no natural right to land, and no need for such a right. We only have a right to the wealth we create. Note that some actions destroy wealth, and those who destroy wealth can be charged. Avoidable monopolies and avoidable barriers destroy wealth. In this way, land rent provides opportunities for all, and so there is no need to invent additional rights. See the pages on freedom and poverty for examples.
Who really created the wealth?
“Some wealth is not created by anyone”
Everything is caused by something. For example, if a person is very tall, and is able to create extra wealth as a basketball player. The height creates extra wealth. The genes create the height. Parents gave the genes. Parents ask something in return - usually respect.
Some wealth is caused by things that are difficult to trace - such as so-called ‘acts of God.’ But as time goes on, science gets better and better at tracing causes. This leads to the possibility of choices, and this leads to causality.
All wealth is created by owners
One way to look at wealth creation is that the owner creates it all, because of his decision. For example, a speculator decides to drill for oil and creates that wealth by bringing the oil to the market. This is true. However, the owner also destroys wealth by preventing more efficient users from using the land. The net result is that the inefficient user takes wealth out of society. Society can demand that this wealth is returned .
“Previous owners (not just society) help create land values”
If the previous owner can prove that he created that wealth then he owns it and can do as he wishes with it - either pass it to the next owner, or give it to society. However, long term planning needs policing. Society can charge for policing.
“On average, properties contribute as much as they take”
We cannot treat society as just as a collection of individuals. If those individuals lived far apart, or hated each other, there would be no society. The wealth of society is created by society as a distinct entity, not by the individual members of that society. Also, it is not true to say that each individual gives and takes the same amount, even if this was true on average. Good neighbors create land value, bad neighbors destroy land value. Society has laws and regulations to create better neighbors (by allowing people to efficiently build roads, etc.) and to punish bad neighbors (through the police force.
“If causality means ownership, parents own their offspring”
The purpose of ownership is to encourage the creation of wealth. So ownership can only be claimed if an action tends to lead to a particular result. So parents can claim ownership of their children’s lives, but not their children’s actions, unless those actions are predictable.
Note that many people can claim to have partially caused an event, or even a life. When there are many complicated claims, it is simplest for society to make the final decision.
Israel, Palestine and the Temple Mount
Jerusalem’s Temple Mount, presents an interesting case study in land rent. If everyone was an orthodox Jew, nobody would try to change the ownership of the Mount, so it would have zero price. When the Arabs arrive, they would like to have the temple, and would gladly pay a large amount for it. So they cause the price to appear. In other words, they create the entire dollar value.
If the owners do not want to sell, they cannot be said to create a dollar price - a price can only be created if there is the possibility of a sale. So the Arabs create (and thus own) the dollar value of the Mount. If the Jews won’t sell (and make a great profit), they need to pay land rent as compensation. A shocking conclusion? Please show me where the logic is wrong!
But what about the temple, built on the land? Note that nobody owns land, we only own the agreement to use it - we create the agreement, not the land. If there is no agreement, there is no ownership at all. If you cannot agree with your neighbors on using the land, it is very foolish to build on that land. Moses had a better idea. He built a portable tabernacle, and had absolute ownership of it forever and ever,.
If you raise the market price, should the owner pay you?
If another person creates something, you might have a better idea for using it. So you have created wealth - the object is now more valuable than before. This is reflected in the price you are willing to pay to buy it. By refusing to sell, the owner is destroying extra wealth. So should we force them to sell or at least pay you the wealth you created?
If a resource (like land) is not created by a person, then forcing a market to exist is a net gain in wealth. It’s simple. But if the person created the resource, forcing them to sell might discourage them from making any more. So this becomes a net destroyer of wealth. So if someone wants to buy your creation and you don’t want to sell, their desire does not create any net gain in wealth.
Is land rent practical?
“Some causes are too difficult to trace”
Some causes will always be too complicated to be worth measuring. But land is the simplest thing to measure. So land rent is easier than any other system of measuring wealth. Land rent does not have to be perfect, it just has to be better than the present system.
“There is no unchanged land for comparison”
Land rent is not based on unimproved land. it is based on the wealth you create and the wealth you do not. There is no need to trace the land back to its original pristine state, only to look to when you bought the property. And if there is no empty land for comparison, we only need to compare similar land that has not been significantly developed in that year.
“Nobody will agree on the value of anything”
Land rents are based on market rates, not political agreements.
“Land rent is too simple. There are no easy answers.”
The greatest ideas are simple. Money was a simple idea, and it was a huge advance from barter. Democracy was a simple idea, and it was a huge advance from monarchy. Competition is a simple idea, and it was a huge advance from monopolies. Communication was a simple idea, and it was a huge advance from ignorance. Land rent is a simple idea, and it is a huge advance from the current system.
“Land owners already pay enough tax”
Nobody, including land owners, should pay any tax. However, we should pay for what we take from society, or the costs we create for society. Society creates land values, oil values, the value of the air, etc., so anyone who uses these things should of course pay more than those who do not.
“Land rent would reduce land values to zero”
Land rent would reduce land prices, but not land values. There is a difference. People value land because they need it to make a profit. The exact value can be found by increasing the cost (sale price plus land rent) until buyers can only just make the profit they want.
“The whole economy is based on mortgages, etc.”
The present economy involves vast sums of money in debts that are based on certain assumptions of future value. Land rent changes all these assumptions. This would cause economic meltdown if everything changed at once. However, markets are always unpredictable, so every investor plans for a certain amount of change. And almost nobody invests for more than 25 years ahead.
So the government just needs to plan changes that are either smaller than what would normally be expected in a volatile year, or are eased in over 25 years or so. Remember that land rent creates a net increase in wealth, so any costs will be more than repaid.
Might it cause problems?
“Land prices will go up”
Prices are not based on what we would LIKE to charge. Prices are based on what we CAN charge. Prices depend on supply and demand. Land rent will force the most inefficient land owners to sell. This reduces demand and increases supply, so the price of land goes down.
“Industry will be crushed by the extra charges”
At present, every industry pays roughly the same taxes, but some industries gain free wealth by taking it from society (through pollution, extraction, monopolizing land etc.). So at present, wealth creating industries subsidize wealth consuming industries. Land rent simply levels the playing field, while providing more wealth in case we still want the expensive industries
“Land will be either tower blocks or wasteland”
If land owners decide to do the same things on less land (by abandoning some land and creating tower blocks on the rest), the abandoned land has lower value and thus lower land rent. So land prices go down until all land is bought and used efficiently.
“The present system already works”
The present system (monopoly ownership with no land rent) allows a land owner to rent out land and gain an income forever, regardless of their talents. But if they sell, one day the money will be used up. So the current system encourages inefficient land owners to hold onto land.
Even if a bad landowner rents out the land to good workers, the workers have reduced freedom and reduced financial incentives.
“Land rent fluctuations will discourage investment”
Imagine that you build a factory, then the area becomes unexpectedly popular, and land rent rises too high. Does this discourage investment? No, because if society created those costs, society is liable for those costs. That is the whole point of land rent: we own the results of our actions.
(Can this rule be abused? Can everyone claim exemption from rising land rents? No, because the market can very easily show if you could sell your investment for a profit in the new climate. And the market will show if others at the beginning agreed that land rent was unlikely to rise. And the market will show if your factory is genuinely profitable in a low-land-rent climate. There is no need for guessing, and no room for special pleading.)
“Society will want to charge too much”
Land rent is decided by the market. If society charges too much, people leave land vacant and society gains no income from that land. So the market will ensure the highest price that efficient land users can accept. And all that money is ploughed back into society, for roads, schools, hospitals, etc..
“With no tax, there is no pressure for democracy”
Land rent transfers money from the wealthy. The wealthy will therefore demand accountability, just as they would with taxation. Indeed, they will demand more accountability than before, because it is “their” money that builds the roads and funds the hospitals. Meanwhile the poor, those with a net income from land rent, will want their cut used to the best effect, but will be forced to be rational since they can no longer demand that the government raise extra taxes to fund their whims.
Retired people could not afford to pay land rent
If society thinks that old people should pay no land rent, it is free to create an 'old folks allowance' that is exactly equal to whatever old folks pay in land rent. But we cannot ignore the fact that occupying land - preventing others from using it - has a real cost. If land rent encourages people to sell land that they don’t need, that is a good thing.
By reducing demand for land, the price goes down, so people can own their own home much earlier. Add the fact that everyone has more wealth, and people can simply invest in property instead of land. Then you can fund your retirement through renting out property, tax free. Or simply use the savings you accumulated through a working life of more wealth and less tax..
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