• water and the beds under it,
• the radio spectrum,
• docks,
• rights of way,
• take-off/landing time slots for aircraft,
• aquifers,
• ambient air (the right to breathe it and the license to pollute),
• "air rights" to strata in the third dimension of cities,
• falling water,
• wild fish, game, and vegetation,
• natural scenery,
• weather,
• the environment,
• the ecology,
• the natural gene pool, etc. 
• Any franchise, license or privilege giving territorial rights is a species of easement over land. 
• Your driver's license is a right to use land;
• red lights remind us of the critical value of space at central locations, since two objects cannot occupy the same space at the same time. 
• It is worth a lot to have the right-of-way, as railroads do.

Michiganders are saying they must wait and see, but there is no need for that: California can show you 17 years of experience. To read your future, just study our past. Here is what has happened since California passed Proposition 13 in 1978.

• They turned property from a functional concept into a sacred one; from a commission to be enterprising, hire people, produce goods, and pay taxes into a welfare entitlement.
• They rejected the concept of a tax on inert wealth in favor of the rival concept of taxing liquidity and cash flow.

Why is that not happening today, 1995? An invisible, pervasive change is Proposition 13, which makes it possible to hold land at negligible tax cost. In 1945 land was taxed at 3% every year, building a fire under holdouts to turn their land to use. Today that same tax cost is well below 1%. Using Gwartney's Rule of Thumb, it is about 1/8 of 1%: a rate of 1% applied to 1/8 of the true value.

Landowners are only taxed now if they use their land to hire people and produce something useful. Then they meet the drag of our high business and employment and sales taxes, necessitated by the fall of property taxes. A handful of oligopolistic landowners control most of the market; small businesses are squeezed out. This helps us segue from being at the cutting edge of industrial progress to a third-world economy - from the NH model to the AL model - with little relief in sight. ...

100 years ago, American Georgists made a big point that city land outvalues rural land many times over. One implication is that taxing city land is taxing the rich, and we can ignore farmland. Some land-taxers counsel that farmers are easily misled to oppose us, so leave them alone and convert the cities. But rich city folks also own choice rural lands.

• The Hearst palace at San Simeon sits amid 82,000 manorial acres, including miles of prime shoreline, "improved" with just one home per 82,000 acres. This home, jammed with imported treasures, had become a white elephant even before Citizen Kane uttered his final "Rosebud." The heirs were glad to fob it off onto the taxpayers of California, deducting its alleged value from their taxable incomes, while they kept the 82,000 acres.
• Craig McCaw, who made his billions by amassing spectrum licenses, turned some of the pile into a spread of many thousands of acres stretching north from Big Sur -- land he never got around to using.
• The O'Neill families and Donald Bren of Orange County,
• the Newhall family of Ventura County,
• the Chandler family that owns the Tejon and Boswell empires that spread over several counties,
• Ted Turner who owns over a million acres around the U.S.;
• the Koch brothers of Kansas with all their oil wells,
• the Kleberg tribe with their million-acre King Ranch in Texas;
• the Southern Pacific Railroad (now Catellus Co.),
• Standard Oil:

The privilege of use-value assessment stretches even beyond farmlands, vast as they are. Timberland in most states gets the same preferred treatment, only better. About 1/3 of the privately owned land in the U.S. is in timber. In California, owners (mostly huge corporations) may put the land into the "TPZ" class. The standing timber is then exempt, and taxed only at harvest, at 2.9%, much too low a rate to make up for a 60-year lifetime of exemption. County assessors have to value the land separately on its putative value for growing timber, following a State-legislated formula that is tailored drastically to understate even that low value (California Revenue and Tax Code, Section 434.5). Much of that land, though, has alternative uses, e.g. for retirement and vacation homes and resorts, the outliers and pioneers of urban sprawl. There are also mineral values, hunting, fishing, rifle ranges, grazing, campsites, tourism, rights of way, lumber camps, loading sites, water sources, lakes, log storage, landings - there are many things to do with 1/3 of a nation's land. Those uses are all declared "compatible" with timber, hence land values derived therefrom are tax-exempt.  Read the whole article

• George reconciled common land rights with private tenure, free markets, and modern capitalism.
  a. Those who got the upper hand by securing land tenures would support public services, so wages and commerce and capital formation could go untaxed.  
  b. To pay the taxes, landowners would have to use the land by hiring workers (or selling to owner-operators and owner-residents). This would raise demand for labor; labor spending would raise demand for final products.
  c. To pay the workers, landowners would have to produce and sell goods, raising supply and precluding inflation. Needed capital would come to their aid by virtue of its being untaxed.
• George's proposal lets us lower taxes on labor without raising taxes on capital.
• Georgist tax policy reconciles equity and efficiency.
• A state, provincial, or local government can finance generous public services without driving away business or population.
• Georgist tax policy contains urban sprawl, and its heavy associated costs, without overriding market decisions or consumer preferences, simply by making the market work better.
• Georgist tax policy makes jobs without inflation, and without deficits.
• George's land tax lets a polity attract people and capital en masse, without diluting its resource base.
• Georgist policies let us conserve ecology and environment while also making jobs, by abating sprawl.
• Georgist policies let us strengthen public revenues while in the same process promoting economy in government.  Read the whole article

Blight is not restricted to stagnant or declining cities. In booming Los Angeles, there is Watts. In nearby Riverside, one of the fastest growing cities in the nation, the CBD [Central Business District] is surrounded by blight which, among other things, frustrates years of subsidies aimed at reviving the moribund CBD itself.

These extreme cases are not anomalies, not simply ghettoes and embarrassments; they are symptoms of systemic malfunction. They could be portents and symbols for the rest of the economy. Blight may be defined as failure to maintain, replace, and renew capital inherited from the past. Studies indicate that all of American industry faces this problem, compared with vigorous foreign competitors. In learning to cure blight, we may learn to restore the greatness and pride of this whole troubled nation.

There is also good news: some cities have risen from the grave. Indeed, all land development is resurrection in a sense: all land has been used before for something. The history of a city lot usually shows that there were several antecedent improvements, layered like the ruins of ancient Troy. The goal should be to make renewal happen faster and more widely, while we are still here to benefit. ...

Some cities should be abandoned.

Towns around played-out mines are obvious examples. A farm town becomes redundant when new roads let customers patronize a larger or better town. Salvage what you can and move on.

Some would apply the same logic to all cities. Dead cities aren't lost, they say, but rebuilt elsewhere; they were cash cows that have been milked dry. Their depreciation allowances are reinvested on new frontiers; people and vitality move with the capital. It is an important half-truth, but a half-truth is also half wrong. The basic original site stays put; land cannot move. Public and private social capital cannot move, either.

We cannot afford throwaway cities in a finite world. New natural sites are not common. There is only one Hudson Valley with only one mouth, and here New York City has stood for 350 years. We cannot abandon the Bronx and duplicate its environment somewhere; we cannot rebuild the natural setting, and the sunk social capital is too costly. Relocating to suburbs involves commuting cost in terms of money and congestion. And then, when we tire of the new suburbs, where will we go next?

Furthermore, blighted areas have high potential market values. Picture a topographic map of a city where the contour lines represent points not of equal elevation, but of equal market value per square foot. The peaks, the Everests and McKinleys, are in the city retail centers, where just one square foot rises to $2,000 (about $90 million per acre). Land just a few miles away from dizzying altitudes can hardly be worthless. Harlem is near Park Avenue; Watts is near Beverly Hills; South State Street is very near the Sears Tower. Newark is 15 minutes by train from Manhattan. Newark office rents are $25/sf per year. That is less, of course, than in Manhattan, but in Riverside, California, we are throwing up offices to get rent of $12/sf per year, while Newark stagnates.

Land prices vary extremely from city to city or block to block. The cost to build a square foot of floor space is fairly constant from place to place, but demand varies with location. A small rise in floor rental translates into a large rise in ground rent and land price, because the land owner gets everything above what is required to operate and amortize the building. Thus,

• in Riverside, neighborhood mall space rental of $12 just pays for the building, with only a little left over, resulting in land prices of perhaps $5-$8/sf.
  
• In Manhattan, rentals are triple those in Riverside; all surplus accrues to ground rent, resulting in land prices 300 times higher than in Riverside.

Land prices across cities and neighborhoods are much more differentiated than other measures economists commonly cite. For example, the median income in upper east side Manhattan is about 8 times higher than north of Central Park, while the price of land per square foot is probably 40 times higher. Urban land is also highly concentrated in ownership; a handful of people and corporations own most of it. A growing share of income property is held by wealthy aliens, who want to diversify and acquire secure wealth they can manage by remote control. Aliens even hold a good deal of residential property in international "jet set" communities.

• Rent control
• "French Equity" (Equity in Kind):  Today we approach French Equity indirectly, and expensively. We distribute land haphazardly, but seek to make every parcel equally good by extending utilities and roads to all parcels on the same terms, regardless of cost or location.

Economists call such schemes "postage stamp pricing," because postal rates do not vary with delivery costs. Manhattan has 64,000 residents per square mile; Montana has 5.4. It costs a lot more to collect or deliver mail in Montana. The reason postal rates rise is that the U.S. urban population is spreading out more like Montana and less like Manhattan (which once had over 100,000 per square mile). Here are five other examples:

• The British Columbia Ferry Service. ...
  
• British Columbia Hydro....
• Water and sewer service in Milwaukee County, Wisconsin. ...
• State university campuses. ...
• Water supply in California. ...
  

• First, by George, equity need not be in kind. The monetary mechanism overcomes the clumsiness of in-kind equity. If four families inherit a one-family house, all four don't crowd in; they sell and divide the money, or one buys out the others. There is equity in money as well as in real estate. Money is often better; the reinvestment opportunity puts the house on a magic carpet to follow you anywhere. Money is wonderful!
• Second, by George, use the tax mechanism. Do not divide land into unusable morsels, or shackle the market with rent controls, or dissipate rent in subsidies. Give land to the highest bidder, and tax ground rents to support government.

George's land tax promotes equity toward the landless in at least four ways:

• it relieves them of taxes, to the extent that landowners pay more;
• it supplies them with more goods and services, as land is used better;
• it offers them jobs producing those goods and services; and
• it offers them a better chance to acquire land, as surpluses are released to the market.

The counterpart of sharing rent through taxation is to untax things, like buildings, that involve human endeavor. This doubles the incentive effect. If land tax is the stick, untaxing buildings is the corresponding carrot, and George's program makes both larger. Every lot with an old "Defender" building has a potential replacement, the "Challenger." Taxing buildings rigs the fight against the Challenger. Say the lot-cum-Defender is worth $100K, and the Challenger would cost $500K to build. Challenger cash flow must exceed Defender cash flow by enough to pay $500K, plus added taxes based on it.

Riverside built a downtown pedestrian mall when they were in vogue, and has been sorry ever since. It did not work; retailers deserted, and half the stores are empty. I asked the developer of a successful mall why he thought downtown failed, and got a two word answer: "absentee ownership." I should have known, having preached it for years.

Farm advisers say, "The best dressing for soil is the owner's shadow, applied daily." In town they ask, "Who's keeping the store?" Absentees aren't the only negligent owners, nor are they all bad. Torpid owners are the problem, and they come in many forms. A city wants to be rid of owners who see real estate as a cash cow for their retirement, and to replace them with owners who see it as a vehicle for enterprise and who apply their shadows daily. The shadows follow them to local civic clubs and to enterprising downtown or neighborhood associations for making joint improvements.

The surplus to land attracts outside buyers. Absentees, redundant parties in production, are often top bidders for pure ownership, which is the legal right to receive land rent plus unearned increments that accrue over time. Georgist taxation cuts directly into rents and unearned increments, which attract absentee owners; it spares the rewards of enterprise. It thereby effects a market transfer of ownership from absentees to occupants, with the community benefits that follow. In a period of rising concern over alien takeovers of U.S. real estate, these points merit focused attention.

Land taxation, if vigorously applied, tends to reduce the investment value of land, through a process called "tax capitalization." With land devalued, those needing wealth acquire substitute assets by saving more, and investing the savings in real new capital rather than land.

• One is to increase job opportunity, which in turn reduces welfare spending. More productive job opportunities should reduce pressure for military spending of a boondoggling, make-jobs nature as well.
• The other is to eliminate urban sprawl and its wasteful cross-subsidies.

But George's program begins with fostering renewal and intensive use. Clearance is involved only to serve renewal, never as a goal in itself. The first land taken would generally be vacant or with boarded-up buildings. New buildings would draw renters and buyers from old ones, releasing more space. The idea and impact are to increase rentable, salable floor space. There would also be more firms to compete in selling and hiring. How do we know there would be an aggregate increase in supply?

• Higher density is one test. Untaxing buildings fosters higher density because density, exemplified by high buildings, substitutes capital for land. Untaxing capital obviously makes it more economical.
• Higher quality is the other test. The richer the new tenants or buyers, the more space is released when they move. This is the hardest point for advocates of the poor to accept. There will always be specific cases where the rich bump the poor, leading to contemptuous names like "trickle-down" that dismiss effects on the market. But the aggregate is what should concern us. If tenants mobilize against new construction, a minority with a vested interest harms everyone else, including the poor. Building new homes for the rich, who can afford them, releases usable space for everyone else.

There are three kinds of slums.

• Only the narrowest kind, the slum on high-value land, causes eviction of the poor to benefit the rich. Owners in these uncommon areas neglect their buildings, expecting to demolish them for expanding commerce or high-rise apartments.
• The second kind is on bad land which will stay bad.
• The third, and most common, kind is on good land with old buildings that have filtered down to people who generate bad neighborhood effects. Units go vacant; land value is low. The market renews these slums not in a stroke, but by nibbling at the fringes. Yet as it nibbles incrementally in, it unavoidably creates more space than it consumes, raising aggregate supply.

Nothing is better for people than to be competed for. It raises their bargaining power as tenants, buyers, and workers.

With all that talk of capital and efficiency, remember that we began with a quest for justice in sharing rent surplus. Justice and efficiency are not at odds; we can have both. The trade-off expounded by many economists is to enervate us so we won't do anything. Yet we have shown not just that we can have both, but more; we cannot have either without the other. If we do not share rents in the efficient Georgist manner, social and political pressures will cause inefficient sharing and eventual dissipation.

This is what economic policy can do. The basic impulses, however, the striving for justice and brotherhood, and the sense of personal ethics, come from within, and from family, community, schools, and religion. So does the sense of workmanship, the striving for excellence without which no system works.

There are city councilpersons who can corrupt the best system ever blueprinted. The Georgist program may even help to straighten them out. Lincoln Steffens taught us that the villain in Eden was neither Eve nor the serpent, but the apple! The apples of discord that corrupt city councils are unearned increments to land value, which they create or deny with every decision on extending sewers or changing zoning. Georgist tax dehydrates those apples by attaching higher tax to each unearned increment.

For better or worse, California has recalled its governor and elected Arnold Schwarzenegger (A.S.) to replace him. A.S. has revealed no specifics of how he will stanch our deficit. He campaigned on generalities: he is against taxes, against waste in government, against measures to rein in vehicle use, and nostalgic about the good old days when Governor Pat Brown was spending heavily on roads and water projects. No one seems sure how he will connect the dots. After his first visit to Sacto last week, he seemed not sure, either.

His choice of advisors, however, tells us A.S. will repeat Pete Wilson's performance from the early 1990s. Chief of Staff Patricia Clarey is a good soldier from Wilson's old staff; Auditor Donna Arduin is from Jeb Bush's Florida. The gurus who set the doctrinal tone give the clearest hints: they are neo-classical economists of deepest dye. These are advisors George Shultz and Michael Boskin from the Hoover Institution. Economics, to them, is a set of dismal choices. California's choice is to cut public services, or lose business and jobs. That is what they told Wilson in 1994. All taxes are the same, always "burdens," always driving away "business."  ...

It is also alleged that land values are too small to support government. Let us test that idea. In 2003, at the current rate, there will be about 15,000 "confirmed" sales of owner-occupied urban California residences at prices over $1 million. That is from DataQuick, a standard source of current real estate data. 15,000 is about 2.7% of all confirmed sales. Some of those go much higher. The mean is probably over $2 million.

Turnover of costlier homes is lower than that of ordinary homes. (For example, turnover of existing homes is 30% greater in Riverside County, with lower values, than in Orange County, with higher values.) 2% a year is a fair guess at the turnover of homes valued at $1 million or more. If so, there are 50 x 15,000, or 750,000 homes in Calif valued at a mean $2 millions. Their aggregate value is 750,000 x $2million = $1.5 trillions.

These are not large buildings: they average 2864 s.f., with 4 bdrms, 3 baths. In the north end of Sta. Monica, a vacant lot alone is over $1m. They are not new buildings: only 9% are new. It's the land that makes them worth so much.

• the Lucas compound and the Pritzker family compound in Marin;
• San Simeon;
• the Reagan Ranch and similar holdings in the northern half of Sta. Barbara Cnty;
• fashionable winery properties in choice valleys statewide;
• the Chandler family's Tejon Ranch;
• the 200,000 acres of James Boswell in the Tulare Lake Basin; etc.

Outline of remarks by Mason Gaffney, for use at Moscow Congress, 5/21/96 

Second, some goes as a return to capital, over replacement. This is pure income. Income to capital is not a taxable surplus, but a functional incentive: it moves people to form and supply capital. This entails securing new capital (by saving, and borrowing) and conserving old capital (avoiding dissaving, and avoiding export of capital).

Capital income serves another useful function: it steers capital into the most productive uses. Steering capital to its best uses has the same useful function as securing new capital, and conserving old. Using capital effectively is as beneficial as securing more capital, and ever so much cheaper. The Great Transition in Russia now is learning to allow income on capital, to secure these benefits. The trick is to do it without allowing more than is needed.

The rest of the excess over wages is captured in the rent of land. It is a true taxable surplus. The amount is already huge, and will become huger yet when existing taxes are abated.

The size of rent is not reported in capitalist nations, except to trivialize it. Their national accountants, dominated by landowners, neglect or conceal it artfully, to protect it from being taxed. Local governments do, however, measure and tax property by value. More than half the value of property is land. In Vancouver, B.C., 73% of the value of all property assessed for taxation is land, even though much land there is exempt from tax, and not assessed at all. In California's major cities it would be just as high if only we assessed land here as accurately as they do there.

3. Rent will become huger yet when you abate taxes presently levied on production and exchange, because these now depress the rent of land. That is, in a tax-free market economy, the benefit of abating present taxes will lodge mainly in land rents. The taxable surplus simply shifts from one form to another.

This is more than a simple shift of a fixed amount. When you substitute land revenues for existing taxes, the surplus actually grows, as if by synergy. You gain more revenue base than you lose, because existing taxes now suppress much latent production. Payroll taxes directly drive workers from taxable jobs to untaxed gains from crime. Abating those taxes will unleash suppressed economic giants, along with all the new surplus values their latent production will generate. "Monetarists" warn you that "there are no free lunches." In fact, however, good policy creates lots of "free lunches." It makes the whole greater than the sum of its parts. Imagine the benefits, alone, of turning people from destructive careers in crime to useful jobs producing goods.

At the same time, the effect of socializing land revenues is to stimulate better land use - the opposite of the effect of existing taxes. Every landowner, to pay the required land charge, is pushed to steer his land to the best use (just as paying interest steers capital to its best use). Thus, the shift to rent-based revenues doubly induces new production: it releases the brake of present taxes, and replaces it with an added push to produce. This is "supply-side economic policy" in the best and truest sense. It generates yet more surplus. You may take all of rent to support government functions, without damaging private market incentives, but only sharpening them.

5. Many varieties of natural resources generate rents. City land is the greatest single source. For example, one city, Vancouver, contains half the value of taxable property in B.C. - a province of 934,000 sq. kilometers, or 70% larger than France.

However, many other resources yield rents. Some of them are also huge in value, even though some are inconspicuous. Here are a few varieties of them:

Some of those varied resources are highly valued. For example,

• newly minted fishing permits offshore of Washington State sell for $1 million each. Their owners retire and rent the permits to working fishermen, creating an instant class structure where before there was equal opportunity. Imagine the value of an exclusive right to take Caspian sturgeon.
• Radio spectrum amassed by the McCaw Company recently passed to AT&T for $13 billions.
• Dmitri Lvov estimates that your oil and gas revenues alone could support the entire national government (Practicable Course of Economic Reforms in Russia. Moscow: Russian Academy of Sciences, Central Economics and Mathematics Institute, 1994). They might even surpass urban rents in value, if they were valued at world market prices.
• In arid lands, access to water is life itself. Read the whole article

But the most delightful distinction about Canadians is the strong and explicit recognition among almost everyone, even if he's an economist, who discusses this subject, that different resource endowments are the basis of inter-provincial differences. Equalisation in Canadian politics means sharing the economic rent. Everybody talks that way. Canadian economists even when they come to the States talk that way. Just as though rent were a permissible word in polite discourse. It's very refreshing. However there's a very selective attitude towards rent -- towards what rents are shareable, I should say.

• Rents from oil and gas are fair game.
• Forest revenues are fair game.
• Mineral revenues of other kinds are fair game.
• Water power is fair game.

But now how about the rents that are generated by the valuable lands of Montreal, or Toronto, or some of those other big and powerful cities in the east? They are not fair game. As a matter of fact, if you pore through the fine print of the equalization law, which I did on the airplane, you find the most interesting exception to what's included in the formula. I'll explain the formula to you in a moment if you are still awake. ...

The conclusion of all this is that the Canadian system is really better in terms of its Georgist implications because the payments to the provinces, with all the faults that I've described, are essentially based on population. Population is in the formula. And if you compare this with the way things are done in the States, population plays a very minor role in the formula for equalisation payments in the United States.

1. Worthy goals often conflict with each other A. Corn vs. Barley B. New rules C. Unresolved conflicts D. Danger of isolation through overkill
2. The Dereliction of Economists A. Defining away land  B. Private property: from means to end C. Leapfrogging, floating value, and compensation  D. Siege mentalities
3. Gifford Pinchot's Winning Formula A. Defining "Conservation" B. Finding common ground
4. Pinchot on "Development"
5. Urban Sprawl A. Development is not identical with Sprawl   B. Sprawl is not a quest for open space   C. Sprawl is not the product of free choice   D. Looking for Mr. Goodbar   E. The public pays twice  F. Proactive solutions
6. Dig deep

Some of the losers in the market game are not willing to grin and bear it. Instead, they write new rules; they want to play a different game. Soilsmen did this long since. They like to classify land and rank it by its potentiality for growing crops. Farming is - to them - the ultimate value, so it is the highest and best use: cities may have what's left over. It is perhaps poetic justice that habitat-savers are now doing the same thing to farmers. They conceive highest use as that which saves endangered species: soils and farming may be damned, right along with housing, commerce, transportation, industry, storage, water supply, waste disposal, fire control, education, religion, mining, government, national defense, recreation, and whatever else needs land. All human activities, and survival itself, need land, so that list is a long one. Each constituent of the other uses becomes an enemy.

Thus, to restore citriculture and habitat in what is now L.A. we would move the city folks to hazard-prone floodplains, steep slopes subject to fire and erosion, quake-prone fault lines and liquefiable soils, etc. We would also move them away from the center, imposing longer commutes, greater auto-dependency, longer utility lines, longer hauls to dispose of solid wastes, more air to protect, more aquifer surface to protect, more land to protect from flooding, etc. ...

There is another kind of fundamentalist, the private property kind. The economics profession (my tribe) has, in recent years, largely abdicated its proper role as an arbitrator and gone over mainly to the side of private-property extremism. This is the essential meaning of "Neo-classical Economics," which is the idiom of most discourse in the field today, both in business and in the profession.

How did economics get so twisted? Don't blame Adam Smith, or David Ricardo, or John Stuart Mill, or John E. Cairnes, or Knut Wicksell, or Philip Wicksteed, sterling 19th Century writers. Rather, blame J.B. Clark, Karl Marx, Richard T. Ely, Alvin Johnson, Frank Fetter, Frank Knight, George Stigler, and a host of lesser figures who gradually warped economics into its present form. How did they do it?

• Man subjects land to private tenure. ...
• Man improves the raw land, pumping value into it. ...

Neoclassical economics, historically, marked the final, total surrender of the profession to this fetish. The modern economist's view runs something like this: "I pledge allegiance to the 14th Amendment, and to the overinterpretation of private landowner supremacy for which it has come to stand." It is ironic to recall that Radical Republicans passed that Amendment, at a time when a "Radical Republican" was one who favored freeing the slaves. The 14th Amendment was designed to protect the rights of freedmen. As interpreted now, the 14th Amendment means that The Emancipation Proclamation itself was unconstitutional! Fortunately, no one has brought that case - yet.

The Neo-classical economists' view of their proper role is rather like that in The Realtor's Oath, which includes a vow "To protect the individual right of real estate ownership." The word "individual" is construed broadly to include corporations, estates, trusts, anonymous offshore funds, schools, government agencies, institutions, partnerships, cooperatives, the Duke of Westminster, the Sultan of Brunei, the Medellin Cartel, Saddam Hussein, congregations, Archbishops, families (including criminal families) and so on, but "individual" sounds more all-American and subsumes them all. This is a potent chant that stirs people to extremes of self-righteousness and siege mentality when challenged.

The resemblance between Neo-classical economics and the Realtor's Oath is easier to understand when you learn that Professor Richard T. Ely, founder of the modern discipline of Land Economics, was heavily subsidized by the National Association of Real Estate Boards, the utilities, the major landowning railroads, and others of like mind and property interests.

When it comes to violating property rights, air pollution today is perhaps the greatest invader and confiscator of property. Where do economists stand? Once a few of them tried to say, following A.C. Pigou, "let the polluter pay," and in parts of Europe they still do. In our modern backward thinking here at home, however, it's not the polluter who is invading the property of others, nor the human rights of those not owning property. Rather, when you tell them to stop, the government is invading their rights. The wage-earning taxpayers must pay them to stop, else you are violating both the 14th Amendment and the "Coase Theorem," a rationalization for polluting now dearly beloved by Neo-classical economists.

Urban sprawl, which creates a psychological effect of great crowding, is not the product of development as such, but of leapfrogging. Leapfrogging means chaos, with development in the wrong places and times. Infilling, on the other hand, is anti-sprawl. It is the cure for sprawl.

In British Columbia, people move around a good deal by car-ferry, because of the terrain. The Provincial Government ("The Crown Provincial") runs the system. There are many lovely little islands in the Straits of Georgia, between Vancouver Island and the mainland, favored by the wealthy, the exclusive and reclusive. Being more sybaritic than Henry D. Thoreau, and politically puissant, they have demanded and received car-ferry service. This service costs about $10 for every $1 in revenue. The resulting deficit is covered by raising rates on the main plebeian line, Victoria-Vancouver. Naturally, these cheap ferries attract new visitors to the islands, and new demand for land there.

Potential builders are little concerned with the social costs they might impose, so long as others are to bear them. Thus, they sometimes settle for and build

• on steep lands (like Malibu Hills) with flammable brush and erosion problems,
• on flood plains (like Victoria Woods subdivision in Riverside),
• on soils subject to liquefaction in quakes (like Northridge),
• in canyons and arroyos,
• on lands with limited access for emergency equipment.
• They even build on lands without water supply, even in arid southern California, then demand water and get it, secure in the knowledge that Sacramento rejected a recent move to ban development in areas with no assured water supply. ...

I could wax rhapsodic about the results to expect from such taxation, but have done so elsewhere and will leave it with a word: visit Sydney, Adelaide, Brisbane, Copenhagen, or Johannesburg, which have made use of this principle to excellent effect.

It is said we need a land use inventory. We already have lots of them: people have been classifying land for decades. The question is, what shall we do with them?

It is said we need "risk ratings." These are subject to manipulation and juggling, like benefit/cost analyses of recent ill fame. The question is, who will control the ratings, and to what ends?

It is said we need fire models. We have fire models; they were already chic in 1950. The question is, how to keep scattered homes out of fire-prone areas, where they make prescribed controlled burning nearly impossible. The question is how to keep the State and the fire insurance industry from cross-subsidizing these homes by averaging their risks in with others.

Rather, let us study how to emulate the model of Butchart Gardens, near Victoria, B.C. Butchart doesn't sound like a gardener's name, and sure enough, Mr. Butchart was a hardrock miner who attacked the earth and left a great ugly gash in it. Ah, but Mrs. Butchart, she wanted space for a garden, so she made one there. She rediscovered the truth that land is not just the matter that occupies space, it is space, always renewable and reclaimable. Now Butchart Gardens is one of the world's great beauty spots, drawing visitors from everywhere - in the summertime you hear every language there. Our decayed central cities, too, may bloom again like Mrs. Butchart's garden. Let us make it our model.  read the whole article

2. "Real Property is Sacred and Untouchable"  Wrong! Suppose this layman writer and the Oregon Chief Justice were in error, and water permits were real property. That is out of the frying pan, into the fire.

What does 'real' mean, applied to property or estate? It is not the opposite of 'imaginary.' No, 'real' is an elided English form of the French 'regal' taken into English when English kings spoke their native French. Real property is The King's.

We threw out kings in 1783, but not the royal powers. Rather, we transferred those powers to our State governments. By succession, real property means government property!

Every landowner is a tenant of the king or his successors in interest. The very word 'own' comes from 'owe.' An owner is one who owes. What he owed historically was fealty to his sovereign.

That used to mean bending the knee, kissing the royal foot, swearing allegiance, and showing up on demand to smite the enemy.

It has evolved into servitudes like eminent domain, police power, the public trust doctrine, and something else that our lawyers may have glided over, but economists underline: the tax power.

These concepts are basic to common law which has been brought into every U.S. state constitution (save Louisiana's). Moses was not just whistling Dixie when he quoted The Lord as saying "The land shall not be sold forever; for the land is mine, and ye are strangers and sojourners with me." ...

The owner must be left with some 'economically viable' use, meaning almost any use whose revenues exceed expenses, however small the net gain.

As to other property, well! No one has yet been compensated for losing the fruits of his sweated brow to the IRS, at rates which once soared as high as 90% in the top bracket.

With dearer water you use less by controlling it better, switching from primitive furrow irrigation to sprinklers, spitters and drip.

This in turn lets you do new things like growing avocados on steep hillsides formerly barren, yielding more dollars of product for less water (and in this case on waste land).

The above facts point to a fascinating, portentous corollary: you can tax water withdrawals without wrecking the water economy.

On the contrary, such taxes (carefully crafted to be constructive) can encourage conservation, getting more bins and bales for the bucket, so to speak.

Americans are raised on anti-tax slogans masquerading as economic analysis, always presuming taxes destroy good incentives and wreck the economy.

If it is oil, we all know mineral rights are routinely severed from surface rights by sale, reservation or lease. Water can be subject to constraints, too.   ...

A simple solution to half our tractable water problems would be a severance tax on water withdrawals. If you can regulate it you can tax it.

A tax can be viewed as nothing more than an economic price charged by the owner of water (the state) for using its property. ...

7. "Economics is hostile to environmentalism"

Partly wrong, although some economists are guilty as charged. Economics, properly pursued, deals with how best to meet human wants. Recreation, fishing, wildlife, amenities, clean air, pure water, sustained resource supply, watershed protection, good health, and conservation are legitimate human wants.

Many economists, I confess and deplore, are blind to such values, and think only of maximizing GNP measured in the brutal old-fashioned way, developed during World War II for war's emergency purposes and never revised.

Others, cowed by cow college deans, dare not think at all, and write only of sustaining farm land values: damn the cost to others.

In 1879, George electrified the world by identifying one underlying cause for two great economic plagues:

• chronic poverty arising from insufficient demand for labor, and
• cycles of boom and bust.

These twin plagues arose from concentrated ownership of land, compounded by land speculation. Large landowners and speculators (often one and the same) held the best land idle or underused, forcing labor onto marginal land and driving down wages. Collapse of speculative land price bubbles caused periodic slumps.

(By "land" George meant exclusive rights to use natural resources in a specified territory. It included mining, water, fishing, and timber rights, road and rail rights-of way, and some patents. George emphasized the high value and productivity of urban land, which facilitated communication and trade. Today, we would add to "land" such items as taxi medallions, telecommunications licenses and pollution "rights".)

George followed his analysis with a plausible, practicable remedy: eliminate all taxes except for a tax on land values. The "single tax," as it later became known, would invigorate the economy by breaking up large idle holdings, making land available to those who would use it. And it would suck the air out of speculative bubbles, damping the boom and bust cycle.

• Taxing land is very progressive because land ownership is highly concentrated among the most wealthy, far more concentrated than income.
• Taxing land is fair, because the community rather than the individual landowner creates land values.
• Taxing land is economically efficient, because the owner cannot avoid a land tax ("shift" it) by choosing less-taxed options. ...

In the US, "Georgism" melded into the populist movement, and later into the Progressive Movement. At the national level, the Progressive Movement dominated both major political parties for 17 years, 1902-19. At the local level, its influence continued through the early 1920s. Local property taxation was modified along Georgist lines: land assessments were raised relative to improvements and rates were increased substantially. California water districts financed by land taxes catapulted California to the top-producing farm state in the Union, using land that had been desert or range. California generated farm jobs and homes, while other states destroyed them by allowing well-connected speculators and "robber barons" to grab large tracts of land. A Georgist, Congressman Warren Worth Bailey of Pennsylvania, drafted the first Federal personal income tax law on Georgist lines: falling mainly on very high incomes from property. ...

Neo-classical economists give us only a hard choice: we may have equity, or efficiency, but not both. By contrast, George's program reconciles equity and efficiency. Think of it! George takes two polar philosophies, collectivism and individualism, and composes them into one solution. He cuts the Gordian knot. Like Keynes after him, George inspires us by saying, "Forget the bitter tradeoffs; we can have it all!"    Read the whole article

It is part of George's genius that his proposals solve one problem by resolving it with another, turning two problems into one solution. It is something like tuning up the orchestra for a concert, turning dissonance into harmony, and keeping the beat together, turning cacaphony into rhythm. It is the mark of good solutions that they reconcile and resolve, rather than simply "trade-off." [If you ever immerse yourself in mathematics deeply enough to find different proofs of the same proposition, you recognize the epiphany when it all comes together, and everything supports and confirms everything else. Then you know you have the right answer. Good ideas and good policies support and reinforce each other.]

Economists today offer us mainly "trade-offs" and hard choices. For every good thing we must give up another, so net gains are just marginal. That is the approved posture: it makes one seem hard-headed, worldly, and practical. Too much positive thinking sounds suspiciously optimistic, and invites rebellious cynical muttering that "there ain't no free lunch." It goes back at least to Malthus, who offered mankind the hard choice of food vs. sex. That sort of thinking is what made people call economics "the dismal science."

A true resolution is much more to be desired. To get one good thing we get a second one as well. It is remarkable how many "hard choices" are turned into benign resolutions in George's program. He is a genius at finding the essential harmony of interests now concealed beneath confused thinking. Instead of a dismal trade-off, there is a "free lunch," or "synergy": the whole is greater than the sum of its parts. Such grand resolutions, when possible, deserve to be called "true win-win solutions." 

Many economists today react to such ideas with reflexive disbelief. They put down optimistic claims by calling them "panaceas," too good to be true. TAANSTAAFL ["There Ain't No Such Thing As A Free Lunch."] is their slogan; cynicism their preferred posture. However, false pessimism is just as false and damaging as false optimism. A truer slogan is TITSTAAFL: "There Is Too Such a Thing As A Free Lunch." It's rather a question of WIGGI?: "Who Is Going to Get It?". Many dismal alleged trade-offs are just someone's mental blocks that stand athwart the path to abundance, or, worse, ways to control and exploit us. Often, in fact, "we can have it all." Is it too good to be true? Let us itemize the many resolutions of alleged trade-offs and standoffs that George's program will achieve. ...

At the state or local level, George's program is the answer to California Governor Pete Wilson' dilemma, and every governor's dilemma:

• it untaxes and attracts capital, and encourages capital formation, without giving away the store, or untaxing the rich, or starving the schools and police.
• It raises state revenues from the richest people while attracting business and wealth with the very same stroke.

So George's simple program not only reconciles efficiency and equity, it squares taxes and incentives....

Dismal trade-offs, deadlocks, and standoffs are just mental blocks and smokescreens. Henry George began with a quest for justice in sharing the rent surplus. He found that justice and efficiency are not at odds, we can have both. This trade-off that many economists expound is a stall, a put-off to enervate and unman us so we won't do anything. It may ease the conscience to think justice must be sacrificed for efficiency, and schools starved and libraries closed to free up incentives, so nothing, really, can ever be done. We all feel compassion by nature but, to survive and stay whole in this world of beggars and bandits, learn to harden our hearts and cork it in. We learn to screen out evidence of suffering and injustice, and rationalize what we cannot deny. This mindset, while understandable, is unaffordable in a period of dangerous national decline, and growing division between haves and have-nots.

What we have shown here is not just that we can have both justice and efficiency, but more, we cannot have either one without the other. If we don't share rents efficiently, in the Georgist manner, social and political pressures will continue to cause inefficient sharing and eventual dissipation.

Economic discourse is afflicted with pessimists who firmly cling to mutually inconsistent positions at the same time, each posing an insoluble problem. Some, for example, believe the world is racing to starvation, and favor limiting demand through birth control, while in another context they deplore "overproduction," or "underconsumption," and favor choking off farm production to keep farmers from losing money. George, of course, would see demand as the answer to supply, and land as the field on which the twain may meet and satisfy each other, leveling them upwards.

Again, some favor cheap power and good roads for rural areas, regardless of cost, and then favor low-density zoning to keep people out. George, of course, would favor infilling to make full use of short interior lines at high capacity, and lower cost per customer. Read the whole article

MG - It pervades the culture of the profession. Most members are looking for grants and promotions to put frosting on their cake. They call it, "Responding to the incentive structure," giggle nervously, and shuffle the blame onto "the system." They abandon personal moral responsibility, and quickly become part of the system themselves. They rationalize their own dereliction by attacking those who expose it, turning themselves into a generation of vipers. Grants come from those with money. Follow the money trail. Most administrators are even worse: they push faculty members to get outside grants, whatever the source. They only occasionally decline one when faced with embarrassing publicity.

Look at the names and histories of major grantors and patrons of the past: Stanford, Rockefeller, Russell Sage, Carnegie, Hewitt, Cornell, Wharton ... Look at the governing boards of major private and public institutions. It's all there to see, for those that have eyes to see, minds to draw the obvious conclusions, and hearts to carry on the good fight for the public interest. Upton Sinclair spelled it out pretty well back in 1923 or so, in "The Goose Step: a Study of Education in America".

It's partly a matter of coopting people by dangling money before them, and partly a matter of selecting and supporting those whose ideas are already more simpatico to the major grantors. It's hard to tell the difference, so it's hard to say who's been corrupted, and who corrupted himself at an early age....

All that interesting Georgist history is blanked out of most history books.

MG - Once the public domain was handed over to a handful of rich, politically connected people, they consolidated their position by taking control of the media, of education, and the churches. This has become so much a part of our being that people hardly think about it, and what it implies. No one needs to pay off the press: in most cities, the biggest single downtown landowner is the press itself. No one needs to pay off radio and TV stations: their spectrum assignments are the basis of their being.

• There are physics Profs. who consult for nuclear firms;
• entomology Profs. who consult for pesticide firms;
• Profs. of medicine who switch mothers' eggs around;
• Profs. of natural resource economics who are promoted for protecting the privileges of water hogs and land speculators;
• Profs. of agronomy who tailor their work to the needs of giant landowners; etc.

TPR - What's your take on the Pennsylvania story? Are the landlords running scared from the new 'Whiskey Tax Rebellion'?

MG - Pennsylvania allows its cities what is called "local option" on property tax policy. This gives each city the option of down-taxing buildings and up-taxing land. An accelerating number of cities have chosen this option, the latest being Allentown.

Landowners can't run, not without leaving their land behind; and the idea is not to scare them, but show most of them they have more to gain from un-taxing buildings than they lose from up-taxing land. Un-taxing buildings encourages new building, with all the gains that brings. When a city gets old and rundown, a lot of people get the point.

TPR - Explain exactly what would happen if America began shifting taxes off of everything else and onto land value.

MG - Exactly? The effects are too great, too pervasive to predict exactly.

• It would unleash massive forces of production, exchange, capital formation, and building, forces now trapped and frustrated in the coils of our complex, counterproductive tax mess.
• It would enhance the supply of goods and services while simultaneously lowering taxes on the poor and the workers, thus reconciling the needs of both efficiency and equity, in one stroke.
• It would raise taxes on the richest Americans, and alien landowners, too, without diluting in the least their incentives to work, to create capital, or to hire workers: it would actually fortify those incentives.
• It would spring people loose to renew large parts of our older cities, and rehab what they do not re place.
• It would let local school districts support education at much higher levels than now, without fear of driving away business.
• It would satisfy the demand for housing on land that Nature suited for housing, without invading flood plains, steep slopes, remote deserts, and other places that cost society dearly to serve and rescue.
• It would raise the demand for labor, taking people off welfare and keeping them out of jails.

One could go on at length, but Henry George summed it up in three words: "Association in Equality." Civilization advances when those conditions are met, and declines when they are denied. America has been denying them; we are all paying the price.

MG - Economic analysis, properly used, can serve the cause of environmentalism. The neo-classical economists abused both economics and the environment badly, as a byproduct of their drive to discredit classical political economy, and Henry George. John Bates Clark wrote that land is not scarce, that mankind can convert capital into land without limit, and create as much as we please. He wrote that natural resources have no value to mankind until and unless they are privatized; that privatization itself is what creates value. Our universities churn out thousands of new economists yearly, imbued with such attitudes. When Rachel Carson kicked off the new environmentalism in 1962 with her "Silent Spring," most economists trashed or disdained her: they 'd been trained that way.

Faced with the obvious growth of environmental sentiment, economists dealt with it as they have with other problems: they absorbed it in the discipline, then marginalized it. Now they can say it is part of economics, while they proceed to ignore or trivia lize it in their major policy pronouncements, wherein endless territorial expansion continues to be not just a goal, but a necessity to make the system work.

The legitimate goals of environmentalists, they coopt and distort. Here are two examples.

• They'll tell you that it's not OK to promote oil conservation by taxing withdrawals, but it is OK to do so by monopolizing the industry - monopolists are our best friends.
• They'll tell you it's not OK to check polluters by taxing their effluents, but it is OK to give them property rights to pollute, based on past emissions, and then buy those rights back from them at their price. You think I'm just making that up? I wish I were! The EPA is actually applying that idea around the country.

TPR - If Earth's ecosystem and poorest people will be the largest beneficiaries of the reform you advocate, how will it ever gain public acceptance in America's increasingly money-driven political system? If the press will never acknowledge it and the education system is so lost and blind, how can this reform ever happen? Are Georgists like the character in 1984?

MG - Every system must purify itself from time to time, or be destroyed. How long that takes depends on how strong a base you started from, and how strong your rivals are. The USA started from a strong base, built in part by the Progressives (including many Georgists) and the New Dealers (in spite of some of their destructive moves). Now, our leaders think we are riding high, just because the stock market is rising, even though real wage rates have fallen for 25 years, our debts are staggering, our liabilities and contingent liabilities exceed our assets, our biggest growth industry is building jails, our population is losing its literacy, our major cities have decayed, and so on. Marx was right about one thing, at least: the system carries the seeds of its own destruction.

Our leaders have done a good job of subverting our rivals, in part by forcing on them the ideas of neo-classical economics, the ideas that originated as part of the anti-Georgist campaigns. Japan gave us a good run for a while, but got suckered into aping our worst habits, and hence a good old-fashioned American-style land boom and bust that has knocked them out of the race for a while. Most of S.E. Asia has now followed suit.

It's a delicate balance. The haves can brainwash the have-nots just so long, until reality breaks through, as in 1929. When it does, you want to be ready with a plan tailored to the times, which Georgists at that time were not. Meantime, we keep the idea alive by recording and publicizing important facts, such as that the prosperity of Hong Kong was a product of Georgist policies; likewise that of Taipei, Sydney, Johannesburg, and other great cities.

• We support object lessons like those in Allentown, Pa., and go for a really visible one like Philadelphia.
• We combat moves to raise sales and income and payroll taxes, and awaken people to the benefits of lowering them.
• We awaken people to the possibilities of including more land income, and less payroll income, in the base of the income tax.
• We support efforts to democratize the media.
• We alert people to the corruption of academia and the kept think-tanks, and provide alternative venues by mobilizing the resources of the few Georgist-oriented foundations.
• We get on social action committees of various churches, and try to give their well-meant but often foggy-minded efforts some clearer focus, with more punch and less platitude.
• We remind people of their common rights, and the history of common property in land.
• We expose and ridicule the inconsistencies and hypocrisies of kept economists, hoping that embarrassment will convert those whom truth will not.
• We avoid the temptation to play Jeremiah, but seek to join the system and make it work better, even as Henry George and his friends did.  Read the whole article

The California Constitution and Water Code, like those of most states, are explicit that “The waters of California belong to the people of California.” Water is not private property, evidenced by its not being taxed as such (except indirectly, as it adds to the value of fee simple land). Water is not, therefore, subject to the limits that Prop. 13 (and cognate laws in other states) impose on property tax rates. The State, as owner, can presumably charge whatever the legislature decides, without its being considered a tax at all. Water claimants would of course resist strenuously, with all the lawyers and pawns and media that money can buy, and social pressure sway, but the public has a strong case.

A fourth way to claim water is by getting “sweetheart” contracts from large supply systems: Federal water from the Bureau of Reclamation; State water from the State Department of Water Resources; and mixed-source waters from the giant MWDSC. No sooner are these contracts inked than learned counselors go to work to convert them into perpetual obligations of the taxpayers and other ratepayers. The original 40-year contracts that the U.S. Bureau of Reclamation executed on the 1950s at giveaway prices came up for renegotiation in the 1990s, and only a few old timers even remembered their origins. Meantime the once-surplus water had multiplied many times in value, and the contractors were busy securing rights to resell water that they buy for some $10 per acre-foot to coastal cities for $200-$500 per acre foot. A rather shocking decision by Senior Judge John Wiese, December 31, 2003, requires the Feds to compensate the Tulare Lake Basin Water Storage District for withholding some of “their” water to comply with the Endangered Species Act to save fish downstream. Said District is a front for the J.G. Boswell Company, owner of 200,000 (sic) acres in the Basin.

What’s the moral? We can turn “Negabucks into Megabucks” for state and Federal treasuries by charging water takers a market price for what they get, instead of subsidizing them to get it, as now. The stakes are huge; the barriers are surmountable. Besides raising revenues we would institute a regime of “demand management,” promoting water conservation in the most economical way. We would solve our factitious “water crisis” and “revenue crisis” in one stroke. Read the whole article

... Another form of Managerial Socialism is direct administration of public lands. Our National Forests are an example. ...

Distributive Socialism, in contrast to Managerial, means tapping surpluses in the private sector and using them for the public good. The revenues may

• provide public services that are available to all, like schooling and social security; or
• be used to abate regressive taxes; or
• be used to finance social dividends paid in cash, as in Alaska.
• Revenues may also be used to finance public works, even though these benefit only a few specific landowners.

Thus, to define Distributive Socialism we need to define "surpluses." These are primarily rents from lands and resources given by nature. In an open tax jurisdiction, labor and capital are mobile and their supply is elastic; only land is fixed. Land rent is the basic taxable surplus. Where there is no land rent, an attempt to levy any tax can only abort production and land use, rather than collect the tax. Where is there no land rent?

• First, there is no rent generated on "marginal" land that is just barely worth using at all.
• Second, and more generally, there is no rent generated by marginal increments of labor and capital applied on any land, from the best to the worst.
• Otherwise, all production on land generates some rent, which is a taxable surplus. ...

Whether on public domain or fee simple lands, Distributive Socialism has three compelling attractions.

• One is, it requires no Managerial Socialism; it may work through the free market. It does not preclude elements of Managerial Socialism, where these are otherwise desirable; it simply does not require them.
• The second attraction is that it lets taxes be progressive without impairing incentives. Taxes that rifle in on rents are progressive and distributively socialistic because the ownership and control of rent-bearing lands is highly concentrated in a few hands.
• The third attraction is that taxes on rent may be heavy without impairing incentives, precisely because rent is a surplus. The land-tax component of the existing property tax is a good model. With this tax, there is no "taxable event" required. Taxes are simply due periodically, based on an external assessment of the land's market value, which in turn derives from rent of its highest and best prospective use.

Most political leaders live and orate in a world of dismal choices and trade-offs. To them, there is no cutting the deficits, either state or federal. We must cut taxes or lose jobs. We must make taxes regressive or destroy useful incentives. On the other hand, once we define, identify, and rifle in on rent as taxable surplus, those hard choices vanish. We can have higher taxes and more jobs, both at once. We can tax progressively while simultaneously enhancing incentives to produce and save.

Likewise, on lands still in the public domain, we can rifle in on rent by framing and administering a good leasing policy. Leasing does have some transaction costs, but the private market does it anyway. There is a reasonable, if less than perfect, track record.

• Ground leases are common in downtown real estate, nationwide, even under imposing structures like the Empire State Building, and Rockefeller Center. 
• The Irvine Company, holding 20% of Orange County, California, has long declined to sell land, but only lets it for intermediate terms.
• Much of Hawaii is developed on the same terms.
• Most oil and gas is developed by lessees on private land, yielding large rents to the lessors.

Thus, the property tax, especially on land, is twice effective as an instrument of Distributive Socialism.

• First, it rifles in on the rent surplus and socializes it.
• Second, it democratizes the ownership and operating control of land.

Thus it achieves something akin to the "worker control" that is an ideal avowed by many modern Socialists, melding egalitarian distribution with egalitarian management and control. To be sure, it does so in a small-business framework, an ideal that is traditionally Populist, not Marxist. However, in this new post-Communist age, when Socialists are seeking new ways to express their yearnings for the good society, they might want to reconsider the value of this approach to worker control. Perhaps Marx, like other reformers of his generation, was oversold on the economies and inevitable triumph of large scale capital and organization, and the substitution of capital for labor. Perhaps small is beautiful, after all. ...

What must be inculcated in everyone's thinking is the essential difference between competition with front money, and competition where payments are deferred.

• The first is limited competition, with places reserved for an affluent few.
  
• The second is evenhanded, democratic competition on a more level playing field, where preferential access to credit confers no differential advantage. This is the condition under which Distributive Socialism can coexist with, and reinforce, a free market economy. It is achieved on fee simple lands by subjecting them to heavy land taxes, whereby newcomers can buy in at low prices in return for paying more over time. It is achieved on public lands by writing leases with high lessor participation over time, and low bonuses required up front. Read the entire article

• Offshore Oil
• Tax All Natural Resources Uniformly and Comprehensively

"Make no small plans: they have no magic to stir men's blood," quoth Daniel Burnham. As a successful architect and planner, he knew how to stir his clients' blood. However, his ringing phrase is negative and preemptive, hence overstated. Leo Tolstoy noted in War and Peace that wars are won and lost by the sum of individual confrontations on chaotic battlefields, where generals lose control. Folk wisdom says "The Devil is in the details." We do need small plans, lots of them, to implement big visions. My hat is off to the trench warriors who are advancing the two-rate property tax reform plans in Pennsylvania and New York, one small city at a time.

Let's rephrase Burnham in the affirmative: "Make big plans: they have magic to stir people's blood." Big Plans imply Grand Visions. Henry George had few peers at stirring his hearers' blood, and agreed.

Big Plans and Grand Visions inspire small ones. They also help orient and coordinate them. They help us divide the major from the minor, to direct our work most efficiently. This is what I will attempt here.

Superficially it seems "sudden," but intellectually the way has been paved by years of Grand Visions and Big Plans.

The upshot is, we need Big Plans with Details Ready. I speak here of Big Plans with magic to stir the blood of those who see the benefits of supporting government from land and resource rents. I'll sketch the big picture, where details fit in, and how they all fit together. Read the whole article

National governments originate historically to acquire, hold and police land. Other functions are assumed later, but sovereignty over land is always the first business. Private parties hold land from the sovereign: every chain of title goes back to a grantor who originally seized the land.

When economists today speak of "rent-seeking" they usually are thinking not of basic land rent, but in subtle and sophisticated terms, looking at dribs and drabs of transfer rent derived from contracting advantages. They develop abstract models for gaming optimally with imperfect information, and so on. By emphasizing the arcane while ignoring the basic they are in danger of matching the proverbial expert who fine-tunes all the details and elaborations as he forges on to the grand disaster. ...

We would be more useful to statesmen if we looked first at rent-seeking in the grosser sense of "land-grabbing", where the whole bundle is at stake. When William of Normandy conquered England the prize was land rent, all of it. He and his retainers dispossessed the local rent-collectors. It was simple, gross, and basic, and much more consequential than the trivial rent-seeking we model today. The bulk of the natives may have been affected only marginally: they just paid Lord B instead of Lord A. But it made all the difference to Lords B and A, the ones who made basic decisions about global conflict and cooperation.

Again, from the 17th century Europeans invaded North America, dispossessed the natives and each other, until today we meet here, overlooking beach and ocean, paying our daily rent for a little slice of land which has been won and kept by a long chain of wars.

The roof over our heads is different, it is the product of capital formation. Someone saved from income, and paid workers to construct the building. Its present value is that less the obvious depreciation and obsolescence, so it is rentable today mainly for its appreciated site, to which therefore an economist or an appraiser must impute most of the market value here.

Economists conventionally bury this point when they submit that "national defense is a public good".

• "Defense" is a loaded word which rationalizes as it describes. "Military spending" is more neutral, and will be used here. It is worth remembering that the German Schutz (as in Schutz-Staffel) and Wehr (as in Wehrmacht) both translate as "defense". Lebensraum is a more forthright term, and explains much more about Nazi aggressions.
• "Public good" says that all gain equally. But that is not true even of pure defense proper. What is defended behind the defense wall is land previously seized. The Lords and Barons have much at stake; the serfs and vagrants very little. Rent is what is being defended, along with, no doubt, traditional feelings of machismo and some local folkways and mores.

Wages, as well as the return for capital formation, ultimately need little defense because they are economically functional. They are paid for real service and sacrifices, and will command a return in almost any viable system. Labor is also more migratory. "Fixed" capital also migrates economically as capital recovery funds are reinvested elsewhere. Land, in contrast, does not migrate among nations. Nations are defined as areas of land.

But it is outside the defense wall of the nation proper that rent-seeking is most dynamic and destabilizing. Military force (often in tandem with finance) is used to project sovereignty into foreign nations, and over no-man's-lands like the oceans, polar regions, radio spectrum, and outer space.

Offshore rent-seekers are of two general kinds.

Natives normally control more of the traditional resources like farmland. Foreigners specialize more in less visible, more novel and sophisticated resources like

• undiscovered minerals (exploration rights),
• navigation rights,
• radio spectrum,
• overflights,
• bank charters, etc. ...

Then one invokes the U.S. armed forces and the sanctions of ancillary statecraft to raise the value of one's acquisition. The three main concerns are

• to firm up precarious tenures (as by supporting the government that granted them);
• to hold down taxes (as by lending the U..S. armed forces); and
• to avoid pure competition (as by giving preferential access to the U.S. market, or Pentagon procurers).

There are four sources of value of foreign holdings:

• capital flows,
• plowbacks,
• appropriations, and
• appreciation.

In many cases like Aramco the last two far outweigh the first. But they are products of statecraft and force, not of capital inputs proper.

Tenure granted by unstable governments is not worth much, and is therefore cheap to acquire. In 1960, for example, Patrice Lumumba pledged a substantial share of the Congo in return for a relatively modest loan from a Wall Street financier.

Of course there are also failures and losses, and someone might even try to show that aggregate losses exceed aggregate gains. But Adam Smith observed long ago that when an occupation offers a small number of extremely high rewards, its attractiveness is enhanced out of all proportion to their aggregate value. It is not just the successes, but all the attempts that provoke global conflict. ...

The views above have been characterized by some as "Marxist", because of the explicit recognition of special class interests. If this be Marxism make the most of it; the point if any is ad hominem. But the views here differ from Marx's.

• For one, Marx was an underconsumptionist who attributed imperialism to a search for overseas markets, not rent-seeking.
• For another, Marx made no sharp consistent distinction between land and capital.

Rent, Taxation, Dissipation and Federalism

Rising Inequality and Falling Property Tax Rates

It is a common belief that property tax relief is "good for farmers." It certainly raises the private share of economic rent. That in turn raises the investment grade of farmland and encourages its purchase as a store of value, a place to park slack money. This may be at odds, however, with using it as a vehicle for enterprise and an outlet for workmanship. Lower farm property taxes are associated with lower ratios of capital to land, and labor to land, both over time and among states. They are also associated with bigger mean farm size and less equal distribution of farm sizes.

In the sections that follow, I first document the rise of inequality in the distribution of farmland that followed a sharp drop in farm property tax rates after 1930. Then I show, by cross-sectional analysis, a positive relationship between higher property tax rates and more intensive use of farmland, which in turn is associated with more equal distribution of farmland. Conversely, I find property tax relief associated with underuse and underimprovement of land.

• rising acreages mean there are fewer farms overall.
• Rising labor prices per farm mean aspiring farmers who lack prior wealth can no longer buy in.
• Rising Gini Ratios mean acreage is less equally shared among a given number of farms.
• Rising Gamma factors mean the higher quality land is moving into bigger farms.
• The Gamma data are confirmed by rising shares of cropland and irrigated land in vast farms.
• Rising P/C ratios reflect a higher LSREV, and they mean it is harder for a newcomer to acquire any farm acres.

The combination means the agricultural ladder has been pulled up. Entry is nearly impossible for farmers lacking outside finance; exit and latifundiazation proceed apace. These changes accompanied and followed a 40 percent drop in farm property tax rates.  ...

THE LESSER IMPROVEMENT OF BIGGER FARMS

A result of rising concentration is the separation of land from capital. With some exaggeration, American latifundia are now lands without buildings, but buildings cluster on smaller farms, many without enough land. This implies at least three points.

• First, building wealth is more equally distributed than land wealth.
• Second, the property tax would be more progressive if changed to a pure land tax, exempting buildings.
• Third, many latifundia are not being used to their potential, while capital on some small farms is undercomplemented with land. I support the case first using national data, and then by comparing states.

The yield per acre of most crops stays level or rises with harvested acres per farm. At the same time, sales per dollar of real estate fall somewhat. (21) The most likely reason is that the quality of harvested land rises with quantity. There is, to be sure, a trade-off between quality and quantity, but there is also a bond. Whoever can afford more can afford better. Which effect is stronger? The question must be resolved by data.  ...

The 1940 Census of Agriculture was the last to separate $L from $B, overall. In 1940 the building share of real estate value ($B/[$L+B], or BSREV) was .69 in the lowest acreage bracket, .31 for all farms, and .12 for farms of 1,000 acres and over. (36)

(36) 1940 Census of Agriculture, Vol. 3:80. An earlier insightful article on the subject is D. Weeks, "Factors Affecting Selling Prices of Land in the 11th Federal Farm Loan District," Hilgardia 3, no. 17 (1929):459-542.

AELOS (1988) gives no comparable comprehensive data, but it does give two series that test the point and have the advantage of disaggregation. One is for "owner-operators" and one for "landlords with debt." For the owner-operators, ranked by acres per farm, BSREV was .63 for farms under 10 acres; .29 for all farms; and .12 for farms of 2,000 acres and over. (37) Building values are much more equally distributed among these farms than land values. ...

CONCLUSION

One may at least firmly conclude that large farm units are less improved and less peopled than small and medium-sized farms. There are two possible interpretations. One is that big farms are more efficient, getting more from less, but that is refuted by their getting less output per $L. The other is that Veblen was right, many of them are oversized stores of value, held first to park slack money and only secondly to produce food and fiber, and complement the owner's workmanship. The Florida 9 [the high LSREV states] may represent a home grown rural "third world" of large, underutilized landholdings that preempt the best land and force median farmers onto small farms on low-grade land.

The issue cannot be settled in a few words, but the implications for tax policy are the same either way. If large units are more efficient, they can bear heavier taxes. If they are less efficient, heavier PTRs will induce them to release surplus land for others, which will tend at the margins to equalize factor proportions, moving more states from the Florida toward the Wisconsin model. Read the whole article

Sounding the Revenue Potential of Land: Fifteen Lost Elements

The revenue potential of land is greater than anyone thinks. This is a progress report on a study that finds, bares, and to some extent measures elements of enhanced revenue potential by using truer and more comprehensive measures of rent and land values. It should go without saying, but often does not, that the purpose of raising more land revenues is not to fatten vexatious bureaucrats. It is

• to replace vexatious taxes,
• to provide and maintain and operate needed public infrastructure and services (including a reasonable national defense),
• to pay off old public debts and avoid new ones, and
• to fund social dividends (including existing social dividends like Social Security and public schools).

• Pro-reds say it’s traditional good Americanism, character, old time religion, morality, family values, horse-sense, freedom from liberal education, and patriotism. 
  
• Pro-blues say it’s primitivism, gullibility, cultural backwardness, and superstition masquerading as religion.
  
• Marx, similarly frustrated in his day, explained it away by dismissing people like the red state voters as Lumpenproletariat - dummkopfs.

  The question I am assigned is whether the taxable capacity of land without buildings is up to the job of financing cities, counties, and schools. Will the revenue be enough? The answer is "yes."

 The universal state and local revenue problem today is whether we must cap tax rates to avoid driving business away. It is exemplified by Governor Pete Wilson of the suffering State of California. He keeps repeating we must make a hard choice: cut taxes and public services, or drive out business and jobs. (When a public figure gives you two choices you know they're both bad, and he wants one of them.)

 The unique, remarkable quality of a property tax based on land ex buildings is that you may raise the rate with no fear of driving away business, construction, people, jobs, or capital! You certainly will not drive away the land. However high the tax rate, not one square foot of it will put on a track shoe and hop out of town. The only bad thing to say about this tax's incentive effects is that it stimulates revitalization, and makes jobs. If some people think that is bad, maybe this attitude is the problem. ...

 Most California land, on the other hand, is now taxed at well below the allowable max of 1%. Speculators may sit on it at little tax cost, however many highways and water and sewer lines run to and past it, however many policemen are guarding it from trespass. Little wonder that California enterprise, once so dynamic, flexible, and vital, is giving way to stasis and decay. We used to lead the nation in making jobs; now in losing them. We used to lead in school quality; now in jail population.

 The taxable capacity of land is camouflaged in our times by a consistent modern tendency to underassess it, relative to buildings. There are several studies in point. The most general one is the quinquennial Report of the U.S. Census of Governments. It actually understates the tendency a lot, by omitting the class of land most underassessed, that is, raw acreage in and near cities.

How does one come to so startling a finding? Wisconsin is not a backward state. It prides itself on the high quality of its public administration. What I did was study sites on the eve of demolition. When you buy an old junker to tear down and replace with a new building, you (the market) are obviously recognizing that the building has no residual value. All the value is then in the land. However, in Milwaukee in 1969 the Assessor was saying the building was worth about three times as much as the land, just before tear-down. That is a good way to measure to what extent land is underassessed.

 Try that in Manhattan. When the visitor first gapes at its skyline from afar, it looks like one big modern high-rise. If you poke around on foot much, though, you soon realize those are the exception. Most of the lots are covered with obsolete junk, some of it tumbledown, commanding rents mainly for their location value.

 Check the Empire State Building. Old as it is, it is still nearly the tallest building in the world. As to its site, it is in a so-so reach of 5th Avenue (34th Street), many blocks from the 100% location (57th Street, I would guess). Even so, when the site and the building sold in separate transactions a few years ago, the site represented 1/3 of the total value. What does that say about the land fraction on neighboring parcels, covered only with the remains of ordinary old structures? What does that say about the land fraction nearer the 100% location? ... 

 Cities and districts around Vancouver and Victoria are ranked, in Table 1, according to the land value per property (single-family residences). These range from nearly $700,000 each in the "University Endowment Lands" district (very posh), to around $40,000 each in the "Victoria Rural" district (more modest). The last column, LSREV (Land Share of Real Estate Value), shows the land value (L) as a share of the total value (B+L).

These shares range from a high of 80% on the University Endowment Lands (UEL) down to 38% in Colwood (the lowest), and 39% in Victoria Rural (next to lowest). In between, the numbers follow the trend closely. The dearer the land parcels, the higher is the "land fraction" (the fraction of total real estate value that is land value). From such data, one might formulate a rule along the lines that "the lot value increases with the square of the house value." It is hard to be so precise, and not necessary. The relevant rule we need here is just that people's house values are more alike than their lot values. It is lot value, more than house value, that divides the rich from the poor.

 The average house (ex land) in the posh UEL jurisdiction is worth 2.8 times the average in the Victoria Rural jurisdiction ($173.1/$61.9). The average land parcel (ex building) in the UEL is worth 17.5 times the average in the Victoria Rural jurisdiction ($692.5/$39.6).

 Now do us both a favor, please. Pause and savor that comparison. Let it linger, as though you were testing a slow sip of wine from Fredonia's famous grapes. Roll it on your tongue, mull sensually over its aroma and bouquet, and, getting back to business, mull cerebrally over its full import. The house that shelters the very rich family is worth 2.8 times the house of the modest family; but the land under the house of the very rich is worth 17.5 times the land of the modest. Seventeen and one half times as much! Again, it is lot value, more than building value, that divides the rich from the poor. Seldom will you find an economic rule more strongly supported by data. It's just a matter of presenting the data so as to test and bring out the rule.

An American counterpart of Vancouver's "University Endowment Lands" is Beverly Hills, California, where land value composes some 80% of residential values, and the mean parcel is worth something like a million dollars. Beverly Hills, with its great wealth and mansions, is known as "Tear-down City." Every year many a grand old palace that once sheltered some renowned matinee idol, and rang to scandalous parties, is torn down to salvage its site for the next, grander one. In a land boom, such as crested in 1989, half the city goes to the brink of demolition and replacement.

 What do those data tell us? The rich as a rule do not live next to the poor. Rather, they cluster in neighborhoods with much higher lot values. The poor seek shelter first, and go where it is affordable. The rich put a high premium on location, neighborhood, views, and grounds, resulting in higher land fractions in their real estate. Mansions are visible evidences of wealth, impressing viewers powerfully; land values are invisible. The perceptual bias is to underrate the invisible, if you are not regularly in the real estate market. In the numbers, however, land and buildings are equally visible, and their message is clear. It is land value more than house value that divides the rich from the poor. Ergo, a tax shift from buildings to land is a shift from the poor to the rich, even though the houses of the rich are exempted. It makes the property tax more progressive. ...

 Making the property tax more progressive is not just equitable, it raises its revenue capacity. That is because visible damage to the poor and marginal puts a cap on any tax. You can't squeeze blood out of a turnip, and if you try you'll look like the Sheriff of Nottingham. A land tax won't drive the poor from their humble huts, because it exempts the huts, and the sites have low tax valuations. It may tax a few off valuable land, if their poor huts are there and they own the land. However, if they own such land, are they really poor?

 They may be "land-poor:" a few folks always are. They have non-cash assets, but are illiquid. "Illiquid" may be just a euphemism for "holding out for more" -- there is always a market at a price. Even so their plight, genuine or affected, traditionally evokes sympathy and support. We must address it.

 California, although backward in many ways, has addressed it effectively. In our special improvement districts (SIDs), State law allows the SID to contract with the landowner as follows. You don't have to pay your annual charge in cash. If you choose not to, we take an equity in your property, charging a modest rate of interest. Our equity accumulates over time. When you die, we sell the property and take our share; your estate gets the rest. Should our equity reach 100% during your lifetime, you stay there for the duration, tax free.

 Objectively, it looks like a good deal for the taxpayer. They can't come out behind, even if they die soon; if they live long, they come out ahead. The instructive result is that very few people take this apparently advantageous option. UCLA's Donald Shoup has published several works on the program. One way or another, they manage to pay on time. Perhaps it attracts the attention of potential heirs, in a compelling way, but somehow the cash comes forth. While intending only to relieve distress, the program seems to have called a great bluff. The lachrymose plea of the cash-poor widow is unanswerable in debate, without appearing callous, doctrinaire, and jackbooted. Meantime wealthy interests, thoroughly undistressed, hide behind the widow's skirt and get their way. ... 

Those getting the cold shower, meantime, may resist it. In California, the land of extremes, we got Howard Jarvis and Prop. 13. This Constitutional Amendment capped the property tax rate at 1%, and virtually froze assessed values until land sold. Then the boom really went wild. I myself, after campaigning hard against Jarvis, unexpectedly made $200,000 in a few months after it passed. Buyers were chasing me around the block, just to buy a scrap of land I happened to have in the right place at the right time. It was blind luck, but the money was as good as though I had earned it honestly: better, in fact, because 60% of the gain was not even reportable as taxable income. It was a once-in-a-lifetime experience, but buyers and sellers came to regard it as normal, and only fair. They saw regular annual increments as a divine right of property. For a few mad years, they were.

 It was the lack of a tax stabilizer that took the cap off land prices. When my lot rose to $240,000, it was still assessed at $10,000, and capped there by constitutional law! Taxes were 1% of $10,000 - that's right, $100/year, 1/24 of 1% of the market value. Was I in a strong bargaining position? You bet, and I loved it, just as you might. Now we are paying the price, or beginning to, as our public services collapse and our criminals outgun our police. This year they are cutting faculty salaries (that's me) 5%, and raising college tuition (that's my three children) 100%. I'll pay all right. All tax rates other than property are headed north; land prices south. Our once-vibrant economy is dying; our unemployment rate leads the nation. Our largest city was torched last year by the frustrated unemployed. Our once-leading schools trail the nation; our murder rate leads it. Those are the economic consequences of Howard Jarvis. Like Tokyo and London and Faust, we signed with Mephistopheles. He showed us a grand time, but now his bill is due. To paraphrase Kipling, "Be warned of our lot, which I dread you may not, and learn about Jarvis from me."

 Another attractive feature of land taxation is its interesting positive effect on the economic base of a city. It strengthens it by its tendency to hit absentee owners harder than resident owners. The land fraction in real estate is generally highest in the CBD of any city, so that is a favorite place for absentees to buy and hold. They like the steady income, and the "trophy" quality. The surplus in real estate is what attracts outside buyers, and land is what yields the surplus. About 2/3 of downtown Los Angeles is owned by non-resident aliens, for example. In a more workaday city, Milwaukee, the absentee owners consist of former residents, or their heirs, who grew too rich to abide the harsh winters.  ...

 When you observe cities much, the positive neighborhood effects of replacing old buildings with new are irresistible and contagious, raising land prices all around. The converse is also true: the negative neighborhood effects of letting old junkers stand without replacement are depressive. Thus, when you take the tax off new buildings, and put it on the land under old tumbledowns, you kick off a general process of revitalization that turns gloom into hope into optimism: optimism that boosts land prices and the land tax base.

 There are three kinds of slums.

 That's the bad news. How do you turn it around? When you drop buildings from the property tax base, you change the arithmetic of incentives, as we have discussed. Parachuting into the middle of a slum is still hopeless, as before. Change will come first to the fringes of the Type II slum, where it merges into healthy neighborhoods. New development likes to anchor onto healthy neighborhoods. Richard Hurd, father of urban studies in America, taught us in 1902 that land values are marked by continuity in space. It's still so. Fashions and technology change, but principles last. Hope survives at the edge of the slum; land there retains some renewal value. There is where you'll first see change, because there is where the forces are evenly balanced. Tip the forces for renewal, and there is where it begins.

 Once it begins, it proceeds incrementally through the Type II slum. When it's through, your oldest neighborhood has become your newest, the cutting edge of progress, the showplace of the town. That is how it has got to work; that is how it will work when you exempt buildings and tax only land. When it is through, you have a high tax base where now you have nothing but fire and police calls.

Not only can you have both common land and free markets, you can't have one without the other. They go together, like love and marriage. You need market prices to help identify land's taxable surplus, which is the net product of land after deducting the human costs of using it. At the same time, you must support government from land revenues to have a truly free market, because otherwise you will raise taxes from production, trade, and capital formation, interfering with free markets. If you learn this second point, and act on it, you will have a much freer market than any of the OECD nations that now presume to instruct you, and that are campaigning vigorously to make all nations in the world "harmonize" their taxes to conform with their own abysmal systems.

California homeowners are wallowing in unearned increments beyond the dreams of avarice, while its governments are courting bankruptcy. Warren Buffett dared point this out, and overnight changed from the Oracle of Omaha into the Numbskull of Nebraska because he does not understand the "reality of California politics," the oxymoron du jour.

Most candidates for Governor fled like startled deer. Buffett's sponsor, well-tailored Mr. Muscles, recalled meeting a tearful widow who said she would have been taxed out of her home were it not for Prop 13. Poor thing, her home had risen in value. No one asked her name, or whether she knew what she was talking about, or had her claims audited - being a tearful widow "on a fixed income" insulates one from reality checks. The press chimed in with pix of poster oldsters, gazing from their multi-million dollar perches over the blue Pacific, fretting about Buffett's solecism and its possible effect on them, never mind anyone else.

• No one has said a word about a severance tax on oil and gas, although California is the only major producing state without one. 
• No one has crusaded for a severance tax on water withdrawals, although it would solve both our revenue and water crises in one stroke.
• No one has said word one about taxing the taboo lands used for golfing, timber, or farming. ... Read the whole article
  

Who Owns Southern California?