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Gini and Lorenz
Mason Gaffney: Full Employment, Growth And Progress On A Small Planet: Relieving Poverty While Healing The Earth
Georgists have focused on urban land, stressing
its stupendous value p.s.f., and also its high value per
capita. Some have favored ignoring rural areas
completely, to placate the rural vote, and the putative
empathy of urban Americans with their rural roots, and
the supposed rural preservation of old cultural values.
If those notions ever had merit, they do not today.
George himself did not think they had merit in his day,
either: his first book, Our Land and Land
Policy (1871) went into great detail about the
villainies (his word) involved in monopolizing rural land
from the public domain. He demolished economist Francis
A. Walker while exposing how Walker’s direction of
the U.S. Census concealed the concentrated ownership of
rural land – an early example of “How to Lie
with Statistics.” In the process,
George invented what today is called the Lorenz Curve,
and influenced the U.S. Census to begin arranging data in
a template geared to that curve, and to report on land
separate from buildings (which it did until
1940).Read the whole
article
Mason Gaffney: The Property Tax is a Progressive Tax Mason Gaffney: The Relationship Between Property Taxation and the Concentration of Farm Land Ownership
Real wage rates, meanwhile since
1955, have not risen as fast as real land prices, and
they haven't risen at all since 1975. This has
raised the labor-price of land (the number of days/years
a person must work at the average wage rate in order to
raise the price of a farm.) Coupling this with
rising acres per farm, the labor-price
of a farm roughly tripled, from about 6 years' wages
(before payroll deductions) in 1954 to about 17 years'
wages in 1987. That, of course, doesn't mean you
could buy a farm in 17 years, unless you didn't eat
anything and saved every penny of your wages to buy a
farm.
That is the mean size. At the same time, concentration of ownership was rising. That was the subject Henry George and Francis Walker debated way back in the 1880s. In the process Henry George invented something, later to be known as the "Lorenz Curve" - academicians are not generous about crediting Henry George with his various contributions to the discipline of political economy. Basically this Lorenz Curve is a way of measuring concentration by answering the question, what fraction of all the land is owned by the top ten percent. The curve extends from zero up to 100 percent. This curve has been reduced to a single figure, called the Gini Ratio, which is a measure of concentration which varies between zero and one. At zero, everyone has the same amount; at one, one person has it all. In 1900 the Census Bureau began publishing farm data ranked by acres per farm. Using those data, the Gini Ratio was .58 in 1900. By 1930 the GR had gotten up only to .63. This, remember, was the peak year of property taxes, before the property tax started waning. The GR began to rise faster, and by 1950 it was up to .70. It plateaued there for 15 years and then rose again to .76 by 1987. That is a high degree of concentration. (By comparison, GRs for personal income are much lower, about .40, and are much more stable over decades.) The accelerated rise since 1930 coincided with the rise of mean acres per farm, and both followed the fall of property tax rates. The Gini Ratio has been criticized because it deals only with the concentration among existing farms, and doesn't take into account all of the former farmers who left the business. To adjust for this, we can simply add them to the distribution of the farms as farmers with zero land. There are 4-1/2 million farms that died between 1935 and 1988. If you add in the farmers with zero acres of land to the lowest bracket, that raises GR for 1988 from .76 to .92, a radical rise of inequality since 1930 (.63). But calculating the ratio this way gives you a better sense of how concentration has shot up during and since the Great Depression. In the Great Depression (1930-1941), six million farms provided a refuge for the urban jobless and homeless. Today, that refuge is closed.
Land in farms of 1,000 acres and over actually
dropped (nationally) by 15 percent from 1900 to 1910, the
only drop on record. Now, however, 34 percent of all
irrigated land is in the top bracket, farms of 2,000
acres and over. Control of irrigated land means control
over water. Control of water gives control over arid
lands roundabout. Ownership and control based on water
have become highly concentrated. For
farms with irrigated land, the Gini Ratio is .82,
substantially higher than the GR of .76 for all
farms. Mason Gaffney: Rising Inequality and
Falling Property Tax RatesFrom 1930-87, the fraction of all farm acres in units of 1,000 acres and over rose from 28% of the total to 62% of the total. That is a rise of 123% over the 1930 base. That rise in degree of concentration is impressive, all by itself. At the same time, however, the mean value per acre in the largest spreads was rising much faster than that of other farms. In result, the value of the real estate (land and buildings) in these giant spreads rose from 8% of the total in 1930 to 38% of the total in 1987. That is a rise of 375% over the 1930 base. The second thing that makes the trivialization humbug is a statistical principle called "regression fallacy." Many people, otherwise bright, are thicker than mud when it comes to picking up on this principle, so there must be some mental block built into the culture. Once you see this "cat," however, it's pretty simple and straightforward. It says that the degree of concentration you find in any distribution depends on what you choose as the ranking variable. If you want to compare the concentration of value with the concentration of acreage, you can't rank the farms by acreage and then take the top bracket and ask what the value is. You have got to re-rank them by value, and these are entirely different rankings with an entirely different collection of farms in the top bracket, and naturally these are more valuable farms. This reranking, farm by farm, is almost impossible to do from published census data, which come in large groups. But I managed to do it with some other series, and I can vouch for the fact that if you do rewrite the data by value, you get a higher - not a lower - degree of concentration in terms of value than in terms of acreage. So, for those two reasons, concentration of land ownership is not only high but it has risen at a very rapid rate. Read the whole article
Vanishing Farmers and Unaffordable Farms
The Vanishing Middle Class; Gini Ratio The Rise of Land Quality in Vast Farms Rising Land Share and Rising Ratio of Price to Cash Flow THE LESSER IMPROVEMENT OF BIGGER FARMS National Data Concentration of irrigated land Land Concentration for Farms Ranked by Sales Lack of buildings on latifundia Lack of family labor on latifundia Comparisons Among States Lesser Improvement of Land in States with Larger Farms Urban Influence Association of Property Taxation and Land Improvement CONCLUSION 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.
A priori, a tax on buildings works to
suppress building and to penalize smaller farmers, whose
building to land ratio is higher than that of bigger
farmers. The findings seem to show, therefore, a stronger
countereffect, proincentive and pro-subdivision, of the
other part of the property tax, the part based on land
value.
... Now, however, 34 percent of all irrigated land is in the top bracket, farms of 2,000 acres and over. (10) Control of irrigated land means control over water. Control of water gives control over arid lands roundabout. Ownership and control based on water have become highly concentrated. For farms with irrigated land, GR = .82, (11) substantially higher than the GR of .76 for all farms. ... To sum up,
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.
It is awkward that the 1987 Census of Agriculture
defines "farm size," and ranks farms, only by acres
rather than value. ...
Concentration of irrigated land 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. ...
Comparing different crops, high
values of GR go with crops that are mostly irrigated.
For example, 85 percent of tomato acres and 14 percent of
silage corn are irrigated. For tomatoes, GR = .91; for
silage corn, GR = .52. (26)
(26) Those who find GR index numbers
too abstract will find more meaning in these raw data.
For tomatoes, the top acreage bracket contains 1.1
percent of the farms, 45 percent of the harvested
acres, and 52 percent of the irrigated acres in
tomatoes. For silage corn, the top bracket contains 1.0
percent of the farms, 11.3 percent of the harvested
acres, and 26 percent of the irrigated acres in silage
corn. ...
Lack of buildings on latifundia 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. ...
The inverse relationship between PTR
and GR is particularly consistent and noteworthy.
...
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 |
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