The Ownership Solution
[Excerpts from a moderated discussion of the
proposals by Jeff Gates in the book The Ownership Solution, May 1999,
participated in by SCI Director, Edward J. Dodson]
STEVE KURTZ / 7 May 1999
I am pleased to open these discussions on behalf of Communications
for a Sustainable Future and The Canadian Association for the Club of
Rome. We thank author Jeffrey Gates for agreeing to participate, and
also thank the volunteer moderators and the staff of CSF for
facilitating these proceedings.
AL ANDERSEN / 7 May 1999
Clearly, our common-heritage wealth (like land, its natural
resources, air, water, the ecosystem, cyberspace, and intellectual
property) is the foundation of all other wealth; nothing can be done
without it. Thus, those elite few who have "ownership" of it
have always controlled the entire economy.
HANNO BECK / 7 May 1999
Jay Hanson suggests that
The Ownership Solution does not challenge our problems at a
sufficiently fundamental level. I think that's a fair criticism,
although it's also true that one must start somewhere. Plenty of us
are kept quite busy just beginning to remove some of the artificial
distortions of modern-day capitalism.
Al Andersen wisely points out a vital distinction in "ownership"
-- ownership of what you produce is a natural right, but "ownership"
of natural resources (including air, airwaves, etc.) is a special
privilege that excludes others. No one produced natural resources, and
no one has a better claim to them than anyone else.
Recognizing this vital distinction can add much power to Gates'
analysis. Anything that is a special privilege should either be
removed or spread out so that all people participate in it.
JEFF GATES / 9 May 1999
As you'll find from reading
The Ownership Solution, this is a multiple goals/multiple
problems issue. It seemed to me that ownership patterns are themselves
a "property" of the system (much like wet is a property of
water) -- a meta-property of sorts. And that with a component of
ownership that is peoplized, human-sized and local-ized, free
enterprise will become more community-wise. It's very much a systems
idiom for accessing a subject that has long been mired in ideology --
suggesting that by designing ownership into such patterns multiple
systems will be better able to learn -- and will become more
sustainable. The five (overlapping) domains I identify are fiscal,
social, cultural, political and environmental. I found that
sustainability provided a handy access point to the subject-matter.
Stu Kauffman (at Santa Fe Institute) "got" this immediately,
seeing that it was about a system for "distributed control"
-- which is the moral foundation of both markets and democracies.
So, yes, it multiple goals, multiple problems -- all of which are
perpetually emergent, coevolving, interdependent, interpenetrating and
"nested" inside one another like so many chinese boxes or
russian dolls. Like so many pebbles polishing each other as they are
pushed along downstream, each of these domains is in constant flux -
as both markets and democracies are supposed to be. The challenge lies
in evoking more collective foresight. As least that's my take on it.
EDWARD DODSON / 11 May 1999
Ed Dodson responding to Barry Randall...
Page 29. LBOs are feasible only because of the self-financing logic
of the closed system of finance ("productive assets can pay for
There is another reason why LBOs were/are feasible. Many corporations
own land (undeveloped but buildable or natural resource-laden) carried
on the books at cost. These assets are not marked-to-market, even
though market values have climbed over time. Thus, the break-up value
of a company might be considerably greater than the book value of the
To date, most Americans have been left with access to the wrong sort
of credit --- that is to say, consumer credit. Whereas "investment
credit" ----- of the LBO sort --- can make you self sufficient,
even rich, consumer credit erodes your income to the extent of future
Agreed, with the notable exception of long-term, fixed rate mortgage
debt, which is repaid with dollars that have less purchasing power
than those borrowed. In the U.S. the last two periods of extensive
refinancing activity increased the disposal incomes of millions of
households by hundreds of dollars per month.
Page 207 In his search for the common factors that led to the failure
of twenty-one past civilizations, historian Arnold Toynbee identified
two: concentrated ownership and inflexibility in light of changing
Gibbon and Ferdinand Lott added the observation that in both Greece
and Rome small freeholders who shifted production to cash crops (olive
oil and grapes) and mortgaged their lands to do so, eventually all
lost their lands to creditor landlords and ended up as either serfs or
slaves. Does this not sound somewhat familiar to the family farmer
around the world today?
JEFF GATES / 11 May 1999
Responding to Keith Wilde.
I am very interested in the tack you are taking here, but I am not
sure What Jeff means when he says that "economic science has not
as yet devised a paradigm for thinking about ownership patterning",
and I have entered quite a different perspective on his call for some
modeling of ownership patterns.
One might hope that economic science would have some way of
evaluating the impact of ownership patterning on, for example, the
need for entitlements. It doesn't. Ownership somehow got relegated to
notions of corporate control and the notion of residual rights. Beyond
those two quite limited issues, I find that the science has largely
left this issue to the side. Perhaps I'm being too severe in my
criticism. If so, kindly point me to some literature where ownership
patterning is used in economic analysis. It seems the issue is largely
relegated to domains of political and social science.
I work in a micro-simulation shop.) I hope you will be willing to put
in a little more work on your contribution, for I would like to see
you draw out the distinction between the George way of distributing
the rights to the product of valuable property and the Kelso-Adler way
of individual shares rather than tax payments to the collective. Could
you also pay a bit of attention at the outset to the possible
ambiguity in "a paradigm for thinking about ownership patterning"?
Gates response in a general and overly broad fashion -- Georgists say
land is a common heritage and only its use can be divisibly owned.
Because the Kelso/Adler approach comes at this from a corporate
perspective, I suppose they might say that land is often mixed in with
other corporate assets and thus, while the corporation is indivisible,
its ownership is infinitely divisible. I think they would tend to view
it as another productive assets lacking the special attributes
attributed to it by the Georgists.
Re a paradigm for thinking about ownership patterning. My hope in The
Ownership Solution was to provide a lense through which to see the
world in a different way. Oftentimes, the world of economics is viewed
through a lense of employment patterning or income patterning. I
thought it might prove useful to think about how the world might be
different if ownership was inclusive rather than exclusive - and the
potential impact on fiscal sustainability, civil cohesion,
environmental sustainability, etc.
ED DODSON / 11 May 1999
Very quickly, I would ask you to think in terms of market equilibrium
theory. Neo-classical economics (what is taught today in the
universities) states that price clears markets. Well, that is true for
labor (which must produce in order to survive) and for capital goods
(which begin to lose utility value as well as exchange value almost
from the moment such goods are produced). Thus, the supply curves rise
with increases in price. For nature the theoretical supply curve is
vertical (i.e., the supply is (nearly) inelastic. Under existing law
that allows collected and imputed rent to be capitalized into a
selling price for locations and natural resource lands, the supply
curve actually leans to the left, indicating a tendency for owners of
land to hoard or speculate as prices rise. There is -- generally
speaking -- no economic penalty for doing so because -- generally --
the annual carrying cost of holding land out of use is low and land
does not -- generally -- depreciate in utility value.
The concentrated control over locations by wealthy individuals, by
governments and by corporations also means that when the market price
for locations fall the owners are able to simply withdraw from the
market until the inflationary spiral returns (after a prolonged period
of disruption, bank failures, bankruptcies, and massive government
borrowing and spending).
Conservatives and libertarians have a very difficult time abandoning
the idea that private ownership of nature by some is at the expense of
the rest of humanity. And yet, the most important basis for arguing
the case for sustainability is that of the moral principle that the
earth is the birthright of all persons equally. If this is a human
right, then the logical question is how to make sure this right is
upheld and enforced. The earth cannot be divided into equal parcels
(or parcels of equal potential productivity) and distributed. Leasing
portions of the earth to the highest bidders (subject to common sense
restrictions on how the lessee might exploit the leased portion) is
the only way to achieve an equitable distribution. Every location has
advantages and disadvantages that will be reflected in how much a user
will bid; and, having to pay a market rent, no one will bid for access
without a plan and the capacity to produce. Thus, distribution of
access if awarded in the most efficient manner we have available to us
-- the market. Who will collect the ground rents (local communities or
larger governmental jurisdictions) is an issue that various writers
have strong opinions on (I favor upward revenue sharing; the ground
rents collected locally, with appropriate distributions to state and
national governments based on services provided). Participatory
government (i.e., the maximizing of democratic decision-making) will
tend to result in the right division between public and private
services, with the opportunity for citizens to change their minds
based on experience and results. If the rent fund has not been fully
spent, then I take the libertarian view that it should be distributed
pro rata to each citizen.
Let me know if the above comments are on the order of what you were
JEFF GATES / 11 May 1999
Thanks for the response. I'm not certain higher-bidder/most efficient
analysis works for the common heritage. I'm thinking of Pacific Lumber
as a case on point (mentioned in the book) where a LBO resulted in
stepping up the cutting rate of old-growth forests in order to pay
down LBO debt. Very market-oriented bidding combined with financially
efficient means to repay debt. Effectiveness is in considerable doubt
(though the LBO artisan did finally negotiate a cutting contract along
with some land swaps).
Sustainability-wise, I'd opt for some element of ownership by people
who live near/in/over the assets being developed. For example, how
would logging look if part of your pension were based on the
sustainability of that logging (i.e., revenues from the operation that
would not be realized for 30 years). I keep thinking there must be
some way to owner-engineer our way to some mix of ownership patterns
that and risk-reward sharing that better advances our collective
foresight. Certainly today's detached, abstract and disconnected
capitalism is proving itself deficient on that score.
When we're talking about trans-generational obligations, we've got to
find some way to inject those obligations into current economic
decision-making. It may be time to recognize that finance-based
economics is just too far off base to be very helpful. I wonder if
it's time to ask for input from the courts (though I hesitate to think
the results would be great given the way they were staffed over the
past two decades). Nevertheless, I take considerable encouragement
from a recent court decision that I discuss in my next book -- let me
post a (rough draft) excerpt from that in the hope that it might
broaden our discussion and encourage us to think about how we inject a
trans-generational ownership obligation into the mix.
The right to a balanced and healthful environment is clearly within
the protective scope of the Constitution. Indeed, it seems reasonable
to expect that the Executive Branch of the government might well be
forced by a concerned citizen to bring such a suit. Just such a suit
was filed in the Philippines where their Supreme Court granted
standing to 42 children who brought an action to ensure "the
judicious disposition, utilization, management, renewal and
conservation of the country's forests, mineral, land, waters,
fisheries, wildlife, off-shore areas and other natural resources to
the end that their exploration, development and utilization be
equitably accessible to the present as well as future generations."
In approving the suit for further disposition, the Philippine court
took a courageous yet commonsense stance in holding that "the
right to balanced and healthful ecology" need not be found in the
law because "it concerns nothing less than self-preservation and
self-perpetuation." Further, the court noted that the advancement
of environmental sustainability "may even be said to predate all
governments and constitutions. As a matter of fact, these basic rights
need not even be written in the Constitution for they are assumed to
exist from the inception of humankind."
The legal issue is one of the right to have an earth capable of
sustaining life. That's about as fundamental a posterity issue as can
be imagined. The United States has three branches of government for a
reason. One very practical reason is that sometimes it proves
difficult for elected officials to break the chains of present-day
politics in order to address the needs of those too young to vote. It
seems to me essential that such a suit be filed in order that we might
as a nation establish a precedent in law that recognizes the
interconnectedness of the present and the future in legal terms.
It is crucial that we find some way to protect the rights of
children, particularly as the number of children in America is
expected to exceed 90 million in 2050, versus just 70 million today.
More than 90 percent of this increase will come as the result of
immigration (mostly Hispanic and Asian). At the same time, however,
the number of families with minor children will continue to shrink,
suggesting the need to ensure in political decision-making the
principle of shared responsibility for all children in society. As
with markets more generally, the appeal to self interest will no
longer suffice to support policies that honor the interests of
Protecting Environmental Properties
Markets have a place in democratic capitalism. Yet they also need to
be kept in their place. Living as we do in a country that now has a
cancer rate 20 (?) times that of other developed countries, it's clear
that market signals alone have proven inadequate to guide our course.
The quandary we face is multi-faceted and not easily addressed. One
way to think about it was capsulized for me in an article titled
simply: "Who Will Pay the Pollinators?" What happens if
nature's pollinators don't show up for work? Do we pay them more? Do
we appeal to the National Labor Relations Board? Or what?
There's certain assumptions that markets make about the future that
are proving to be wholly false, particularly those about the
environment. We now know, for example, that we are cutting two percent
of the world's standing rain forests each year. That works out to
eighty-thousand square miles a year. That's an acre each second. And
even where forest is not clear-cut, it is often fragmented into small
"islands" that are ecologically fragmented because they are
separated from the whole. For example, the ruby-throated hummingbird
previously migrated to the United States each year, stopping along the
way in different rain forest habitats to rest and feed. With many of
those habitats now destroyed or left in separate, more distant
fragments, they are now too far apart for the birds to successfully
navigate the migration. As a consequence, many now perish enroute.
Such is the fate of that particular labor force of pollinators.
EDWARD DODSON / 11 May 1999
Ed Dodson responding to Jeff Gates...
It was much more Kelso than Adler who insisted on linking the ESOP
notion to what Kelso called "two-factor theory" -- the
notion that human capital is an input deserving renumeration as is
physical or other non-human capital. Kelso felt that non-human
capital, in a fully functioning market system, would provide a
complimentary source of income (a "second income"). Note
that federal tax law provides ESOP-sponsoring employers a tax
deduction for dividends paid on ESOP shares provided those dividends
are either paid out to employees (as taxable income) or used to repay
an ESOP loan (the "self-financing" notion that underlies the
ESOP concept). Perhaps someone on this list might post their appraisal
of two-factor theory?
By accepting the idea that land is acceptably defined as one type of
capital good, Kelso played into the hands of the very economists who
spent a good deal of their careers using the two-factor model of
economies to defend the status quo and the idea that resources are
scarce. I have long been surprised that Mortimer Adler did not
recognize this inconsistency when the two combined energy to write on
Rather than end the private appropriation of land rent, what the
Kelso/Adler proposal does is broaden the private distribution of rent
-- as well as the legitimate returns to the investment in capital
Nature is not produced by labor nor by the application of the capital
goods produced by labor. Nature has, then, a zero cost of production
in terms of labor and capital.
In another posting I elaborated on the why the price mechanism so
cherished by neo-classical economists does not work with regard to
nature (i.e., locations suitable for building on, agricultural lands,
natural resource-laden lands and the broadcast frequencies).
Take the housing market for example. It is composed of numerous
markets functioning simultaneously. New construction (if built on
speculation) is like inventory; the longer it sits unsold there is a
measurable loss in utility and newly-constructed houses will sell for
more -- all things being equal. Interest rates are normally equal.
Labor costs are normally equal. Materials costs and transport costs
are normally equal. Regulatory fees and taxes are equal at the state
or national government level, but very unequal at the local level.
And, then, there is land cost, the greatest variable of them all as a
component to housing prices. And, how does land (the first factor --
the source of production but not itself production -- under the
classical model of economies) warrant this separate treatment? The
tendency is that any reduction in the labor, materials, tax and other
costs associated with housing will be capitalized into high land
prices. I have working in the housing sector for 25 years; this is how
the land market works. A two-factor model does not capture these
JEFF GATES / 11 May 1999
However, like the societies discussed by Nancy Glock-Grueneich,
Aboriginal relationships were much more complex and intimate than
Responding to Ed Dodson:
The political/economic/social structure to put these ideas into
practice is what I call a Community Land Bank (CLB) described in
Democratising The Wealth of Nations and expanded in a number of other
articles listed at http://www.peg.apc.org/~shann "" Refer to
the contributions by Bob Swann and self in the TOES book Building
Sustainable Communities which also explains the differences between
CLBs and Community Land Trusts.
Responding to R.J. Morrison:
No matter how small or large the income distribution may be,
distributing ownership would distribute power and control over cash
flows to avoid resource rich communities becoming cash poor and
destroying their natural environment. This in itself would create a
more equitable sustainable society.
It is this concept which provides the basis for my proposal for a
World Community Investment Code in Appendix B of my submission to the
Australian government soon to be posted at:
http://www.aph.gov.au/house/committee/eewr/ESO/subslist.htm There are
many other articles listed on my web page.
Responding to Barry Randall:
His boss, Jimmy Wolfensohn used ownership transfer provisions in
financing the Eraring power station for the New South Wales provincial
government in Australia, following my 1978 report for his client, the
Though I've never yet seen a U-Haul behind a hearse, it is true that
people will try to take it with them -- no matter where or when they
go. Shann Turnbull and I share the opinion that local capital is
simply smarter -- it is better able to hear, to adapt, to go where
needed. Following adoption of the North American Free Trade Agreement,
the Manitoba government authorized the establishment of several
investment funds whereby tax incentives would be provided to save
money, provided the funds were invested in Manitoba. The Crocus Fund
now has US $100 million that it invests largely in venture capital in
smaller firms in Manitoba. While this is hardly "self financing,"
it is a new way to think about what role capital should play. Crocus
intends to use ESOPs as a primary investment exit mechanism.
EDWARD DODSON / 11 May 1999
Ed Dodson responding to Jeff Gates ...
In response to Don Roper, Jeff wrote:
Having served as counsel to the Senate Hydrocarbon Committee for
seven years (AKA Senate Finance Committee), it seemed to me then that
the likelihood of full-price accounting for hydrocarbons was not in
the cards ...
Absolutely correct. Corporations and all businesses engaging in
resource extraction activities on publicly-owned lands use whatever
means they can to pay less than market rents for access to those
lands. Not too long ago I recall reading that there is a large
secondary market in public land leases; the lessee paying the U.S.
government, say $1 an acre per year is able to turn around and
sublease its rights of exploitation to another company at the market
price of, say, $10 an acre. Thus, in such case production is not even
being subsidized in order to moderate prices to consumers; the ground
rent that ought to be used to offset government expenses is being
siphoned off as private profit. Despite countless Congressional
hearings on this and similar subjects, I am not aware of any
meaningful changes in the laws or how they are administered to suggest
the public interest is being served at the expense of entrenched
EDWARD DODSON / 11 May 1999
Ed Dodson responding to Jeff Gates ...
In response to Al Anderson, Jeff wrote: ... money is a social tool. I
suggest that it be used in a way that supports those values to which
we at least pretent to aspire. My hypothesis is that widespread
ownership will do better job of dispersing money (and power).
In all but barter situations today, what is exchanged for goods and
services is not actual money, of course, but either promissory notes
or their electronic representation. And, these promissory notes are
not backed by any specific quantity of goods or services (with the
exception of local currency systems that have arisen in regions where
there is a shortage of government-mandated legal tender).
The world has only briefly had a system of sound money. When in the
16th century the Bank of Amsterdam acted as a bank of deposit for gold
and silver bullion, issuing certificates of deposit that became the
accepted medium of exchange in the global (i.e., European) economy,
trade flourished and production expanded. Unfortunately, the directors
of the Bank eventually discovered the magic of fractional reserve
Governments have cleverly made it possible to do what no individual
or entity is able to do -- to self-create credit by mandating that
promissory notes issued by central banks in exchange for promissory
notes issued by government be accepted for all debts public and
private. A corporation is able to issue bonds, of course,
collateralized by the general (or specific) assets it owns; but, there
is no law that requires anyone to accept the bonds in payment for
A sustainable economy requires an extensive, privately-run system of
banks of deposit that will gradually convert legal tender currencies
into certificates of deposit backed by baskets of goods. With enough
people and businesses and groups belonging to this private network,
government legal tender will eventually be discounted out of use. And,
governments would be forced to secure credit the same way the rest of
us must and to actually raise revenue via taxation or user fees in
order to spend it. Banks of deposit would invoke Gresham's Law in
reverse: good money would chase out bad.
EDWARD DODSON / 12 May 1999
Jeff Gates has repeatedly asked the question (I paraphrase): "What
is the legitimate basis for ownership?"
This is an OUGHT question, answerable only by acceptance of a moral
principle. Mortimer Adler provided us with considerable guidance in
his book "The Common Sense of Politics." Adler develops
further the Lockean concept of property arising out of mixing one's
labor with land. Unfortunately, both Locke and Adler conclude that
this justifies property in land, so long as the land in question is
land that is actively worked by its claimant. The more appropriate
conclusion is, I suggest, that we acquire ownership in what we produce
(whether directly with our labor or with the assistance of capital
goods we produce or acquire by exchange). This position is a "labor
theory of property" that leaves land ownership in that realm
Locke described by the term 'licence'.
Now, in return for societal granting and protection of such
'licences' to monopolize a portion of the earth and exploit the
natural resources available, virtually all of the political economists
and philosophers from Locke on wrestled with the moral considerations
associated with payment to society of ground rent. Locke, as some may
recall, thought such payments were -- while morally appropriate --
were practically speaking not necessary because of the vast untamed
wilderness then called the New World; there was more than enough as
good or better land to be had by all, so long as absentee landlordism
was not permitted to take hold. Smith, Malthus, Ricardo, Quesnay,
Turgot, Mill and Mill, all found way to compromise the moral principle
at stake. Thomas Paine's pamphlet, 'Agrarian Justice', put moral
principles back in the forefront but was largely ignored because Paine
and his heretical ideas had become persona non grata. And so, it was
left up to Henry George in the 1880s to attempt to resurrect the labor
theory of property. He made a good run at it, stirred up some dust and
made a lot of entrenched people very nervous.
Henry George contributed a great deal to this debate that is poorly
appreciated today by most of us, as evidenced by the fact that a
century later we still grapple with the same issues. George realized
that uprisings would rarely, if ever, result in the implementation of
just socio-political arrangements and institutions. He was right. His
action plan was to educate the public -- primarily in places where
they had the vote and could organize politically -- and get them to
vote for changes, chief among the changes being the elimination of
taxes on property and earned income and on commerce (he was a staunch
advocate of free trade, even unilateral free trade). Ground rent
(i.e., the rental value of locations, natural resource lands and what
he called "natural monopolies") is and ought to be treated
as that portion of production owed to society, to all citizens
collectively, because titles or leases to 'land' are licenses granted
by society. To the extent people are willing to give up some of what
the produce to gain control of location or the privileges under any
license that restricts access (e.g., taxi medallions, liquor licenses)
the payment is due to society and not to any individual. This was
George's practical application of public policy consistent with the
Well, there are a fair number of communities around the globe that
are applying this idea to some extent by exempting property
improvements from some or all taxation and collecting some portion of
the annual rental value of locations as a land value tax or as
'rates'. Activists around the globe (perhaps a few thousand in total)
pound away at politicians to enact laws to keep moving in this
Many other activists have decided this approach is not moving along
well and have dedicated themselves to getting hold of as much land as
possible to put into land trusts and out of private hands. This is
another practical approach to solving the problem.
More later... To Jeff and others, I hope this generates some
EDWARD DODSON / 13 May 1999
Ed Dodson responding to Bill Ryan ... Bill wrote: There is nothing
accomplishable through the "securitization" of pollution
rights that cannot be accomplished through a reasonable program of
regulation and taxation. In effect, such "securitization" is
the privatization of taxation and the further erosion of the
sovereignty of government.
Those who advocate the use of market forces to price and sell the
privilege of polluting tend to view this as a transitional measure
until the cost of instituting new technologies falls to the point
where profit margins associated with "clean production" are
equal to or greater than the status quo.
A far easier and more comprehensive solution is available to us, if
we are able to convince policy makers to take advantage of how the
market for land functions. The rental value of any location in the
market is dependent on the cost of doing business at that location.
Thus, a location subjected to little or no regulation would tend to
yield much higher rent than a location where use is highly restricted
(and where the user is prohibited from discharging pollutants into the
atmosphere or water or ground, etc.). If a society is collecting the
full rental value of locations as a revenue source, then the decision
about regulation becomes one of whether to forego rent -- and prevent
pollution -- or collect higher rents and use the revenue to remedy the
pollution. Common sense dictates that in most instances prevention is
the best course of action, although there are some cases where remedy
works best (e.g., the treatment of raw sewage at a central treatment
plant or series of ecologically-beneficial cleansing areas).
The theory of rent is extremely potent and directs us to changes in
public policy that fundamentally attack the status quo and
conventional wisdoms. Perhaps that is why entrenched interests have
dedicated so much energy to channel research funding away from this
area of analysis.
EDWARD DODSON / 13 May 1999
Ed Dodson responding to Jeff Gates...
In response to my post, Jeff wrote: ... difficult to know what to say
about this. I do speak about CLTs (Community Land Trusts) and about
cooperatives (as in Italy) and other means for addressing some of the
ills George identified. Perhaps there's a misconception afoot here.
I'm not advocating a solution. This is not some silver bullet, panacea
approach to political science. The goal was to stimulate the
institutional imagination and to assist readers in seeing their world
anew by viewing it through the prism of participatory ownership
patterns. I don't think there is one ownership solution. There's
doubtless many. Mondragon works in the Basque region of Spain. Would
it work in Berlin or Islamabad? That makes me altogether
insufficiently doctrinaire for some who tout a certain line on this
issue. I long ago found them boring beyond belief. And profoundly,
I certainly agree there is no silver bullet to solving the complexity
of problems and issues that threaten our survival (and that of life on
this planet). I do think there are strategies that positively work in
concert toward fundamental change. I recognize that a very difficult
challenge is to advance a particular set of socio-political principles
without seeming to be an utopian dreamer; and, yet, one of the most
powerful obstacles to change is the defense of cultural relativism in
the guise of moral principles. Thus, we must have debate over
principles if we are to reach consensus over value systems that are
sound at the core and yet sufficiently flexible to accommodate
What is important about discussing the principles of the basis for
ownership is that we then understand and acknowledge what compromises
we are making for practical considerations.
EDWARD DODSON / 13 May 1999
Ed Dodson responding to Paul Dillon ...
Paul, you wrote: When you write "the theory of rent" are
you referring to an integrated theoretical framework, e.g., the
micro-economic theory of the firm. I was under the impression that
rent was one of the more slippery fish in the sea of modern economic
theory and that it hadn't been as successfully developed as other
topics in that discourse.
I am referring to rent theory as developed by the political
economists and which today relates to markets rather than how firm's
maximize allocation of resources to achieve specific output
objectives. For quite a long time, economics textbooks have (because
of the adoption of a two-factor -- labor and capital -- model of
economies) paid little attention to rent as the return to land. Rent
is defined today as a surplus return, period. Thus, people who make
more than the average for their profession are receiving a surplus
above what would be necessary to bring their labor to market. In this
same sense, economists write that investment in capital goods can
The presentation of rent theory reached its high point within the
community of political economists in the writings of Henry George
(that is my view, at any rate). A number of economic theorists have in
recent years gone back to take another look at the three-factor model.
Several have been mentioned in these discussions already (e.g.,
Tideman, Gaffney, etc.). Another economist whose writings deserve
critical re-evaluation is Harry Gunnison Brown (who, in his prime
years, taught at Washington University in Missouri).
EDWARD DODSON / 13 May 1999
Ed Dodson responding to Steve Kurtz...
Steve wrote: Al Andersons gripe is based upon an assumption/belief
that is stated (talked, not walked) by most religions and their
followers. It has to do with notions of ethical value and human
rights. Al uses the terms "Justice" and "fairness"
to represent it; others might use "equality", "righteousness",
etc. From these types of terms, Al and many others evolve a set of
extensive definitions - all taken as 'self-evident truths'. My point
is that these truths are anthropogenic (man-made). I may agree with Al
on sharing what he calls "common-heritage capital", but that
is my value judgment.
Rights have to do with behavior not beliefs. Locke is our primary
source for dividing behavior into the realms of just behavior (i.e.,
liberty) and unjust behavior (i.e., licence). Mortimer Adler adds an
important qualifier to the definition of liberty by stating that "liberty
is freedom constrained by justice." I, for one, would be elated
if any religions even talked in these terms. I continue to hold much
the same opinion of the organized religions as was held by Thomas
Values are not necessarily rooted in cultural relativism, although
many values are held in doctrinaire fashion by people willing to
accept with question the authority of others (the "true believers"
Eric Hoffer wrote of). As I review our history and observe our
behavior, I see a preponderance of evidence that we possess (to
different degrees, admittedly) a moral sense of right and wrong. How
we acquires this moral sense I do not know. What is striking is that
at least some people who experience little or no socialization about
right and wrong -- about values -- still adopt values consistent with
liberty. We have this remarkable capacity to contemplate our behavior,
to look into the future at the probable consequences and then make
judgments -- even moral judgments -- about whether to act. We are a
long way form consensus over what is and is not just behavior, but at
least there is a global dialogue taking place -- over the internet, at
international conferences, at UN forums, among NGOs, suggesting we are
in pursuit of transnational (i.e., universal) values. We still have
wars, but most people agree war is not the way to solve problems
between societies or between groups within societies. We still have
murders and rapes, but most people agree murders and rapes are acts of
criminal license. We still have pollution, the destruction of habitat
and other forms of environmental degradation, but most people agree
this has to stop. These values are being adopted by us as people as we
learn more about the consequences of our behavior and how this
learning nurtures our moral sense of right and wrong.
EDWARD DODSON / 13 May 1999
Ed Dodson responding to Jeff Gates...
Jeff wrote: Gates response: or maybe those entrenched interests can't
figure out how to get from here to there. For example, the imposition
of additional charges -- whether called emission fees or polluter
rents -- raises costs. For firms that cannot move (utility power
plants), that clearly raises their costs that, unable to move, they
will attempt to pass onto their customers. If they can't, what then?
In the case of emission rights, they can trade them, so the incentive
to move is reduced -- and, ideally, the "efficiency" of the
regulation (vis pricing) is enhanced. Plus the emissions track the
polluter and are not wedded to the site (taxes on which are sensitive
to political pressures -- suggesting a competitive "race to the
bottom" amongst neighboring political districts). There also
appears to be an assumption of "rent" paid to a government
entity. In what status? As owner? If not, isn't that a tax? If that
could be done, why hasn't it been done? If as owner, how do you get
from here to there?
Ed Dodson here: (1) In instances where private persons or entitles
have title to locations, the public policy is to collect an annual tax
nearly equal to the annual rental value of the location. Thus, this
translates into, say, a 90% tax on rent.
(2) In instances where public lands are leased to private persons and
entities, the public policy is to lease the locations under an
auction-bidding system to the highest bidder.
In both cases, the cost of regulation will directly influence the
rental value of the location. If we democratically agree that we shall
have a zero tolerance for pollution, the cost of achieving this will
be factored into the amount bid for control of a location. The rental
value will tend to be lower than if the location was not subject to
tight regulatory controls of its use.
As to what this has not been done, the answer is that it is being
done on a limited basis without a full appreciation for the synergy
that develops when owners and holders of locations -- each acting
individually -- begin to bring the land in an entire region to its
highest and best use; that is, the highest and best use the community
permits based on zoning, land use and other regulations.