Attacking the Real Societal Problem

Harry Pollard

[An exchange of views with Dan Sullivan; 2 March 2015]

Solutions are easy. The real difficulty lies in discovering the problem. Albert Einstein

In the modern economic structure land-value and rack-rent are synonymous. The difference, perhaps, is that land-value is a name and rack-rent describes what this value is.

This parallels the description of money as a measure of value and a unit of account. The unit of account is a name for the dollar, whereas a measure of value describes what money does. Modern economists, eager to diminish the importance of the basic function of money, use 'unit of account' rather than 'measure of value'.

In earlier emails, I have stressed that Georgists are likely to use contract rent rather than economic rent in their political discussions. Contract rent is likely to be rack-rent, or the highest amount that can be extracted from the tenant in a monopoly market.

This leads to calculations of total economic rent which are pie-in-the-sky and bear little relation to real economic rent. Further, present attempts to achieve land-value taxation are unlikely to support the Georgist case. Their main function is to keep these ideas beefore the public.

As rack-rent exists by taking the wages of labor, when some of the rack-rent is taken by a land-value tax, it is really taxing wages at secondhand.

First rack-rent takes wages, then the land-value tax takes some of that rack-rent.

Dan Sullivan The Pennsylvania data makes in clear that even small increases in LVT will change the economic behavior of landholders. Without doubt, any change in taxation will affect the behavior of people and the effect of the land-value tax is preferable to the effects of production taxes.

This is perhaps why Milton Friedman said the land-value tax was the “least bad tax”. But Georgism is not a discussion of good and bad taxes. It is a complete change in the present economic system that will make it just and will attack and cure poverty and persistent involuntary unemployment.

Georgism seeks to make “liberty and justice for all” a reality.

The only way this can be achieved is by levying the full collection of community created rent.

The result of such a policy would be to force presently held vacant and underused land onto the market. Rack-rents would disappear and we would be left with economic rent that would be collected by the community. I think that our hopelessly inefficient cities would be entirely reformed. Cities are now sprawling entities containing large amounts of vacant and underused land. I would suspect that there would be a general movement toward the centers of urban areas. Within present boundaries of the city, in due course, at the outskirts there should be large areas of free land.

As people move into the city centers, they will leave behind a lot of buildings which can serve to house the present homeless. I would expect the centers of cities to rise very high. Roads and traffic would disappear to be replaced by walkways and lots of green.

I also think that the present megalopolis would become a number of separate cities and towns. This is attempted now, but inevitably runs into land speculation that stops or diminishes the effort.

However, these are suppositions. What people would do in a free system is up to them.

Present government approaches to this problem generally include the compulsory purchase of speculative land (at a good price) which is then developed. They think this solves the problem.

I appreciate that a full Georgist reform is beyond unlikely, but we should not forget what Georgist Political Economy is about. It is not an improvement of the tax system. It is a radical change in the present economic structure.

Present reformers have mostly lost themselves in complicated political and economic ideas. This leads to various forms of welfare and the present campaigns against inequality – mostly involving taxation.

In doing so, they leave present injustices alone but try to compensate the victims in some way. It’s a hopeless endeavor and deflects attention from real problems.