If I understand you correctly, then I think I agree. Furthermore, I think B does sell the service of rearrangement - to A, who pays him a certain amount of money that could be called a “wage”, a “salary”, etc.
Okay. That’s not what it sounded like to me before, but okay.
Are you treating the proposition “humans aren’t resources” as a premise or as a conclusion?
As I mentioned before, the reductio ad absurdum only holds if the right to life is also included as a premise. There is no logical reason why the right to life must be included as a premise.
Okay. We’re in disagreement here, though. I personally derive the right to life from self-ownership, not the other way around.
Rights don’t exist in an external material sense (i.e. outside of the mind), just like value doesn’t exist in an external material sense.
Fair enough. It certainly sounded to me like that was your claim, though. Anyway, do you agree that the following is a more systematic version of the above: “The marginal incentive to allocate land to the highest bidder is necessarily lower in the absence of LVT than it is in the presence of LVT.”
Okay, see above.
So if it’s not necessarily the case that “the same production” would have occurred using the more productive “land” otherwise, then it follows that there’s not necessarily an economic cost to someone exclusively owning “land” and allocating it according to his own wishes. The question becomes when is there such an economic cost and how exactly can it be determined.
I don’t consider market prices to be objective values. If you do, then it seems that you’re equivocating over the word “value”.
Okay. What is your definition of “economic rent”?
If you define “economic rent” as “goods that (presumably) would’ve been produced otherwise” (notwithstanding my previous question), then how does something that doesn’t exist nevertheless exist? Furthermore, how can one even know the “value” of the goods that (presumably) would’ve been produced otherwise?
And again you’re using the gnomic aspect. Are you really claiming that all landowners always and necessarily receive at no cost “things like a good location and access to services” that provide value that people are willing to pay for?
How can landowners take something that doesn’t exist in the first place?
I was talking about the Rembrandts already owned by the museums.
So what? The treasured paintings are still lost, and it wouldn’t have been that way if economic incentives hadn’t been altered to favor ‘immediate use’ over speculative ‘holding out of use’.
No, speculation stabilises PRICES over time. There was no production going on in my example, because wheat cannot be produced between November and Spring. The total supply in November must last through to next harvest, and if it weren’t for people engaging in speculation, it would all be gone before then. How next year’s production would be affected by all this is irrelevant. The wheat is in fixed supply throughout the time-period involved. So the analogy holds.
Do you accept that speculators are a crucial part of markets (even for goods in fixed supply) and that their effect is to make resource-allocation more efficient with respect to time? This shouldn’t be any more difficult for you to accept than that arbitragers are a crucial part of markets and that their effect is to make resource-allocation more efficient with respect to location. Speculators buy low NOW to sell higher LATER. Arbitragers buy low HERE to sell higher THERE. Speculators are the reason we have wheat all year round at stable prices. Arbitragers are the reason the price of wheat is similar no matter where you are.
Land may not get ‘used up’, but it does get used. And land tends to be highly committed, in the sense that altering the use of land tends to involve considerable cost: namely, destroying the improvements on it that combined with it in it’s previous use that are not needed for it’s new use. If a patch of land has a house on it, and someone wants to build a block of flats on it, he has to acquire the land but also buy the house and then destroy it. This makes starting a new project on committed land more costly than starting a new project on relatively uncommitted or bare land.
There is a sense in which land can be withdrawn from the economy, or held out for later. Isn’t that what this whole ‘problem of speculators’ is about? Land being withdrawn from or held out of the economy by big bad landowners? But a land decision-maker could decide that a piece of land is going to be worth more in the long-run if he waits and doesn’t commit the land for a couple of years, waits to see what happens to demand, then makes the decision about what to build on the land later. If he’s right, the land has been used as efficiently as possible. That would be equivalent to someone deciding to hold onto his wheat for a while, and then sell it in the spring.
Yes, but the benefit of LVT is supposed to come in the form of less speculators, less land being held out of use. If you admit that sometimes the best thing to do economically is to have a patch of land kept bare for a while, uncommitted, then how can you say that it’s necessarily beneficial to shift some of the land that is currently uncommitted into being committed?
Does CCR (community collection of rent) distort or does it optimize the timing of development? Today’s fiscal system distorts the timing by imposing taxes on capital goods and subsidies to land value. In a pure market, neither would exist, and the timing would not be distorted. Without CCR, landowners would implicitly pay a community rent for public goods, because it is unlikely that market-based payments would be based instead on sales prices or income unrelated to the public goods. With complete and explicit CCR, there is also no distortion, because the rent payment is independent of the actions of the developer entrepreneur. CCR converts the implicit opportunity cost of foregone rent revenue with an explicit rent payment based on the highest and best use of the site as estimated from uses and rentals in the neighborhood. Though monetarily equivalent, these are psychologically different, as an explicit payment has a different psychological effect than an implicit cost that one may not think about much. Thus CCR promotes a more efficient timing of development relative to merely implicit payments by spurring lazy site holders to optimize their timing.
Economic rent is income not needed to put a factor to its most productive use. The economic rent of land is the rental paid by the highest bidding tenant (at the rental offered by the second-highest bidder) minus the normal costs of landlording.
In that case the cost of paying the tax is offset by a reduced purchase price.
So the museum bears the burden of the loss, not the economy as a whole.
Of course, I don’t disagree, but in this case the difference is semantics. The demand for wheat is relatively stable over time, so saying that speculation stabilises its price over time is functionally equivalent to saying that it is stabilising supply.
Why should a person who wants to acquire land with a house on it pay anything less than the market price for land with a house on it?
A speculator might reduce the cost of acquiring the land for the developer of the flats 15 years in the future, but only at the expense of reducing production for the economy as a whole in the meantime. Why should the economy as a whole incur the cost of reduced production only so that a developer can buy land cheaper?
LVT does not foreclose this option to the speculator/developer. It only ensures that the gains made from the change in use after the two years of withholding must be equal to or greater than the loss made during the two years of withholding (since only otherwise does the speculator/developer make a net loss).
As I note above, the LVT only causes this shift in the case where the speculator would as a consequence make a net loss (i.e., where the withholding causes a loss from the perspective of the economy as a whole).
The reduced purchase price also means a reduced selling price, so they cancel out. The cost of paying the tax is not offset by anything.
So the museum is not part of the economy as a whole? What?
And are you really saying that it is not a bad thing for “the economy” if treasured paintings get destroyed?
It seems like a crucial distinction to make (“prices” vs “production”) to me, but OK. Do we agree that speculators play a useful, beneficial role in the economy (namely, getting supplies to where they are most demanded, across time) even for goods in fixed supply and not able to be (further) produced?
15 years? What about if it’s 1 year? Or 1 month? Surely then you would agree that it would be a big waste of resources to build a house on the land, only to knock it down almost straight away to build something else. So then the question becomes how long is it preferable to hold land in an uncommitted state, and this is something we need market calculation to work out. Each land speculator will decide how long he wants to leave his land in an uncommitted state, and the length of time that maximises his profit over the time-period he cares about is the length of time which is the optimal for that particular piece of land.
You have absolutely no basis for implying that the cost of holding land uncommitted for 15 years and then building on it is necessarily more than the cost of building on it straight away and then having to destroy what you built and build something else 15 years later. That kind of calculation can only be done by entrepreneurs on a case-by-case basis.
Also, you seem to imply the developer is not part of “the economy as a whole” as well now. It is as if you have a notion of “the economy” which is disconnected from the individuals that comprise it.
Right, but the economic “selling point” of the LVT, the reason it’s supposed to be good for the economy, is that it will reduce the amount of land left uncommitted. And I agree it will likely have this effect, but there’s no reason to consider that good for the economy. The tax makes it more costly to hold land, so relative to a situation with no LVT, land will be committed sooner than it would otherwise be. Do you agree with that? Then tell me why it’s necessarily a good thing to have land committed sooner than it otherwise would be.
Nobody’s talking about today’s fiscal system, or taxing capital goods. And none of us here are worried about public goods being “underfunded” or anything like that, because we know that even roads, defense, lighthouses, etc can and ought to be provided privately. So I don’t know why you brought this up.
I don’t know what you mean by this.
On what basis do you call one site holder “lazy” and another usefully keeping his land uncommitted? Why is it more optimal to have land committed to projects sooner rather than later, as it would be without CCR?
As I note above, only in the case where the cost of withholding for a particular duration is greater than the increase in gains made after that duration.
It is not necessarily a good thing to have land committed sooner. But (as implied above) in the cases where it is, LVT encourages it. In the cases where it is not, LVT does not have that effect.
Fred is saying that (in the case of uncommited, underdeveloped land with no tenant) the calculations of the developers AND the broader economy are improved when rent is paid upfront by the titleholder, explicitly, rather than being an implicit and hidden subsidy, calculated ex post facto when the rent is capitlized into the sale price 15 years later.
That is, the economic costs are explicitly expressed in the real-time rental price and obvious to everyone concerned, as in the case of Manhattan skyscrapers built on leased land.
I’m talking about the margin here. Say you have a parcel of land (or a Rembrandt) and a speculator (with no LVT) decides to hold it uncommitted and he ends up waiting 5 years before committing it. When you have an LVT, it will change the calculation for him, and he might hold it out of use for only 2 years, say. In both cases he is maximising his profit. The question is whether the original 5 years hold out represents the actual best use of the land, and the 2 years is a distortion, or the original 5 years was a distortion and the actual best use of the land would be 2 years hold out, then commit. I don’t know how you can so confidently assert the latter. So, again, why is it necessarily a beneficial consequence of the LVT to have (some) land committed sooner than it would be without the LVT?
I’ll rephrase Fred again (from the previous page):
The tax is offset by greater equity, and the price to each indivdual consumer goes down. The tax would actually not arise in the first place unless the demand for equity already existed. It would be a policy based on the rational expectation of “80%” of the population demanding equity in Rembrandts – it’s a bad example because this is not actually the case.
Land on the other hand has universal 100% appeal to everybody whether they realise it or not.
Yes, fires occur and therefore speculation is good and taxes are bad. Shall we treat this as a premise, a conclusion or have you just made a non-sequitur?
Not to go off on a tangent here, but I have to wholeheartedly disagree with the notion that PURE speculation ever has a stabilizing effect. It may unavoidable and unharmul in small doses, but I think from any objective viewpoint it always increases volatility.
In the case of wheat, the farms or groups of farms often have their own storage capacity, their products go through at least 2 brokers (in the form of whosale elevators and smaller smaller distributors) before hitting the mills, which is the last possible choke point before the you are primarily on the more stabile demand side of the equation dealing with more perishable goods.
The farmers, elevators, brokers, and distributors are not hapless animals, ignorant of their role in the supply and demand equation. They in fact have access to better information with which to speculate on the value of the goods and services they are providing, because that is their sole business. Producers and consumers do not need the help of middlemen who are only there to jerk the prices around to nobody’s benefit but their own.
Let’s be consistent: do the central banks improve stability when they speculate on the demand for currency in the economy? I was under the impression that the entire Austrian position was that stability would be improved by removing this speculation and returning to a more direct supply and demand equation.
Are we to draw distinctions in the supply and demand equations for land, wheat and money?
Dan, you’ve been arguing that “LVT encourages land owners to put land to the best possible use” and you’ve made it clear that you consider the lack of an LVT to have the negative economic consequence of encouraging land owners to ‘hold their land out of use’. The economic benefit of LVT, according to you, is that there will be less of these land speculators. In other words, that some of the land which, in a market without LVT, would be ‘held out of use’ (uncommitted) would be ‘brought into use’ (committed) in a market with the LVT.
Your question above is equivalent to ‘why would LVT have any impact on land use?’ You tell me, since we both agreed many posts ago that LVT will have an impact on land use.