patrick.net

@Troy
Then you are being oblivious to a HUGE BUG, a bug so big that it's "sucking out the life flood of humanity," to paraphrase Matt Taiibbi from RollingStone and put "bug" in place of his more graphical phrase "vampire squid stuck on the face of humanity."

There is a crucial difference between the "LANDOWNER" and the "STATE": the former is usually an individual held to account for his/her own actions whereas the latter is a case of Identity Theft (some privileged individuals doing things in the name of the STATE). When the LANDOWNER borrows too much based on that cash stream during boom time, he and his banker will suffer for their mistakes. The "STATE" however is too big to fail, and will put you and me under gun point to pay back whatever boondongle some bribed government officials took out loans to build.

The "LANDOWNER" will use the cash stream to make improvements based on what will create economic value (despite occasional mistakes), whereas the STATE will spend improvement funds based on political patronage, nowadays for the sake of creating public debt so the banks can be paid out of tax money for decades to come. More importantly, when a LANDOWNER doesn't allocate his resources efficiently, you and I can shop somewhere else . . . with the STATE we have no such luxury. The STATE is by definition coercive.

That neo-Marxian disdain for "speculative parasite" is badly misplaced, IMHO. Private investors that face the risk of failure/bankruptcy actually adds value to the economy: profitability is nothing more than the society deeming their output being more valuable than their input. It is the "too big to fails," including the STATE itself, that are the economic parasites.

I think that in a free society to have a “fair” tax system those that gain the most from living in our system also throw in the most to help maintain that system. Sort of like the way our graduated income tax brackets are supposed to work now.

I think that Georgism would have worked much better when it was conceived 100+ years ago. Back then productivity and profit was linked much closer to land. Today you can put a factory on 1 acre that generates 1 billion in income next to a 1000 acre farm that makes only 1 million. Would it be fair to tax the farm 1000 times more than the factory?

It just seems to me that working out the issues of a Georgism type land tax would end up with a tax system at least as complicated as our current system.

So why shouldn’t the town take the entire rent income? Because the economy is not constantly smooth rotating.

This business cycle is driven by the land credit cycle. Seriously. 1930s in the US came off a land speculation boom. 1990s, same thing, both here and in Japan. And of course the current recession.

We can even go back to the 18th and 19th century, where famous Americans like Robert Morris ("financier of the Revolution") lost his ass in land speculation, along with many others in the Panic of 1797. Congress passed the 1800 Bankruptcy Act to bail him out of debtor's prison.

Daniel Boone became a frontiersman largely due to being a failed land specuvestor.

The Panics of 1819, 1837, 1857, and were worsened if not largely driven by failed land speculation.

"The American people with one consent gave themselves to an amazing extravagance of land speculation." -- http://en.wikipedia.org/wiki/Panic_of_1837

"With the large influx of people moving, the railroads became a profitable industry and the banks seized the opportunity and began to provide railroad companies with large loans. However, by late summer, the value of western land fell and migration drastically slowed causing railroad securities to fall in value." -- http://en.wikipedia.org/wiki/Panic_of_1857

By keeping our capital investment OUT of land and INTO the actual productive economy, we buffer ourselves from the land boom/bust cycle. This is the secret of the economies of Hong Kong, Singapore, and others.

The parasites among us defend the status quo of landlording to the death, of course. Often literally, either at the end in some communist killing field of the bloody past or perhaps in the trunk of some kidnapper's car today in some unjust banana republic.

@Troy,

How do you define "median" in an ever changing market? In a typically Gaussian distribution, you'd have thousands of people in the "fat middle" not knowing if they are liable to a huge tax or not depending on what the cut-off that year is and how their particular home is evaluated. Can you say invitation to massive briberies?

What do you mean by "deferred into a lien"? Would the town then auction property tax liens to predatory tax lien lenders? Like many towns already do nowadays, much to the detriment of many families?

Singapore, HK and China have leaseholds that last 99 years or 50 years. That's practically the same as our "ownership" with 1-2% property tax. Land parcels sitting under their buildings are not coming up for auction every year. Otherwise, there wouldn't be fixed building.

I think that Georgism would have worked much better when it was conceived 100+ years ago. Back then productivity and profit was linked much closer to land. Today you can put a factory on 1 acre that generates 1 billion in income next to a 1000 acre farm that makes only 1 million. Would it be fair to tax the farm 1000 times more than the factory?

Yes. I'd rather have a billion-dollar wealth-creating enterprise than a turnip field in my neighborhood.

Maybe you haven't been keeping up on current events, but land and land value is still an immensely critical part of our modern economy.

TOO critical. Aside from redirecting flows from specuvestors and the financiers behind them TO the state, LVT also encourages more economical use of land. LVT works great to fund civic improvements like mass transit and even bus lines.

This is not to say we shouldn't have ag land. But 40% of this country is ag land, industry isn't going to displace much of it.

Landowners collect immense amounts of rent in the current economy. This is a large part of what is wrong with the economy today, people getting something (rent) for nothing (site value they did nothing to create).

Whenever an economic agent gets something for nothing, that's theft. You can identify the thieves in any economy by removing them from the picture and seeing if anything changes in terms of wealth creation.

Landlords qua landlords fail this Thief Test spectacularly. They are liquidatable, though of course they say they are not, but to do so they have to argue with fallacies and lies.

How do you define “median” in an ever changing market?

Uh, is this a trick question?

In a typically Gaussian distribution, you’d have thousands of people in the “fat middle” not knowing if they are liable to a huge tax or not depending on what the cut-off that year is and how their particular home is evaluated.

Land values are not redistributed every year, and they are certainly not random in this distribution anyway. They are very continuous and smooth in time and place. Plus the tax would/could be proportional to how far away from the median one is, so the impact of any yearly changes (if they even exist, I'm actually having a hard time imagining how land value would become so differential since the extrinsic value of property -- the value of everything outside the lot lines -- changes so slowly in real life) would not be significant.

Plus if I were king I would not subject owner-occupied residential to significant LVT anyway. Just enough to keep the specuvestors focused on actual wealth-creating enterprises and not fastening their fangs on their fellow man via purchase of landholdings.

Can you say invitation to massive briberies?

Anti-LVT people always wheel out their anti-govenment schtick. If we can't run a government here we have larger problems than the tax regime.

@Troy

HK and Singapore also have their economic cycles. Property speculations were and are rampant in both places despite leaseholds. "Landlording" are widespread in both places. "Landlording" is simply the arbitrage of long-term lease (including from the State, as in our current property tax system) vs. short-term leases. You can do that without even owning land or owning any property. You can go lease an entire commercial building for long term, and subdivide to smaller units and shorter terms now. Commercial Mall operators and hotel operators do precisely that on a routine basis.

The idea that the state should be the only landlord and no other intermediate landlords can exist is about as absurd as trying to make the state into the only food producer and no other food producers and distributors are allowed, because they are all allegedly "parasitic." If the state is the only legit owner of all land, then should it also be the only legit owner of all sunlight shining down on the crop plants on the land? and all the flour mills and all the bread baking facilities and all the grocery stores that either sit on the land or burn mineral out of the land to stay warm? The rub against such thinking is of course that:

1. all future planning is speculative;
2. if such speculative decision making is not individually held accountable through private ownership (and no bailouts), the result is "too big to fail" and throwing good resources after bad bets, as in all the failed socialist schemes.

Land parcels sitting under their buildings are not coming up for auction every year. Otherwise, there wouldn’t be fixed building.

Obviously security of tenancy is important. But so is redirection of the ground rent from landowner to the community that creates it.

LVT doesn't take anything that isn't already on the table. Allowing the LLs to rake it all is a primary driver of the increasing wealth inequality in this country.

For every bad thing you can imagine about LVT, I will just say "then let's not do that".

Remember, LVT is competing with our current Prop 13-protected regime, something that is failing spectacularly here in California. LVT would have to be pretty bad to be worse than the status quo.

The idea that the state should be the only landlord and no other intermediate landlords can exist is about as absurd as trying to make the state into the only food producer and no other food producers and distributors are allowed, because they are all allegedly “parasitic.” If the state is the only legit owner of all land, then should it also be the only legit owner of all sunlight shining down on the crop plants on the land?

The state should not be the "only" landlord, just the basal, the primary collector of site value ie ground rent, since the State is the primary creator of site value ie ground rent.

Thomas Paine and Jefferson said as much in their writings. So did Adam Smith, and John Locke implied it with his Proviso.

Land titles are created and issued by the state. They give away too much, which is why they are so expensive.

Not a trick question at all. Two different appraisers can have two entirely different sets of "comparables." It's not much of a problem now, but would be a huge problem if there is some kind of drastic cut-off line for tax payment running through the fattest part of the Gaussian distribution of home values in town. You can easily have neighbors fighting each other physically over $5-10k tax liabilities.

Land values do change drastically from year to year. We are looking at some neighborhoods with 50% or more in price reduction over 3 years . . . the buildings have not changed at all in those 3 years (most are far more than 17 or 30 years old, so fully depreciated in the accounting sense). So the entire change is due to land value.

"If I were king . . ." well, that just shows your fangs as a wannabe feudal aristocrat. The only legitimate thing to do if one finds himself to be a king (with real power) is to resign and make sure that nobody else can acquire that kind of monopolistic power afterward over his fellow men.

Reality says

The “STATE” however is too big to fail, and will put you and me under gun point to pay back whatever boondongle some bribed government officials took out loans to build.

Always with the anti-government stuff. Don't you see this as Anti-American? Do we not have the world-class government and aren't we the pioneer of democracy?

The history of state investment of public goods has been immensely beneficial to the public weal. Where are the boondoggles you speak of?

On the positive side of the ledger, we have the Wright Act Irrigation Districts of the previous century, something created entirely from Georgist philosophy of collection of ground rents.

"Governor Haight, in his inaugural address, and in his final address in 1871 stressed the land problem. "Our land system," he said, "seems to be mainly framed to facilitate the acquisition of large bodies of land by capitalists or corporations, either as donations, or at nominal prices. Barker claims that the inaugural address of Height's successor, Governor Boothe, could easily have been written by George. Boothe called for a tax on land values to cut down speculation, and for the land to be more generally cultivated by farmer-owners."

. . .

"The irrigation districts brought prosperity and local development to the valleys of California which were once recorded on the map as "deserts." Many officials, writers, and professors have since recognized the power of this one act. In 1915, the former California legislator from Modesto, L.L. Dennett told the Los Angeles Times, "I doubt if any law ever enacted by our legislature has even approached the beneficial results of this law. It puts a premium upon development and improvement... it has perpetuated to the people and to their children a great heritage... [a] birthright has been preserved not to be administered by a remote national or even state organization, but by the very people whose birthright it is.""

http://www.henrygeorge.org/caldes.htm

your fears "marxist boondoggles" are just bullshit. You really need to review http://geolib.com/essays/sullivan.dan/royallib.html to get your head realigned to reality and not the propagandistic fear-mongering your thoughts are dominated with.

Reality says

“If I were king . . .” well, that just shows your fangs as a wannabe feudal aristocrat. The only legitimate thing to do if one finds himself to be a king (with real power) is to resign and make sure that nobody else can acquire that kind of monopolistic power afterward over his fellow men.

Now you're declining into stupidity. I've said all I need to say here. Good day good sir, and enjoy cashing those rent checks.

@Troy,

Redirecting financiers from private landlords to the State would be a huge curse on the rest of the population. The State can force you to pay back whatever it borrowed from the financiers.

Buying a property, improve upon it and rent it out actually involves far more labor than buying a stock and collect dividends. Do you also call all stockholders thieves? Do you call bond-holders thieves? A case might be made that holders of government bonds are indeed engaged in supporting theft as government tax collection is theft as it is coercive. Rent on the other hand is something that both the renter and the owner enter into without coercion from either side.

BTW, I'm speaking as a renter. Having numerous owners offering to rent is the reason why I have low rent on a decent place to live. Can you imagine what it would be like if government effectively owned all housing and have to use over-paid bureaucrats and union labor to do the maintenance and review applications? You can look to the projects, the DMV and the city hospitals for an answer. A stay at the government-run hospital room is like over $1000 per day, not including any of the medical services.

@troy

The government is already the "basal landlord." That's what the 1-2% property tax / 90-yr / 50-yr leases are. Real life experience seems to indicate that anything much over 2.5% leads to rapid deterioration in the community due to property value collapse.

America's success came from the liberty enjoyed by the American people . . . a people that have enjoy the freedom to compete with each other and bring better value to the table for fellow Americans. Government undertakings are by definition monopolistic. Many other countries have governments undertaking far greater projects than ours have (especially proportionally speaking to the economy size), and usually end up as white elephants.

Never assume that private sector would not undertake on better terms what the government monopoly has brought forth, and never discount the time-cost of pre-mature investment. Every single transcontinental railroad sponsored by the US government went bankrupt, whereas the privately funded Great Northern did very well. After about 1913, the accounting became fishy for government projects because of the imposition of the fiat money regime. Almost all the "great projects" undertaken in the 1930's that the statist-worshippers would like to boast so much can only be termed "success" when assuming zero interest cost . . . just like all the bailouts of the financial industry and GM in the last couple years. When measured against real economic opportunity cost (reflected by gold price), they are resounding failures. Those "great undertakings" are usually nothing more than exploiting destitute Americans as slave labor, a condition of poverty that was created by the government to begin with.

Being skeptical about the government is very American, and a defining character of libertarianism. I was quite correct in suspecting your "libertarian" credentials in your use of "geo-libertarianism." While Henry George came up with Single-Tax as a way of reducing taxes, many of today's Georgists are not libertarians at all, but socialists/communists looking for a new home after the failure of the former soviet union. Your repeated allusion to violence against what you consider "parasites" is quite indicative of your communist inclinations.

The idea that landowners are taking a huge bite of the economy doesn't jive with current reality at all . . . especially given how many times Patrick has re-emphasized (correctly) that it is still cheaper to rent than to buy in many places. The bulk of the rent that we renters pay actually end up as mortgage payment to banks. The landlords are in effect passing along some of the savings that they got when they bought the house before the bubble . . . either that, or they are digging into their own savings to make up the mortgage cash flow shortfall, or using the rent as a way of getting a relatively secure return that is lower than our own mortgage interest rate would be but higher than they can get in a savings account, if they put a big down payment on the house. These are the only three possibilities (assuming they are not defaulting to their creditors). In any case, the landlords have to make sure that they are solvent by themselves, unlike a STATE as "landlord" that can dig into our (taxpayers') wallets when it runs out of money. When was the last time any landlord could coerce us renters to cough up more money just because they partied too hard themselves? but the STATE as the "landlord" can do precisely that.

Raising land taxes would raise rent and reduce maintenance . . . and more importantly, make everything we buy much much more expensive if homeowners are exempt from it but commercial land users have to carry the entire tax burden. Businesses do not actually pay taxes (because they do not have to exist); they are just conduits for collecting money from their customers to pay the government; their profit comes on top of that: if a business has market power (like a convenience store), it may even take tax expense as one of the costs of doing business and apply the same profit margin to it before arriving at the prices. Individual consumers can not avoid paying the taxes / raised price without killing themselves or drastically cut back on standards of living.

@Troy:

You wrote "Whenever an economic agent gets something for nothing, that’s theft. You can identify the thieves in any economy by removing them from the picture and seeing if anything changes in terms of wealth creation.

Landlords qua landlords fail this Thief Test spectacularly. They are liquidatable, though of course they say they are not, but to do so they have to argue with fallacies and lies."

With intimations of violence like this, and you call yourself a libertarian (a philosophy based on non-initiation of violence)? By your test, wouldn't the old and the infirm be liquidatable too? What kind of fascist monster are you?

Without landlords, from whom would I be renting from? More precisely,

Who would have kept the house that I'm in now pristine and available before I moved here?
Who would have paid for the leveling of the lot?
Who would have paid for the landscaping?
Who would have paid for paving the driveway?
Who would have paid for the construction of the house?
Who would have paid for the expansion of the house?
Who would have kept the pipes from freezing in winter before moved in?
Who would have paid for the broker who showed me the house?
Who would have paid for and tracked the warranty repairs for the appliances that make the house livable?

and from the town's perspective, who would have paid for the property taxes when the house was vacant and being renovated?

I'm not trying to kiss up to my landlord here, but it's preposterous to suggest that he is not rendering a service when I know I'm getting a better deal than I would have to pay if I took out a mortgage to buy the same house that I'm living in. To suggest that somehow his hold on the land is illigitimate is tantamount to saying that my use of the land is illigitimate! My paying the rent (at much lower price than a mortgage would be on the same house) is the reason why I have the use right, and nobody else can trespass. Unlike the property tax levy, the rent amount is something that we arrived at by mutual consent, a consent that is renewed each year! I even talked him into lowering rent by a couple hundred bucks a month when the recession hit, while the town raised tax on him! Talk about rapid market response vs. slow-motion bureaucratic response to changing reality on the ground.

"Not sure how the two bids would work together though. Greatest sum of land tax and purchase price wins?"

That's essentially what the current price system with land included means. With 1-2% total property tax rates, the town is getting a free house plus the entire land value from the "owner" every 36-72 years. Not bad at all. This approach actually smooth out the town's income from year to year, instead of a higher tax on land value alone, which is far more economy-dependent and far more volatile than the cost of improvements. I wouldn't trust the town officials to handle a binge and purge cash flow.

Reality says

Raising land taxes would raise rent

I don't think so, because rents are determined by salaries. It doesn't matter what the landlord wants. People can pay only so much in rent. They cannot borrow to pay rent.

Reality says

I’m not trying to kiss up to my landlord here, but it’s preposterous to suggest that he is not rendering a service when I know I’m getting a better deal than I would have to pay if I took out a mortgage to buy the same house that I’m living in.

In my own case, my landlord bought a very long time ago, so she pays essentially zero property tax on her rental properties because of Prop 13. Almost all the rent goes to her as profit, minus a bit for maintenance.

I still cannot buy a house and get a better deal than I have as a renter. But Prop 13 guarantees that she can make a good profit off of me anyway.

I like my landlord, but she's not really rendering any service to me. She's exploiting the Prop 13 gift to landlords and businesses.

Reality says

Never assume that private sector would not undertake on better terms what the government monopoly has brought forth

The private sector fails completely in essential functions like providing an army, police forces, fire departments, elementary schools, and essential health care.

Never assume that the private sector would undertake anything for the public good, ever.

The private sector is great for non-essential services, but for essential services, they will rape and kill you with glee and provide nothing.

A raised LVT would function as a cartel price setting mechanism, and raise rent amount. It's just like a raised sales tax would raise the total price of everything that is subject to sales tax; the vendors would not absorb it because all other vendors face that charge too. Not having to pay other taxes in a Single-Tax scheme would also make more money available for paying rent. Giving owner-occupied homes exemption like Troy suggested would disproportionally burden us the renters. Although you and I may not be in the low-income group, many renters and their families are. Such a lopsided taxation would severely disadvantage families that have to rent because that's all they can afford.

I'd be very surprised if your landlord doesn't have a mortgage to pay. My landlord took out a sizable mortgage to renovate the house after the previous tenant moved out and before I moved in. In any case, you are benefiting significantly from lower cost of housing over the past 7years than would have been the case if you bought (counting interest payment, tax payment and massive capital depreciation), that's a huge service to you. In my case, the difference is nearly $400k over half a decade: $570k potential losses/expenses ($300k drop in house value, $210k interest payment at 6% fixed half a decade ago and $60k in taxes and repairs; not fulling counting the depreciation of his new renovation just before I moved in and now could use some after half a decade of use) vs. $180k rental expense over the same half decade. My landlord's service practically saved me the bulk of my next house's likely purchase price. The house I'm in had a market value around $700k when I moved in, and now is probably around $400k if I bargain hard enough. I don't think I have ever received any service/benfit of that magnitude from any other single individual (besides my parents' raising me and teaching me when I was young, which was not quantifiable).

The "public" monopoly, once established, would just kill, rape and pillage even harder. What do you think is going on with the multiple wars? and Trump's contention that he would just keep Libyan oil? All the warmongering around the world leads to is easier for American corporations to operate overseas with impunity; the lack of risk from foreign tinpot dictatorships makes it possible for shipping jobs overseas, especially since jobs here actually have to pay for the "public army" that is subsidizing shipped out jobs overseas. The standing army shouldn't even be there at all; remember from the Constitution?

Americans used to be the most literate and well-read people in the world in the 18th and 19th century, before public school monopolies came along.

Without a government enforced medicine monopoly, there used to be charity hospitals . . . now those charity hospitals are bankrupt and bought up by for-profit hospitals because medical equipment and medical school graduates are so loaded up with huge government-guaranteed non-dischargeable (student) debts that they can not afford to work for charity hospitals. Why is the same MRI or CT scan costing 10-100 times as much in the US compared to India? Why is a surgical knife costing $900 when a kitchen knife made of the same material costs $2? Price is determined by supply and demand. When the demand/purchasing power is forcibly pillaged from the off-springs and neighbors of the patients, the sky is the limit for price. The wrong crowd has been attracted to the government enforced medical oligopoly. Medicine has become a massive machine for raping and pillaging patients, their families and other taxpayers alike to pay off debts to banks at gun point (that's what taxation and fiat money is, at gun point). In every technology field that does not involve government enforced monopoly and subsidy, goods and services get better and cheaper very rapidly: a $10,000 computer 20 years ago would cost only $1000 10 years ago and 10 times faster, and now costing $100 and fits in your hand! The same thing refuses to happen in the publicly funded and monopolized medical field, nor the publicly funded and monopolized education field. I have great respect for private citizens who are part time volunteer fire fighters; I'm fearful about what will happen when the six-figure salaried firefighters and policemen find out their pensions are not secure and their wages are to be cut.

Speaking of essential services, what can be more essential to human existence than food? Yet every time a government tried to monopolize food production and distribution, it led to starvation and famine. Every single time that's been tried in human history! All the other "essential services and goods" are just less essential, not needed by everyone three times a day, so the inefficiencies of a monopoly vs. free market alternatives just takes longer to become obvious.

Reality says

Americans used to be the most literate and well-read people in the world in the 18th and 19th century, before public school monopolies came along.

But public schools are not monopolies at all, except for the poor, who cannot pay for private schools.

Reality says

The standing army shouldn’t even be there at all; remember from the Constitution?

I agree with you there.

Reality says

Price is determined by supply and demand.

Not for essential medical care! There is no price list presented, no opportunity to shop, and no time to do it anyway. Under purely private health care, your costs are guaranteed to be all the money you have. You pay or die.

I'm not suggesting government doctors, just a little restraint on the raping and pillaging. How about mandatory price lists, for example? Wait, that would be socialism, right?

Reality says

In every technology field that does not involve government enforced monopoly and subsidy, goods and services get better and cheaper very rapidly:

Not true at all. In fact, that's about as wrong as you can get with respect to the internet. The internet exists only because of government funding for ARPANET and the imposition of government-created communication standards.

Reality says

I’m fearful about what will happen when the six-figure salaried firefighters and policemen find out their pensions are not secure and their wages are to be cut.

But you're not afraid of what private firemen would charge you when you house is already on fire? What do you think that price would be?

dude, you're arguing with a libertarian on the internet.

@Patrick

Glad we agree on the distaste for warfare-state.

Public schools are a monopoly because one has to pay for them even if placing kids in private schools. That's the ultimate form of charging and not providing service. When it's a badly run gym, you can cancel membership the next month, but not with public schools. The kids from poor families have been educated by charitable organizations for hundreds of years. People used to go into teaching (and medicine) for charitable causes, not to get rich or get tenure and cushy pensions; not having a non-dischargeable student debt also helped freedom in career choices.

I certainly agree with you that medicine prices have to be listed. Can you imagine what it would be like if restaurants did not list prices and all restaurant bills are paid for by the government? There would be free-for-all food fights using lobsters inside the restaurant while long lines outside waiting to be seated. The cost of medicine would be much less if there is no licensing requirement to artificially restrain supply of service providers. . . and if there is no FDA limiting the supply of drugs. Many elderly may well choose legalized pot or even legalized opioids at much lower prices instead of the ridiculously expensive patent drugs that the big pharma come up every few years like the Cox-2 painkillers that ended up killing the patients. The net effect of life extension for old adults from modern medicine is only a few months for the entire population on average. Many of the so-called cancer cures in the past couple decades have been the result of over-diagonosis: if 1% of women die of breast cancer and 1% of men die of prostate cancer in a general population before cancer medicine, then after the tests came along, suddenly 10% of the population are diagonosed with them and the cure rate is 90% . . . what exactly has been the net benefit of those tests and cures? Big Zero! No net improvement at all, still 1% of the population dying of these cancers. Only now that zillions of dollars are spent on cutting off breasts and making old men impotent, all paid for courtesy of taxpayers, who also have to foot more bills for healing side effects and mood enhancers after the dismemberment.

The ARPANET reached only a few hundred govoernment and educational institutions (and I was on it). It was the free market forces that made internet accessible to billions of people around the world. It's also a mistake to assume that had government not taken away the resources from the private sector, something like ARPANET would not have evolved in the private sector. AT&T network was built by the private sector before WWI and WWII enabled government take-over of the high tech sector of the economy (and much of the rest). Perhaps that's the reason why big-government types love wars.

The incident where the firemen let someone's house burn down a few months ago for lack of membership was actually a publicly established monopoly, trying to make the victim into an example of the perils of not subscribing to their service, even after the homeowner offered and begged to pay several times over the annual membership fee. Competing private service providers would have had enormous incentives to accept his offer; can you imagine the reputational damage if it's not a mafia-like monopoly?

@troy,

and you pretended to be a libertarian only a few posts ago.

Just because something is called "government" doesn't mean it's not be subject to the laws of economics. Government is intrinsically just as efficient as the private sector. Also, Cost is not just measured by dollar value. If something is cheaper it might mean they provided a better service, but it might mean they paid their workers less, destroyed the environment or didn't perform adequate safety inspections. That's why I'm generally skeptical of the term "wealth creation", because it is usually just taken out of something else rather than anything being tangibly "created".

@pdh

The same laws of economics indeed apply to both the government and the private sector. When people had the freedom to buy well made Toyota's and Hondas instead of poorly made Chevy's and Ford's, more resources were allocated away from the underperforming carmakers to the better carmakers. If there were two DMV's, one were run more efficiently than the other, and the DMV workers got paid based on the customers that they serve, then yes, more resources would get allocated from the poorly run DMV to the better run DMV. In reality however, DMV workers are paid the same regardless their performance, so good workers leave and the slackers stay. Likewise, when the government keep bailing out poorly performing "private" companies at the expense of better run companies, the economy grinds to a halt, just like the DMV.

Economic exchange and "wealth creation" takes place when division of labor takes place: someone else renders a service for you that is of greater value to you than what you have to pay them in return (from your perspective). . . . and conversely, they deem what they receive in return is of greater value than what they are giving you (otherwise, they would not voluntarily consent to the exchange). Both sides are made better off as a result of the exchange. Hence "wealth creation." Robbery at gun point is certainly not wealth creation.

MRI and CT scans used in the US and those in India are roughly comparable in medical value because:
(1) the same models of machines are used;
(2) the same Indian doctors read and interpret those images.

Reality says

Americans used to be the most literate and well-read people in the world in the 18th and 19th century, before public school monopolies came along.

That's a strange statement. Back then most people didn't go to school beyond the elementary, and we had child labor, and slavery. Education was for the elite then. Jefferson advocated public education in part for very pragmatic reasons: the talent and intelligence among the poor needed to be found and nurtured for the benefit of all.

There were far more truly illiterate people then than now.

marcus says

There were far more truly illiterate people then than now.

Marcus--let's not allow the truth to get in the way of a good story. Especially a nostalgic one..

@Reality

The Georgist ideas are not easy to understand. I too went back and forth with Troy on it, but mostly in a struggle to understand. It is intriguing. I would suggest understanding first, before asserting objections. And understanding it is no small task because it is so foreign to the way we think about land utility, land values and land rents now.

Reality says

In reality however, DMV workers are paid the same regardless their performance, so good workers leave and the slackers stay. Likewise, when the government keep bailing out poorly performing “private” companies at the expense of better run companies, the economy grinds to a halt, just like the DMV.

To me it seems that public sector is structured in such a way that there is really no need to actually do better, or do anything. Most common mental set in public employees is "I've got a permanent job where I can sit and do nothing until retirement, I got it made". And those who do want to try, are discouraged from trying due to all the red tape and corruption in the system.

At any DMV I've seen there are usually around 30 people sitting getting paid, but only about 10 actually working.

ChrisLA says

Reality says

In reality however, DMV workers are paid the same regardless their performance, so good workers leave and the slackers stay. Likewise, when the government keep bailing out poorly performing “private” companies at the expense of better run companies, the economy grinds to a halt, just like the DMV.

To me it seems that public sector is structured in such a way that there is really no need to actually do better, or do anything. Most common mental set in public employees is “I’ve got a permanent job where I can sit and do nothing until retirement, I got it made”. And those who do want to try, are discouraged from trying due to all the red tape and corruption in the system.
At any DMV I’ve seen there are usually around 30 people sitting getting paid, but only about 10 actually working.

Police, Fire, Post Office? All very well run public sector organizations. I think that people have a tendency to forget this.

Complaining about the DMV, which is not that bad (I would take a wait at the DMV any day over trying to fix an error on my cell phone or credit card bill), seems to have a subtext insinuating that a private company would run it better. Don't even get me started on private medical insurance companies, days... weeks... even months to get minor things resolved.

Private organizations provide people with plenty of headache and frustration when trying to navigate their bureaucratic procedures. Enough so that I am not convinced that they actually provide better service to customers than the public sector does.

Reality says

when the government keep bailing out poorly performing “private” companies at the expense of better run companies, the economy grinds to a halt

I definitely agree with you there. I think our core problem is corporate control of government. Why bother to compete in the free market when you can simply get some law passed which will insulate you from competition, or bail you out when you fail?

Corporations literally write laws, send them to their lobbyists, the lobbyists send them to the right Congressional staff members, who then recommend a vote for them. The Congressmen never actually read the laws, nor does the public for the most part.

The corporate lawyers, the lobbyists, and the Congressional staff (along with most of Wall Street) all went to the same Ivy League schools, they know each other, and even sleep with each other. It's a club. We're not in it. I'm not even sure most of the Congressmen are in it. They vote how their staff tells them to.

Cooperation evolves among all those parties (See http://en.wikipedia.org/wiki/The_Evolution_of_Cooperation ) at the expense of the public when the same group keeps interacting over and over. One possible way out is to scramble the people involved so they don't have all these pre-existing social ties.

The problem is not the mere existence of government, as most Republicans and Libertarians seem to think.

I think the core problem is that government is just too damn big.

I for one devote 99.9% of my attention to what stupid thing DC is doing and almost nothing to Sacramento, yet state governance is much more important than what the Feds are doing.

Issue #1 is that it should be unconstitutional for the Feds to ever run a deficit. If it is doing something stupid, it should have to have the People pay for it in realtime, not run up a $2T bill that is collecting $100B/yr in interest.

http://www.usgovernmentspending.com/year2011_US.html

this site is a reasonably useful data-dump of government spending.

Not counting social security, which is now in basically pay-as-you-go mode, the Feds are spending $3T this year.

That is $25,000 per household. Theoretically one out of TWO households could and should have either a $50,000 .gov job or a job that is indirectly dependent on Fed $ (eg. many jobs in military towns).

States and localities are spending another $2.4T of their own money -- add in ANOTHER $20,000 per household for that.

$45,000 per household spending burden, and that's only going to go up as the baby boom turns 65 -- annual births went over 4M for the first time in 1954 and remained over 4M through 1964.

Bringing this back on topic, I think all this deficit spending is boosting land values just as much as the actual mortgage bubble did 2003-2006.

Bond sales distribute money from a magical place -- from some rich guy who has more money saved up than he knows what to do with, and pushes this money right into the private economy.

California is running a $20B deficit, just imagine what residential rents and land values here would look like if everyone had their state taxes go up 25% for 2011.

Alternative, imagine what rents and land values would look like if California cut $20B out of its budget. Well, we may not have to imagine that soon enough. . .

Same thing on the Federal level, though California is already feeling this pinch by only getting 80c for every dollar going to DC.

shrekgrinch says

Troy says

Whenever an economic agent gets something for nothing, that’s theft.

You just described government, Troy. Take monetary seigniorage as an example…one out of zillions.

But government does give you something. Even seigniorage gives you currency that other people recognize as issued by the gov't. Maybe it's not a good deal, but it's not nothing.

The question is how to get the best deal from government in the areas where the private market fails ... and there are zillions. :-)

shrekgrinch says

The private sector fails completely in essential functions like providing an army, police forces, fire departments, elementary schools, and essential health care.

Uh, yes they can…if there were no government monopolies or regulatory overcontrol of these sectors, then people would sign up with private providers….and the one’s that didn’t deliver to their customers would lose business to the ones who did. Period.

You mean like in Somalia? Lots of private armies there. No police, fire, schools, or essential health care. Wonderful place to live. So much freedom!

Compare that to the living hell of Sweden, where the government does tax the people to provide all those services. So awful.

shrekgrinch says

Troy says

Whenever an economic agent gets something for nothing, that’s theft.

You just described government, Troy. Take monetary seigniorage as an example…one out of zillions.

Um... shrek... correct me if I am mistaking what you are saying, but it sounds like you just said government provides no value for the cost it takes in taxes.

And, even with seigniorage you see no added value in having a common currency for us to trade.

shrekgrinch says

The private sector fails completely in essential functions like providing an army, police forces, fire departments, elementary schools, and essential health care.

Uh, yes they can…if there were no government monopolies or regulatory overcontrol of these sectors, then people would sign up with private providers….and the one’s that didn’t deliver to their customers would lose business to the ones who did. Period.

Oh, god... shrek don't tell me you know nothing of the history in this country regarding privatized fire services. Do yourself (and us) a favor and do a little research.

It is not that tough, just give it 10 minutes on Google, and see what you can come up with.

@Troy

I agree with the gist of your latest post. The reality is even worse than you have described:

1. There is no rich guy lending the government money. The banking cartel is lending back to the government at 3-4.5% what the government paid out to the TBTF banks as "bailout" at 0%. The entire game is just a scam for the banking cartel to collect a slice from the rest of the economy, using the government as the leg-breaker. Since the banking cartel never put up the principal money to begin with, this loan sharking scheme has an infinity as ROI. The bulk of the increase in US government debt load during Bush and Obama years is the result of the bailout; the banking cartel is collecting twice on the money: once during the bailout, and a second time in interest after it lends the money back to the government. Now they are screaming for austerity measures . . . just another way to make the interest payment worth more.

I agree with you that government shouldn't be allowed to run deficit. However, the real problem is not deficit, but the concept of public debt: something that the banking cartel set up using their paid-for politicians, and the rest of us are supposed to pay back. The whole concept of "public debt" is illegitimate; it's identity theft, just as if I used my unborn grand-children's credit to take out loans and expect them to pay back the creditors.

2. Social Security has always been a pay-as-you-go system. It's actually even more sinister than that: because every time it's rejigged, the demographic break-even horizon is pushed back 2-3 decades, that means the statistical certainty that the few years immediately following the rejigging provides a flood of surplus, to be spent as general fund. When you look at the government spending outside SS and related Medicare/Medicaid, the biggest item in general fund spending is warmaking. It is not a co-incidence that FDR, LBJ, Regan and BushII, the four presidents who setup and/or rejigged the SS/MM scam were all warmongers, and had plenty money to play their toy soldiers. Of course, when the accounting edifice "trust fund" needs to call in the non-marketable Treasury instruments, the rest of us get to pay for it.

3. The housing bubble is another one of those scams: lending money to people who have no business taking out loans (just like the federal government), then expect the rest of the population to pay it back via government agencies bailouts. Meanwhile, the town's tax receipts went up during the boom, so they were talked into "taking advantage of debt load capacity," building boondongle new public schools that run up construction cost like the Taj Mahal, to the tune of about $100 million apiece on average! They are skyscrapers without the tall building to show for it, just like college student loans are like a mortgage without a house to show for it. $100mil is enough money to pay 100 teachers' entire teaching careers (don't forget the interest over 3-4 decades from that pile of money), if there had been no "public school" to force the townfolks to squander resources on boondongle buildings like that.

I shudder at the thought of what those monopolists would do when they get their hands on LVT or "fair tax."

@Marcus

"Education" vs. "learning" vs. "diploma and tenure mill" are three different concepts. Farmers in the 18th and 19th century America had to enter into all sorts of contracts that involved discounting of future cash flow . . . a skill that is sorely absent among today's general population as exemplified by the mortgage-financing fiasco. BTW, I learned calculus during Junior High, whereas my wife with her Master's degree in education (with certification to be a science teacher) never learned calculus.

The problem with Georgism is several fold:

(1) The concept of "land value" presumes unchanging economic conditions and homogeneous land. That might have been an approximation of reality in Henry George's time when 80+% of the population were farmers. In today's real life, the value of a particular piece of land can change dramatically due to general economic conditions, particulars in localities and new technological development. It is not possible for a government to designate "land value" without being wrong all the time. The market is constantly engaged in discovering "land value"; that's what the rental market is about: discovering the use value in real time. If modern Georgists are saying that the government is entitled to a tax that is the equivalent of the base value of the land as a hunter-gathering ground, perhaps 1/10 of a deer skin per acre, then I'd be fine with such a low tax as the only tax in the society. LOL. Anything more than that would involve the government bureaucrats trying to decide/discover land value. The performance of assessors in the last decade alone should tell us that it's not feasible. Even at only 1-2%, many assessor's offices around the country barely avoided destruction by distraught home owners / mobs. Any substantially higher per centage to replace all other taxes (including taxes on improvements on land) would quickly plunge society into chaos, simply due to differing points of views and taxpayment is compulsory.

(2) "Land value" is highly dependent on the improvements made upon it, even improvements made by neighbor, not just by the government. While roads are important to land use, something like the presence of CalTech or Stanford can have enormous impact on the land value of surrounding lands. Neither institutions are owned by the government. So should Stanford or Caltech be entitled to collect a LVT on their neighbors?

(3) Because "land value" is highly dependent on improvements (on and off property), collecting rent is essential to the upkeep and upgrade of "land value." You can adversely impact your "land value" and that of your neighbor quite quickly just by turning your land into a dump. Improvements to land to enhance "land value" has to be carried out in a timely and efficient manner (in terms of ROI). The government monopoly is a poor candidate to manage that. Leaving land improvement/upkeep resources (that's what rent is) in the diversified hands of multiple layers of lease-holders / stake-holders is far better at discovering new opportunities and how to capitalize on them. In fact, even road building might be better left to private community organizations that coordinate people among themselves on a voluntary basis . . . much like how Stanford developed the Silicon Valley.

(4) The good news for the more social-justice minded Georgist is that: "new land" is actually made available as technology progress; it's called transportation and communication technology; they can turn lead into gold as far as prime land availability is concerned. So long as land in any particular location is not concentrated into too small a set of hands, competition among landlords do deliver fair value: the phenomenon of renting being substantially cheaper than owning in the past few years, despite government subsidies to homeownership, is proof of that the competitive market place is live and well. Concentrating all rent and land-improvement/upkeep resources into the hands of the government bureaucrats would probably be detrimental to the economy.