Podcast Summary
Challenging the Conflict between Capitalism and Socialism with Georgism: Georgism advocates for a land value tax, addressing land speculation to be pro-worker and pro-business, and solving the paradox of progress and poverty.
Henry George's philosophy of Georgism offers a unique perspective on economics that challenges the long-standing conflict between capitalism and socialism. Georgism advocates for a land value tax, which targets unimproved land value, and views land as a scarce resource causing inequality. Georgist theory argues that control over land has been the oldest struggle in human history, and the fundamental insight is that we can be pro-worker and pro-business by addressing land speculation. Lars Doucet, a game developer, was drawn to this idea due to his experiences dealing with decentralized rent seekers in the gaming industry. The essence of land speculation is that those who control access to a scarce resource, like land, can charge rent, creating a paradox of progress and poverty. Georgism aims to solve this paradox by taxing land value and redistributing the revenue.
Virtual worlds face housing crises and land speculation: Virtual worlds, like real worlds, experience housing crises and land speculation. Georgist argument for taxing unimproved land value targets rent-seeking and encourages production.
Virtual worlds, much like the real world, can experience housing crises and land speculation. This was observed in a game the speaker played decades ago, and the trend has continued in more recent online games and crypto projects like Axie Infinity, Decentraland, The Sandbox, and Bored Ape Yacht Club. The speaker, who worked as a video game analyst, predicted this would happen and was proven right. The Georgist argument for taxing unimproved land value is based on the idea of taxing unproductive rent-seeking and encouraging production. The speaker argues for taxing monopolies and rent-seeking before considering other taxation methods.
Taxes on the worst things in society and resources: Consider implementing taxes on land value and natural resources to encourage productive use and reduce reliance on traditional income, sales, or capital taxes. Land value tax targets unimproved land, while severance tax focuses on natural resources.
Instead of relying on traditional taxes like income, sales, or capital taxes, we should consider implementing taxes on the worst things in society and resources, such as land value tax and severance tax. The argument is that these taxes can come from a "much better somewhere" and reduce the need for the downsides of other taxes. Land value tax specifically targets unimproved land and encourages productive use, while severance tax focuses on natural resources. Property owners may not be incentivized to make the most productive use of desirable land due to the potential for land appreciation and the negative value of building on vacant land or teardown properties. By implementing these taxes, we can focus on taxes that target rent-seeking and monopolies before turning to more complex and subjective taxes like those based on the value of time or opportunity cost.
The scarcity of specific locations drives up land prices: The scarcity of desirable land locations contributes to high demand and rising prices, emphasizing the importance of efficient land use and sharing.
The scarcity of specific locations and the urban agglomeration effect contribute to the high demand and value of land, leading to rising land prices and the phenomenon of land banking. This is due to the negotiation power of landowners and local regulations, as well as the desirability of human relationships and proximity to other people in urban areas. Contrary to a scarcity mindset, the abundance mindset of Georgism suggests expanding our thinking to include the possibility of utilizing more land, such as the seas, air, and space, and learning to share land to promote growth and development. While there may be plenty of land in total, it's the specific locations that are truly valuable and scarce.
Exploring the Impact of Frontier Expansion on Economies and Mindset: Frontier expansion brings new opportunities and value but comes with costs and eventual closure. Georgism, an economic theory advocating for land value taxation, can help unlock abundance by recognizing potential new frontiers and their costs. However, finding new frontiers with minimal negative consequences is crucial.
The concept of a frontier and its expansion plays a significant role in shaping economies and the abundance mindset. Frontier expansion, such as the settlement of the American West or the invention of the automobile, brings new opportunities and value, but comes with costs and eventual closure. Georgism, an economic theory advocating for the taxation of land value, can help unlock an abundance mindset by recognizing the potential of new frontiers and the need to pay for their costs. However, the challenge lies in finding new frontiers that don't come with significant negative consequences, such as the displacement of indigenous peoples or environmental damage. The current trend of remote work and telecommuting, while offering some benefits, has already led to increased demand for suburban housing and higher prices, making it a weak semi-frontier that has already closed for many. To truly unlock abundance, we need to find new frontiers that provide significant value without causing harm to people or the planet.
Value of land and resources not fully captured in tax systems: Implementing a Land Value Tax (LVT) to capture under-taxed land value faces challenges, including potential discouragement of discovery and innovation, but a compromise of a high, not 100%, LVT is suggested. Successful resource models show that subsidies can incentivize efficient use without discouraging discovery.
The value of land and natural resources is not fully captured in conventional tax systems, leading to a potential subsidy for those who identify and develop valuable land. However, the implementation of a Land Value Tax (LVT) to capture this value is not without challenges. Critics argue that a 100% LVT could discourage discovery and innovation, but this extreme is not advocated by most Georgists. Instead, they suggest a compromise of a high, but not 100%, LVT. Additionally, the successful Norwegian petroleum model shows that subsidizing discovery and development can incentivize companies to use resources efficiently without discouraging discovery. While some argue that speculation can reduce price volatility, it's important to remember that we cannot create more land or non-renewable resources, making their speculation potentially harmful. Empirical evidence suggests that land speculation leads to constant increases in land values, rather than stabilizing them.
Historical Real Estate Price Trends and Their Implications: Rising residential real estate prices driven by productivity and speculation lead to economic inequality, pollution, and climate change. A transition to a Georgist economy through a land value tax could address these issues, but must be done incrementally to avoid financial instability.
The historical trend of rising residential real estate prices, driven by productivity and speculation, has significant implications for economic inequality, pollution, and climate change. While speculation plays a role in markets, the market's upward trend implies a transfer of income from renters to landowners, which could lead to social and political instability. Implementing a land value tax could potentially lead to financial instability, but the transition towards a Georgist economy must be incremental. The comparison is drawn between the economy based on slavery in the past and the current economy based on land ownership, emphasizing the need for change despite potential challenges.
Ricardo's Rent Theory Explains High Land Prices: Ricardo's Rent Theory explains why desirable locations have high land prices due to competition among tenants for productivity and amenities, with landowners increasing rents up to the margin of production.
The scarcity of desirable locations, such as urban areas, drives up land prices as people bid against each other to secure proximity to productive capacity and desirable amenities. Ricardo's rent theory explains this phenomenon, stating that the value of an area's productivity and amenities gets soaked into land prices, forcing competition among tenants. Landowners can increase rents as more land gets privatized, up to the margin of production or subsistence level. This theory helps explain why property values in desirable areas, like San Francisco, are high but not at subsistence levels or the margin of production. Over the long run, productivity booms in these areas can drive up land prices even further.
High cost of living in productive areas disproportionately affects lower productivity individuals: High rents in productive areas burden the working class and young people, while wealthiest individuals accumulate wealth through various means, including real estate investment. A potential solution is to shift societal subsidies towards super-productive individuals and companies, but this could be seen as regressive.
The high cost of living in productive areas, such as San Francisco, creates a situation where higher productivity individuals benefit from the high income they earn, while lower productivity individuals are priced out and forced to live in less productive areas. At the same time, the wealthiest people in society, who are often not landowners, are able to accumulate wealth through various means, including real estate investment. The high rents paid by workers in productive areas are a significant issue, disproportionately affecting the working class and young people. A proposed solution is to shift societal subsidies away from upper-middle-class landowners in urban areas and towards super-productive individuals and companies, in order to ease the burden on these entities and allow them to continue innovating. However, this solution could be seen as regressive as it shifts the subsidy from the upper-middle class to the tech billionaires. Ultimately, the issue is the high rents, rather than the existence of billionaires, and addressing this issue could lead to a more economically efficient and equitable society.
Land Wealth in Urban Areas: Concentrated in Commercial Real Estate: A land value tax primarily targets underutilized, valuable commercial real estate in urban areas, redistributing wealth and funding public services
The majority of land wealth in urban areas is concentrated in commercial real estate, particularly in central business districts. This is where the most valuable land is located, yet it is often underutilized. A land value tax would primarily affect those who own this valuable but underutilized land, and not the average upper middle class Americans or hardworking industrialists. The discussion also touched upon the historical example of land reform in Asia, where distributing land to those who could make the most productive use of it led to economic growth. However, the challenge lies in the fact that those who improve the land may face increased rents due to Ricardo's Law of Rent. The goal of implementing a land value tax is to collect revenue for public services, but it is not intended to replace existing taxes or serve as a Universal Basic Income.
Implementing UBI and funding existing programs with a land value tax: A land value tax could potentially generate trillions annually, covering UBI and existing program costs, but concerns must be addressed through tax reforms and starting in states with separated property taxes.
Implementing Universal Basic Income (UBI) and fully funding existing programs like Social Security, Medicare, Medicaid, and defense through a land value tax could be possible, but it depends on the amount of UBI desired and the extent of taxes replaced. A land value tax could potentially raise trillions of dollars annually, enough to cover these expenses and leave room for more. However, concerns about regressivity and implementation could be addressed by implementing UBI alongside tax reforms, such as replacing property taxes on buildings with land value taxes. This approach aligns with libertarian ideologies by reducing taxes on productive capital and income, and potentially increasing revenue through the Atkore theory. Starting with reforms in places like Texas, where property taxes on buildings and land are separated, could be a plausible path to implementing a land value tax.
Critiquing Government's Role in Favoring Landowners: Milton Friedman endorsed land value taxes as least intrusive, but transitioning away from income taxes could be difficult due to potential backlash from those who benefited from asset value increases.
Georgism, an economic theory advocating for the taxation of land value, critiques the historical role of government in protecting the interests of landowners. Milton Friedman, a champion of limited government and free markets, endorsed land value taxes as the least intrusive tax, as income tax can lead to privacy invasion and a surveillance state. Crypto, which could potentially make transactions untraceable, might force governments to rely on land value taxes as the primary source of revenue. Transitioning to such a system could be challenging due to the concept of transitional gains trap, where those who benefited from an asset before its value was fully realized may feel unfairly affected by its abolition.
Implementing a Land Value Tax System: Balancing Fairness and Productivity: A revenue-neutral property tax shift, where buildings are exempted but the same amount is collected from land, can help ease the transition to a land value tax system without harming current property owners. Regular property tax assessments and accurate determination of land value are crucial for successful implementation.
Implementing a land value tax system, while fair and productive in the long run, requires careful consideration and calculation to avoid negatively impacting current homeowners and property owners. A potential solution is a revenue-neutral property tax shift, where buildings are exempted from taxation, but the same amount is collected from the land. This approach, combined with a modest citizens dividend, can help ease the transition without screwing over current property owners. However, there are challenges in determining the actual worth of unimproved land and the potential societal effects of decreasing land prices. Empirically, if the land selling price has dropped to 0, then all land rents are being captured. If it's above 0, then not all rents are being captured. To effectively implement this system, property tax assessments must be updated regularly, and the difference between land and improvement prices must be determined through multiple regression and geographic weighted regression. Additionally, having a rental registry would help keep even better track of rents. Overall, while there are challenges in implementing a land value tax system, the benefits of a more equitable distribution of wealth and productivity make it a worthwhile pursuit.
Startup GLA Solutions aims to modernize property tax assessments: GLA Solutions uses advanced tech and research to modernize property tax assessments, increasing transparency and fairness, addressing regressivity issues and moving towards open source models.
The speaker is starting a new startup, GLA Solutions, focused on improving municipal property tax assessments using modern methods and research. The current state of property tax assessment practices is behind, with many offices using outdated cost approaches and infrequent reassessments. This leads to regressivity issues, with landlords often under assessed and minorities and low-income individuals over assessed. The speaker aims to address these issues by implementing the latest mass appraisal technology and research, increasing transparency, and moving towards open source models and open data. Despite concerns about potential corruption with land value assessments, the speaker believes that transparency is key to ensuring accuracy and fairness.
Challenges in implementing land value taxes: Implementing land value taxes involves addressing hidden assets, potential impact on property rights, and balancing resource exploration and preservation.
The implementation of land value taxes, while promising in terms of transparency and potential reduction of corruption, comes with challenges. One of the main concerns is the existence of hidden assets, such as oil or minerals, which may not be declared to the government to avoid taxes. This issue is particularly relevant in areas where mineral rights and land rights are not united, like in Texas. Another concern is the potential impact on countries or regions with strong contract and property rights, as the implementation of land value taxes might be perceived as a breach of those principles. The speaker also mentions the need for a balance between incentivizing resource exploration and preservation, using examples from England's treasure law and Spain's approach to sunken treasure. In summary, while land value taxes present an intriguing solution for fairer property taxation, careful consideration and balance are necessary to address potential challenges and maintain economic stability.
The importance of trust in the economy despite change: Historical instances of broken agreements and rule changes don't necessarily destroy trust if proper compensation is provided. Long-term gains may require short-term losses.
The rule of law and the consistency of agreements are crucial for maintaining trust in the economic system, but change is not inherently destructive to that trust. The speaker acknowledges historical instances of broken agreements and changes in rules, but argues that proper compensation for those affected by such changes can help mitigate any potential damage to trust. The speaker also distinguishes between seizing land and raising taxes on it, and suggests that sometimes, it may be worth accepting short-term losses for the sake of long-term gains. The discussion also touches on the applicability of George's principles to digital assets and the importance of recognizing when something functions like a land-like asset in those contexts.
Applying Economic Principles of Henry George to Digital Assets and Virtual Real Estate: Henry George's Land Value Tax can be applied to digital assets and virtual real estate to prevent rent-seeking and encourage efficient resource use, but challenges include identity issues and long-lived copyrights and patents. Georgism is also relevant to space exploration and settlement.
The economic principles of Henry George, specifically the Land Value Tax (LVT), can be applied to various forms of digital assets and virtual real estate, such as domain names, virtual worlds, and even chart positions on user-generated content platforms. The LVT can help prevent rent-seeking and encourage efficient use of resources. However, there are unique challenges in applying these principles to digital assets, such as issues of identity and confusion with similar names. Additionally, long-lived copyrights and patents can act as monopoly assets and hinder progress. The concept of Georgism is particularly relevant to the future colonization of space, as it can help prevent the monopolization of resources and encourage exploration and settlement. The international outer space treaty currently prohibits the claim of interstellar bodies as national territory, and applying Georgist principles to space could help establish an equitable system for resource use.
Applying Georgism to Copyright and Land Ownership: Georgist policies, focusing on land value and rent seeking, can be applied to copyright and land ownership. Shorter copyright terms and property tax reform are suggested to encourage new ideas and reduce resistance from homeowners. Constitutional challenges may arise, requiring education and advocacy to address.
Georgism, an economic theory focused on land value and rent seeking, can be applied to various issues including land ownership and copyright. The discussion touched upon the complexities of copyright, particularly the intrinsic value of ideas versus improvements. It was suggested that copyright terms should be shorter to encourage new ideas while allowing older ones to become part of the cultural commons. Regarding the political feasibility of Georgist policies, it was noted that while there may be resistance from homeowners, the idea could gain traction as property tax reform. The example of Texas, with its history of property tax reform efforts and the existence of a single tax mayor in Houston, was cited as evidence of the potential for Georgist policies. However, constitutional challenges could pose obstacles, and it's essential to address these issues through education and advocacy.
Land Value Taxes: A Popular Coalition for Property Tax Reform?: Land value taxes, which target the value of land instead of buildings, are gaining popularity as a property tax reform solution. Proponents argue it's politically feasible and aligns with the community's role in determining land value. However, the 'Disneyland question' about large landowners remains unresolved.
There's a growing interest in implementing land value taxes as a form of property tax reform. Proponents argue that it's politically feasible, especially when pitched as a way to reduce overall property taxes. They believe that targeting land value instead of building value could create a popular coalition, as people are generally concerned about high property taxes. Furthermore, the idea of taxing land to fund local amenities aligns with the notion that the value of land is largely determined by the community around it. However, there's a complex issue regarding large landowners, such as Disney World, who contribute significantly to the value of their land. In such cases, it's debated whether they should be entitled to all the proceeds or if the community should still benefit. This concept, often referred to as the "Disneyland question," is actually a common topic of discussion among Georgists, and they argue that these private entities function as the government or community in those situations. Overall, the idea of implementing land value taxes is gaining traction, with various organizations and cities exploring the possibility.
Alternative land governance for community benefits: Georgism proposes government collection of rents to generate community wealth, with potential solutions like charter cities, starter cities, or ground leases.
The traditional role of private landowners in collecting rents and managing land use can lead to inefficiencies and negative outcomes for communities. Georgism proposes an alternative solution where the rents are collected by the government, and the community benefits from the wealth generated. This shift in perspective changes the governance question and requires considering new approaches like charter cities, starter cities, or ground leases. The ultimate goal is to ensure that rents are collected effectively and equitably, and that the wealth generated from land is shared among the community. The speaker, who is a game developer, is currently working on a startup, Geoland Solutions, which aims to improve municipal mass appraisal practices to make them more accurate, efficient, and transparent, potentially paving the way for Georgist principles.
The Importance of Accurately Measuring Land Value: Measuring land value accurately is crucial for addressing economic issues and promoting social justice. Georgism offers a new perspective on economics and challenges readers to reconsider their assumptions.
The value of land is a significant issue that deserves our attention, as it can have a major impact on economics and the distribution of wealth. The author, Lars, is passionate about making Georgism practical by accurately measuring the value of land. He believes that this is crucial for addressing multiple diseases in our economic system, even if it doesn't cure all of them. The book "Land is a Big Deal" delves deeper into this perspective, offering a new perspective on economics and challenging readers to reconsider their assumptions. Lars is currently working on tools to help measure land value and make Georgism a viable solution. If you're interested in economics, economics history, or social justice, this book is a must-read. You can find Lars on various platforms, including his website, Twitter, and a series of articles on Gameofrent.com. Don't miss out on this thought-provoking read!
