From Wikipedia:
In economics, a monopoly exists when a specific individual or an enterprise has sufficient control over a particular product or service to determine significantly the terms on which other individuals shall have access to it.
Monopolies are thus characterised by a lack of economic competition for the good or service that they provide and a lack of viable substitute goods. The verb "monopolise" refers to the process by which a firm gains persistently greater market share than what is expected under perfect competition.
Monopolies, monopsonies and oligopolies are all situations where one or a few entities have market power and therefore must interact with their customers (monopoly), suppliers (monopsony) and the other firms (oligopoly) in a game theoretic manner - meaning that expectations about their behavior affects other players' choice of strategy and vice versa. This is to be contrasted with the model of perfect competition where firms are price takers and do not have market power.
Monopolists typically produce fewer goods and sell them at a higher price than under perfect competition, resulting in abnormal and sustained profit.
Assuming the above to be a reasonable summary of monopolies, can anybody seriously claim that land-ownership is not a monopoly?
And however much it is chopped up, it is still a monopoly. Even if somebody only owns a fairly standard house similar to hundreds of others in their area, that does not make it anywhere near 'perfect competition' that just means that people only have very small shares in a larger, overall monopoly.
By analogy, if a company has a monopoly (and there are very few real life examples), then the fact that is happens to be quoted on the Stock Exchange and so people can buy and sell small shares in it, does not stop the company itself having a monopoly. There may well be a free market in the company's shares, and the individual shareholders are in perfect competition with each other when it comes to buying and selling; but what they are buying and selling is a share in the underlying monopoly profits, without which the shares would be worth a lot less.
Saturday, 26 June 2010
Monopoly
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22 comments:
...and it being a monopoly, means it cannot be a very efficient market either. Which it ain't.
So if I buy something I monopolise it? Property is theft........
Anon, isn't it profit that's theft?
L, exactly.
Anon, ownership of most physical objects is of course not a monopoly as the factory can always make another one. Which is why you cannot become wealthy by merely owning a car or a hi-fi or a lawnmower or indeed a pile of bricks and timber stored in somebody else's yard.
Neither property nor profit are theft if they arise from free exchange of goods and services, I have never said anything else. In fact, it is the taxation of non-monopoly income that is theft.
I'd have said that the expression was better applied to something like the NHS.
Now there's a classic case of an inefficient organisation supplying a second-rate product at high prices.
Anon, just because the NHS (or education) is a taxpayer-funded state near monopoly does not stop land ownership from being a monopoly. That's two entirely different topics.
But if we are agreed that state-protected monopolies are a bad thing, and that they unduly benefit incumbents, how do we address these?
1. We can fix the NHS quite simply by disbanding it (healthcare provision is about as far from being a natural monopoly as you can get). Whether or not there should be state subsidies for healthcare is a separate debate (and I believe there should be, but I'm not going to fight over it).
2. As the (state protected) right to exclusive possession of land is in and of itself A Very Good Thing Indeed, why not maintain that state protection but ensure that people do not make private gains therefrom (basically by renting out or selling those rights) by simply taxing land values (rather than non-monopoly incomes and profits)?
I've finally realised why I have a visceral opposition to LVT.
It is one step removed from Communism.
Under Communism, all land belongs to the State, and people are allowed to rent it from the State at a rent decided by the State. If the State decides your house is in the way of a coal mine, economic efficiency decrees that the fact you have lived here for decades means nothing, you are out on your ear.
Under LVT, while land owners are permitted a 'title', in effect you are merely renting it from the State for the LVT, and the State also decides what level of LVT it will charge. If the State decides your land could be more efficently used for some other purpose than you are using it, it will tax you accordingly. You either pay up or have to sell up. The effect is much the same - in both cases you are forced to move when you didn't want to. The collective (the State) has the whip hand over the individual.
All taxation is extortion really, demanding money with the threat of violence (who would pay tax if there was no penalty if you didn't?), but LVT is the worse sort of tax because it is not related to any cash you may have - at least income tax is only payable on income you have had, ditto CGT, and VAT & duties are only paid when you pay someone else for something. LVT is in no way related to your ability to pay, and as such is arbitrary, unfair, and oppressive. Just like Communism.
Admit it - you are really a 'all property is theft' merchant aren't you?
Sobers, it boils down to three basic observations:
1. Taxation of non-monopoly incomes is theft.
2. Income from land depends on the existence of 'the state'.
3. Those who benefit most from the existence of 'the state' should pay for it.
"LVT is the worse sort of tax because it is not related to any cash you may have - at least income tax is only payable on income you have had, ditto CGT, and VAT & duties are only paid when you pay someone else for something.
LVT is in no way related to your ability to pay, and as such is arbitrary, unfair, and oppressive. Just like Communism."
Yeah, but the vested interest land- and home-owning classes use the power of the state to feather their own nests. The two are synonymous. You cannot have a state without land ownership (even if all land nominally belongs to the state); and you cannot have landownership without the state.
As to 'ability to pay', what a load of rubbish. If you decide to rent or buy somewhere, that depends on your 'ability to pay'. The people with the highest incomes end up in the nicest houses (and rightly so, that is the whole point of having a high income) - with or without LVT.
Would you say that house prices or rents are "arbitrary, unfair or oppressive"? If you are being logically consistent, then you must say that as well. And which vested interest group is using the power of the state to ensure that they are? It is the landowners, for whose benefit the state exists.
And if people don't want to pay LVT, then fine, just remain a tenant; if they put up the LVT to what you think is an unfair amount, then you can just move, can't you? What have you lost? LVT goes with the grain of free markets and not against it.
And as under LVT everybody would be (in economic terms) simultaneously tenant (of where he lives) and landowner (because the LVT goes into a common pot for everybody's benefit), what is wrong with the state ensuring that certain bits of land are put to more efficient use? Is that any different to a landlord letting his premises to the person who bids the highest rent?
As to 'just like Communism' can you explain to me how taxation of incomes and profits is not 'just like Communism'? Can you explain how NIMBY planning restrictions are not the worst kind of 'planned economy'?
Has there ever been perfect competition?
Would it not be slightly more accurate to think of landownership (home-owner-ism/rent seeking if you prefer) as a state sanctioned cartel? BTW I accept that 'The State' is us, it being a convenient adminsitrative fiction by which we can better organise our lives.
The whole point of ownership of something is monopoly. You and you alone decide what happens to that posession.
I own a car. I can park it on my driveway and use it every blue moon, or drive it hundreds of miles a day. And if my neighbour has no car, he has no right to use my car if I am not using it, however 'unfair' that may seem. It might be 'economically efficient' to say 'you are not using your car to its potential, so we (the State) will allow others to use it in a more efficent manner'. But we don't say that do we? Because that would be Communism wouldn't it? The 'communal' ownership of assets, to be used in accordance with some over-arching central plan.
My 'possession' of a car gives me a monopoly over a small percentage of the resources of the planet - metals, plastics and the energy used to refine those metals, and manufacture the car. Those resources are mine, to do with as I please. It could be a TV, a computer, a lathe, a tractor, the materials that constitute a house, whatever. By owning them I am denying the rest of humanity the use of that resource. I can destroy them if I so choose, or use them, or recycle them, or rent them to other people. No one decrees that I must use the resources my possessions represent in the most economically efficient manner.
Land is no different. It is in limited supply, yes, like the natural resources we consume and make into items for our use. In fact as you cannot destroy land (in normal usage) it should be less subject to controls over its use than natural resources which are both finite and destroyable (and in the case of carbon fuels are produced to be destroyed for our benefit). It would make more sense to levy a tax on physical goods so as to ensure that items are not wasted or sit idle. If having a TV sitting unwatched in your spare bedroom attracted an ongoing annual tax (along with every other item you owned) it might encourage people to consume less of the planets resources.
I don't advocate such a tax. But it would make more sense, and have more rationale, than LVT.
As for your other points:
1)Rents for property are no more arbitary or unfair than rents for any asset. I can own a car, or rent one from someone else. What is unfair about that? If I wish to use someone else's asset, I must compensate them for depriving them of said asset. House prices are the same as any other prices. Supply and demand - lots of people want a Porsche, not many about + high price. Loads of Ford Kas + not so desireable to drive = lot lower price. Houses are no different.
2)Taxation of income and profits would not exist in an ideal world. I regard taxation of almost any sort as legalised extortion with menaces. However we live in the world we live in, and the State and taxation are a facts of life, however much we might like them not to be. So if we have to have taxes, at least make them ones that are related to peoples ability to pay them.
3)Planning restrictions should be abolished entirely. I do not support them at all.
I notice you do not deny that LVT represents the destruction of the concept of private property, and the effective introduction of the communal ownership of all land? If I cannot have the monopoly ownership of a piece of land, why can I have the monopoly ownership of other physical assets? Or do you deny the right to 'own' anything at all?
JH, no. But there is a sliding scale between 'nearly perfet' and 'absolutely bloody miles therefrom'.
L, yes, 'the state' is also shorthand for 'a set of mutually beneficial rules', the key is ensuring that every person who abides by those rules benefits equally.
S, does the value of a car derive solely from a state- protected monopoly? is the ownership of an R-reg VW Gold with 62,000 miles on the clock in any way a monopoly?
Answer = no.
Has any serious land value taxer suggested a tax on car values?
Answer = No.
"you do not deny that LVT represents the destruction of the concept of private property,"\
Typical Home-Owner-Ist cant. There is 'private property' in the true sense (the ownership of the profits derived from your own skills and labour) and there is 'private property' in the Home-Owner-Ist sense (monopoly rights created by and enforced by The State).
Just imagine that 'the state' sold off the right to use the letter "h" to a new class of rent seekers. Would that make us richer or poorer?
Has any serious land value taxer suggested a tax on car values?
Wel, yes. Sliding scale road fund licence spuriously justified by 'carbon emmissions' could perhaps be looked at as a sort of LVT, as is the 'showroom' tax. The higher price cars tend to use more fuel (which is sort of 'land'). The higher taxed cars tend to depreciate more quickly which is the RFVT working just like it would on property. This is excellent because it allows blokes like me access to the used car (aka used home) market at a reasonable price as long as I am happy with the maintenance costs - aas would be the case with a bigger house.
Just a thought.
Sorry, PS. To understand the analogy you have to acknowledge that houses (the built environment in general) depreciates like cars do. Just a lot more slowly.
Mark,
You're brilliant no doubt but there's something you're missing here. The figures and theory may look brilliant on paper but in the real world when you give any government powers to tax assets there would be no stopping them. Pandora's box would be opened.
Don't forget, having no pensions to speak of (unless you're in the public sector) the only option people have now for a reasonable retirement is through the home ownership that you seem to dislike so much.
If you could concentrate on solving the pensions crisis you would benefit mankind!
Crazy thing is that a Citizen's Dividend funded by the LVT would completely defuse the pensions crisis, so he's already solved it. And as for asset taxing, that was far more common 200 years ago than it is now, so experience demonstrates that it is pretty straightforward to stop the government taxing assets. In fact governments would rather tax transactions since the majority of them are carried out by people who can't afford to fight the taxman. So transactions provide much easier tax pickings than assets for a government.
L, the annual car tax is a bad tax, the much better analogy is with fuel duties, which is exactly like LVT. The more road space you use, the more you pay. The more valuable road space you use (i.e. the popular bits, which get congested, hence you use more fuel traversing them), the more you pay.
Anon, that's advantage number 237. A tax on land values is open, honest and in your face. So there would be every bit of 'stopping them', as Derek points out.
The government claims that the VAT hike will raise £13 billion, and people grumblingly accept it. Just imagine that the only way they could have raised another £13 billion was to stick 50% on Council Tax - it wouldn't have happened, would it?
And what makes you think I 'dislike homeownership'? It is a splendid way of arranging things. What I dislike is that the people who want to own homes first have to pay vast amounts in income tax, and out of what they have left, they have to pay vast amounts for the scarcity value of land. They are being taxed twice (and indeed paying rent for things which they have funded through their own income tax). LVT is the only tax system without double taxation.
D, thanks for back up.
MW. Yeah. Sorry not thinking again. But I was getting there!
Probably right. On the whole, monopolies raise prices, produce less output, more badly for more effort
But they do allow the monopoly holder to take a greater proportional share of this smaller production outcome from the whole. This is why monopolies are attractive to the individual or corporation. Through the monopoly they gain power in proportion to the whole. But less power to produce is delivered absolutely. This may be why societies promoting monopolies tend towards decline. Or at least do not advance as fast as expected due to frequent collapse. As can be seen all around.
I would say each house is a monopoly on that particular piece of land.
"Just imagine that 'the state' sold off the right to use the letter "h" to a new class of rent seekers."
Or imagine that the State charged LVT ("Letter Value Tax") on it on the grounds that nobody who used the letter "h" had created it by his labour!
AC, you failed to grasp the analogy.
Nobody suffers because we don't invent more letters to add to the alphabet. A lot of people suffer because NIMBYs (out of naked and petty self-interest) prevent more factories, roads, power stations or houses from being built.
So why not slap a tax on those people imposing suffering on others? Why not tax Bad Things instead of taxing Good Things? That way the pie gets bigger and the NIMBYs are taxed on a relatively smaller share?
They have to both sort of. Its called copyright.
People can combine words and for a time be protected by the state on those combinations. That may be OK so long as it the combination of words is all that is protected not the words or letters themselves individually. Its when the copyright is bought and resold (traded) that the injustice starts.
On the Letter VT this is also in action. Nobody pays it because nobody collects any rent by using it. Letters are common property and so are free for all. There is no scarcity so the problem never arises.
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