Sobers again, who launches the occasional 'sophisticated' argument in favour of taxing incomes and against taxing land values...
"I think I have conclusively proved that incomes ARE intimately linked to the type, size and level of sophistication of society, and as such, IMO, are perfectly fair game for taxation."
1. Yup, it is indisputably true that "incomes ARE intimately linked to the type, size and level of sophistication of society", so seeing as taxes are raised to pay for things which are of benefit to that self-same society, would it not be nice if we could just tax (a) the extra incomes which arise because of "the type, size and level of sophistication of society", rather than taxing (b) truly 'earned income' (i.e. that which owes nothing to "the type, size and level of sophistication of society") or those incomes which are required to pay for the basic essentials (however defined)?
2. Methinks yes - it's just a question of somehow splitting gross incomes up into (a) and (b). This could easily be done on an intellectual level, but actually working out the split for each worker or businessman and each type of income would be administratively impossible and subject to far too much guesswork (how would you deal with overtime, for example?).
3. Luckily - there is absolutely no need to look at individual incomes, as the land market carries out this split for us: all (or nearly all) income in excess of (b) goes straight into higher land values, i.e. (a). We know that human beings are more or less the same in terms of innate abilities etc in all parts of the UK, and we have free movement of people within the UK, so the only explanation for the massive differential in gross incomes must be different levels of "sophistication of society" in different areas (be that transport infrastructure, or the fact that some industries have died off and others become more important, better schools in some areas than others etc).
We can easily illustrate this by looking at actual figures for average incomes and average house prices (or rents) in all local authority areas and there is a very high correlation - you can guesstimate the average price of a semi by deducting a 'personal allowance' of about £7,000 from the average wage and multiplying it by 10, for example; or if you want that expressed in terms of rental values, it's average wage minus £7,000 times forty to fifty per cent (sure, for a two earner household, the rate is twenty to twenty-five per cent).
4. Income tax (and National Insurance, and indirectly, VAT) are calculated in exactly the same manner, so people are paying two kinds of income tax; official income tax paid to the government and privately collected income tax on the extra value generated by "the type, size and level of sophistication of society".
5. So as a matter of simplification, would it not be easier to roll the two into a Single Tax on land values, which collects the same amount of money from the same people, while preventing the 'private state' from siphoning off a large chunk, by simply taxing rental values (or their close proxy, house prices), thereby reclaiming for 'society' exactly that which Sobers agrees was generated by 'society' and is thus fair game for taxation?
Sunday, 17 April 2011
Killer Arguments against LVT, not (114)
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32 comments:
He's actually a bit arse-about-face. The "sophistication" of a society is quite dependent upon having the right incentives. Haiti's dirt poor because owning land is a pain in the arse, and there's masses of corruption in government, so no-one starts anything but the most disposable business (which means no tourist hotels).
LVT of course helps this because it actually lowers disincentives.
JT, I covered Haiti here.
The problem you mention arises because there is neither LVT nor proper land registration - so everybody is claiming as much land as possible on the most tenuous grounds. If they had LVT, then nobody would claim more than he could sensibly use himself and so land registry would be a doddle.
Working out the right rate is easy, you just do a Dutch auction and the first to claim it (at the highest price) gets it.
JT is right about Haiti. More than $2 billion in aid has been provided for Haiti by Americans alone and yet the situation is still pretty bad for many reasons including the reasons that MW mentions.
There's another disaster where LVT made a very substantial contribution to recovery: the destruction of San Francisco by earthquake and fire in 1906. Miraculously the city recovered fast and thrived without a penny in aid. Was the election of a Georgist mayor shortly after the disaster a contributory factor? Could be...
Mason Gaffney has written a good article on the topic. It discusses San Fran and New Orleans but the central point is the same.
Quite by chance I just read that a Land Registry was proposed during the Commonwealth period in the Barebones Parliament so that "every man may see what is his and what is another's". It was opposed
"Thus may the State be intituled to most of the lands in England; hence will the Commonwealth swarm with informers, Prowlers and Searchers into others Titles".
The proposal failed
There were fierce debates when the Liberal government imposed a higher rate of tax on "unearned" income. The opposition spokesman, a Mr. Joynson-Hicks complained that all income was earned.
Joynson-Hicks had only acquired his double-barrelled name on marrying an heiress.
"I would liken unearned income" said Lloyd George "to the hyphen in the honourable gentleman's name".
The quality of debates was higher then, I think.
D, SF is an excellent example of how LVT-man can ride to the rescue in the most unlikely and extreme situations.
Ed, the irony being that the Normans did the whole exercise (Domesday Book) in double quick time when they wanted to tax the previous incumbents; the boot was on the other foot a few centuries later when it was descendants of the Normans deciding that frankly, they'd rather do without being taxed, thank you very much.
all (or nearly all) income in excess of (b) goes straight into higher land values, i.e. (a).
Mark, you're really going to have to get to grips with the fact that Ricardo was wrong about, well everything, but specifically about rentiers.
There is a type of Ricardian effect in a taxed'n'regged society, but it's rent seeking, not a law of market economics.
Value is inherently subjectivist. It is a law of the Universe that you can't split up (a) and (b). I actually agree with your general moral objections to the current rigged property market, but your economics is just flat wrong, which is why you keep getting the justifications for your tax, and how it would work, wrong.
Yea, I even (before getting barred) upset everybody at Samizdata by proposing a temporary super-LVT to wrest the land from the rentiers (I suggested that it was easier than sending in the War Veterans, you know) but it all still comes down to the fact that any organised group in the marketplace can rent-seek- landowners or employers or women or ethnic businessmen or train drivers- and only then does a market appear to exhibit a Ricardian effect.
Really. The whole theory that rentiers get all the value above "subsistence measured in corn" is erroneous stone age economics. It is simply not true.
Ian B, nice bit of straw man arguing there. Where did I say "rentiers get all value above subsistence measured in corn"? I used the rather more accurate "basic essentials, however defined".
And I'm surprised that you say it's simply not true when it simply is true...
Figures for average salaries in each local authority area are easily available, as are figures for average price of homes. The correlation between the two is about 0.8.
There is another set of figures that Barclays produce every now and then on "the best place to live in the UK" they look at gross wages and net wages and net wages after housing costs (actual or notional) and they discover that net incomes after housing costs are flat all across the UK.
Of course, a lot of people have paid off their mortgage, so these people enjoy the GROSS income without having to pay the housing costs, so these people genuinely are better off for living in a high wage area - these people (sometimes disparagingly referred to as Baby Boomers are of course better off than new arrivals to the area).
So... I invite you to explain to us all
a. Why it is that there are such differences in gross wages in different parts of the UK
b. Why it is that there are such differences in house prices in different parts of the UK
c. Why there is such a near perfect correlation between the two.
d. Why similar effects can be observed in all countries in the world regardless of how sophisticated the society and have been observable for centuries.
As to your opinion that "value is subjective", maybe it is, maybe it isn't, but it is still easily measurable in £-s-d, and that's what matters.
IB, AFAICS, your argument (condensed) runs thus: Ricardo was wrong because the effect he attributed to ? is, in fact caused by the tendency of organised groups to rent-seek. This will happen in any taxed and regulated society.
Doesn't that mean he was right? Aren't all societies above tribal level taxed and regulated and regardless of the mechanism, the end result is the same? Isn't LVT simply rent-seeking in another form, this time by the state?
You can't split income into two bits - subsistence 'value' and everything else.
If I am a subsistence farmer I have no 'income' and my produce has no 'value'. I grow or hunt to eat. What I don't eat rots away. Thats it. No money, no income, no value.
Enter other people (society) and suddenly I have value - if I have excess food I may sell it (for whatever passes as money) or barter it. I suddenly have income, but only because there are other people around to 'buy' my production. Society creates value where none existed before.
And thus as society grows from a few cave men grouped together, to villages, to towns and eventually modern cities, the potential for higher and higher incomes grows with it, via specialisation and trade.
And thus as all incomes exist because of the existence of society, I see no reason why taxation of income is any more morally wrong than taxation of land (the ownership of which is also created by society).
And land ownership is not the only ownerships that society creates. It creates the ability to own anything, a legal framework for saying 'this is mine' beyond just fighting people for things.
And you will say 'but land is different, its finite, its zero-sum, you owning house A means I can't own house A'. To which I reply so is everything finite in the world, its just a matter of degree. There are a finite number of houses in the UK, and a finite number of cars and TVs. Yes we can manufacture more cars and TVs, but we can build more houses too. There is plenty of land to go around, even in the UK, as you often point out, only a small % is developed. As for the world, its massive. I'd be more worried about running out of other natural resources before land.
So the simple answer is tax incomes (preferably lightly, with a small State), and allow people to build houses where they like, and the whole house price bubble issue dissolves away.
S: From your example: "I suddenly have income, but only because there are other people around to 'buy' my production. Society creates value where none existed before."
On the facts, agreed.
Now, if you are a tenant farmer (assume short-ish lease), then very little of that extra income goes to you because the landlord claims it in higher rent in future.
So if we are to tax incomes, why not just tax the landlord's rental income, which has no damaging effect on the economy and is to all intents and purposes, the same as LVT?
For sure, some farmers are owner-occupiers, again, surely it is better to just tax the element of their income which relates to the extra income they can earn because of what "society" does at a high rate than to tax ALL their income at a lower rate.
(of course in real life, there's little point taxing farm land, I was just extending your example).
The 'liberalise planning' is a red herring. While I'm in favour of doing so, and while it may keep down houses prices at the very margin, what happens next is that the total rental value of all UK land goes UP!!!
LVT works just as well with or without planning restrictions.
S, to continue your example, maybe there are ten owner-occupier farmers in the vicinity of the new town whose earnings potential (i.e. land rental value) increases by (say) £10,000 a year.
We can happily tax that extra marginal 80% rather than taxing all their income from the first penny up at (say) 30%.
Income tax generally DEPRESSES output, but if we just have LVT and among those ten farmers there are one or two who are too lazy to take advantage of the potential extra income, then they will sell their land to a new farmer who is keen to do so - as a result, total farm output INCREASES.
What's not to like?
Whats not to like is that you are taxing potential, not actual income. Which in my view is unfair. If some of your farmers choose to avail themselves of the extra income that the new town provides, all well and good, they pay tax on it. If some don't why should they be taxed on what they do not have? They were quite happy jogging along before the new town, why should they have to sell up as a result of it, just because they don't want to do the 'economically efficient' thing?
And don't say they now have more value to their land, because a) that's paper money until they sell and b) it can be taxed at that point as CGT if they do sell.
No-one gets a bill they can't afford, or avoids paying a contribution to the extra value society has created, either by higher income or higher land sale prices. What's not to like (or is unfair) about that?
If I am a subsistence farmer I have no 'income' and my produce has no 'value'. I grow or hunt to eat. What I don't eat rots away. Thats it. No money, no income, no value.
If your produce has no value, then why did you grow it? Your income *is* what you grow, the fact that you effectively buy it from yourself is neither here nor there. (In essence, subsistence farmers are the original self-employed)
Note that there are two components to the amount of income (crops) that you receive: the work you put into tending the crops and the natural productivity of the soil/agreeableness of the environment. If the ground isn't as good, you must work harder and more ingeniously to get the same amount of crops. If it's not, then you can take it relatively easy, you get an improved yield without any extra effort on your part, entirely based on *where* you are. Sound familiar?
There are a finite number of houses in the UK, and a finite number of cars and TVs. Yes we can manufacture more cars and TVs, but we can build more houses too.
Not really, no. You can build more of the same structure but you cannot build more of the same location. Identical houses in different places within a market are worth different amounts, whereas identical cars and tellies cost the same. This is trivial to observe.
Land really is different.
Even if Ricardo was totally clueless, the fact is that LVT works on a purely practical level. And if Ian B doesn't like Ricardo, he can use good old subjectivist supply-and-demand diagrams to discover why. Hint: think of goods in extremely inelastic supply.
Rubbishing the Law of Rent may weaken the moral argument for LVT but it does nothing to diminish the other arguments for it. It would still be the least cheatable, the cheapest to collect, and the least harmful to economic activity for any given level of state spending. And that isn't just theory; it has been practically demonstrated.
So even if Ian B doesn't accept that there is such a thing as unearned income, he should still support LVT on the grounds that it would cost the economy less than any other form of taxation.
F, by definition, a subsistence farmer on a small plot of marginal land would pay no LVT either :-)
Also, cars and tellies become cheaper over time (certainly relative to wages), unlike land...
D, "Even if Ian B doesn't accept that there is such a thing as unearned income, he should still support LVT on the grounds that it would cost the economy less than any other form of taxation."
It's not clear to me whether the Faux Lib's are just the intellectual wing of Home-Owner-Ism (who want more income to be siphoned off by land owners and other monopolists) or whether they put certain vaguely defined principles ahead of pragmatism. They appear to prefer having a stagnant economy in a world run by landowners is better than a vibrant economy with LVT.
S: " If some don't why should they be taxed on what they do not have? They were quite happy jogging along before the new town, why should they have to sell up as a result of it, just because they don't want to do the 'economically efficient' thing?"
If they don't want to sell, but they want the more relaxed subsistence lifestyle, they can rent out their now much more valuable land, pocket the £2,000 net income and rent themselves a smaller plot elsewhere.
"And don't say they now have more value to their land, because a) that's paper money until they sell and b) it can be taxed at that point as CGT if they do sell. "
They do have more value to their land - they can make an extra £10,000 from the same land. Surely that land is now more valuable - the rental value has just increased by £10,000.
And under LVT there will be little or no capital gains (paper or realised) and no CGT either - CGT will be one of the first taxes to go as it DISCOURAGES efficient allocation of assets.
Derek, the point is this. LVT may well be a least worst tax. In the current situation, it may be a very good tax. I'm not disputing that.
But the fact that Ricardo's "law" of rent is simply wrong is vital when Mark and other Georgists get into trying to convince people that LVT is the only moral or justifiable tax, or that the laws of economics justify it on a general and eternal level; because they don't.
Ricardo is largely responsible for the whole erroneous trend of "class economics". Marx was a Ricardian. He used exactly the same arguments about unearned income, but switched classes from landlords and tenants to capitalists and proleteriat. Effectively, Ricardo's theory is agrarian and Marx's is the industrialism version. Both theories are simply WRONG. Not, in my opinion, but objectively wrong.
You can use the same arguments by defining any two antagonistic classes- men and women, train companies and passengers, whatever, and show that one is expropriating the other. All you have to do is ignore the reciprocity of trade, and hey presto, you have your class theory. I can prove that Mr Patel is gaining "unearned" income in his shop, because I and the rest of the local residents are provided "free", for instance. So long as you narrow your gaze to only half of each transaction- focussing on the class you don't like (Landlords, capitalists, men, Mr Patel) you can prove that they are all unfair benificiaries of an externality.
Like I said, it may be a good tax. But Georgists are using an antiquated theory of value that was blown out of the water by the marginalists, who demonstrated that value is individualist and subjective. Mark may like to believe that marginal utility is just an "opinion" but it isn't. It's a fact. Values are held in individual brains, change constantly, cannot be calculated from other facts about reality[1] and thus cannot be objectively assessed by the Georgists' army of assessors. It's a physical impossibility. It's also a fundamental economic fallacy believed by every crank from Marx to Monbiot; the fallacy of intrinsic value.
Mark cannot define subsistence. He pretends that my statement of it pure Ricardian terms- "subsistence in corn"- is a straw man. It isn't. Mark cannot define what subsistence is, he cannot measure unearned income- for there is none- and he cannot therefore economically derive his tax. He can argue that it's a least bad tax for various reasons. But the economic theory he cleaves to is rubbish, and has been known to be rubbish for 150 years. Even Marx couldn't finish Das Kapital, because he realised that the Marginalists had blown the whole theory out of the water.
[1] Basically, Hume's is/ought split in economic terms. No facts about the universe can tell you what the price of a loaf of bread ought to be.
Ian B: "I can prove that Mr Patel is gaining "unearned" income in his shop, because I and the rest of the local residents are provided "free", for instance. So long as you narrow your gaze to only half of each transaction- focussing on the class you don't like (Landlords, capitalists, men, Mr Patel) you can prove that they are all unfair benificiaries of an externality."
Mr Patel doesn't get the customers 'for free', as he pays higher rents where there are more customers. And local residents don't get Mr Patel's shop 'for free' because rents are higher where there are better shopping or work opportunities.
The value that one individual places on something is of course subjective - to me a Mozart CD is worthless, to a Mozart fan an AC/DC CD is worthless, so what? That doesn't mean that neither Mozart nor AC/DC CDs have market value, does it?
"Mark cannot define what subsistence is, he cannot measure unearned income"
I didn't say 'subsistence', I said a 'certain basic minimum', Nowadays that includes a flat screen TV, a car and a week's holiday abroad. Most people will curtail their housing spend if it means doing without these things, the land market only soaks up the excess.
"But the economic theory he cleaves to is rubbish..."
It's not a theory, it's observing actual FACTS and recognising patterns. E.g. when North Sea oil took off, it created a lot of risky, difficuly and hence well paid jobs in and around Aberdeen, and at the time they boasted that rents and house prices in Aberdeen had risen to London levels. It is also observable that when mines shut, that house prices and rents in former mining towns or villages fell.
I'm not sure whether you disagree with easily observable FACTS or my assumption that wage levels drive house prices, or more subtly, that wage levels above a 'certain basic minimum' go into higher rents on a £ for £ basis.
If you agree with the FACTS then how do you explain the relationship? Do you claim that high rents cause high wages, or that both are purely coincidentally caused by a third factor, and if so, what?
If you dispute the FACTS then there is little point having this debate.
... as to 'unearned income', imagine the landlord of a house in Aberdeen before and after North Sea oil started - he can now charge much higher rents for no extra effort whatsoever, I would refer to that as 'unearned income'. And for a landlord of a house in a mining area, the fall in income is an unearned loss (or a fall in unearned income).
You can refer to it how you like Mark. You can stick it in your cap and call it Macaroni. It doesn't mean your description is accurate.
All you've done there is discover that sellers can't set the values in buyers' minds. Congratulations. Keep going and you'll get all the way into the 20th century if you carry on like this.
Two artists, Alice and Bob. Alice finds she can sell pictures for $1000. Bob can only sell his generally for $200. One day, Bob becomes more trendy. people on the internets start liking Bob, and a bit of a cult of Bob starts. Now, he can sell his pictures for $1000 too. Unearned income?
What about Alice's income? How do we calculate the unearned proportion of hers? The difference from her first sale as a youngster, for $20?
You can't do it. You can't decide what the "just" rent is in order to calculate the surplus value. Same problem Marx had. He couldn't calculate the just wage, so he couldn't calculate the surplus expropriated. Without appealing to the absurdly arbitrary "subsistence". Which apparently is enough corn to survive on, a flat screen TV, and a holiday in Barbados or something.
Try another tack. You've said yourself (as Ricardo had to admit) that subsistence is variable. But how under your theory can it vary? If at some point T it doesn't include a flat screen TV, and the landlord is expropriating everything above a bowl of corn, how does the tenant get to push the TV into the definition? He can't ring the landlord and demand a rent reduction so he can buy a TV, can he? The landlord is a monopolist according to you so will just refuse.
Bit stumped here, aren't we?
Sellers can't set market values Mark. This is basic stuff. You're aware of Menger's analysis of monopoly, yes?
Ian B, your point about art works has little relevance as I never suggested taxing paintings. Alice, Bob and their buyers are competing in a free-ish market and can set any old price they like, this is of absolutely NO concern to the wider public or the real economy.
Conversely, if you want to have a gallery selling paintings, you will find that you get higher prices if you rent premises in certain streets in certain towns...
"Try another tack. You've said yourself (as Ricardo had to admit) that subsistence is variable. But how under your theory can it vary? If at some point T it doesn't include a flat screen TV, and the landlord is expropriating everything above a bowl of corn, how does the tenant get to push the TV into the definition... The landlord is a monopolist according to you so will just refuse.
Bit stumped here, aren't we? Sellers can't set market values Mark. This is basic stuff. "
No I'm not stumped at all. I agree - ultimately, sellers can't set market values (when did I say that?), although they can influence the clearing price by restricting supply (cartel behaviour, of which NIMBYism is one form), and in the context of housing, the HO cartel (which includes banks) can push up the price by loosening credit terms and the MSM and politicians can stoke a bubble (irrational behaviour which self-corrects over time) by wailing on about how important it is to 'get on the housing ladder.'
Of course, tenants and potential purchasers compete with each other (with whom else?) and it is this competition which sets the clearing price (within the confines of the restricted supply of housing in any location).
So if all tenants etc agree that henceforth a TV, car and one-week holiday abroad will be paid first, clearly the balancing figure soaked up by rents goes down. If all tenants and FTB went on a tenants or buyers strike and moved back in with their parents, then prices would fall, of course they would.
However, in a stable market, we observe that if wages are £10,000 higher in Town A than Town B, and there is free movement between the two towns, then the rent of a house in Town A will be about £10,000 higher than for an identical house in Town B. Simple theory, stacks up in real life.
Your observation that "sellers cannot set market prices" is quite true and compatible with the observation that "the basic minimum" changes over time (notwithstanding the whole property ramping propaganda that tells people to 'jump on the property ladder' and hence overpay etc) BUT BUT BUT these are both compatible with the basic and easily observable FACT that rents soak up the balancing figure, and that this balancing figure increases as a % of GDP as societies and economies become more advanced.
"You're aware of Menger's analysis of monopoly, yes?"
Nope, never heard of it. But I'm still arguing about basic observable FACTS here, let alone interpretations or theories.
In any event, you haven't denied the FACTS and I am not sure how you explain it other than applying basic logic and knowledge of human nature, which is that advancements in science, technology, society, whatever, all tend to flow through into higher land rents.
Nope, never heard of it.
AS I'd guessed. You've never really studied economics. Odd, for somebody who hangs out with libertarians. (In this sense admittedly, Georgists are like the definition of drummers as people who hang out with musicians).
You're not talking FACTS Mark. You're doing a primitive econometrics, and if you'd hung out a bit more with libertarians, you'd know that that is a flawed method. The economy is too complex to divine cause and effect by statistical analysis. You have to fall back on pure theory to understand what is going on.
So, we both agree that landowners are currently getting a vast amount of benefit. The question of why can't be discenred from that fact. You can't discern between rent seeking and Ricardo's Iron law.
So, you fall back on theory, then it becomes clear because, as I explained repeatedly above, Ricardo's Iron Law is plain wrong. Its theoretical basis is wrong. Rents are not set by subsistence, whether in corn or flat screen TVs. It simply isn't true. It's hard to explain why, in the same sense as the assertion "rents are set by the height of properties' hedges" is wrong, but hard to show why other than, well, there is no reason to believe that it is true.
Now, I know that you are a dishonest debater Mark, having debated you before. I still remember when I illustrated the absurdity of your theory with an analogy to a "whore value tax" to demonstrate that you can't tax potentia, and you went ahead and announced in a blog post that I was actually advocating such a tax, and refused to retract that calumny. So, I know you'll say anything to win an argument. Fair enough.
But, I did not suggest that you had suggested taxing paintings. Again, in that case, I was showing that what applies to the property sector can be applied to any other market sector, and that illustrates the fallacious nature of your argument. It also illustrates that market values are not set by sellers, but by buyers, and this is true for all products. Thus, if the buyers award a higher subjective value to a product- any product- this is not "unearned income". It is how the market operates. Oil had a low value until somebody other than oilfield owners awarded it a higher one by inventing the internal combustion engine. Guano had a high value until chemical fertiliser was invented.
The value of anything may go down as well as up, and the seller can do nothing about that.
Ergo. You can't pretend that a rental value rising due to an externality is an unjust income. It just is. A rental value may fall as well. All rental values, as with all market values, are just perceptions in the minds of potential purchasers; hence the importance of understanding marginal utility and the fact of that subjectivism.
So, if you're going to go on, I recommend spending less time writing economically illiterate justifications of your fetish, and trying a spot of RTFM. If you're too busy writing to read, I recommend this Joe Salerno video-
http://www.youtube.com/watch?v=UoeWfhg0P-I
All you have to do is ignore the reciprocity of trade, and hey presto, you have your class theory.
What exactly is this reciprocity of trade between land-user and landowner?
Values are held in individual brains, change constantly, cannot be calculated from other facts about reality[1] and thus cannot be objectively assessed by the Georgists' army of assessors.
??? This is a curious argument to be sure. How is VAT or Income Tax assessed, if value cannot be calculated from other facts about reality? Answer, the market provides the price signal and then the tax is applied. For sure, that then *alters* the price signal, but the market still provides a signal output.
Economies are dynamic systems with feedback loops. Signals take time to travel, but travel they do.
The value theory argument is irrelevant anyway. No theory of value tells you what an unearned income is because whether something is unearned or not is in no way related to how valuable a thing is. These are entirely orthogonal concepts.
And call me unorthodox, but I don't see what this subsistence level malarkey has to do with anything either. For starters, it's meaningless to talk about a subsistence level of wages when you have unemployment. Surely any gains made by the workforce in terms of 'minimum wage' in this environment must be paid for by increased unemployment? Is this not what is observed?
Examining the views of the original subjectivists on taxation reveals something quite interesting.
Jevons followed Adam Smith. In his Primer of Political Economy he said, "Adam Smith first stated certain rules, or maxims, which should guide the statesman in laying on taxes; they are such good rules that everybody who studies political economy ought to learn them".
Walras hated taxes because he said that they inhibited capital formation. So he proposed that the state should be financed by land rents. He suggested that the State nationalise land by buying it from landowners one plot at a time and then rent it out. This is a step beyond LVT.
Menger didn't say a lot about taxation. However a newspaper article that he wrote in support of Adam Smiths views indicates that he had much the same views on what makes a good tax as Smith.
And we all know that Smith supported Ground Rent Taxation, aka LVT. So we can say that two of the founders of the subjectivist school approved the tax policies of someone who recommended LVT and one was a land nationaliser. So it seems that the subjectivist founders of the neoclassical and Austrian schools were just as aware of the benefits of using ground rent as a means of supporting the state as the classical economists even though the two schools differed on the nature of value.
F, D, thanks for back up, but to be honest it's water off a duck's back. There is a knee jerk thing with the FL's that "LVT bad so everything vaguely connected with it bad and everything that we don't like is connected with LVT"
Thus: Ricardo, Adam Smith = bad, everything they said was wrong
Socialism also bad, so therefore Marx = Ricardian
Marx once said LVT = bad (allegedly) therefore Ricardo and Adam Smith evern wronger than wrong
I've never heard of Menger, I have no idea what the "Value theory" is and I don't wish to know, neither do I givbe a toss what Rothbard said about anything. It's quite possibly bollocks like the "multiplier effect" (which is the equivalent bollocks on the lefty side).
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Frag, your specific question as to "subsistence wage", if you have a welfare system, then the "subsistence wage" is of course "somewhat more than what you'd get if you were on welfare".
As welfare (especially Housing Benefit - a subsidy to land owners) is far too generous, this pushes up the minimum amount for which people will work -> causes unemployment.
My point about a "certain basic minimum" is because this is what I observe by doing a regression line on a scatter graph of wages vs house prices in 350 local authority areas.
IanB, on what do these people base their wonderful theories if not on observed FACTS? We have to start somewhere. I prefer the scientific approach to the political approach or philosophical approach.
"I was showing that what applies to the property sector can be applied to [paintings] and that illustrates the fallacious nature of your argument."
You showed no such thing. Does the value of a painting change because a railway station opens or closes in its vicinity? Or because the local police do a good job or a bad job fighting crime? Is a painting absolutely fixed to one location and can never be taken abroad? Can the local planning department change the value of a painting at the stroke of a pen?
Answer to all those questions = "no" therefore paintings are quite unlike land.
"The value of anything may go down as well as up, and the seller can do nothing about that."
Correct. As I said, the value of land can go up or down, all for reasons beyond the control of, or without any effort on the part of, the seller, although the long term trend (one of those boring FACTS) is upwards and rising slightly faster than GDP.
I hope you're not accusing me of having said that land values can never go down.
But so what? It's the "location rent" that goes up or down, isn't it?
And I think your expression "the seller can do nothing about that" is not too far from my view that "the seller does nothing to earn the rent" i.e. the rent is unearned income (I don't particularly like the expression 'unearned income' but I was taking apart one of Sobers' killer arguments and he started it).
... and what relevance does it have that the price of other goods and services goes up or down (you give several examples)?
Sure, there are some industries which find themselves suddenly more profitable, in which case new entrants move in and compete profits away (unless incumbents have done their own rent seeking and put up barriers to entry, such as VAT or maternal leave laws). All those people are now earning money.
Or some industries become less profitable, they have to cut costs, adapt or die. The money they are earning in future, having cut costs or adapted is still earned income.
"I have no idea what the "Value theory" is and I don't wish to know,"
Then you're a wilful idiot Mark, because you can't start doing economics, and you certainly can't start contemplating value, until you know what value is.
You may as well be trying to discuss biology while saying, "I have no idea what this 'evolution theory' is and I don't wish to know".
How the hell do you think you can theorise about values without having a value theory?
You're not being scientific Mark. You're seeing patterns in the flames and, because of your ignorance of economic theory, drawing wrong conclusions from the patterns you see, or think you see.
Ian B, I had a quick google and all these 'value theories' seem perfectly sensible to me, objective is a bit daft, subjective makes sense, marginal value, marginal utility etc, it's all stuff I didn't know I knew.
Before I end up being accused of misquoting you, would you like to do a one paragraph "Killer Argument Against LVT, Not" for me to dissect?
I think the argument "LVT is rubbish because Mark Wadsworth does the scientific method of applying logic to known facts rather than quoting obscure economic theory" doesn't really wash.
I cheerfully agree, it is impossible to say to within a decimal place what the relative rental value of each plot of land in the UK is, but on a rough and ready basis, it's quite easy. Remember: this is a tax we are talking about, you impose the tax and then you observe what happens.
Like the other extreme, tobacco duty. As a smoker, I think they are far too high, as an economist, I observe that different governments make up different numbers - it's 50 cents/packet in Turkey, EUR1 in Greece, EUR 2 in Italy etc all the way up to £5 in the UK (and possibly more elsewhere).
It strikes me as unlikely that a UK smoker enjoys his cigarettes ten times as much as a Greek smoker, but by and large, the UK smoker is willing to pay these outrageous prices... hey, this is real life. There is no hifalutin theory behind tobacco duty, it just 'works'.
The government can then observe how much revenue is raised, how many cigarettes are sold and make some estimates as to how many people smoke how much and what the smuggling rates are.
It's the same with LVT - you scrap as many taxes as possible (all of them AFAIAC), do some rough and ready valuations for developed land in each defined area and then the free markets will smooth out the rough edges; if the tax is 'too low' then people will pay higher prices for a house than in an area where the tax is 'too high'.
Nobody dies, no job is destroyed, no house is demolished, the value of other investments rises accordingly, most things become much cheaper, economy is stimulated, UK becomes vast tax haven for foreign companies and individuals etc.
I'm not sure what's so terrible about this proposal, but no doubt you will explain.
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