Community generated land values (part the manieth)

From yesterday's Evening Standard:

The Nationwide also found that Londoners are willing to pay nine per cent more for homes within 500 metres of a Tube or railway station, compared with seven per cent in 2010. It means that people are prepared to pay £27,000 more than they would for a similar property a mile away.

Robert Gardner, Nationwide’s chief economist, said: "We examined how the proximity to a Tube or railway station impacted on property prices in Greater London after taking account of other characteristics, such as type, size and local neighbourhood. Interestingly, only six per cent of properties in London are more than a mile away from a station. The vast majority of these are in outer suburban areas, where stations tend to be more spread out serving larger catchments."

The best-served boroughs are Westminster*, Camden and Tower Hamlets, where more than three in four homes are within 500 metres of a station. These boroughs are also some of the most expensive in the capital. Havering and Bexley are the least well-connected boroughs, with fewer than 20 per cent of properties within 500 metres of a station. The cheapest homes are those where the nearest station is on the outer reaches of the Metropolitan line.

Now, this is a bit chicken-and-egg, do people move to be near a train station, or do they build the train stations where more people are? It's both, of course. The train lines have to meet in the middle of town, so that is where most stations will be; it is also the most densely populated (whether by people or by businesses), it would be the most densely populated anyway, but having lots of train lines makes it more so.

But ultimately, it is population density which drives land values. Despite what NIMBYs pretend, most human beings are in fact very sociable beings and like being near other people, or at least to have easy access to what other people have to offer, it makes exchange of goods and services easier.

If you bear this in mind, solving Alice's problem is quite simple, and her four "great truths" turn out to be three "great misconceptions" and one truth.

Alice rounds off by saying: "The harsh truth about UK public finances is that the people who benefit from it also have to pay for it."

On a moral level, correct. Why should a high earner pay more for the same "services" than a low earner? The answer is "he shouldn't", but that is the wrong question because people seem to suffer from the grand delusion that earned income (or private wealth) is a suitable subject matter for taxation.

The real question is: "Which are the most important services which 'the state' (i.e. the people acting in co-operation, with a government to act as referee and final arbiter) provides?" and the answer is: simply existing in a stable form and thereby generating rental values (compare rental values in Dubai with those in Somalia). If we re-think her question in the context of Land Value Tax, it's quite clear that the owners/occupiers of those plots which benefit most from the existence of "the state" are automatically also paying most. Those rents are the natural source of national revenue, in the same way as selling cars is Mercedes' natural source of revenue. it would be insane for Mercedes to give away cars for free and pay its workers by levying an income tax on everybody else in Baden-Württemberg.

There is no real reason why the government (in the narrow sense) should be providing "services" above and beyond the core function of merely exercising its rôle as democratically appointed referee and final arbiter. And the government certainly shouldn't be demanding payment for those extra "services", neither from the recipients and nor from other people who happen to earn a lot of money or have a lot of private wealth.

Think about it: shareholders don't pay cash for their dividends (which would be a nonsense), they just get them in exchange for having financed/helped create the business, in the same way as citizens who abide by the rules all play their part in generating land rental values and so all get a Citizen's Dividend or free healthcare or whatever.

* Cluebat: which three or four people own most of the land in these areas?