Sunday, 8 September 2013

Georgist Economist Criticises Knight Frank's Report On The Mansion Tax

Hot on the heels of high end estate agents Knight Frank's widely publicised report denigrating the Mansion Tax, economist Nic Tideman, writing for the Journal of Economic Literature, has launched a scathing riposte.

Titled  "Knight Frank's Proposal to End Distinctions Among Factors of Production and Their Objection to the Mansion Tax" , Tideman shows how the failure to recognise the conceptual difference between rent and interest, inexorably leads to the rejection that land rents are a just source of public revenue.

The abstract is as follows:

"Knight Frank claimed that there are no economically interesting distinctions among factors of production, and they also strongly opposed Vince Cable's proposal to implement a Mansion Tax.

We locate and examine the Mansion Tax in Knight’s framework of property rights and argue that Knight ignored an inefficiency in the original appropriation of land that occurs when competition is used to assign property rights in land. This inefficiency is visible only if land and capital are conceptually separated."

The full article can be read here.


Mark Wadsworth said...

Hehe, took a while for the penny to drop there.

It'd be even funnier if it turned out that Mr F Knight's middle name was "Rutley".

Ben Jamin' said...

What Tideman is actually trying to explain, is unlike labour and capital, the efforts to obtain property rights in land produces a dead weight cost. Whereas the other two produces more of the same.

So aside for the moral arguments, it is from an analytical point of view, important not to lump land and capital together.

Frank Knight, I'm sure new this. He just hoped to conflate the two by asserting that because some effort was expended in the discovery, the securing of, and exploitation of(!), any return from land,no matter how much, or how far into the future, must all be capital.

Knight was obviously, just flip-flopping around to justify greed, theft and monopoly rents. Just like all the modern day faux-libs his Chicago School branch of economics spawned.

I don't know if Knight was a bad person, but I'm guessing his ideological opposition to Socialism lead him, and his followers, wittingly or not, to an even darker place.

Thanks Frank.