"Why is the "Cost of Living" in Cities so High?"

Spotted by Lola at Mises.org.

Most of the article is the author discussing the correct interpretation of The Gospel according to St Mises, the interesting bit is near the end:

This raises the question, then, of why do workers move to a big city where the rent is so high? As I’ve exhaustively argued above, this isn’t a mere matter of units. Dollars are the same in San Francisco, but most of the prices are higher. Why do people put up with this?

The obvious answer is, “Because wages and salaries tend to be higher.”

... The brief explanation is that the productivity of many types of labor is much higher in urban areas than elsewhere. Historically the development of the big cities in the United States was tied to water transport: New York, Los Angeles, and Houston are still major port cities, while Chicago’s access to the Great Lakes and key rivers played an important role in its growth.

So it wasn’t a coincidence that America’s largest cities developed where they did. However, once people start living in close proximity because of some external factor (such as access to the water), there is a separate effect: Their productivity is amplified in other areas too, simply because of their proximity. The “economic approach to cities” is an entire subfield, so I won’t dwell on it here. Suffice it to say, people don’t spread out uniformly across the land, the way electrons repel each other on the surface of an object to distribute the electric charge uniformly.

Rather, more than half of the people in the world currently live in urban areas or cities, with projections that that figure will rise to two-thirds by 2050. There must be some reason for this attraction. On the consumer side, it might be the ability to eat at the finest restaurants and go to a Broadway show (if we’re talking about Manhattan). On the producer side, it might be because cities offer the highest salaries, and are worth moving to, despite the higher price for an apartment of a certain size.

Yet contrary to Cochrane, these high wages aren’t due to a difference in currency; they are supported by the fact that the productivity of workers is genuinely higher. The worker who is paid $100,000 in San Francisco is producing twice as much for his employer as the worker who is paid $50,000 in Cleveland. This isn’t because the units are different, it’s because the first worker is genuinely more productive.

Yes and amen to all that, that's Von Thünen's-Ricardo's law of Rent. The author does not just trot out the Faux Lib argument about lack of supply. Whether he draws the obvious conclusion on what should and what shouldn't be taxed is unknown.

"Mapping the U.S. by Property Value Instead of Land Area"

Excellent article and graphics at CityLab.com, worth a visit, here's the crux of it:

Metrocosm’s June cartograms include one that compares the property value of NYC neighborhoods with various U.S. states. The total value of all the residential property in Kentucky ($300 billion) falls just short of the value of all the housing property in Queens ($317 billion). The housing value of the Upper East Side all by itself is greater than that of six states.

Where it gets really interesting is at the county level.

This cartogram, which compares property values between counties across the continental United States, looks like bad news from a gastroenterologist. What this in fact shows is that just a handful of counties account for the vast majority of property values in the U.S. The distortion is so severe that it doesn’t look like a map of the U.S. at all.
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I am sure this is the same for most developed countries, see for example London houses worth more than Scotland, Wales and north combined.

Half the reason is population, even if house prices were the same across the country, London has approx. the same population and same amount of housing as NI, Wales and Scotland combined. That's easy.

The kicker is that population density amplifies this (agglomeration effects), so even if London's population were only half what it is and the same as Scotland's, London housing, with lots of people and homes in a fairly small area would be worth more than housing in Scotland, scattered across a much wider area.

So if anybody says "Land Value Tax would be a tax on London", that's quite true (I'm never sure whether this is an argument for or against LVT). Within London, land in the very centre (Zone 1) would probably be half the total, and land in the City and a few streets in the West End would be half of the total of Zone 1, and so on.

Me in The Guardian

From The Guardian:

Mark Wadsworth, the head of the Campaign for Land Value Taxation, said: “The minority with a vested interest in high land values will no doubt celebrate higher values, saying that is shows the importance of land to the UK economy.

“In truth, land values are not a net addition to national wealth, they merely represent the benefits that accrue to landowners because of government spending on public services funded out of general taxation; land values are actually just a measure of ongoing transfers of wealth from taxpayers to landowners and a zero-sum game.”

It's nice to have a journalist contact you for a quote and then publish it verbatim, unlike my experience with The Telegraph who twisted everything on its head (not that I didn't expect it from them, but all publicity is good publicity).

Ransome values

From The Daily Mail:

A group of 26 ambitious homeowners are hoping to sell their properties as one big 'super site' to maximise their profits.

The residents in Baulkham Hills, in Sydney's north-west, have joined forces to create what they are calling 'Hillsview Central', a site almost two hectares in size... The average median house price for the area is $1.15 million, but residents are hoping to get approximately $2.3 million per property if the new deal goes through.

Well done Mrs Papas for getting this all off the ground! That planning uplift has to go somewhere, and (in the absence of LVT), if the current owners do the site assembly themselves, then they get all get a share of the gain. This must be preferably to a large developer mucking about for years or decades buying up the sites piecemeal in the hope of banking the entire gain for himself - but making himself more and more vulnerable to a ransom demand as time goes on.

This illustrates the point that all ultimately all land values are ransom values, despite RICS' flummery, in the criminal sense. Every landowner is holding everybody else to ransom.

As we see from the photograph, there are two gaps along the front row, let's call them Plot 2 and Plot 13. This puts Plots 1 and 14 in a very weak position, as I doubt a large developer would be interested in such a wonky shaped plot.

Heck knows what the (owners of) Plots 2 and 13 are playing at. Are they:

1. Just complete spoilsports who don't understand the maths of all this and who don't care if they ruin things for Plots 1 and 14, and probably dilute the gains for everybody else?

2. Hoping to do private deals with Plots 1 and 14 whereby those two have to hand over a chunk of the marriage value to Plots 2 and 13?

3. Gambling on the developer buying all the plots including 1 and 14 and then holding him to ransom for an even larger amount?

4. Risking the developer just buying up plots 3 through 12 and cracking on with it, in which case Plots 2 and 13 fall in value considerably and have to put up with being next to a building site for a year or two? Plots 13 and 14 in isolation have little marriage value and will be stuck between a block of flats and an office block, so Plot 13 is playing the more dangerous game.

It might be a long time or never before there's an opportunity to sell Plot 2 to a future large developer who wants the land to the left, in which case the boot is on the other foot and Plot 1 can hold Plot 2 to ransom.

Lex Luthor bought the houses on the other side of the road...

... but he couldn't get sign off for nuclear weapons from Health and Safety, so engineered a few high tides instead.

California's Love of Cars Is Fueling Its Housing Crisis - allegedly.

Emailed in by Mombers from Bloomberg:

In Los Angeles, it’s perfectly legal to build a new apartment without a refrigerator, a balcony, or air conditioning. But you can’t build one without plenty of parking. In most cases, in fact, you have to build at least two spaces per unit -- and no fudging with tandem or compact spaces. That makes housing much more expensive. Removing parking requirements would be one of the simplest ways to ease California’s housing crisis...

Shoup gives the real-life example of a standard-size L.A. parcel whose zoning allows eight apartments, with required parking of 2.25 spaces each, or 18 total. The lot is only big enough to accommodate 16 spaces on one level of underground parking. Going from seven to eight apartments thus means digging down another level, which is prohibitively expensive. So the builder settles for seven units. The parking requirement costs one more family a home...

Scott Wiener, a San Francisco Democrat, has introduced a bill whose provisions include exempting new residential buildings from parking requirements if they’re within half mile of a major transit station or a quarter mile from a frequent bus stop. The bill would certainly ease California’s housing shortage. But, especially in the era of ride-sharing, there’s no need to tie parking deregulation to transit -- or to wait for the state government to act.

Mombers adds: Question is whether this has any impact on rents – someone without a car will ceteris paribus pay more than someone with one – public transport and/or Uber much cheaper, leaving more income for the landlord/ bank to tuck into. And of course Manhattan has much fewer parking spaces per dwelling and much higher rents...

Ho hum.

1. As we know, construction costs add nothing to the selling price of homes (for a given 'quality') -  that is limited by what people can afford. Higher construction costs just depress residual land values.

2. As we know, any sort of planning regulation (like making each unit have two parking spaces - or indeed not allowing a new block of flats to have parking spaces to encourage people to use public transport) must depress the value of the land. The developer works out what is 'best' by looking at what's sold for how much in the surrounding area and works backwards from that. If the regulations stipulate something different, then the value must be depressed, by definition. You wouldn't need regulations to encourage developers to make the best use of a site.

For example, It might be the case that people like having one parking space but aren't bothered about the second, in which case the second parking space adds nothing to the value or the selling price. Or it might be that they do value the second space, in which the developer would provide it anyway (unless the planning rules limited the number of spaces per unit etc).

3. Using more land for parking reduces the amount available for housing. By and large, denser populations lead to higher prices and hence disproportionately higher land values - see Mombers' Manhattan example. San Francisco has the highest prices and land values in California because it has the highest densities, being squeezed into a small geographically restricted area (like Manhattan). Assuming always that there's more public transport to take up the strain.

4. There is no housing shortage in California and prices are not particularly high, it's only expensive on the coast because continental USA has so little coastline, and even less nice coastline that the coastal premium is gigantic. By definition, there will never be 'enough' homes in the best areas (i.e. near the coast) if you define 'enough' as 'one for every household which would like one'.

So I am not convinced.

Fun Online Polls: Donald Trump and Severn Tolls

The results to last week's Fun Online Poll were as follows:

Did Trump collude with Russia in the 2016 Presidential election?

No - 70%
We'll never find out - 11%
Trump is clearly trying to cover up something - 12%
Yes - 5%
Other, please specify - 3%

Well that's conclusive enough. I still think there was something fishy going on, but I'm in the minority.

Thanks to everybody who took part.
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I allowed this poll to run for far too long, partly out of laziness and secondly because I haven't been inspired to start a new one. If anybody has any bright ideas on which burning issue of the day can be resolved by asking the internet, please advise.
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I just stumbled across this article of a year ago, from the BBC:

Estate agents in south Monmouthshire claim about 80% of home buyers are now coming from the Bristol area ready for the halving of the Severn bridge tolls. As a result, property prices have been rising quicker than the Wales average as Bristol commuters seek new homes, figures have suggested...

"House prices in Bristol are off the scale," said agent Charles Heaven, "People know the tolls are coming down next year and hoping to get a bargain... With the railway electrification of the south Wales mainline, the planned south Wales Metro, the proposed M4 Relief Road around Newport, coupled with the beautiful countryside of south Monmouthshire and the Wye Valley, this is desirable place to live."

Two big housing developments are planned at Chepstow's old dockyard and near its hospital while a new estate is heading for Undy, bordering the M4 motorway near Magor. Severn Tunnel Junction railway station in Rogiet, between Caldicot and Magor, has recently undergone an £8m refurbishment while a new train station at Magor has the backing of Monmouthshire council and is part of the new South Wales Metro proposal.

Nathan Reeks, owner of Nathan James Estate Agents in Caldicot and Magor, explained why south Monmouthshire is becoming attractive for commuters from Bristol.

"We recently had a couple from Bristol who bought a property in Rogiet near Severn Tunnel Junction station, they bought a four-bedroom detached house with detached garage for about £295,000, after selling their three-bedroom mid-terrace in Bristol for £390,000. So they made almost £100,000 on a bigger house and the new owner can get to his work in Patchway on the outskirts of Bristol quicker from Severn Tunnel Junction than from when he lived in Bristol.

"That's typical of our business in the last six months as since the government was announced they are reducing the bridge tolls, 80% of my buyers have come from over the Severn Bridge. The accessibility for Bristol, the Midlands, the south west, south Wales, London and Heathrow Airport is all the more desirable as south Monmouthshire offers a semi-rural location with a stunning backdrop. It's a great place to bring up children and with a new comprehensive school opening soon in Caldicot, the Monmouthshire market is very strong."

They say "location, location, location", the Georgists say "community-generated value of land", it's two ways of describing the same thing.

This all reminds me of a Winston Churchill speech when he was (fairly briefly) a land value taxer:

Roads are made, streets are made, services are improved, electric light turns night into day, water is brought from reservoirs a hundred miles off in the mountains -- and all the while the landlord sits still. Every one of those improvements is effected by the labor and cost of other people and the taxpayers. To not one of those improvements does the land monopolist, as a land monopolist, contribute, and yet by every one of them the value of his land is enhanced.

He renders no service to the community, he contributes nothing to the general welfare, he contributes nothing to the process from which his own enrichment is derived...

Some years ago in London there was a toll bar on a bridge across the Thames, and all the working people who lived on the south side of the river had to pay a daily toll of one penny for going and returning from their work. The spectacle of these poor people thus mulcted of so large a proportion of their earnings offended the public conscience, and agitation was set on foot, municipal authorities were roused, and at the cost of the taxpayers, the bridge was freed and the toll removed.

All those people who used the bridge were saved sixpence a week, but within a very short time rents on the south side of the river were found to have risen about sixpence a week, or the amount of the toll which had been remitted.

"Wealthy San Francisco residents lose private street over tax bill"

Here's the background for many an interesting thought experiment, from the BBC:

Residents of a San Francisco private street where homes sell for millions of dollars have had the street itself bought from under them.

Presidio Terrace is now owned by two investors, Tina Lam and Michael Cheng, who snapped up the private road for about $90,000 (£69,039, €76,203).

The street - parking, pathways and all - was sold by the city over a $14-a-year tax which went unpaid for decades. Wealthy residents say they knew nothing about the sale until it was done.

(Clearly, in administrative terms, this was pretty appalling behaviour by the "city". If nothing else they should have first identified and contacted the beneficial owners of the street - the 'homeowners association', who are not exactly difficult to track down - and if they failed to pay the tax arrears, then as a quid pro quo, at least pay them the $90,000 proceeds less $944 outstanding tax, but hey.)

We are where we are.

The result is that residents no longer own the road, pavements, trees, or any of the common land - and might have to pay its new owners for parking.

The terrace, an oval-shaped private compound, is seen as one of the expensive city's most prestigious addresses.

Let's assume that the new owners own the street absolutely and can do what they like with it. The street itself is not of interest, it is the ransom value that matters.

Forget charging for on-street parking (the plots are big enough for plenty of off-street parking), the new owners can go the whole hog and do some text-book rent-seeking by setting up a toll booth at the entrance to the cul de sac.

The classic example of rent-seeking, according to Robert Shiller, is that of a feudal lord who installs a chain across a river that flows through his land and then hires a collector to charge passing boats a fee (or rent of the section of the river for a few minutes) to lower the chain. 

There is nothing productive about the chain or the collector. The lord has made no improvements to the river and is helping nobody in any way, directly or indirectly, except himself. All he is doing is finding a way to make money from something that used to be free.

If the average rental value of a house there is $300,000 a year, the average house has three occupants and the average occupant needs to access the outside world one hundred times a year, that means each time they pass they toll booth, they would be prepared to pay up to something like $500 ($300,000 a year). This reduces the net rent that the owner of an individual home can charge to more or less $zero.

In other words, in a Faux Libertarian free market, with thirty homes on the street the potential ransom value of the street is $9 million dollars a year, capitalised at 3% that's $300 million.

If the current residents refuse to pay up and abandon their homes, so what? There will only be on bidder for the vacant homes, so Ms Lam and Mr Cheng now own thirty lovely homes. They can parcel them up with the street and sell them for $300 million again.

(This is all something that Land-Value-Tax Man would sort out in his afternoon off, but it's nice watching one gang of 'property investors' being pitched against another).

Reader's Letter Of The Day

Spotted by Carol W in the FT:

Sir, I normally agree with your Europe correspondent, Wolfgang Münchau, and his incisive comments on European economic matters, but I disagree with him when he says that the eurozone “needs free movement [of labour] as a macroeconomic stabiliser — with people moving from countries with high unemployment to those with a shortage of labour” (“Opt-outs and the high price of misguided pragmatism”, July 25).

He states the orthodoxy, but not the reality. Labour migration is a dynamic process that tends to generate cumulative expansionary forces in the countries of destination and relative contractionary forces in the countries of origin; a process of “circular and cumulative causation”, as the famous Swedish economist Gunnar Myrdal once called it.

If one of the purposes of the free movement of labour (and capital) within the EU is to promote the convergence of European economies, the movement to an equilibrium is far from guaranteed. The free movement of labour from poorer to richer countries is not necessarily a “macroeconomic stabiliser”. The same argument applies to regions within countries: witness the continuing north-south divide in the UK and Italy despite years of labour flows from poor to richer regions.

The disequilibrating nature of free factor movements is a powerful reason for taking work to workers, rather than encouraging the free movement of workers to work. The EU could do much more in this regard if it is serious about the economic plight of the peripheral economies of Europe with high unemployment.

Tony Thirlwall, Professor of Applied Economics, Keynes College, University of Kent.

I don't agree with his conclusion (i.e. that we should encourage businesses to relocate to low-wage/high-unemployment areas), but the observation is sound: free movement increases regional inequalities. (I suppose some would use this as justification for restricting freedom of movement, I'm not sure that's a good idea either).

This is exactly mirrored by land values, of course. If people move from north to south, then land values in the south will increase, regardless of how many new homes are built there (building more homes to dampen prices is like throwing twigs on a fire to cool it down - more homes = more people = even higher values), and land values in the north will fall.

The obvious policy conclusion seems to me to just leave capitalism to itself to do what it does best (i.e. allow free movement and avoid subsidies to poorer regions) and collect the uplift in destination areas via LVT; reduce other taxes accordingly and distribute the rest as a Citizen's Dividend and you are half way there - stronger economy and less inequality. What's not to like?

Interesting articles which people have emailed me.

Random sent this from The Independent:

A ban on super-strength kettles has been put on hold amid fears that it could drive Britain to leave the EU, it has been reported.

The European Commission had been planning a number of measures to ban high energy appliances for environmental reasons. However it has now quietly shelved the ban due to concerns that backlash in Britain could drive the country towards a Brexit.

Sounds plausible, actually. So they'll wait until after the referendum and then do it.
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SG sent this from The Guardian:

A Silicon Valley venture capitalist whose net worth is greater than $1bn is asking the state of California to pay him $30m to restore public access to a beloved beach – sparking fresh outrage in a lengthy legal battle over coastal lands.

That's outrageous, how can the government sell off the public access in the first place? In English land law, if there is a public right of way, then the owner and all subsequent owners are stuck with it (it comes off the price when you buy).

MBK sent in this from The Telegraph:

A couple were shocked to discover their farm cottage is set to be surrounded by a 700-home estate - despite not being consulted when developers first applied for planning permission.

Cheryle Walton and her partner Paul Jones were unaware of plans to build the "mini town" until a passer-by mentioned the development. But the 507,500-square metre development in Chippenham, Wiltshire, is set to encompass their detached cottage, which currently sits in miles of fields.

Miles of fields, my arse. A quick search on Google Maps tells us that their house is in the wedge of fields (top left hand corner, opposite Wavin Plastics), which is pretty much the most obvious place to build new housing (unless the village/town is so big that it ought to be earmarked as a public park/woodland). (It is easy to find - the River Avon makes a distinctive bend on the plan in the Telegraph article which is easily identified on Google Maps).

So they must have known it would happen sooner or later (or be subject to a CPO to open up the park). Top tip, if you don't like change, buy a house in a built up area where not much more is going to happen or one which really is miles from anywhere.

Maths news: a small number times a big number is an even bigger number*

From The Mirror:

Arsenal fans left fuming after Stan Kroenke buys this mega 535,000-acre Texas ranch for £500 million

£500 million is of course a huge amount of money, but at less than £1,000 an acre, it was a fraction of the price of farm land in the UK.

The land for a typical, average English house has a selling price of about £100,000, which is £1 million per acre. Paying that much is extravagant!

* Assuming the small number is greater than 1 etc.

"Are modern blocks of flats modelled on Roman insulae?"

Quite an interesting article on Roman architecture and town planning at the BBC.

But the short answer is "No".

However old or new a settlement, it is nearly always the case that they are/were more densely built up in the centre than at the outer edges, in other words, taller buildings and smaller gardens. This applies to Egyptian towns, Anglo-Saxon villages, prehistoric sites, ancient Rome, modern Rome, London or anywhere else. The 'centre' is not always the geographical centre of course - so the 'centre' of an English seaside town is the beach and the pier; the centre of a port is the actual harbour etc.

Why? It is because location values are higher in the centre, so for a given budget, people are prepared to sacrifice space for convenience. And traders have to be in the centre where the "market" is anyway, especially if they are dealing in commodities stored elsewhere (so physical space barely matters).

Community generated land values.

All from today's Evening Standard:

Exhibit One (no link)

State schools in London risk becoming victims of their own success by pushing house prices up so high that teachers cannot afford to live near them, a senior mayor has warned.

Exhibit Two

A popular vegetarian restaurant is set to close after 40 years of trade in Covent Garden because the owners cannot afford to pay spiralling rent prices.

Food For Thought, in Neal Street, runs as a co-operative and counts celebrities and West End stars as regular customers.

Exhibit Three

The West End’s historic Chinatown will “disappear in five years” as oriental restaurants are squeezed out by rising rents and soaring property prices, traders said today.

The cheap and cheerful grid of streets lined with red lanterns and restaurants between Leicester Square and Soho have been popular with theatre-goers, office workers, late-night revellers and tourists since the 1950s.

Landlords Shaftesbury PLC, which owns 71 premises in the area, saw profits grow by almost 50 per cent in the six months to the end of March 2014.

A spokesman for Shaftesbury said: “The company, whose ownership in Chinatown has been built up over 50 years, has demonstrated a long-term commitment to supporting the local community through its strategy of creating lively, prosperous and interesting destinations in the West End for visitors, those working in the area and residents."

Exhibit Four

A run-down row of Edwardian villas once home to a community of squatters has been restored after decades of neglect — with some flats now up for rent at more than £3,000 a month.

The six blocks in Rushcroft Road, Brixton, were seized back by Lambeth council during violent clashes in 2013. During the eviction, squatters, some of whom had lived there rent-free for more than 30 years, fought with bailiffs, with furniture set ablaze in the street.

The 47 properties have been gutted and renovated in a project funded by the sale of half the block to private developers for a reported £2.5 million.

"Get rich quick"

From today's City AM:

An interactive graphic released last month by sales agent JLL on their website predicts the parts of the route that are likely to see the biggest house price growth once the Shenfield to Reading line starts to kick in in 2020.

The agent has charted all 38 stations and installed a number of filters that predict where the most money can be made. Top performing areas include Whitechapel in east London, with Woolwich in the south east coming in at a close second.

'Nuff said.

Let's see whether he actually learned anything...

... and if he did, whether he puts that knowledge to good use:

PROFILE: Alexis Tsipras

■ Born in Athens 1974.

■ Holds a degree in Civil Engineering from the National Technical University of Athens.

■ Conducted post graduate studies in Land Surveying and Planning.

Blatant

Here

Comment is superfluous.

"Joseph Stiglitz: Thomas Piketty gets income inequality wrong"

Emailed in by Sackerson, from salon.com

What’s new in your recent work on the distribution of income and wealth among individuals?

JS: There are several things. There’s some debate about this, but I think most readers of Thomas Piketty’s book (Capital in the Twenty-First Century) get the impression that the accumulation of wealth — savings —is responsible for the rise in inequality and that there is, therefore, in a way, a link between the growth of the economy — the accumulation of capital— on the one hand and inequality and wealth.

My paper begins with the observation that in fact, you cannot explain what has happened to the wealth/income ratio by that analysis. A closer look at what has gone on suggests that a large fraction of the increase in wealth is an increase in the value of land, not in the amount of capital goods.

When you say “land,” you’re not talking about land in the Jane Austen sense, that is, agricultural land under the ownership of the lord of the manor, right?

JS: It’s not agricultural land, it’s the value of urban land. I would include in that, broadly, rents associated with natural resources (“rent” is an economic term for unearned revenue). It’s the value of existing assets.

As a footnote, some of what has gone on, in addition to an increase in the wealth/income ratio, is a capitalization of the increase in other kinds of rents, like monopoly rents. If monopoly rents get increased, if the market power of firms relative to workers gets increased, as when you have the ability of a few, like the banks, to get government guarantees — the value of that is increased and gets capitalized. That increases wealth but it doesn’t increase capital. So it’s that distinction between wealth and capital that turns out to be critical. That’s the first idea.

The reason that’s important is that you then begin an inquiry into the explanations of why the value of the land or other sources of the value of rents would have gone up. A lot of my book (The Price of Inequality) is about why there has been an increase in rent-seeking. But the other part is more external in terms of the value of land or the value of assets. That, I suggest, is very closely linked with the credit system….

Stiglitz is a bit of a leftie, but apart from that, amen brother!

"Simplicate and Add Lightness"

My simple Pro-LVT rationale.

1. The Factors of Production are Land, Labour and Capital.
2. Land is a Monopoly
3. Labour and Capital create wealth.
4. Wealth creation is 'Profit'
5. Taxes can only be raised from the Profits of Private Business.
6. 'All profits return to rents'
7. Rents and Taxes are therefore synonymous
8. Hence, It is self evidently better to tax Rents, not Profits (aka Wealth Creation).

Discuss.

Update: (Following useful comment by Ben Jamin)

1. The Factors of Production are Land, Labour and Capital.
2. Land is a Gift of Nature and a Monopoly
3. Labour and Capital combine to create wealth through Exchanges..
4. Wealth creation is otherwise known as 'Profit'.
5. 'All profits return to rents',  That is Rents can only be collected from the Profits of Private Business and will be maximised and vary with location.
6. Taxes can only be collected from the Profits of Private Business.
7. Rents and Taxes are therefore both charges on wealth creation and therefore synonymous
8. Hence, It is self evidently better to tax (Private) Rents, not Profits (aka Wealth Creation).

Any more for any more?

Update 2 (27/12/2014  22.47)

Thanks for all your inputs.  I will work on them.

What I am trying to do is to evolve a short layman's language and logical rationale for LVT that can be made quickly.  An 'elevator pitch' for LVT if you like.  LVT - despite what we may think - needs 'selling' (a thing I am quite good at), and getting your presentation pat is crucial.  BTW, you can't sell crap ideas or products for very long. You soon get found out.  And the secret to successful selling is repeat business and recommendations from customer to customer.

Miller Homes - Land Bankers Of The Week

From their Intention To Float Announcement:

Distinctive regional exposure
• In the six months to 30 June 2014, core completions of: 257 units in the Midlands & South; 359 units in the North and 229 units in Scotland.
•Strategic land bank concentrated within chosen geographic locations to benefit from growth opportunities.

Clear strategy to increase margin and ROCE by enhancing quality of land bank and product mix
• completions from legacy land, as a percentage of core completions, are expected to continue to decline relative to completions on sites from new and strategic land (which typically produce higher margins).
• Growing consented land bank (30 June 2014: 8,987 plots).

Significant opportunity from large and well‑located strategic land bank
• Strong track record of delivering planning consents for strategic land bank sites.
• Strategic land bank of 16,553 plots on 56 separate sites held under options with an estimated gross development value (“GDV”) of £3.7 billion at 30 June 2014.
• Strategic land bank represents 8.9 years of supply at 30 June 2014.
• At 30 June 2014, 24% of the strategic land bank was located in the Midlands, 45% in the South of England, 25% in the North of England and 6% in Scotland.

Shale Fracking Is a “Ponzi Scheme”

So says Washington's Blog.

Who's losing out?

A review of more than 9,000 wells, using data from 2003 to 2009, shows that — based on widely used industry assumptions about the market price of gas and the cost of drilling and operating a well — less than 10 percent of the wells had recouped their estimated costs by the time they were seven years old.

and

The gas rush has … been a money loser so far for many of the gas exploration companies and their tens of thousands of investors.

Well, someone has to be making money from this. Ah, yes, the usual suspects:

Although the bankers made a lot of money from the deal making and a handful of energy companies made fortunes by exiting at the market’s peak, most of the industry has been bloodied — forced to sell assets, take huge write-offs and shift as many drill rigs as possible from gas exploration to oil, whose price has held up much better.

and

For Chesapeake, the primary profit in fracking comes not from selling the gas itself, but from buying and flipping the land that contains the gas. The company is now the largest leaseholder in the United States, owning the drilling rights to some 15 million acres – an area more than twice the size of Maryland. McClendon [the CEO of fracking giant Chesapeake] has financed this land grab with junk bonds and complex partnerships and future production deals, creating a highly leveraged, deeply indebted company that has more in common with Enron than ExxonMobil.

Of course, it doesn't really do those who stand to gain any harm if there is a lot of public anti-fracking hype: if anything, it just helps to confirm to would-be investors that Shale gas is the Next Big Thing. So we have landowners and bankers making out like bandits and the general public (in the form of small investors) losing out big time. Hmm, sounds familiar...