More Faux Lib fun with Murray Rothbard

Kj draws my attention to this:

In the September 15, 1970 issue of The Libertarian Forum, (Vol. II #18), prominent libertarian economist Murray Rothbard wrote:

"The Heathian goal is to have cities and large land areas owned by single private corporations, which would own and rent out the land and housing over the area, and provide all conceivable "public services": police, fire, roads, courts, etc., out of the voluntarily-paid rent.

Heathianism is Henry Georgism stood on its head; like George, Heath and MacCallum would provide for all public services out of rent; but unlike George, the rent would be collected, and the land owned, by private corporate landlords rather than by the government, and the payment therefore voluntary rather than coercive.

The Heathian 'proprietary community' is, of course, in stark contrast to the scruffy egalitarian commune dreamed of by anarchists of the Left.

I accept that such Heathian corporations will often lead to better outcomes than dividing up land into ever smaller plots, that's a separate topic. But it amazes me that somebody can say something so incredibly stupid and then not realise what he has just said.

He merrily overlooks the fact that all landownership arises from the use of force.

To make a car, you need metal, rubber, electronic stuff, plastic, machines, lots of electricity and workers and so on. And you put it all together and have a car. For sure it is helpful if you have anti-locking devices and police who will chase car thieves and so on, but that's an extra. There can be no "car ownership" until people create the car, the "car" and the "car ownership" are the same thing. In a sane world, whoever makes the car is the first owner (not in a Socialist or Home-Owner-Ist world, of course) and they can sell it and split up the proceeds between themselves.

To own land, you need an army, police, courts and prisons. You need fences, gates, locks and barriers. That's all you need, the "land ownership" was not created by the people who created the land. "Land" and "land ownership" are not synonymous, what are synonymous is "land ownership" and "the state". That land or location has been knocking about for billions of years, and belonged to nothing and nobody. The "land ownership" did not come into existence until somebody ("the state") built up a big enough army to invade it and/or defend it from invaders.

Secondly, like all Faux Libs he says that any payment to the government must automatically be a tax paid under coercion and therefore BAD, but that any payment to a "private" entity is voluntary and therefore GOOD.

We can illustrate that this is nonsense quite simply by following the logic through:

i. Let us imagine that the country is divided in a few dozen areas, each owned by a Heathian corporation. We know that they will make bumper profits, even after paying for border patrols, roads and so on.

ii. Unless you want to move abroad, you will have to choose in which area you want to live. You have no choice about this. You can choose the amount you are willing to pay but not whether you pay. Even if you move abroad, you will always have to pay something (unless you hide somewhere uninhabitable).

iii. So each corporation in raking in £10 billion in rents, spending maybe £3 billion on border patrols, roads etc and the rest is a handsome profit. That is monopoly profits, it cannot be competed away (the rents would level out at whatever cannot be competed away, by definition. If they could be competed away, they would be). Perhaps the shares in the corporation are publicly traded on the stock exchange, so what, it is still monopoly income.

iv. If the government tries to tax that profit (i.e. by demanding £6 billion in LVT from the corporation), the Faux Libs argue that this is a tax and therefore automatically BAD.

v. From the point of view of the citizen, it does not make any difference, his rent is the same however it is split up between corporation and government, the government is just the superior landlord. But the Faux Libs think it does.

vi. Suitably outraged, the corporation decides to cede from the country and form its own independent state. Again, apart from customs hassle, this makes little difference to the citizens of that area, he's still paying the same rent to the same people and goes about his business.

vi. But wait - that is no longer a corporation, it is now a "state" in its own right. So according to Faux Lib logic, any payment to that state/corporation is now paid under "coercion", is a tax and is BAD.

I mean, I've heard some really shit KLNs in my time but he disproves his own point.

And why he bundles in Georgism with "the scruffy egalitarian commune dreamed of by anarchists of the Left" I do not know, I don't even know what this is supposed to mean. "Egalitarian" suggests some form of redistribution, but in anarchy, there is no government to collect and redistribute.

Killer Arguments Against LVT, Not (188)

For my penultimate post of 2011, I will hand over to Fraggle, who spent a lot of time and effort earlier this year dismantling all the arguments which Murray Rothbard advanced against LVT and/or Georgism decades ago.

Rothbard's counter-arguments are themselves completely irrelevant to anything, but for some unknown reason, The Faux Libertarians take Murray's Word As Gospel and recite it to this day (clearly without having ever given any of it a further moment's critical thought). So next time a Faux Lib's tries to throw it in your face, you might be able to save yourself a bit of thinking time by using Fraggle's counter-counter-arguments.

Some of Fraggle's posts are still work under construction, hopefully he'll get round to polishing them off, but here are the links anyway:

Overview
Land - Abundance and the landlord's function
Rent and the effect of LVT
Who benefits from economic progress?
The Morality of LVT
Loose ends

To save to-ing and fro-ing, I've disabled comments to this post, please leave comments over at Fraggle's if you have any.

Killer Arguments Against LVT, Not (184)

Regular commenter Kj posted a link to Justin Keith's Twenty FAQs about Geo-Libertarianism, in which he refutes twenty Frequently Raised Objections. He covers some of the same ground as I have done but from a philosophical/moral standpoint rather than just cold facts, logic, maths and economics, presumably because he is addressing Faux Libertarians rather than Home-Owner-Ists

It really is pathetic that the Faux Lib's come up with entirely contradictory arguments, so our hero has to deal with the KLN2. Wouldn't LVT increase the price of land? (nope) as well as batting away Faux Lib fave Murray Rothbard's objection in KLN 6. A 100% tax on rent would cause the capital value of all land to fall promptly to zero (correct) Since owners could not obtain any net rent, the sites would become valueless on the market (bollocks)".

The first statement is incorrect, the second statement is correct. But the assumption that land would become valueless is idiocy, how can this man be considered an economist?

i. Imagine, if you will, a fairly real life example: the council or some other government body decides to sell off an average semi-detached house which is superfluous to their requirements for its market value of £180,000. We know that the rebuild cost/value of the building is about £80,000, so the land is worth £100,000 (by subtraction).

ii. In this example, a bank is offering a twenty-five years interest-only mortgages, fixed at 6% for (say) ten years on a non-recourse basis and it so happens that the purchaser has £80,000 in cash to pay as a deposit. The purchaser pays his cash and takes out the mortgage. The purchaser is now clearly the legal owner of the house, and will benefit if he keeps it in good repair, or decorates it to his personal liking (or to the liking of his tenants), keeps the garden looking nice etc.

iii. And for the next ten years, he is paying over £500 cash every month which is +/- the same as the rental value of the site. Although he is the legal owner of the house burdened with a mortgage (the land and buildings are part-owned by the bank in economic terms), you might as well say that he is the 100% owner of the building itself but the bank owns the land, or at least collects rent on the land.

iv. So our hero is perfectly happy with this arrangement. It is a perfectly normal, every day arrangement, he is confident that he can meet the interest every month and being a cautious cove, he builds up a sinking fund of other investments so that he can one day pay off the mortgage in full, or to cover him for a few months if he loses his job, or to buy a pension annuity when he is too old to work etc (OK, in this day and age, this part of the example is rather fanciful, but I'm sure there are a few sensible people left in the UK).

v. A few years later, he is going through the small print and it turns out that the bank is in fact owned by HM Treasury, and every penny of the interest/rent he pays is going straight into government coffers. Does this make the slightest bit of difference to anything? Surely not.

vi. So why would it make the slightest bit of difference to the substance or the reality if, in fact, on Day One he hadn't taken out an interest-only non-recourse mortgage to buy the house, but had in fact paid £80,000 cash for the bricks and mortar and bought the site for a zero premium, subject to an monthly ground rent/LVT payment of £500 fixed for ten years and then subject to review?

vii. As long as the mechanism for the ten-yearly review is agreed at the onset, i.e. it will be based on rental values and selling prices of other similar houses in the area, he will be able to budget for any changes as he goes along. This is no riskier than having a variable rate mortgage, is it?

viii. And he can still build up a sinking fund using the money that he would otherwise have to hand over if it were a repayment and not an interest-only mortgage, and with a bit of luck, after twenty-five years he has built up a fund which will generate enough interest/dividends to pay the LVT/ground rent for the rest of his life. You can't take it with you, you know.

ix. To round off the picture, we can throw the Citizen's Income into the mix as well, he knows from the onset that he and others he shares the house with from time to time (family, friends, lodgers) will be receiving rather more than £6,000 in Citizen's Income or Citizen's Pension payments each year (unless he wants to live there on his own). As the CI payments will be funded out of the LVT which people are paying, he can just ignore both sides of the equation and work on the basis that he received the site for free, pays no ground rent and receives no CI. But the benefit that he gets from owning his own house, or the rent he can collect from tenants is exactly the same as in the example above.