Thursday, 19 December 2013

Reader's Letter Of The Day

DBC draws my attention to this in The Guardian:

Ed Miliband's proposals to prevent the hoarding of land by developers and unhelpful neighbouring councils (Report, 16 December) marks the return of the land value question to the mainstream political agenda, which was once taken up by the issue and its proposed solution, the land value tax, with pro-LVT arguments from the Physiocrats, Adam Smith, the Mills, father and son, and, most spectacularly, Henry George.

Significantly, though it was once thought more important in an agricultural economy, the big pushes for LVT were in the People's Budget of 1909 (Lloyd George and Churchill) and the 1931 Finance Act (Philip Snowden) as it became obvious that cheap money from the banks does not stimulate consumption and production in an industrial economy but just sets off land price inflation, leading to house price bubbles which actually reduce spending on manufactured goods by heavily mortgaged households and those paying high inflated rents.

Ed Miliband should not underestimate the strength of the opposition in the UK: the entire political system, including some in his own party, is based on the practice of homeownerism, which means being voted in and staying in power by keeping up house prices to offer a working majority of voters huge unearned capital gains in their house prices as a something-for-nothing reward for their quiescence over falling real wages.

DBC Reed, Northampton


Lola said...

Homeownerism/Political expediency is just another twist on the Randian 'looters' and 'moochers' meme. Engineering a parliamentary majority now turns on two sets of moochers to please 'benefit scroungers' or 'homeownerists'.

We're, well, buggered, aren't we?

Steven_L said...

Nice on Mr Reed!

Pablo said...

Nice comment on the BBC 1 o clock gnus - something to the effect that farmer X who "farms" 1000 acres gets £1000/acre for little more than owning the land!

Mark Wadsworth said...

P, ag sub's are about £50 - £150 per acre, it's negative LVT, no way is it £1,000. So who on earth is paying him that?

Ian B said...

Hmm, Northampton. So with DBC and myself here, and Libertarian blogosphere stalwart Paul Marks just down the road in Kettering, clearly this part of the country is still a hotbed of English radicalism!

Pablo said...

MW: 20.30 in.
For protectin' wildlife.

Mark Wadsworth said...

IB, as you can imagine, I consider Mr. P. Marks to be a Faux Lib (i.e. supporter of rent seekers and monopolists) rather than a radical.

P, which programme should I watch?

Pablo said...

MW: Friday's 1 o'clock news - seems not to be available at the mo.

Robin Smith said...

Good one.

Don't forget that if there were no windfall, there would be no profit in mortgages, nor all financial assets, all of which sit on top of The Mortgage.

Forget to mention it and they will say land values are created by cheap money, as is the doctrine of like Positive Money.

Even, forex profits are gambles on the present value of a nations money supply mostly created for mortgages. Without mortgages, forex would be an extremely effective price discovery mechanism for international trade. Because the more the speculation the more the bubble would shrink in a negative feedback loop, contrary to today with mortgages where the more the speculation the bigger the bubble due to positive feedback.

Mark Wadsworth said...

RS: "Forget to mention it and they will say land values are created by cheap money, as is the doctrine of like Positive Money."

Well no, rental values create themselves, the capitalised value of that is what people think is 'land values', and cheap and easy credit pushes up the multiple (rental value x interest rate = selling price) but does not create it.

Even with zero interest rates and infinite credit, the selling price of a sub-marginal site will always be zero because the rental value is zero.

Derek said...

I like to make the difference betwenn land value and land price here. The land value is dependent on how many people are in the vicinity and basically measures its ability to meet their needs. Even in a society without money different plots of land will vary in their desirability depending on how well they can meet an individual's needs

Land price on the other hand will only exist in a monetary economy. It doesn't matter whether that money is cattle, gold or dollars. The land price depends on the relative value of the land and of the monetary token in use. Hence cheaper money may not cause land value to change but it will cause land price to change.

We tend to use the words value and price as if they are interchangeable. For many purposes they are but this is one of those places where it's important to know the difference.

Derek said...

Oops. I forgot to say that the price is governed by the factors which Mark was talking about.

DBC Reed said...

@Ian B
Despite low wages and pathetic job opportunities, Northampton elects two Conservative MP's. The local council has turned off the street lights on urban main roads to save money. All with mass popular support. We are surrounded by such right-wing MP luminaries as Hollobone, Bone etc.We used to have Mensch in Corby ,although its working population was suffering God knows what problems of deindustrialisation. Paul Marks said of Mrs Thatcher in 2012 " I would have charged the gates of Hell with her".Not very radical.