A Dismissal of a Dismissal

Brad Spangler recently published a quick dismissal of Georgism which I found to be particularly uncompelling. Occasionally, brevity is a virtue, but in this case, I think it’s going to take a bit more effort and insight by Spangler to make the case. Writes Spangler:

Proximity is a two-way relationship but Georgists attempt to use it to justify a one-way transfer of wealth. Real estate prices are, indeed, largely a matter of location — but there’s no way to argue that one’s proximity to the rest of the community creates an obligation to reimburse the community, since the community also derives value from people (such as one’s self) being in proximity to it.

Me being close to you necessarily implies that you, likewise, are close to me. There’s no getting around that for Georgists. Sorry.

Frankly, not convincing.  Let’s review what “Georgist rent” actually is. Georgist rents are ground rents paid not for any privilege for the use of the land, but rather to exclude anyone else from the use of the same land. “Georgist rents” are applied against the “non-improved” value of the land, not the improved value. In the Georgist scheme, ground rents should more or less equal the unimproved value of the land, so there is, in effect, no wealth in holding land. The effective price of unimproved land should be zero, whether in the middle of the boondocks, the outskirts of Detroit(where it actually is more or less zero now), or in a vibrant, highly-coordinated community. However, the rents are are not applied against the improved value, so the rent is not a deadweight loss. In the Georgist scheme, we basically have an economic system that enforces “unimproved land as part of the commons,” with the ground rents constituting neither a wealth transfer nor a deadweight loss.

In some quarters, there have been criticisms that the positive externalities of “land improvements” or, say, population inflows, creates an “effective tax” on unimproved land, so Georgist rents end up being a form of deadweight losses. But when I read these criticisms, I’m not sure the critics are getting the point that increased value of the land creates opportunity costs for the use of such land, so, it is actually quite rational that it would cost more in compensation to retain exclusive use of such land. Frankly, this is how it’s supposed to work, to prevent land speculation and free-riding off the labor and investment of others. Remembering, of course,we are talking about rents applied against the “unimproved value” of the land, and a principle that the effective price of unimproved land should be zero, regardless of it’s location(NOTE: THIS DOES NOT MEAN ACTUAL PRICE OF REAL ESTATE/REAL PROPERTY ITSELF IS ZERO!).

I realize that for hard-core Austrians, the Georgist treatment of land may be a bit of an anathema, but I think it’s the height of denial to think that human history hasn’t been riddled with a “land question.” Frankly, I never have been convinced by any Austrian resolution to the land question, to the extent that Austrians even acknowledge a “land question.” Other alternatives, such as the “mutualist” treatment” of land, have their own problems. Georgism is not perfect, and does have some empirical problems to tackle, but conceptually, it offers a compelling paradigm for a more egalitarian free market order that places the costs of governance on those benefit the most, without having to implode/destroy the entirety of the current social order.

Update

Some good commentary at Freedom Democrats.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s