Have you heard of Henry George? In this EconTalk episode, host Russ Roberts welcomes Glen Weyl to discuss his book, co-authored with Eric Posner, Radical Markets. One of Weyl’s objectives is to bring back one of George’s main proposals, a form of land tax.
1. Weyl asserts that his broad purpose in the book is to “create a different sort of political coalition.” Who is he trying to align, and how successful do you think his various proposals could be in accomplishing this?
2. What’s the difference between allocative and investment efficiency? How is each addressed by Weyl’s land tax plan, and how well?
3. In their discussion of Weyl’s proposed land tax, Roberts pushes him to define what the problem really is…How would you describe the “problem” Weyl is trying to solve, and to what extent do you think it’s a problem?
4. Both Roberts and Weyl seem to agree that we are too attached to our material possessions. Do you agree? Why or why not?
5. Would you “sponsor” an immigrant in the way Weyl describes? Again, why or why not? Would you sell (or purchase) a vote?
READER COMMENTS
Adam
May 25 2018 at 9:25am
A few thoughts:
1. Does this include businesses? Businesses involve complicated social relationships that don’t show up in an textbook model of “the firm.” How does the constant threat of purchase affect internal efficiency, loyalty, team building and social organization within businesses?
2. Doesn’t sale at listed WTA encourage monopoly? Suppose a region has a bunch of small tractor dealers. They sell competitively and list their sale prices at the presented value of their competitive profits. A monopoly minded investor comes along and sees she can create regional monopoly profits by buying up the small firms. No more competition.
3. Does ‘property’ include animals? Farm animals? Dogs and cats? My dog produces no income, but would I be forced to give a WTA to prevent a sale of my dog? Pricing love? Taxing love?
Markets have their place. It’s hubris or insanity that markets every aspect of property and life.
Dallas Weaver Ph.D.
May 28 2018 at 4:10pm
Students of my generation were raised with the concept of the “tragedy of the common” where an open-access resource will be overexploited such as overfishing or overgrazing the commons. The solution to this type of problem that scales is the creation of property rights and markets like ITQ (individual transferable quotas) to allocate the common resource or taxes like carbon taxes. You could argue about how these property rights or taxes should be allocated and how the benefits of the allocation are shared, but using a market mechanisms can prevent the “tragedy of the commons” and that is a net economic good for the society.
The author was really discussing the “tragedy of the anti-commons” https://en.wikipedia.org/wiki/Tragedy_of_the_anticommons type allocation problems in real estate where many players effectively have veto power over property development with a strong focus on “land ownership” as a monopoly. How and why this concept wasn’t menioned, I have no idea.
However, most of the “tragedy of the anti-commons” effects are related to zoning and government planning, not to the nature of land itself or to individual owners (sometimes a problem requiring emenent domain taking). Area for housing can be 3-D and is not limited to 2-D site maps, as shown in China’s mega-cities, but not in Palo Alto, thanks to the zoning/planning/activist communites who have NIMBY veto power that is a real monopoly over the land. His solution will not correct the NIMBY and BANANA problems in some areas that are preventing more optimal solutions. In fact, his solution may well increase the walk away problem of abandoned property that occurs when a city overreaches on taxes while the population is decreasing with a job decrease. Look at Detroit with all their abandoned property that is just a drain on the tax payers making those that remain pay even more. His high annual rate would turn any local economic downturn into an economic disaster with the government owning abandoned property or getting no money as people decrease the value (which may happen even in Silicon Valley as every area of the wold is trying to copy the technical success: some may actually do it). Remember when Japan bought up California and lost a forturne or Saudi Arabians bought up US midwest farm land and lost their shirts. His system would make the overall socity less stable as a turndown would be passed on thorugh his giveback problem.
His problem would work as an amplyfier on a real property variations. When the market is going up speculators would have a field day tying up property at the stated valuations and flipping and when it goes south that would bounce through the whole economy not just a bunch of bankrupted speculators.
Solving the “tragedy of the anti-commons” by requiring “stakeholders” in all these zoning type decisions actually have skin in the game and allowing owners of the property to increase the area by going up would be a more sensible solution. A vetocracy where everyone has veto power over everyone elses actions and no one has the power to say yes, is an unstable system and that is what California has become in all areas except the permissionless areas of Silicon Valley type businesses. Try getting a permit in Ca. for offshore aquaculture like what is being done south of the border or even build a desalinization facility as a fresh water source in So. California (12 year permit process with no end in sight) is a tragedy of the anti-commons imacting all citizens.
His taxation solution with self-defined value may have some merit for copyrights and patents (whose values can’t be reliably determined by zillo) but seems like using an elephant gun to kill a mouse for land.
Again another influence from a long dead economist from a time where large 3-D structures were not possible and vetical farms weren’t even a dream and visions of an totally automated personal transit system (automated cars) wan’t even science fiction. The world has changed and the author needs to learn that the old “anti-market”, socialistic type thinking. We know how well “common ownership” of land by the people worked out in the USSR and in China with the starvation of some 75 million people. In China they solved their food problem by allowing effective real ownership over the land without a “zoning board” or “agriculture productivity and integration board” to dictate how he could utilize his effective ownership.
[broken html removed—Econlib Ed.]
Amy Willis
May 29 2018 at 1:51pm
@Adam- great follow-up questions… I had similar ones. Even more complicated than my dog, what about my jewelry (some given to me by my husband, some my parents, lefts to me by my grandmother…)? Our artwork? (Stole that idea from our twitter feed…)
Michael Byrnes
May 29 2018 at 10:20pm
I am a long way away from endorsing Weyl’s plan with regard to property, but I cannot help but think that there are potential solutions for a lot of the problems, and other problems only seem probelmatic because we implicitly assume that everything will stay the same but the one transaction we focus on.
For example, the worry that someone can swoop in and buy my home out from under me, occurs, not in our current property market, but in a market in which I could do the same to a different property, and indeed a market in which my buyer needs to worry about the same thing happening to him. I imagine that transitioning into such a system would be a difficult nightmare, but that an equillibrium might be reached that works OK for everyone (or at least as big a percentage of everyone as who benefits from the current system).
Someone in the other thread observed that people who underpriced their homes would be victims of arbitrage bets by people buying them out from under them. I think that could be avoided in a couple of ways.
What if I, as property owner, give myself a lease on the property I own, with right of renewal going to the tenant. This means someone could buy the home but not force me to move out, or do anything else with it, which might lower the value a buyer would be willing to pay.
Also, that kind of predatory buying would be expected to be accompanied by a large markup in price. My run down condo that I value at say $200K might be bought by a developer with inside knowledge that the whole block will be demolished and a high rise built. So, he buys my condo for $200K, and then, to avoid losing it to another buyer, immediately marks it up to $1.2 million. That might be solveable. Maybe if a buyer wants to raise the price by more than a set amount, he must pay that higher price to the prior owner.
Anyway, I’m not going to endorse the plan, although I am very curious about how such a system might be applied to, say, patents and taxi medallions.
Ken Daniszewski
Jun 6 2018 at 10:13pm
Could George’s views on property inform our understanding of Facebook’s territorial gains in cyberspace? Consider, for example, this quote from a recent Digg.com interview with Dinosaur Comics creator Ryan North:
Brian Bergman
Jun 14 2018 at 4:25pm
The Ivory Tower
The concept of a Land tax would never improve inequality, just the opposite:
What happens to the Seattle School Teacher who bought the before a housing boom and has benefited financially but can’t afford to pay higher voluntary taxes to prohibit a sale? She would be quickly consumed by an Amazon employee or a Chinese buyer. No moderate-income earners would live in Seattle.
Wealthy people would buy up under-taxed homes and rent them out. Once again the wealthier would hold the assets and the less wealthy would rent from them.
A homeowner would never improve their house, as one would pay for the improvements and then have to pay higher taxes to protect their investment.
Homeowner would have the incentive to not to have a unique house or land, as they would fear someone would be attracted to it. We would live in Trumanville.
Increasing the velocity of sales would lead to unstable neighborhoods and people would not invest in building communities and friendships.
People would have to pay higher taxes for personal intangibles i.e. to stay close to family and friends.
People would not project that they are happy or that they love their house for fear that an envious acquaintance could disrupt their lives.
A person could exploit an owner who doesn’t want to move by asking for money or other “favors” in exchange for not buying their house.
This structure could work on the spectrum, but how would this not create inefficiencies from a few “googles” artificially paying higher taxes for monopoly control and then pass their higher costs on to consumers.
Mike South
Jun 19 2018 at 9:46pm
Those of you asserting “but if we followed Weyl’s recommendation, the rich would…” are in the same trap that Weyl has walked into (and taken up permanent residence, I think), which is that you may be able to make a logical case that the effect you’re describing would occur, but in reality that’s all you have, and it’s worth practically nothing.
The value of having decisions like this left to markets is that no one gets to impose their vision of what is best on anyone else involuntarily.
The market might have inefficiencies, but they are the inefficiencies people have chosen. I might really like my shovel on a wall as a decoration–Weyl dictates that I pay for that privilege because my use of it as a decoration is (in his dictatorial view) a waste (pristine 68 mustang in my living room, same thing–it would be so much more economically beneficial for someone to be able to use it for transportation!). It might *be* a waste, by someone’s definition, but it’s the way I chose to use it.
I was creeped out through the whole episode, listening to the repeated description of how much more efficient and easy things would be under the system. These are the kinds of things that the would-be dictators promise to the would-be subjects.
In a free market he could set this system up, if he found enough people to agree with it. I don’t know his political leanings but he was sounding to me like someone who would gladly force it on 350 million people if he could get 65 million to vote in favor (numbers here being the population of the US vs ~50% of voter turnout).
Ralf Arnemann
Jun 20 2018 at 8:17am
Ivory Tower indead.
There is something in the argument that land could not be created and thus has to be treated differently from other property. And self-assessement for a tax regulated by the risk of having to sell on this assessed price is a cute idea and could work in some contexts (which are not of that magnitude of impact).
But then Weyls proposal to put this into practise leaves me open-mouthed. It is so incredibly unjust and far from any reality.
First it means a heavy punishment for people, who happened to have invested in real estate. Without compensation they should now be obliged to pay billions in additonal taxes – whereas all other forms of investment are unmolested. As many investors (including many private home owners) did finance their real estate engagement with a mortgage they are directly threatened by ruin. Their interest dues remain unchanged and additionally they have to pay the 7% tax.
Secondly the massive additional revenue should be used not to replace other taxes, but to finance a grandiose socialist utopia. Which has no connection to the initial question of best land-use.
And most important: The bulk of the new tax is NOT on land, but on the buildings and other land improvements. You have to raise the price-assessment of your real estate to cover everything you invested there – otherwise others will snatch it away from you. Every brick you add, every plant you grow will automatically increase your tax burden. This is a decisive dis-incentive to improve living-conditions.
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