Brad DeLong's Semi-Daily Journal (2004)

OK, I posted my frustrations on this story under wrong thread - but I guess Cheney lies and their trade protection go hand-in-hand.

In other words, the "productivity" of the US shrimp industry will increase. What more could one ask for?

But on a more serious note, the underlying problems in almost all subsidy and tariff protection areas are (1) the higher cost of doing business in the US, which to a large extent is related to higher relative living standards, worker protections, and environmental regulation, and (2) the relatively high profit rates asked by investors and owners.

Now we probably don't want to weaken (1) further, and I frankly don't know how to address (2). When forcing US companies to cut into their profits, investors will run (guess where?), and pressures to offshore will increase.

This is assuming the US industry should be preserved, in which case I would like to hear alternatives. One other possibility is to let the "free market" decide what industries to keep, and construct a social safety net to alleviate hardships resulting from the decline of the respective industries. But then this safety net has to be financed by taxes on the profits of industries producing above average yields.

But perhaps the problem is rooted in too little liquidity in the hands of consumers, who cannot afford shrimp prices consistent with good profits in the US shrimp business?

Any ideas?

cm refered to "(1) the higher cost of doing business in the US, which to a large extent is related to higher relative living standards, worker protections, and environmental regulation..." and later wrote "But then this safety net has to be financed by taxes on the profits of industries producing above average yields."

You're missing "handing landowners a big chunk of GDP in the form of Ricardian rent." As GDP grows, rent tends to grow with it. If this rent (or a larger fraction of it) went into government coffers instead of landowners' bank accounts, you'd have quite a chunk of change with which to fund a social safety net (among other things).

I should add:
cm wrote, "But then this safety net has to be financed by taxes on the profits of industries producing above average yields..."

This assumes that (a) taxes should be on income, not wealth, and (b) if taxes are on income, they should be on profit, not (Ricardian) rent.

I love this story; I've been blogging on it since the shrimpers first started whining. But today I found out something amazing, something completely typical of the Bush Administration. I quote from the Mobile Register:

"The Commerce Department assigned the smallest tariffs to the largest shrimp exporting companies while the largest tariffs will hit the hundreds of small producers that make up the rest of the market, observed John Sackton, president of the on-line seafood industry news service Seafood.com. Sackton has tracked the seafood industry for more than 20 years.

For example, shrimp from Minh Phu Seafood Corp., one of Vietnam's top seafood-exporting businesses, was assigned a 15 percent tariff, while the Vietnam-wide shrimp tariff is to be 93 percent."

http://www.al.com/news/mobileregister/index.ssf?/base/news/108919184919810.xml

Doesn't that say it all? They're so obsessed with helping big business that they're on the side of Vietnamese big business.

I close with the obvious joke I made about Bush's trade record vis-a-vis Southeast Asia:

"Vietnam in particular has been getting rough treatment from Bush. Well, better late than never, I guess."

Why not let shrimp farmers in the U.S. compete with those from other countries just like we would want if we had the competitive advnatage. If China and Vietnam can produce shrimp that much cheaper than we can, then we have no reason to produce shrimp and should import it all. The end result will be lower prices for 275 million American consumers. The whole dumping arguement is complete crap. In more cases it isn't dumping, it is just a lower cost producer passing their superior cost structure on to the consumer and in cases where an industry is subsidized, who cares? They are giving products to Americans for less than they cost to produce, why wouldn't we want that?

FWIW, I should note that Gulf whites - shrimp harvested in the Gulf of Mexico by, I would presume, mostly American shrimpers - are far superior to their Asian competition (including "tiger" shrimp, which are popular mostly due to a cool name, I think). Unfortunately, for whatever reason, shrimp are treated as a commodity - only better mongers label their origin, and only the best actually offer different varieties in the same size. This means that, as has happened in other markets, superior American products are at a market disadvantage due not so much to higher structural costs (which no doubt exist) as to undiscerning, cost-driven consumers. In this case, I have no compunction about "blaming the consumer," because I have no doubt that American shrimp-buyers do not in fact discern among the shrimp they sample.

Arguably, American shrimpers would better serve themselves, their consumers, and the world shrimping community by investing in a branding strategy to let people know that Gulf whites are superior shrimp, and that they're worth "a little extra." But the surer investment was probably in hiring powerful lobbyists.

Although it's worth noting that such a strategy would probably be derided as dishonesty, or appealing to base patriotism, or some other crap by race-to-the-bottom globalists.

JRoth,

Would that be similar to "Angus" beef. Am I correct in thinking that there are several types of beef but that due to branding and marketing, Angus beef obtains a premium price?

Imported shrimp destroyed at least one business in Tennessee, according to its proprietors, who were driven into personal as well as business bankruptcy. The business, raising fresh-water shrimp, was profitable for years, through 2002. It then went downhill. According to the owners, under oath, after 9/11, a number of ships were held up off-shore, and lost their cargos of shrimp. This so enraged the Asians that they decided to ruin the American shrimp industry. A whole new conspiracy theory.

And here is another choice tidbit: the lawyer for the large shrimp company is Matthew Nicely of Wilkie Farr & Gallagher of NYC. He says in the NYT that the Vietnamese are not dumping; they have invested in technology. I bet that is the justification he offered to the Commerce Department for the differential tariffs.

However, the technology we are talking about is worthless. The Debtor described above had that technology, and the bank got next to nothing for it.

liberal: Ricardian rent

You are right about rents. I did miss them, but the thrust of my argument was in a different direction. Anyway, it is difficult to tax rent gouging or the underlying assets, as typically the gougers are in a position to pass those costs through to the tenants. Which is not to say it shouldn't be done.

Landownership or other ownership of assets does not by itself create riches & utility; it needs labor input for that, even if the effectiveness of the labor can be greatly amplified using automation etc.

Eventually a safety net will have to be "financed" out of the surplus-value of economic production. (This can take the shape of collecting wealth taxes and allocate the money to _productive_ activities, which is perhaps where this economy is falling short.)

The effect of the safety net is to give benefit recipients a right to purchase goods (& services), but these goods must either come out of the surplus-value of the economy, or must be traded against surplus-value goods produced in the US.

To the extent that domestic surplus-value in the kind sought to be consumed (shrimp) declines, other surplus-value has to make up for it, generating items that can be traded against the needed good.

The terms of the trade are set on the market. If you don't have any surplus value to trade (what does the US export? trade deficit, anybody?), you may try protectionism (tariffs) or the threat of military force or economic reprisals to "help" set trade terms more favorably for your side.

Well, I went a long way from the original point. Anybody still care to comment?

wtf: "Why not let shrimp farmers in the U.S. compete with those from other countries ..."

I hope you are resting comfortably. Of course we can let shrimp farmers compete with cheap imports. We also can let workers of your job description compete with their "cheap" Asian counterparts. This goes by the rubric "offshoring".

There is seriously nothing wrong with that, if you have a safety net for those unfortunate to be out-competed that gives them a _dignified_ living standard. But then this safety net has to be supported by an economy that can deliver enough surplus-value to feed, house, and give sufficient medical care to the welfare recipients.

"We also can let workers of your job description compete with their "cheap" Asian counterparts."

I do compete against cheap Asian counterparts, and European counterparts, and counterparts from New York and Chicago, and everywhere else in the world. It doesn't bother me one bit because it is a two way street....I am allowed to work on projects for companies in other countries. My employer is hired for those jobs because of free trade. If other countries reacted with tariffs everytime a U.S. company could do a job better, faster, or cheaper just about everyone int his country would be affected.

The arguement against free trade seems to always boil down to another country selling a good at a cheaper price than what companies here can produce it for. I would like someone to tell me what is wrong with that? Would it be okay if the Asians wanted to sell shrimp at twice the price of U.S. producers? I doubt any protectionists would have a problem with that. One more question for all of you anti free traders out there: If Asia wanted to give U.S. consumers all the shrimp they wanted for free forever would you be against that? If so please explain.

Wtf how can another country do such wonderous things under cut us on price ect. Are we that grossly under productive. I thought we were the tech marvels of the new age. Where have we gone wrong. If not please explain.

Brad: The Bush administration decides to make China and Vietnam a little bit poorer ...

... and their shrimps a little happier. Save a shrimp - eat a cockroach!

"superior American products are at a market disadvantage due not so much to higher structural costs (which no doubt exist) as to undiscerning, cost-driven consumers. In this case, I have no compunction about 'blaming the consumer'"

I don't mean to sound like a free market fundamentalist here, but it seems to me that if you think your product is superior enough to command a premium price, but your customers don't agree, you are either (a) doing a bad job of marketing, or (b) delusional. ;)

little alex, shrimp aren't exactly as technology centered as computers, telecom, healthcare, etc. We are very productive which is why we shouldn't waste our time growing shrimp when we can do other more advanced activites. So like I said, please explain how lower prices are ever bad.

little alex, shrimp aren't exactly as technology centered as computers, telecom, healthcare, etc. We are very productive which is why we shouldn't waste our time growing shrimp when we can do other more advanced activites. So like I said, please explain how lower prices are ever bad.

wtf: The term "free trade" does not capture all of the issue. Completely "free", unimpeded trade is perhaps as desirable as "free", unimpeded enterprise, where entrepreneurs can take advantage of workers & the environment without regard to OSHA or FLSA standards, or environmental regulations.

Nobody in their right mind wants frivolous restrictions on trade to protect domestic interest groups who think they are entitled to a fat profit "just because".

No offense to you or anybody else intended, but people who work in "high-tech" (which includes me) or other lofty professions sometimes have a warped view of people & industries who are producing the necessities of life (what is the big deal with food -- I get it in the store, power -- it comes out of the wall socket, water -- I open the faucet and there it comes, garbage -- I dump it in the bin and it disappears, etc.). There is a certain arrogance towards those "lowly" jobs that "every idiot can do". It would be nice to imagine that the people doing them, idiot or not, have a decent living as well.

cm, thanks for your courteous reply.

You wrote, "You are right about rents. I did miss them, but the thrust of my argument was in a different direction. Anyway, it is difficult to tax rent gouging or the underlying assets, as typically the gougers are in a position to pass those costs through to the tenants. Which is not to say it shouldn't be done."

Right, I realize that that wasn't the general thrust of your argument. But I was answering a broader question: how to finance government services, which includes welfare payments, which you did raise in your post.

The point I'm making about Ricardian rent is mostly about land rent. This is from a Georgist (Henry George) perspective, to wit: the return from holding land. Land is a scarce resource for which you must pay for use (which is Ricardian (scarcity) rent). Currently, the value of rent goes to landowners, who are rewarded for holding unimproved land. (They're also rewarded for improvements, but those really are *capital*, not land---I'm referring to the classical modes of production: labor, land, and capital---neoclassical economics has forgotten land.)

So the rent from unimproved land is, in a sense, *all* gouging. These rents could be recovered by the *government* instead of by private landlords. So your tax bill would be reduced by the portion of your "rent" (quotes indicating rent as we usually hear it) which your landlord would have to pass on to the gov't. (Of course, people who hold land would be screwed in the transition.)

For an excellent intro to these ideas, see
http://members.aol.com/_ht_a/tma68/geo-faq.htm
It's from an otherwise libertarian perspective, which I don't share, but it's very well-written.

"Landownership or other ownership of assets does not by itself create riches & utility; it needs labor input for that, ..." But that misses the point. You need land, labor, and capital for production. Land is in very fixed supply, so land rent goes up with GDP. This was Ricardo's point in his famous treatise on land and corn; see
http://www.econlib.org/library/Enc/bios/Ricardo.html
In particular, note:
"One of Ricardo's chief contributions, arrived at without mathematical tools, is his theory of rents. Borrowing from Malthus, with whom Ricardo was closely, but often diametrically, associated, Ricardo explained that as more land was cultivated, farmers would have to start using less productive land. But because a bushel of corn from less productive land sells for the same price as a bushel from highly productive land, tenant farmers would be willing to pay more to rent the highly productive land. Result: the landowners, not the tenant farmers, are the ones who gain from productive land. This finding has withstood the test of time."

The point about land value taxation (meaning attempting to recover all or much of the Ricardian rent on land) is that it is both efficient (because the supply of land is inelastic) and equitable because (a) landowners are mostly wealthy, (b) there's no a priori reason in any consistent theory of justice for private parties to be able to hold scarce natural resources that they did not create and charge others for access to them---this is the biggest chink in the armor of usual "libertarian" arguments...An additional point about efficiency is that if you tax away rents, you prevent inefficient uses of land like speculation (which often leads to land being held idle).

Finally, I should add that
(a) the annual take from such a system could be quite large, as one estimate of annual Ricardian rent in the US is 14% GDP;
(b) authors like Smith, Mill, and modern economists ranging from Milton Friedman (!) to Vickery have endorsed some of these views.

"(a) landowners are mostly wealthy, (b) there's no a priori reason in any consistent theory of justice for private parties to be able to hold scarce natural resources that they did not create and charge others for access to them---this is the biggest chink in the armor of usual "libertarian" arguments...An additional point about efficiency is that if you tax away rents, you prevent inefficient uses of land like speculation (which often leads to land being held idle)."

Why is it that liberals think that anyone that has any wealth at all does not deserve it and so it should be taken by the government? This isn't North Korea, it is the U.S.

The fact that someone is wealthy should never be an open invitation to take from them simply because you can. Further, the statement about nobody has the right to own scarce natural resources is complete Bull Shit. If I work and save my wages and decide to buy land, then the land is mine, I own it and nobody has a right to it other than me. It is that simple. Most scarce natural resources are only valuable because there are other uses for them. Take oil for example. It is by all definitions a scarce natural resource. It is very valuable but it is only valuable because we can put it in our cars and factories to do other things. Prior to the internal combustion engine, oil was basically worthless. The same goes for most land thousands of years ago when people were nomadic.

It is exactly because of these "rents" that people purchase, develop, and maintain land and other scarce resources. The government does not have a right to them anymore than I have a right to come and take your house. So many of you liberals forget that the real reason for government is to PROTECT PRIVATE PROPERTY, not confiscate it. So liberal, why don't you change your username to "communist" because that is what you really advocate.

Um, there's a big difference between taxation and Communism. I think you've fallen victim to Grover Norquist, wtf.

God hates shrimp! Burn in hell you sinners!

http://godhatesshrimp.com

wtf: Are you sure you know what communism is, other than a name to be called left and right in lieu of factual arguments? liberal didn't propose to expropriate people of their possesions (either generally or at will), only to partially neutralize the extraction of (Ricardian) land rent. Admittedly the difficulty with that is that it is hard to attribute what parts of a rent asked are the Ricardian "rent on the unimproved value of the land" which is charged simply because I "own" the land and not you, and a "service charge" for improvements to the land (buildings, roads, water & sewer systems, electricity, cultivation, ...). Nobody is suggesting expropriating e.g. houses, which are clearly the result of somebody's productive efforts.

Regarding how land ownership came about, the land was not owned from day one of its existence. In the US or for that matter, America, European or European-descended colonizers came here, squatted on the land, and took it, often with force & deception, from the native population. It is not that the Indians told the white man "please take this land, I see you can develop and maintain it and put it to productive use, for all of which I have neither capability nor desire". They were driven from the ("the", not "their") land backed by the force of first European armies and later the US army. Marx called this and analogous happenings elsewhere the "initial accumulation of capital" in his analysis.

So initially the unowned land (related to the concept of "the commons") was appropriated either by right of use (I don't know the English term; individual or family ownership or use rights established by long undisputed use and inhabitation), or effective expropriation of individuals or the public (driving others from the(ir) land and/or a "sovereign" decreeing exclusive ownership rights).

From this philosophical perspective, the title to a piece of land obtained by purchase is as legitimate as asserting ownership of a purchased stolen or embezzled good. But as they say, there is philosophy and there is the law, or some such. And one could perhaps legitimately make the case that with time and passing-on of the illicitly gotten item in good-faith transactions, the ownership becomes increasingly "legalized", as it would be unfair to expropriate owners who often purchased the land from the fruits of their labor.

Finally, why should a single entity be entitled to let's say 5-10% of your production simply because the land they "own" was taken from the public? Again, we are not talking about legitimate charges for their efforts to make the land usable and maintain it for you. What liberal argued, and I largely agree with, is that a larger portion of this Ricardian rent should be available to public expenditure on behalf of useful endeavors. (Which could serve as an opening to a discussion along the lines of "private industry is more effective than government", but I'm not inclined to go into that right now.)

liberal: I think we largely agree here. 14% sounds like a lot, but not implausible. This is part of the money supply that together with the money allocated to stock & other "asset" transactions loops forever in the financial system and can never be put ot productive use, leaving only a fraction of the money stock to act as liquid money for _real_ economic activities.

Good point about speculative and inefficient land use. I can see one caveat however -- what about privately owned gardens, forests, or wildlife preserves provided by the benevolent owners as a benefit for the public to enjoy, or as a sanctuary for wildlife driven from "developed" land? Their use is not "efficient" -- note the scare quotes -- but you won't want to argue they should be effectively expropriated and put under public management, right? But then presumably declaring and enforcing execptions for these public-interest purposes should be a second-order difficulty.

"This is part of the money supply that together with the money allocated to stock & other "asset" transactions loops forever in the financial system and can never be put ot productive use"

Are you joking? Money invested in stock or other financial assets isn't put to productive use? What exactly do you think happens to the money that people use to purchase stock? Here is a hint...it doesn't get burried or burned. It funds business, mortgages, loans, factories, land purchases, etc. All of which are very productive uses.

The entire concept of Ricardian rent is flawed to begin with. The value of John Kerry's multi million dollar Beacon Hill home is mostly a function of its location. If it were located in the middle of the Sahara it would probably be worth nothing. The land it is built on is worth millions even if it were a vacant lot. And why is it worth as much as it is? Because people are willing to pay for it! What a novel concept....something is only worth what people are willing to pay for it. If the government declared that they would be collecting this so called "rent" on all property, most land would be valued at ZERO. What is next? Collectivizing all of the farms and factories?

And another thing, the so called theft of indian lands is really an absurd arguement. Some of the most valuable real estate in the nation was PURCHASED from indians...think NYC

cm,

"liberal: I think we largely agree here. 14% sounds like a lot, but not implausible."

Yes, it sounds like a lot. One problem is that no one knows the actual number for sure. Georgist types claim that neoclassical economics became corrupted when it started ignoring "land" in the classical scheme of the 3 factors of production. Thus, if you look at national stats for the US, you'll hear about "labor share" and "capital share," but not about land.

Supposedly, once some economists at the Fed or something tried to compute the value of land held by commercial entities. The contribution of land to national wealth is so neglect that---hilariously---they came up with a *negative number*!! (The reason for this is that there's things hidden by the fact that land is bought with a mortgage, and stuff gets recycled through interest payments.)

"I can see one caveat however -- what about privately owned gardens, forests, or wildlife preserves provided by the benevolent owners as a benefit for the public to enjoy, or as a sanctuary for wildlife driven from "developed" land?"

This is a good point (especially given that I gave a lot of $$ to an environmental group that purchases land and easements). But I'm sure it could be taken care of in the context of a comprehensive, rational government policy.

wtf wrote, "Are you joking? Money invested in stock or other financial assets isn't put to productive use? What exactly do you think happens to the money that people use to purchase stock? Here is a hint...it doesn't get burried or burned. It funds business, mortgages, loans, factories, land purchases, etc. All of which are very productive uses."

You're wrong. Suppose I own X shares of company Y, and you buy them from me. What's happened to net investment? NOTHING. A paper claim to (possibly) productive assets has changed hands.

Your mentioning "land purchases" is very telling...

wtf wrote, "The entire concept of Ricardian rent is flawed to begin with. The value of John Kerry's multi million dollar Beacon Hill home is mostly a function of its location. If it were located in the middle of the Sahara it would probably be worth nothing."

Nice way to publically humiliate yourself...that *is* the point about Ricardian rent. Ricardian rent is higher in Beacon Hill than the Sahara.

wtf wrote, "And why is it worth as much as it is? Because people are willing to pay for it! What a novel concept....something is only worth what people are willing to pay for it. If the government declared that they would be collecting this so called "rent" on all property, most land would be valued at ZERO. What is next? Collectivizing all of the farms and factories?"

No, actually. The point about Georgism is that the land would still be in private hands. You'd just have to annually remit to the government the Ricardian rent on the parcel. (Of course, there are *practical* objections---how well can the rent be measured? Some have proposed taxing away 80%, say, of the rent.)

There are quotes from many non-Marxist notables supporting some or all of the concepts behind taxing away Ricardian rent---including Smith, Mill, Milton Friedman:

From http://geolib.pair.com/essays/sullivan.dan/royallib.html :

"Ground rents are a species of revenue which the owner, in many cases, enjoys without any care or attention of his own. Ground rents are, therefore, perhaps a species of revenue which can best bear to have a peculiar tax imposed upon them." --Adam Smith

"Landlords grow richer in their sleep, without working, risking, or economizing. The increase in the value of land, arising as it does from the
efforts of an entire community, should belong to the community and not to the individual who might hold title." --John Stuart Mill

Found these on USENET; pretty sure they're genuine:

"Pure ground rent is in the nature of a 'surplus,' which can be taxed heavily without distorting production incentives or reducing efficiency." -- Paul Samuelson, Nobel laureate in Economics

"In my opinion the least bad tax is the property tax on the unimproved value of land, the Henry George argument of many, many years ago." -- Milton Friedman, Nobel laureate in Economics

"It is important that the rent of land be retained as a source of government revenue." -- Franco Modigliani, Nobel laureate in Economics

"For efficiency, for adequate revenue, and for justice, every user of land should be required to make an annual payment to the local government equal to the current rental value of the land he or she prevents others from using." -- Robert Solow, Nobel laureate in Economics

"While the governments of developed nations with market economies collect some of the rent of land, they do not collect nearly as much as they could, and they therefore make unnecessarily great use of taxes that impede their economies -- taxes on such things as incomes, sales, and the value of capital goods." -- William Vickrey, Nobel laureate in Economics and past president of the American Economics Association

"Suppose I own X shares of company Y, and you buy them from me. What's happened to net investment?"

Suppose a company needs to raise capital and doesn't want to borrow, what options do they have? That is after all basically how all shares come into being.

So, really ricardian rent is all about preventing anyone from living in anything other than a cave or a tent in the middle of nowhere ebcause otherwise they would be benefiting from the rent of the land that they shouldn't own in the first place because it was stolen from someone who didn't know they owned it 400 years ago and we can all just redistribute the wealth man? Sound about right? Those evil corporations are holding the people down. Liberal, your last name wouldn't happen to be 'Marx' would it?

"In my opinion the least bad tax is the property tax on the unimproved value of land, the Henry George argument of many, many years ago." -- Milton Friedman, Nobel laureate in Economics

Note the words used - "least BAD tax".

"Landlords grow richer in their sleep, without working, risking, or economizing. The increase in the value of land, arising as it does from the
efforts of an entire community, should belong to the community and not to the individual who might hold title."

Landlords borrow to buy land and take a risk that they can put it to profitable use. If I buy an empty lot and it decreases in value the government is not going to reimburse me for my loss.

Also, why would anyone own any property if the government collected all of the "rent"? There is no point to owning it if that is the case....the government might as well own it all. And like I said before, liberal, you obviously do not understand the role of government in this country. It is NOT to maximize tax reciepts. Nor is it to redistribute wealth. It is to provide for the common defense and protect private property, the most fundamental of which is land.

"Landlords grow richer in their sleep, without working, risking, or economizing. The increase in the value of land, arising as it does from the
efforts of an entire community, should belong to the community and not to the individual who might hold title."

Patent holders grow richer in their sleep too, should we eliminate patents. People who hold the rights to movies, music, and other media can grow richer in their sleep too. And the idea that landowners grow richer without working is absurd. Might they have had to have worked in order to make money to buy the land in question? And might saving to purchase that land involve economizing?

wtf wrote, "Suppose a company needs to raise capital and doesn't want to borrow, what options do they have? That is after all basically how all shares come into being."

A company issuing new shares of stock, which might result in positive net investment, is NOT the same as stock being traded on the secondary market.

"So, really ricardian rent is all about preventing anyone from living in anything other than a cave or a tent in the middle of nowhere ebcause otherwise they would be benefiting from the rent of the land that they shouldn't own in the first place because it was stolen from someone who didn't know they owned it 400 years ago and we can all just redistribute the wealth man? Sound about right?"

Uh, no, actually.

Put aside the fact that a transition to a full land value tax scheme would be a real bath for landowners. (Mill, if I recall correctly, proposed dealing with that by taxing away all the *increase* in land rent from some initial time.) If you can pay the rent on the land, you get to use it.

The easiest way to think about it is the modern analogy of the electromagnetic spectrum, which is also "land" in the classical sense ("land" being any scarce natural resource). The government doesn't just give E-M spectrum away (or, at least, not all of it); it has an auction, and if you win the auction, you get to use the E-M spectrum for a certain amount of time. Thus, in that scenario, Verizon (for example) makes a plan for using a chunk of spectrum that's coming up for auction and bids on it. The amount of the winning bid is paid to the government.

If the winner of the big can't make up for the money spent on the E-M, he (or it) takes a loss. The E-M is still productively used, by a private entity...

"Those evil corporations are holding the people down."

Where did I ever say corporations owned the land? Landowners own the land, be they corporations or individuals.

"Liberal, your last name wouldn't happen to be 'Marx' would it?"

No, it wouldn't. Are Smith, Mill, Friedman, and the other notables I quoted Marxists? In fact, Marx seems to have underemphasized the role of land, and many modern Marxists want to collectivize capital but NOT land, as far as I can tell.

"A company issuing new shares of stock, which might result in positive net investment, is NOT the same as stock being traded on the secondary market."

Why would anyone buy stock in the first place if they couldn't sell it later. You cannot have one without the other.

"If you can pay the rent on the land, you get to use it."

So the rich can use the land....At least those liberal elite will still have their ivory towers to look down on the rest of us.

wtf wrote, "Patent holders grow richer in their sleep too, should we eliminate patents. People who hold the rights to movies, music, and other media can grow richer in their sleep too. And the idea that landowners grow richer without working is absurd. Might they have had to have worked in order to make money to buy the land in question? And might saving to purchase that land involve economizing?"

Some people advocate abolishing patents for that very reason. It's pretty hard to make the case that *all* patents that have been granted should have been granted. (Henry George himself was against patents and in favor of copyright.)

Overall, dealing with the issues related to patent rights is a diffcult one, because patents *do* serve a useful purpose---providing an incentive to make fixed, sunk costs. (Think pharmaceuticals, or any industry where marginal costs of production are significantly lower than fixed costs.) That being said, patents *are* a monopoly granted by the government, and they *do* screw up price signals---marginal price charged is often one or more orders of magnitude greater than marginal cost.

In the case of (unimproved) land, however, the landlord produces nothing, and the land would still be there without the landlord.

It's true that landowners might have worked to gain the wealth to purchase the land from another landowner. Like I said, land value taxation schemes aren't without transition issues. But it's not clear that this is necessarily a reason not to do land value taxation. Slave owners stand to lose a lot when slaves are emancipated---should they be compensated?

And note the very important point that while moving to a Georgist scheme will "hurt" landowners, the status quo hurts non-landowners, as they are born into a world where significant natural resources, produced by the hand of no man, are locked up by others. This is the crucial point, and why "Ricardian rent" is often called "scarcity rent"---by holding title to the land, a landowners not only has right of use, but right of preventing anyone else from using it---backed up by the guns of big guvmint.

wtf wrote, "Why would anyone buy stock in the first place if they couldn't sell it later. You cannot have one without the other.

Wrong. Stock also pays an income over time. If companies never produced income, now or in the future, they'd be worthless.

And you're missing the point---the point is whether selling on the secondary market represents net investment. It doesn't.

" 'If you can pay the rent on the land, you get to use it.' So the rich can use the land....At least those liberal elite will still have their ivory towers to look down on the rest of us."

Uh, no. It's up to the free market---if you can pay the rent, *which is determined by the market*, you can use the land. And often that use will be to provide things that others can use---like an apartment building.

Whereever land value taxation has been used historically, it's resulted in faster economic growth, because (a) land is used more efficiently, (b) other taxes which do produce economic distortions (unlike land taxes) are lessened.

wtf wrote, " 'In my opinion the least bad tax is the property tax on the unimproved value of land, the Henry George argument of many, many years ago.' -- Milton Friedman, Nobel laureate in Economics

"Note the words used - 'least BAD tax'."

I see. So I suppose you advocate a regime of *no* taxes?

"And note the very important point that while moving to a Georgist scheme will "hurt" landowners, the status quo hurts non-landowners, as they are born into a world where significant natural resources, produced by the hand of no man, are locked up by others. This is the crucial point, and why "Ricardian rent" is often called "scarcity rent"---by holding title to the land, a landowners not only has right of use, but right of preventing anyone else from using it---backed up by the guns of big guvmint."

Two points:

1) The majority of Americans ARE landowners in some way shape or form. Either they own a home (approx. 65% of familes right?) or another piece of property or they own shares in a company that owns land or they recieve (or will recieve)payments from a pension plan that probably owns land, stock, etc. Many people fall into multiple categories.

2) The fact that government enforces property rights is what made this country as wealthy as it is. Big government also prevents me from stealing your car or robbing a bank. That is the job of government. Not some sort of social re-allignment. If I couldn't control who could use my land there would be no reason for me to want to own it in the first place.

wtf: "Landlords borrow to buy land and take a risk that they can put it to profitable use.", and: "Also, why would anyone own any property if the government collected all of the "rent"?"

That's all fine, and they are rewarded for their risk with the fruits of the productive use, or savings of alterantive cost (like apartment rent if you bought a parcel with a house on it). As pointed out several times before, and you are apparently disregarding it, the point is not to "punish" or "fleece" property owners, or to rob them of their control of the use of their land, but to neutralize the unproductive extraction of scarcity rent. We very well know and acknowledge that private ownership of land is a well-accepted social institution, and forms one of the cornerstones of our societies; we do in no way propose to remove it, as it does provide said beneficial incentives; however there is a measure to everything in that it will work only within a certain parameter range, so to speak. (I called scarcity rent "unproductive" because this is money extracted from the liquid stock of money. What does the owner do with the rent? Spend it all on food and drink, and having a good time? No. It is reinvested in buying more land (to make more rent), or in stock or other instruments. If it is taken to the bank, the bank will do that.)

Property buyers can be and are partially compensated for their risk by giving tax deductions or credits for mortgage interest and other cost-of-renting expenses. Otherwise, the purpose of government policy is not to put anybody in a risk-free position. Every endeavor in life is inherently risky, but worthwhile endeavors carry material and immaterial rewards that compensate for the risk. One constraint on government policy is to not distort the risk/reward structure of "desirable" (in lieu of "worthwhile") endeavors to make to unworthwhile. Which could bring us back to the initial point of "free" market incentives vs. protectionism if I wouldn't digress again ...

If you ever went through a mortgage application or pre-approval, I'm sure you saw how the prospective property tax was figured into the calculation. Property taxes and other expected taxes/fees/ownership costs on land are similarly figured into the sales price. If you are about to purchase a used car, you will deduct expected repair costs from the sales price (why do sellers fix at least the more egregious problems of the car before selling it?), if you intend to buy a fixer-upper, the repair cost will be deducted from the sales price, etc. The transition effect that liberal mentioned is where you transition from a situation where a certain cost was not figured in to one where a cost will be figured in, and seller and buyer have differently biased cost thresholds -- the seller wants to recover his "full" cost, the buyer only wants to pay "adjusted" cost. one or both parties may end up shafted. If the transition is done more smoothly, the shafting can be partitioned into smaller increments that individuals may be more willing to swallow.

wtf wrote,

"1) The majority of Americans ARE landowners in some way shape or form. Either they own a home (approx. 65% of familes right?) or another piece of property or they own shares in a company that owns land or they recieve (or will recieve)payments from a pension plan that probably owns land, stock, etc. Many people fall into multiple categories."

65%? No, many of them don't own their homes--the bank does. And while yes, many of them do own shares in companies that own land, many of them also buy goods from companies that (a) rent land from someone else, (b) must deal with labor markets screwed up because the guvmint chooses to tax productive activities like labor instead of first taxing unproductive activities like land ownership.

The question you asking has to be posed in the context of *net* ownership of land. If I own a little parcel of land, but it's not that big, and I'm constantly paying others for access to land (including indirectly), then *on net* I'm not a landowner.

"2) The fact that government enforces property rights is what made this country as wealthy as it is. Big government also prevents me from stealing your car or robbing a bank. That is the job of government. Not some sort of social re-allignment. If I couldn't control who could use my land there would be no reason for me to want to own it in the first place."

The question isn't "property rights or no property rights," it's *which* property rights, with what attendant responsibilities. Furthermore, like all good right-wingers, you're implicitly claiming that a proposed reform (here, LVT) is a social experiment (or "realignment," as you say), but the _status quo_ is not---and all the while, the government is taking money from non-landowners and handing it over to landowners.

And yes, under a Georgist system, you *could* still control who had access to your land---you'd just have to pay for that right. The point about access is that while ownership of a scarce natural resource is a positive benefit conferred by government on the holder of the title, it is a penalty on everyone else.

cm wrote,

"That's all fine, and they are rewarded for their risk with the fruits of the productive use, or savings of alterantive cost (like apartment rent if you bought a parcel with a house on it)."

Right. I would add that only *productive* risk should be rewarded. That is, when a capitalist invests in a new factory, he is taking a risk with his capital that may benefit us all (creating jobs, etc). When someone purchases land, he may be taking a risk (if the land were to depreciate in value, say), but the risk is not *productive*---the land would be there in either case.

"As pointed out several times before, and you are apparently disregarding it, the point is not to 'punish' or 'fleece' property owners, ..."

Right. Note, though, that if a 100% LVT were imposed overnight, landowners would take a bath. A very big one. Why? Because increasing the tax on unimproved land to recover Ricardian rent would lead to a BIG increase, and the net present value of future tax payments is capitalized into current land value.

liberal: Homeowners do own their homes, not the bank. The bank only has a lien on the house & property for securing the loan. This is a severe restriction on exercising full ownership rights, but the bank "owns" the house only in a figurative sense.

cm wrote, "liberal: Homeowners do own their homes, not the bank. The bank only has a lien on the house & property for securing the loan. This is a severe restriction on exercising full ownership rights, but the bank 'owns' the house only in a figurative sense."

Hmm...that's not so clear to me. The question is who gets the rent. That's a complicated question with interest payments in the picture.

Certainly, if LVT were imposed overnight, and you had just purchased a house, you could walk away and the bank would be stuck. (Not that LVT would be implemented like this.)

Finally, the point (not addressed to you, but rather wtf) in the large is not who owns land, but rather who, *on net*, collects land rent. If you own your own home, you're still paying land rent to businesses and so forth---we do more with land than live on it.

liberal: Ownership and net extraction of benefit are two separate concepts. The bank extends the buyer a loan, and in exchange receives an IOU plus a lien on the purchased property to back up the IOU. That you have to pay back the loan does not mean that the bank owns the property. The bank's interest in the property normally extends only as far as securing the loan is concerned. Inasmuch as most of the owner's potential rental income goes towards mortgage payments, the bank "owns" the owner more than the property.

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