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editorialized title. Tsk. the tipping situation sucks, but the larger economic problem is effectively due to rent extraction by the landlord. when a restaurant
by joshu 10y ago
editorialized title. Tsk.
the tipping situation sucks, but the larger economic problem is effectively due to rent extraction by the landlord. when a restaurant can't afford the rent that, say, a bank can, they are effectively priced out of the market. All excess returns and up going to the land owner. This effectively becomes a variant of baumol's cost disease. Once again, return on capital trumps return on labor.
I remember, many years ago, living in Manhattan: in a short period of time, for restaurants on each corner of an intersection were replaced with four banks. A vibrant spot died.
- kiba 10y agoThis is why I support the land-value tax. Landlords would only be taxed on the value of their land and not the property they're building. They're heavily incentivized to develop as much as possible to pay tax, since land-value tax doesn't care about the cost of any improvement you make.
- samastur 10y agoThis wouldn't change landlord's incentives and therefore unlikely to change the outcome.
- kiba 10y agoYou would need to explain that to me.
- smallnamespace 10y agohttps://en.wikipedia.org/wiki/Land_value_tax#Efficiency https://en.wikipedia.org/wiki/Land_value_tax#Efficiency A landlord's decision to improve or not improve the property only depends on 1) the cost of the improvements and 2) the expected revenue stream from that improvement, neither of which are affected by an LVT, since the LVT only cares about the unimproved value of the lot.
- kiba 10y agoI can't follow the technical arguments you're making.
- smallnamespace 10y agoYou are a landlord. You need to decide whether to make an improvement to your property. There are only two things you care about: 1. How much money does that improvement bring in? 2. How much does that improvement cost? Neither of those two inputs are affected by a land value tax. Therefore the landlord must reach the same decision, regardless of whether there is an LVT or not, and so LVTs have no effect on whether landlords improve their property. You might think that they'll be motivated to improve the lot in order to be able to pay the LVT, but that rationally doesn't factor in to the decision to improve the land or not. It only affects the price of the land (Imposing an LVT makes land prices fall by the discounted future cost of the tax). And not to be rude, but it seems strange to jump into discussions recommending LVTs as a solution to an economic problem without first understanding basic economic theory.
- kiba 10y agoYou might think that they'll be motivated to improve the lot in order to be able to pay the LVT, but that rationally doesn't factor in to the decision to improve the land or not. It only affects the price at which the land is bought or sold. I misunderstood the LVT as something that is levied against the landowner every year? And not to be rude, but it seems strange to jump into discussions recommending LVTs as a solution to an economic problem without understanding basic economic theory. I read an economist article on it, and I thought that I understood it. Apparently I don't. I won't be recommending it in the future until I fully understand the consequences.
- smallnamespace 10y ago> I misunderstood the LVT as something that is levied against the landowner every year? Yes, but it still doesn't affect the (rational) landowner's decision. Imagine an improvement that can net the owner $Y a year in profit. A rational owner should always make that improvement, regardless of whether the government is also taxing them $X a year on the land. If they doesn't have the money/capital to do so, they should sell the land to someone else. Obviously not every landowner acts fully rationally, but in the aggregate, landowners should act pretty closely to that model.