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I have tried understanding Georgism a few different times, but I struggle to understand pricing: assuming we could fairly solve the transition from a society in

I have tried understanding Georgism a few different times, but I struggle to understand pricing: assuming we could fairly solve the transition from a society in which people currently own land, how would land be valued? Who determines what land is worth? In a society with property rights, the market bids up land that is undervalued according to society's current needs and expectations and bids down land that is overvalued. When not significantly hindered by government zoning policy, it is pretty good at generating more buildings where there is high demand (see Dallas, TX). If the answer is a bureaucracy, it seems like a system of price controls where prices will inevitably be wrong and misallocate assets. I'm not aware of any country that has yet demonstrated the ability to successfully set direct prices of important economic assets for more than a decade without causing huge surpluses or (more commonly) shortages. A direct price control removes all input information from the market, whereas existing price floors (minimum wages), price ceilings, and subsidies tend to create smaller scale problems.

curuinor 7y ago
Georgism is also compatible with a system where land is auctioned, it's just that the proceeds of the auction go to the state instead of the owner of the land. So you could do auctions and market stuff. Without the possibility of profit from appreciation, of course, the land value would be much lower. But land has value even without appreciation.
- lend000 7y ago
  Interesting -- the market aspect is crucial. My only other qualm, which may or may not be better than necessary side effects of capitalism: if someone has "owned" a house for a long time, especially in a growing area, what is their Land Value Tax? Have they not profited through intelligent or lucky speculation by not having an auction since decades back when the price was much lower, and are they not incentivized to hold onto it even if it should be redeveloped? On the other side, will the feds kick people out with eminent domain for the above reasoning? I came up with a scenario about why I thought this would hinder property improvement, but I think I solved it within the Georgian system: Let's say Alice buys a piece of property zoned for 10 story buildings at 2mm/year LVT. She invests 30M and 3 years of construction into building a 10 story building that can generate 4mm/year in rent. It will pay itself off in 21 years plus start generating profit. Alice has specialized in being a great property develop but not a property manager. However, she is now TIED to this property -- if she lets it go up for auction, she loses the profits from her improvements. Sure, she can contract out property managers and eat into the profit, but this just increases the time until she can afford to build the next building. In a capitalist system, Alice can sell the building upon successful completion and immediately profit to the exact degree the market thinks she improved the land's value. That capital can immediately go into the next project and allow better specialization of human resources. However, I now suppose that the party who "bought" the land from the feds doesn't have to be the specialist who gets contracted to develop it. She can still be paid 30M upon completion and go straight into the next project with a different owner, without ever dealing with an auction. I potentially like this system a lot, as long as it allows wealth and non-land property rights, and market pricing, but I do need to think about it more. Thanks for helping to explain.
  - iso947 7y ago
    LVT applies to the land value today. If the value increases because a commuter rail station opens, the value of the land goes up, so the price of the tax goes up (you’re effectively paying more tax as you benefit from better society) If a power station opens next door and price drops, you pay less tax
    - harimau777 7y ago
      Presumably it would also be possible to take steps to adjust the LVT. For example, perhaps the first x thousand dollars of a family's primary home is untaxed.
      - cmcaine 7y ago
        But why? What problem would that rebate seek to solve? If the concern is that poor people might be unable to afford to stay in their homes, why not target poverty or house prices directly rather than adjusting the tax?
        harimau777 7y ago
        Either would be fine as long as it works. I just meant that there are different ways that a LVT could be implemented.
        iso947 7y ago
        If you want to avoid the cash flow problem you allow the tax to be levied as a charge on the land - collected at disposal
        eru 7y ago
        Rebates for primary homes are especially annoying, because they get the government into the business of deciding what your primary home is.
    - lend000 7y ago
snidane 7y ago
'Land ownership' actually means 'rights for exclusive use of land'. Government owns the land but gives out rights to use to people. If oil deposit or gold mine is found on it, the right is often revoked after compensating the rights holder. The prices for rights of use are determined by market, but usually bundled together with prices of buildings on it. One way to look at Georgist critique of current land system is that the rights of use are sold once but held infinitely long. If you got lucky and bought a piece of land in downtown Manhattan 200 years ago for 20 bucks, now you wouldn't need to pay anyone for granting you that ownership right. Basically land (and natural resources) are owned by people who got lucky, not by people who actually use it (such as a restaurant which has to rent it from that lucky holder). If the ownership rights were not given for infinite amount of time but reentered into an auction every, say 7 years, the allocation of land would then go to people who actually need it. It is the same economical problem as Domain Name allocation on web. People 'own' land on paper only. The government actually owns it no matter if you are in China, Europe or United States.
- lend000 7y ago
  I like the auction aspect the parent described in another comment. However I don't like the idea that the government can revoke at will and eminent domain you out of property even if you paid the tax you won at auction. For example -- what incentivizes people to take their expensive expertise, time and equipment and survey land before placing a bid at auction? If the government is going to be the only one to survey land, that's a great way to kill innovation in the field of natural resource exploration. Similarly, if you "bought" a piece of land you just use for a single story home near downtown SF 30 years ago, are you still paying the same LVT you got at action back then? Or will the price keep going up and price you out of your longtime house?
  - snidane 7y ago
    Yes, many people are not comfortable about being evicted. In reality that is how majority of people and business operate because they rent from somebody else. Your apartment lease usually expires after a year and you can be 'evicted' by your landlord. Businesess have contracts for longer periods (about 10years) of time because they put more investment into it. Instead of renting from lucky private landowners, the business owners could just as easily lease from a government for 7 years. The only question really is how long the auction should repeat after. Every year would mean people would not invest much for risk of non renewal of the contract next year. On the other hand too long between auctions (such as infinite time like in present day situation) and you get huge underutilization because the lucky winner in the first auction is not pressured to sell. LVT (or this auction mechanism) is based on market price of the land in that area so it changes in time. To prevent sudden spikes in price, the valuation of land should happen in intervals of several years like I described above in the case of an auction.
throwno 7y ago
There's a reason Georgism never took off. It's not a great idea.
- ethanbond 7y ago
  Alternatively, it’s difficult to get there from where we are today (effectively feudalism with security outsourced to the State). There are lots of reasons great ideas may not take off, including the difficulty of grokking them and/or entrenched interests.
- jlhawn 7y ago
  The Georgist movement (or Single-Tax movement) had a lot of momentum at the beginning of the 20th century. Major political leaders like Winston Churchill, Rutherford B. Hayes, and Sun Yat-Sen were all Georgists. There are various reasons for why the movement lost traction but I think it can mostly be attributed to: (1) the automobile which increased the accessibility and productivity of formerly-marginal land, lessening the problem of equitable access to land, and (2) the introduction of the income tax as an alternative to land value taxes. Notable, land monopolists preferred income taxes because as long as their land is unused or underused they are not producing as much income. The Georgist movement then split between those who thought that income tax was a good enough replacement and those who "knew" it wasn't. There's also a kind of conspiracy theory which claims that (to a certain extent) neo-classical economics (which developed at about the same time that Georgism become popular) was promoted by wealthy and biased land owners and monopolists at the time with an intent to discredit Henry George and obfuscate the role of land in the economy, folding it under the definition of 'capital' to reduce the factors of production to just two, along with labor.
  - throwno 7y ago
    The wealthiest people in America aren't big landholders though. Georgism does nothing to reduce inequality. In fact, it looks like the people pushing Georgism today (wealthy tech bros) are hoping to avoid paying any kind of income or capital gains, and soak people who own land.
lr4444lr 7y ago
I don't know if it's how Georgian works, but this shouldn't mystify you in principle: municipalities do it all the time for property taxes: set a budget for the year (mostly going to schools), then determine every plot's relative value to all of the other plots. Divide up the budget along these percentages.
- dodobirdlord 7y ago
  Georgists and others who support land value taxes generally oppose conventional property taxes because property taxes are usually based on the total value of the property, not just the component of the value that comes from the underlying land. https://en.wikipedia.org/wiki/Land_value_tax https://en.wikipedia.org/wiki/Land_value_tax
  - lr4444lr 7y ago
    Well okay, but in the modern era like ours where value is increasingly found in intellectual property and an increasingly mobile workforce, physically commodifying land like that sounds more limiting, wedding the theory to a 19th century economy.
    - dodobirdlord 7y ago
      While true, the underlying land is still enormously valuable, and the principle of the land value tax applies to other land-like things, most notably rights to use electromagnetic frequency bands.
amiga_500 7y ago
Land value tax explained: https://www.youtube.com/watch?v=gD_dZvPwAj0 https://www.youtube.com/watch?v=gD_dZvPwAj0
eru 7y ago
> Who determines what land is worth? You can use an auction. Eg you can auction the land off to the highest bidder for a few years at a time.
- nybble41 7y ago
  How does that work if there are already improvements on the land? You'd either have to auction the land with the improvements—in which the auction price won't indicate how much the land would have fetched on its own—or else stipulate that any improvements must be demolished prior to the auction, which would be massively wasteful.
  - eru 7y ago
    It's not a trivial problem, but solvable. There are other solutions than the two you mentioned.
    - nybble41 7y ago
      There are other options, sure. The tax assessors could simply guess, or outright dictate whatever "unimproved value" they choose (i.e. the highest tax they think they can get away with). If the the point is to establish the "unimproved" value of the land through an auction, however, you can't do that when the land and its improvements are inseparable. These are not two distinct economic goods with independent values. The improved land is one good, with one combined value.

curuinor 7y ago

Georgism is also compatible with a system where land is auctioned, it's just that the proceeds of the auction go to the state instead of the owner of the land. So you could do auctions and market stuff. Without the possibility of profit from appreciation, of course, the land value would be much lower. But land has value even without appreciation.

lend000 7y ago
Interesting -- the market aspect is crucial. My only other qualm, which may or may not be better than necessary side effects of capitalism: if someone has "owned" a house for a long time, especially in a growing area, what is their Land Value Tax? Have they not profited through intelligent or lucky speculation by not having an auction since decades back when the price was much lower, and are they not incentivized to hold onto it even if it should be redeveloped? On the other side, will the feds kick people out with eminent domain for the above reasoning? I came up with a scenario about why I thought this would hinder property improvement, but I think I solved it within the Georgian system: Let's say Alice buys a piece of property zoned for 10 story buildings at 2mm/year LVT. She invests 30M and 3 years of construction into building a 10 story building that can generate 4mm/year in rent. It will pay itself off in 21 years plus start generating profit. Alice has specialized in being a great property develop but not a property manager. However, she is now TIED to this property -- if she lets it go up for auction, she loses the profits from her improvements. Sure, she can contract out property managers and eat into the profit, but this just increases the time until she can afford to build the next building. In a capitalist system, Alice can sell the building upon successful completion and immediately profit to the exact degree the market thinks she improved the land's value. That capital can immediately go into the next project and allow better specialization of human resources. However, I now suppose that the party who "bought" the land from the feds doesn't have to be the specialist who gets contracted to develop it. She can still be paid 30M upon completion and go straight into the next project with a different owner, without ever dealing with an auction. I potentially like this system a lot, as long as it allows wealth and non-land property rights, and market pricing, but I do need to think about it more. Thanks for helping to explain.
- iso947 7y ago
  LVT applies to the land value today. If the value increases because a commuter rail station opens, the value of the land goes up, so the price of the tax goes up (you’re effectively paying more tax as you benefit from better society) If a power station opens next door and price drops, you pay less tax
  - harimau777 7y ago
    Presumably it would also be possible to take steps to adjust the LVT. For example, perhaps the first x thousand dollars of a family's primary home is untaxed.
    - cmcaine 7y ago
      But why? What problem would that rebate seek to solve? If the concern is that poor people might be unable to afford to stay in their homes, why not target poverty or house prices directly rather than adjusting the tax?
      - harimau777 7y ago
        Either would be fine as long as it works. I just meant that there are different ways that a LVT could be implemented.
        iso947 7y ago
        If you want to avoid the cash flow problem you allow the tax to be levied as a charge on the land - collected at disposal
      - eru 7y ago
        Rebates for primary homes are especially annoying, because they get the government into the business of deciding what your primary home is.
  - lend000 7y ago

snidane 7y ago

'Land ownership' actually means 'rights for exclusive use of land'. Government owns the land but gives out rights to use to people. If oil deposit or gold mine is found on it, the right is often revoked after compensating the rights holder. The prices for rights of use are determined by market, but usually bundled together with prices of buildings on it. One way to look at Georgist critique of current land system is that the rights of use are sold once but held infinitely long. If you got lucky and bought a piece of land in downtown Manhattan 200 years ago for 20 bucks, now you wouldn't need to pay anyone for granting you that ownership right. Basically land (and natural resources) are owned by people who got lucky, not by people who actually use it (such as a restaurant which has to rent it from that lucky holder). If the ownership rights were not given for infinite amount of time but reentered into an auction every, say 7 years, the allocation of land would then go to people who actually need it. It is the same economical problem as Domain Name allocation on web. People 'own' land on paper only. The government actually owns it no matter if you are in China, Europe or United States.

lend000 7y ago
I like the auction aspect the parent described in another comment. However I don't like the idea that the government can revoke at will and eminent domain you out of property even if you paid the tax you won at auction. For example -- what incentivizes people to take their expensive expertise, time and equipment and survey land before placing a bid at auction? If the government is going to be the only one to survey land, that's a great way to kill innovation in the field of natural resource exploration. Similarly, if you "bought" a piece of land you just use for a single story home near downtown SF 30 years ago, are you still paying the same LVT you got at action back then? Or will the price keep going up and price you out of your longtime house?
- snidane 7y ago
  Yes, many people are not comfortable about being evicted. In reality that is how majority of people and business operate because they rent from somebody else. Your apartment lease usually expires after a year and you can be 'evicted' by your landlord. Businesess have contracts for longer periods (about 10years) of time because they put more investment into it. Instead of renting from lucky private landowners, the business owners could just as easily lease from a government for 7 years. The only question really is how long the auction should repeat after. Every year would mean people would not invest much for risk of non renewal of the contract next year. On the other hand too long between auctions (such as infinite time like in present day situation) and you get huge underutilization because the lucky winner in the first auction is not pressured to sell. LVT (or this auction mechanism) is based on market price of the land in that area so it changes in time. To prevent sudden spikes in price, the valuation of land should happen in intervals of several years like I described above in the case of an auction.

throwno 7y ago

There's a reason Georgism never took off. It's not a great idea.

ethanbond 7y ago
Alternatively, it’s difficult to get there from where we are today (effectively feudalism with security outsourced to the State). There are lots of reasons great ideas may not take off, including the difficulty of grokking them and/or entrenched interests.
jlhawn 7y ago
The Georgist movement (or Single-Tax movement) had a lot of momentum at the beginning of the 20th century. Major political leaders like Winston Churchill, Rutherford B. Hayes, and Sun Yat-Sen were all Georgists. There are various reasons for why the movement lost traction but I think it can mostly be attributed to: (1) the automobile which increased the accessibility and productivity of formerly-marginal land, lessening the problem of equitable access to land, and (2) the introduction of the income tax as an alternative to land value taxes. Notable, land monopolists preferred income taxes because as long as their land is unused or underused they are not producing as much income. The Georgist movement then split between those who thought that income tax was a good enough replacement and those who "knew" it wasn't. There's also a kind of conspiracy theory which claims that (to a certain extent) neo-classical economics (which developed at about the same time that Georgism become popular) was promoted by wealthy and biased land owners and monopolists at the time with an intent to discredit Henry George and obfuscate the role of land in the economy, folding it under the definition of 'capital' to reduce the factors of production to just two, along with labor.
- throwno 7y ago
  The wealthiest people in America aren't big landholders though. Georgism does nothing to reduce inequality. In fact, it looks like the people pushing Georgism today (wealthy tech bros) are hoping to avoid paying any kind of income or capital gains, and soak people who own land.

lr4444lr 7y ago

I don't know if it's how Georgian works, but this shouldn't mystify you in principle: municipalities do it all the time for property taxes: set a budget for the year (mostly going to schools), then determine every plot's relative value to all of the other plots. Divide up the budget along these percentages.

dodobirdlord 7y ago
Georgists and others who support land value taxes generally oppose conventional property taxes because property taxes are usually based on the total value of the property, not just the component of the value that comes from the underlying land. https://en.wikipedia.org/wiki/Land_value_tax https://en.wikipedia.org/wiki/Land_value_tax
- lr4444lr 7y ago
  Well okay, but in the modern era like ours where value is increasingly found in intellectual property and an increasingly mobile workforce, physically commodifying land like that sounds more limiting, wedding the theory to a 19th century economy.
  - dodobirdlord 7y ago
    While true, the underlying land is still enormously valuable, and the principle of the land value tax applies to other land-like things, most notably rights to use electromagnetic frequency bands.

amiga_500 7y ago

Land value tax explained: https://www.youtube.com/watch?v=gD_dZvPwAj0 https://www.youtube.com/watch?v=gD_dZvPwAj0

eru 7y ago

> Who determines what land is worth? You can use an auction. Eg you can auction the land off to the highest bidder for a few years at a time.

nybble41 7y ago
How does that work if there are already improvements on the land? You'd either have to auction the land with the improvements—in which the auction price won't indicate how much the land would have fetched on its own—or else stipulate that any improvements must be demolished prior to the auction, which would be massively wasteful.
- eru 7y ago
  It's not a trivial problem, but solvable. There are other solutions than the two you mentioned.
  - nybble41 7y ago
    There are other options, sure. The tax assessors could simply guess, or outright dictate whatever "unimproved value" they choose (i.e. the highest tax they think they can get away with). If the the point is to establish the "unimproved" value of the land through an auction, however, you can't do that when the land and its improvements are inseparable. These are not two distinct economic goods with independent values. The improved land is one good, with one combined value.