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Any transition to a LVT should accompany one-time compensation to existing land owners. The same should apply to any other repeal of rent-seeking institutions,

Any transition to a LVT should accompany one-time compensation to existing land owners. The same should apply to any other repeal of rent-seeking institutions, whether it's anti-labor-competitive laws privileging labor unions, licensure barriers privileging taxi medallion holders, etc. The British used this method to end slavery throughout their empire, which meant: 1. much more rapid end to slavery, due to less political opposition to its abolition, 2. no costly civil war and enduring sociopolitical grievances that emanated from it. Economic analyses indicate that compensating rent-seekers at an amount equal to the expected loss of economic utility over their lifetime from the elimination of their rent-seeking opportunity, as part of a reformation to end the institutions that enable their rent-seeking, leads to net economic gains, because the economic efficiency gains from expedited abolition of the rent-seeking far outweighs the cost of the compensation.

neilparikh 5y ago
Just out of curiosity (ie. not trying to ask you a "gotcha" question), would you apply this idea to measures to reduce climate change? Oil companies and companies/individuals dependent on cheap oil would presumably lose a lot. I'm not sure if their current behavior is exactly rent-seeking, but asking them to internalize their externalities is fairly close to abolishing rent seeking I think. And if your answer is yes, how would we value the economic loss they face?
- ItsMonkk 5y ago
  I don't know the answer to this either, but I'll at least try to give an idea on how one might get to that value. For the Land Value Tax this question is fairly straight-forward. We have the current market value(say $2.4M from the article). We need to work out the value for the land($2M from the article). That 2M is the losses if a 100% LVT is applied. You can choose to phase in the tax, or you can give a tax subsidy equal to the land value($2M), or you can flat out print money equal to the land value, and you can do some combination of all three. Of those 3, it is better to implement the full tax right away to correct the incentives as soon as possible, but long-term it doesn't matter so long as the incentives get there. One of the interesting consequences here is if you currently own a home, and understand that we are currently in a bubble, and know the consequences of 2008, you are incentivized to vote for a Land Value Tax with a one time transition subsidy, as it will lower your risk profile from another catastrophic collapse of the housing market. Similar approaches surely apply to carbon sellers, and the carbon tax and dividend is extremely close in idea as the Land Value tax with UBI. So long as people are disincentivized against using carbon, giving tax credits or cash to these companies seems appropriate.
- CryptoPunk 5y ago
  I would definitely apply this to oil companies as part of any CO2 emissions reduction/elimination plan. I'm not qualified to determine how to assess their expected losses, but I assume there are financial analysts that are.
- radu_floricica 5y ago
  In the case of current land owners we'll be changing the way they pay for what they get. Currently they pay a lump sum when they buy the land, and we're switching to a model where the land would be a lot cheaper but tax on land would be high. Not compensating them at all would have them pay twice. I'm all for breaking eggs to make omelet, but it is unfair. Polluters simply generate negative externalities. They've benefited so far by making a profit without compensating society for the harm they cause. Fair would be hitting them with backcharges. Adding various taxes and regulations to bring them closer to a net zero harm is a bare minimum. As an aside, in both cases we're talking about commons. Land owners enjoy for free the commons of being in an urban place (other people, infrastructure, access to interesting places, clients, employees and employers). Polluters hurt the commons of clean air and clean water.
pydry 5y ago
This is essentially saying that the rich must be kept rich to prevent them from hurting us. You're saying that they must be paid protection money. Slavery wasn't as big a part of the economy of the British Empire as it was to the American south. In any case the US made back a lot of the losses of the war during the period of reconstruction.
- CryptoPunk 5y ago
  It's not about rich or poor. Any group, if you threaten their economic interests, will retaliate. Take for instance public sector unions: they have grown from strength to strength over the last 50 years, and today are owed trillions in pensions, from sweetheart collective bargaining agreements, that have massively increased their benefits, while degrading the quality of public services, like public education: https://academic.oup.com/qje/article-abstract/111/3/671/1839935 https://academic.oup.com/qje/article-abstract/111/3/671/1839... Public school teachers in New York state have a pension that averages $88K per year upon retirement, and it is almost impossible to fire them over the course of their career: https://www.the74million.org/article/investigation-nyc-tried-to-fire-154-teachers-for-incompetence-or-misconduct-75-were/ https://www.the74million.org/article/investigation-nyc-tried... If you were to eliminate the laws that force states into collective bargaining with their exclusive unions, without compensating them, you would get a socialist (Black Lives Matter / the 99%) revolution on your hands. If you were to institute a LVT without compensating the millions of people whose main source of wealth is property, you would get a fascist revolution on your hands. Conflicts are enormously costly. It is better to pay to avoid them where it can be morally justified. And conflicts can be preceded by decades long stalemates, where no reform happens. Reaching a settlement sooner can save trillions in cumulative efficiency gains from ridding the economic structure of rent-seeking. As for the moral justification, the Guardian in 1833 provided it: https://www.theguardian.com/theguardian/from-the-archive-blog/2011/may/07/newspapers-national-newspapers https://www.theguardian.com/theguardian/from-the-archive-blo... >>"The guilt of slavery attaches far more to the nation which has introduced, legalized and supported it, than to the planters" Ironically, today it's the Guardian's journalists who extract economic rent, via laws that force their employer to limit the parties they negotiate with to members of their union, to the exclusion of all other workers. The Guardian's 1833 defense of punitive reformation would thus protect the staff of the Guardian in 2021 from a highly disruptive transformation of the legal framework. >>In any case the US made back a lot of the losses of the war during the period of reconstruction. The damage from the Civil War is still not fully repaired.

neilparikh 5y ago

Just out of curiosity (ie. not trying to ask you a "gotcha" question), would you apply this idea to measures to reduce climate change? Oil companies and companies/individuals dependent on cheap oil would presumably lose a lot. I'm not sure if their current behavior is exactly rent-seeking, but asking them to internalize their externalities is fairly close to abolishing rent seeking I think. And if your answer is yes, how would we value the economic loss they face?

ItsMonkk 5y ago
I don't know the answer to this either, but I'll at least try to give an idea on how one might get to that value. For the Land Value Tax this question is fairly straight-forward. We have the current market value(say $2.4M from the article). We need to work out the value for the land($2M from the article). That 2M is the losses if a 100% LVT is applied. You can choose to phase in the tax, or you can give a tax subsidy equal to the land value($2M), or you can flat out print money equal to the land value, and you can do some combination of all three. Of those 3, it is better to implement the full tax right away to correct the incentives as soon as possible, but long-term it doesn't matter so long as the incentives get there. One of the interesting consequences here is if you currently own a home, and understand that we are currently in a bubble, and know the consequences of 2008, you are incentivized to vote for a Land Value Tax with a one time transition subsidy, as it will lower your risk profile from another catastrophic collapse of the housing market. Similar approaches surely apply to carbon sellers, and the carbon tax and dividend is extremely close in idea as the Land Value tax with UBI. So long as people are disincentivized against using carbon, giving tax credits or cash to these companies seems appropriate.
CryptoPunk 5y ago
I would definitely apply this to oil companies as part of any CO2 emissions reduction/elimination plan. I'm not qualified to determine how to assess their expected losses, but I assume there are financial analysts that are.
radu_floricica 5y ago
In the case of current land owners we'll be changing the way they pay for what they get. Currently they pay a lump sum when they buy the land, and we're switching to a model where the land would be a lot cheaper but tax on land would be high. Not compensating them at all would have them pay twice. I'm all for breaking eggs to make omelet, but it is unfair. Polluters simply generate negative externalities. They've benefited so far by making a profit without compensating society for the harm they cause. Fair would be hitting them with backcharges. Adding various taxes and regulations to bring them closer to a net zero harm is a bare minimum. As an aside, in both cases we're talking about commons. Land owners enjoy for free the commons of being in an urban place (other people, infrastructure, access to interesting places, clients, employees and employers). Polluters hurt the commons of clean air and clean water.

pydry 5y ago

This is essentially saying that the rich must be kept rich to prevent them from hurting us. You're saying that they must be paid protection money. Slavery wasn't as big a part of the economy of the British Empire as it was to the American south. In any case the US made back a lot of the losses of the war during the period of reconstruction.

CryptoPunk 5y ago
It's not about rich or poor. Any group, if you threaten their economic interests, will retaliate. Take for instance public sector unions: they have grown from strength to strength over the last 50 years, and today are owed trillions in pensions, from sweetheart collective bargaining agreements, that have massively increased their benefits, while degrading the quality of public services, like public education: https://academic.oup.com/qje/article-abstract/111/3/671/1839935 https://academic.oup.com/qje/article-abstract/111/3/671/1839... Public school teachers in New York state have a pension that averages $88K per year upon retirement, and it is almost impossible to fire them over the course of their career: https://www.the74million.org/article/investigation-nyc-tried-to-fire-154-teachers-for-incompetence-or-misconduct-75-were/ https://www.the74million.org/article/investigation-nyc-tried... If you were to eliminate the laws that force states into collective bargaining with their exclusive unions, without compensating them, you would get a socialist (Black Lives Matter / the 99%) revolution on your hands. If you were to institute a LVT without compensating the millions of people whose main source of wealth is property, you would get a fascist revolution on your hands. Conflicts are enormously costly. It is better to pay to avoid them where it can be morally justified. And conflicts can be preceded by decades long stalemates, where no reform happens. Reaching a settlement sooner can save trillions in cumulative efficiency gains from ridding the economic structure of rent-seeking. As for the moral justification, the Guardian in 1833 provided it: https://www.theguardian.com/theguardian/from-the-archive-blog/2011/may/07/newspapers-national-newspapers https://www.theguardian.com/theguardian/from-the-archive-blo... >>"The guilt of slavery attaches far more to the nation which has introduced, legalized and supported it, than to the planters" Ironically, today it's the Guardian's journalists who extract economic rent, via laws that force their employer to limit the parties they negotiate with to members of their union, to the exclusion of all other workers. The Guardian's 1833 defense of punitive reformation would thus protect the staff of the Guardian in 2021 from a highly disruptive transformation of the legal framework. >>In any case the US made back a lot of the losses of the war during the period of reconstruction. The damage from the Civil War is still not fully repaired.