Thursday, June 15, 2017

Infrastructure Comes from Land Rent (not Vice Versa)

There is a misconception among some geoists that some portion of land rent is owed to public goods and services. This is nonsense, of course, as land rent is just that: LAND rent. It does not come from infrastructure. That is, public goods and services do not "generate" land rent, as some say.

How do I know? Because if no public goods and services existed and yet exclusive land titles were still enforced -- which is an act of violence, not a good or service -- rent would still exist. Rent comes from two things alone: (1) Exclusion, and (2) The difference between what can be produced at the site and what can be produced at the margin of production. Competitive demand for good locations -- especially locations near people -- exists with or without public goods and services.

Public goods and services (PGS) can of course aid in production, but those public goods and services have an opportunity cost. If the PGS were funded by production taxes, the PGS exist at the expense of whatever choices would have been made if the taxes had never been collected; if the PGS were funded by land rent, they represent the loss of whatever choices would have been made if the rent had been issued as a Dividend to each individual instead.

If a PGS is truly useful, then it can maintain itself by charging user fees just like any privately owned capital. This, in my opinion, is the best way to maintain infrastructure after it has been built from land rent because it allows producers to pay for the manmade things they use and then leaves no doubt that the land rent they pay thereafter is for LAND and not manmade things. This gives Geo-Authoritarians one less leg to stand on when they want to steal from the Dividend and pay for infrastructure that has already been paid for.


Since it must be spelled out, here is how a geoist economy works, from the top. Note, this version concedes maintaining PGS from land rent although they should really be forced to maintain/justify themselves through user fees. The point here is to illustrate that PGS result from land rent, not vice-versa:

Cycle 0:

1. Land users produce.

2. Land users pay market rent to the public purse for the use of land.

3. A Dividend is paid back out per capita, net of what is deducted to fund the building of public infrastructure in the next cycle.


Cycle 1: 

1. Land users produce. This includes those who are being paid by the previous cycle's deducted rent to produce infrastructure.

2. Land users pay market rent for the use of land.

3. A Dividend is paid back out per capita, net of what is deducted to fund the building/maintenance of public infrastructure in the next cycle.


Cycle 2:

1. Land users produce. This includes those who are being paid by the previous cycle's deducted rent to produce/maintain infrastructure.

2. Land users pay market rent for the use of land.

3. A Dividend is paid back out per capita, net of what is deducted to fund the next cycle's building/maintenance of public infrastructure.


Cycles 3 - Infinity:
See Cycle 2.


If costs go a little high in any Cycle's step 1, then sure, withhold a little extra in step 3 to cover the overrun.