P = R/(T+C)

This post is to explain the equation P = R/(T+C), which explains what up-front price a land title will sell for if a tax is promised to be levied on that same price in perpetuity given the conditions below.

I came up with this formula a while ago. I recently learned I'm not the only one, so I'm certainly not saying that makes me special -- just that it's intuitive to me and I "get it."

***

The conditions are as follows. These may be obvious, but I'm stating them in case they're not:

1. R is independent. It's what the bidder would bid as rent to leasehold the title at the time bidding on the up-front price takes place. It's the true value of the title -- again, at the time of the title auction. (Or "sale" as it might be called colloquially, since we don't have proper auctions in the modern world).

2. T is independent. It's the number the government has communicated it will apply to the selling price of the title in order to determine the periodic amount the title holder will pay to the government.

3. I'm used to writing the cap rate as C. In any case, it's also independent.

***

There are a number of angles from which to approach an explanation. I'm unlikely to choose the one that works best for you, but I'll give it a shot.

Let's start with the usual price equation in the absence of taxes: P = R/C.

Well, the government has come in and said, "Potential landowners will no longer have the full 'R' to capitalize into a bid price. After bidding P_B, they will pay a monthly fee of 'TP_B' to hold the title."

In other words, any theoretical bid price, P_B, will tell the bidder what his periodic payment will be into the public purse: TP_B. The government has given the bidder all the information he needs in order to determine whether he, bidding P_B, can retroactively justify bidding that price. This is not a causal problem because each bidder can determine their range of justifiable bid prices before actually bidding.

I don't know how to write the chain of dependency mathematically, but in English, it is like this:

"A bid price of P_B will cause the landowner to have a periodic liability to the public of TP_B. This will leave the landowner with only (R-TP_B) periodically. In other words: (R-TP_B) will be all that's available to capitalize into a price right now. Thus any bid price P_B must be less than or equal to the capitalization of this still-available rent ... in other words, P_B must be less than or equal to (R-TP_B)/C."

• P_B immediately yields (R-TP_B)/C, which is essentially just a "check number".
• If that result, (R-TP_B)/C, is greater to or equal to the P_B that fed into it, that P_B can be afforded as a bid price.

The bidder can do a plug-and-chug spreadsheet, or he can just cut to the mathematical chase by skipping to the maximum acceptable bid price, the one where P_B yields (R-TP_B)/C such that P_B = (R-TP_B)/C.

At this point, I'm just going to chop the P_B back down to P to make this writing easier on myself:

• P = (R-TP)/C
• CP  = R-TP
• CP + TP = R
• P(T+C) = R
• P = R/(T+C)

The maximum price the bidder would pay is R/(T+C), if we're defining R as the rent that bidder would pay. If we're defining R as the market rent, then the formula can equally well be applied to determine what the up-front market price of the title will be.

(No up-front price on a land title, of course is a true "market price," since it represents force being used to prevent the landowner from paying the full market rent.)

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.

Geoists' Top Semantic Sins

It's hard enough being a geoist. Freehold land ownership is a powerful meme, a disease of almost perfectly optimal virulence. Even a geoist with perfect word choice and a great personality faces a steep climb on the path to winning hearts and minds. (Which is why I recommend we don't even try.)

But many make it harder on themselves than necessary. I'm part of several online discussion groups, and when I see someone make the semantic errors below, it's impossible to tell whether the person committing them is simply a hard-boiled geoist who understands land economics but plays fast and loose with words -- or if he is a self-identified "geoist" who actually doesn't know what he's talking about.

If I can't tell, neither can the average internet user, and that's a problem.

I'm compiling this list for two audiences: (a) People who are interested in geoism but remain unconvinced due to our poor word usage, and (b) Geoists who want to improve their language and widen their appeal.

Without further ado, please:



1. Don't say "land" when you mean "land value" or "land rent."


Example A
"We must make land common property."

This was Henry George's one-sentence summary for how to cure humanity's ills. Surrounded by hundreds of pages of context in Progress and Poverty, this sentence is acceptable; uttered alone on Facebook to Joe Average -- from whom so much is constantly stolen -- it's a red flag.

Geoists see freehold land ownership for what it is: a giant screw plunging billions into the muck by the very energy they use trying to ascend it. Everyone else, screw-bound, sees only rising, spinning muck and the salvation of the spiral stair.  In practical terms, this means that Joe Average's land -- he calls it "his house," and we'll just agree even though he owes $500,000 on it -- is all he's got. It's all anyone's got.  His world is full of takers; you must be out to take his land; why don't you just oil his boots and shove him muckward?

Of course, Henry George had no intention of taking anybody's land. What he meant was, "We must make land rent common property." While this sentence isn't much better on its own, it has the advantage of resulting in confusion ("What the f*** is land rent?") instead of violent backlash. The confusion opens the door for you to do what you should have done in the first place and be a little more systemic in your explanation. I like to say, "Geoism means that instead of paying banks, hedge funds, private equity firms and other large corporations for access to land, we pay each other on the basis of exclusion." Maybe that'll help Joe see why he doesn't own land but in fact is owned by landowners.


Example B
"80% of United States land is owned by the top 10%."

It blows my mind that geoists still say stuff like this. I'll flog it 'til I'm blue in the face: Land area doesn't matter. Land value does.

In my experience, few people are intellectually triggered by land area ownership, and they are right to be so apathetic: If everyone had guaranteed access to a couple of acres of rural land, it would affect their well-being -- and the health of Earth in general -- literally not at all. Rural land is what we call marginal land, land where earnings are shit. Put that shit between the twin buns of today's wage and capital taxation, and working on marginal land yields you a nice shit sandwich.

We want people to have equal access to land by its QUALITY, or rental value. This means guaranteed access to constantly improving communities, which is the way humans are wired to live. Let's use language that communicates that.


2. Don't say "growth" when you mean "efficiency."

I'm pretty passionate about wildlife conservation. I know that geoism is the path to effiency. By the simple stroke of ending economic theft, it will undo suburban sprawl and create cities as efficient and compact as zoning laws will allow. I believe that roads and cars as we know them will become largely obsolete, as will industrial monoculture farming. Eco-friendly food production methods will rule the day for the simple reason that they can sustain themselves without subsidies (and they yield better food output per acre). "Growth" may happen; it may not; but it doesn't matter because growth (output) is not as important as efficiency (output per input).

I think some of my fellow geoists use the word growth just because it's fashionable in mainstream media to support growth. The popularity of this word stems, of course, from land rent dispossession -- the constant theft that leads people to believe more work and more production is the answer to poverty when the answer is simply to stop the theft.

It is a mistake to cater our language to growth-lovers. Sustainability is a hot enough topic that for every growth-lover we may sway to the side of geoism, we will lose at least one green-minded person. It is both inaccurate and politically foolish to say that geoism promotes growth; it promotes efficiency and prosperity by ending theft.
   

3. Don't say "Development" when you mean "Best Use."
See #2 above. People sometimes say geoist policy will cause more land to be developed. This is inaccurate and, again, scares as many people as it intrigues. What geoist policy will do is cause different locations to be developed: Good locations (urban centers) will be developed first because that's where the demand is, and less-demanded locations (the countryside and wilderness) will be developed last because that's where the demand isn't.


4. Be careful about the word "wages."

First, when you do use the word "wages," try to use it by its useful, classical definition: the earnings that workers keep after paying market rent for the use of land.

Second, be aware that most people are completely unfamiliar with this definition. If you are referring to this, it might be more illustrative to use a phrase like "post-rent wages" (even if to us that is redundant) or "kept wages" or even just be a bit wordy and say "the earnings you keep after paying rent for the use of land." Or maybe "the earnings you keep after paying the landlord, whether that's an apartment owner or a mortgagee bank."

Use your imagination. Just be aware.

Geoists Need a Spot in the Tournament

I'm going somewhere with this, I swear. TLDR: I think geoists should focus on starting a viral city over any other strategy.

I'm on Twitter @urbanlandrights.

 ***

Outside of Geo-Libertarianism, I'm part of another niche community, the "Melee community." We play Super Smash Brothers Melee ("Melee"), a fighting video game, competitively.

In Melee, anyone is allowed to enter a tournament. Anyone, if they are good enough, can win. But only 5-6 people in the world are the best; with few exceptions in the last several years, anyone who has faced them has lost.

Not all of these top players are popular. One in particular, going by the tag "Hungrybox," is known for being ruthlessly un-sexy, sometimes running out the 8-minute clock during matches to win. This is "boring" or "lame" to many in the community.

What do you suppose would happen if tournament winners were decided by vote? Would Hungrybox win? No. Would he ever have won? Probably not. Would the game be fun, interesting or competitive? Not even close. Players would argue online about how THEIR play-style is the best, and they would back up their claim with pictures of their kissing babies, shaking the hands of construction workers, or cutting the ribbon at the opening of a free health clinic. The game would likely not be played at all.

The concept seems absurd, but that's what democracies do with economic policy: They poll, by vote, the dogma and feelings of the majority, grant a monopoly to the prevailing ideas and let them determine the fate of an entire nation for the next four years or whatever the term may be.

Participating in politics-as-usual, in my opinion, is a waste of time for geoists. We are the Hungrybox of economic policy. People won't even know their own ideas suck until they see us compete. Asking the average person to become a geoist is like asking them to vote for Hungrybox to win a tournament because he kisses babies. Why should they think he's different from any other player who kisses babies? Any player can make promises and kiss babies.

What we need is a spot in the tournament. Right now, there are 195 or 196 nation-state players, and although there are some skill differences among them, they all suck. Their play styles are ass. They're frauds. But people can't really know that because those 196 shitty play styles are the only ones they've seen in action. Expecting a majority to vote for any significant change in any jurisdiction, no matter how you draw it, is a fool's game -- or at least one for which I doubt we have time. Our overrated species is crashing fast. We could try to convince the proverbial lizard to warm itself by wearing a coat -- condemning ourselves to eternal frustration -- or we could simply point to other, coat-wearing lizards so the naked one can say, "Why don't I have that?" An observation is worth a thousand explanations.

I realize the irony of what I'm saying: in order to get an land-monopoly-ending economic system, we first need to break the land monopoly. But it's already been done to a small degree with Special Economic Zones (SEZ), and examples like Shenzhen in China show how explosive the growth can be even for a non-geoist city. A rent-sharing geoist city even in a relatively small, low-population area should have no problem.

If there's anything I know about human beings, it's that, no matter how impossibly crappy their lives are, they will vote for change in piecemeal at best, and likely not at all. They are creatures of fear. The mere existence of SEZ's shows we neither must nor should depend on their votes for progress.

So let's do it. Or maybe we can somehow convince Singapore to make the transition, since they're already pretty well structured for it?

Why Only Geoists Are Libertarians

Funny how so-called “libertarians” (monarchists) believe that as long as you can violently “protect” a chunk of land, you should have an unconditional claim to it.

With today’s technology, I think it would be relatively easy for one person to “protect” 100 acres. So under the aforementioned “libertarian” worldview, Earth would have 360 million fence-erecting landowners controlling 100% of the planet's landmasses, pointing guns at and charging rent from the remaining 7 billion of us for nothing more than permission to exist — under whatever rules they dictate — on "their" planet.

…and yet somehow those 360 million landowners aren’t a government.

It’s almost like these so-called "libertarians" haven’t thought about what a government is. Or what freedom is.

Scott Santens Starting to See the Cat

We geoists have been hen-pecking prominent basic income advocate Scott Santens for a while, and it looks like he might be starting to come around.

https://www.weforum.org/agenda/2017/04/extreme-wealth-inequality-alaska-model

First, THANK YOU to Scott for writing this. You're a big voice, and we need you.

But of course I'm picky. Scott takes the approach of caution, saying: "Even with a land-value tax functioning to create a more progressive distribution of wealth after taxes, it still doesn’t confront the question of why national productivity is being so unequally distributed in the first place."

It does, and I must try to make this clear because it shows why public land rent collection is so important.

The best way I can think to explain it is by repeating what it seems I try hardest to make people understand: land value "taxation" is not a tax. It is the market rental value of land titles. It is what land users willingly pay to exclude other land users from a location due to its productive advantage. "Incomes" -- what people have before paying market land rent -- will always be grossly unequal because some people are using excellent locations while others are using shitty ones.

In the current economy, it's even worse, of course, because land users don't keep the rent at all; they pay it to title holders: banks, private equity firms, REITs, etc. It's really just a few tens of thousands of people throughout the world who are collecting in any significant way the unearned rent of land.

Rent -- the rental value of privilege -- explains all unequal and unearned income distribution. The only other way to derive income, fundamentally, is by creating labor or capital -- in other words, by earning it.

Another Immigration Post Because It's So Hot Right Now

The “immigration issue” is a land tenure issue. And people desperately need an education. In short: There is no argument for closed borders.

1. No wall is big or strong enough to protect you from the consequences of fencing off the commons. That's because a nation that fences itself off from the rest of the world has typically already fenced its own people out of the best land within its borders. It has already impoverished its children and begun the path to internal collapse. There is no safety argument for raising fences.


2. Immigrants, as well as your fellow countrymen, are trying to pay you rent for their use of your country. But this value was long ago securitized by your government and sold to private parties: These securities are called freehold land titles. They are held in a closed-end fund (land is fixed in supply) and trade, at the whim of existing owners, at a monopoly price (land is necessary for all life and production). Your economic trouble is caused by your government, not by immigrants; there is thus no economic argument for raising fences. 

There are very few terrorists in this world who can inflict more damage on a country than the institution of private, freehold land ownership already has. It's reasonable enough to screen for such terrorists, but any restriction on residence beyond a simple background check is, really, just the act of serfs trying to make other serfs more servile than themselves.

Here's a post I wrote last year that goes into another aspect of the economics.

A Geo-Libertarian Glossary & FAQ

Glossary

in narrative, not alphabetical, order:

1. The Commons -- each individual, equally.
   
   Example: “Land titles should be leaseheld, at market rental value, from the commons.”



2. Privilege -- private law.
   
   We are not using this word lightly, as many do. There is no such thing as “white privilege” or “male privilege,” for example, because there are no laws on the books granting explicit economic advantages to white people or males. We are concerned with actual privilege, the kind written into law and enforced by the state. Privileges steal from the commons; increase real prices and costs of living; and generally make life miserable. Examples include intellectual property (think of pharmaceuticals in the US), zoning laws, building codes and – the mother of all – land titles. Because monopolies result from privilege, the words “privilege” and “monopoly” are virtually interchangeable.



3. Rent -- the economic returns to privilege; unearned economic value.
   
   Some geoists use “rent” to refer exclusively to land rent, the economic returns to land titles, one specific type of privilege. Because of the importance and simplicity of land and its rent, this is totally acceptable and a good way to simplify and build one's understanding of rent.



4. The Law of Rent -- Formalized by David Ricardo circa 1817, this law observes the bargaining power of land and its owners. Understand this law and its implications, and you will understand pretty much everything about the world and how it works … or, rather, why it doesn't.



5. Land Value "Taxation" -- A.k.a., “the single tax.” One method of publicly collecting land rent, which is simply what land users willingly pay to exclude the commons from desirable locations. LVT is not necessary if landowners leasehold their titles at market rental value from a (ideally dividend-issuing) public entity; rather, LVT is one tool a jurisdiction can use after it has made the mistake of enforcing freehold titles to try to transform them back into leasehold ones.



6. Land Monopoly -- A.k.a. Feudalism. An economic system based on freehold land ownership. The mother of all monopolies and also of poverty, war, systemic debt … you name it. It is a system in which the many pay the few for the right to exist.

FAQ

• Is it true that land value taxation doesn't hurt production?
  
  Yes. Anyone who disagrees will typically get this graph as a response.
  
  But you don't need a graph to understand why. When LVT reclaims land rent from landowners, it can't hurt production because landowners, as such, don't produce. They gatekeep. (Land users produce; the extent to which a site's user[s] and owner[s] are the same is a coincidence.) The only thing LVT punishes is gatekeeping, and that's a good thing.
  
  That's why many of us dislike the term Land Value “Taxation.” If we had a truly free market in land – that is, if land titles were leaseheld at market rental value from the commons – nobody would call it a tax. The only reason LV”T” seems to the casual observer an act of force is because of our already entrenched, enforced freehold system. In other words, I've never seen anyone argue against systemic geoism or LVT; I've only seen people argue against the transition to such a system because either (1) They are invested in the current feudal system, or (2) Far more often, they think they are invested in the current feudal system.



• How do we determine a just percentage for land value tax?
  
  100% of the rental value of all locations within a jurisdiction should be collected by its public.



• How exactly would it be distributed to solve the problems associated with inequality of land ownership and injustice of monopolies? Would it be a UBI?
  
  Yes. We prefer to call this a “Residents' Dividend” or “Citizens' Dividend” to distinguish our version of the “UBI” from the less educated ones.



• What about government funding -- that is, public goods and services? Is there room for that in Geo-Libertarianism?
  
  Yes. One can make an efficiency argument in favor of public goods and services. Many goods and services are fairer, more desirable and/or more efficient when funded publicly. Especially when more efficient, an argument can be made to fund such goods and services from the Dividend because the increased efficiency will increase future land rent and therefore future Dividends.
  
  Outside of this, favoring more public goods and services might move you more from the “Geo-Libertarian” side of the scale to the “Geo-Statist” side. But if you know the intricacies of land economics – that the collection of land rent from title holders, not the subsequent spending, is the most important part – you know not to waste time arguing with other geoists. As long as the rent is spent in the service of the public, Geo-Libertarians should be relatively happy. (Although we should always remind others that the Dividend, an individual right, should not be subject to democratic majority tyranny.)



• At what level does land value taxation become theft? Surely 1,000% would be considered theft?
  
  100% public land rent collection is the correct amount. Any more than that will force the site out of production; it is impossible to collect more. Any less than that means that title owners are depriving the commons of their just compensation for land exclusion.
  
  Again, the most robust solution is a market one, with land titles bid on and held at market rental value from a commonly held trust. No need for assessments. No need for the political vulnerability of LVT.



• Would this lower overall prices by getting rid of land speculation?
  
  That and better. It would also eliminate the under-use of good (urban) locations, and the over-use of bad ones (sprawl). It would reduce up-front land prices to $0 because bidders do not bid up-front prices on things they are renting at market rental value.



• If you collect 100% land tax, that's a huge amount of money collected for everyone. If you give out such a high UBI or Citizens' Dividend, won't people work significantly less?
  
  If enough people work little enough, rent (and therefore the Dividend) fall. So the simple answer is that if people stop working, soon enough they will have to return to work to maintain their old standard of living: the Dividend is self-correcting.
  
  But the reality is better. Geolibertarianism (Public Land Rent Collection + Dividend) creates a system in which everyone can continuously live wherever they want, without labor, so long as they're willing to share the location. (And if they can't live where they want because somebody is excluding them, they're being compensated by the Dividend and the person excluding them is having to work for it.)
  
  What is likely is that (1) People will work significantly less, AND (2) Standards of living will stay constant or rise. This is possible because of agglomeration, a.k.a. efficient land use, and all of the efficiencies that follow. No more sprawl. No more land monopolists artificially keeping people apart. No more commutes. No more labor spent just to be allowed to exist. No more deadweight loss of taxation. Lower blood pressure. More sex.



• What is the best way for Geoists or Geo-Libertarians to gain political ground?
  
  The most success I've had in spreading geoist ideas is with two core groups of people: (1) Extremely intelligent, rational people, and (2) Poor people. These groups are not mutually exclusive, but FOCUS ON THE LATTER.
  
  My easiest sell ever was when I attended a Basic Income event in Los Angeles. Surprise, surprise: There were economically scared and desperate people there looking for answers. When I explained that anyone benefiting from a normal Basic Income would simply see their rents rise, THEY UNDERSTOOD THIS IMMEDIATELY. When I told them there's an entire economic philosophy dedicated to getting them such a basic income without that effect as a matter of natural rights, I didn't have to go farther than that because they were hooked enough to go home and do the intellectual legwork themselves.
  
  I'm as guilty of staying in my Internet bubble as the next geoist, but this is a mistake. While it's true that 90% of home “owners” (mortgagors, actually) would benefit from geoism, we must abandon them as a target audience. For some reason, as soon as people own a few thousand dollars of land value, their brains turn to mush and they fathom themselves gentry. Probably about half of the United States are renters who have ZERO stake in the current system. Those are our people. It's simply more efficient to focus on the people who can most easily be won.
  
  One last piece of advice: Even if you don't like the Residents' Dividend for some weird reason, do not abandon it as a political tool. It makes geoism so much easier to sell. Here's an example:
  
  Q: If you tax land value, won't rents rise?
  A: No. But if they did, who cares? You'd get those rents right back in your Dividend. When rents rise now, you get nothing.
  
  Case. Fucking. Closed. Land has the first and last word in every economy. We as geoists understand this, and that is our advantage.

The Law of Rent is Easy

Intro

(Skip the intro and formulate the Law of Rent!)

If I had to recommend someone a course of study to help them understand life on Earth, I would recommend two fields: Biology and Economics. In the field of Biology, there is perhaps no theory more important than the Theory of Evolution by Natural Selection. And in the field of Economics, there is no law more important than the Law of Rent.

The very word “economics” turns many people off, and understandably so. Over the last century the field has devolved so markedly that anyone who calls it a “science” is right to be laughed out of the room. Do you, like most, get frustrated at the thought of economics – at the thought of old men trying to explain why you should work harder for less, and at your sense – or perhaps conviction – that no policy they recommend will ever change things for the better? Or, simultaneously, at your own inability to offer an alternative?

Imagine that frustration turned in reverse. Imagine you knew exactly where hardship comes from and how to fix it; that you could explain every real-world human behavior you saw; that not a single economic phenomena were any longer a mystery to you. And then imagine that everyone you tried to enlighten ignored you and just kept nodding at the old, suited men on TV, debating which pint of poison – austerity or labor taxes – will taste better jammed three feet up everyone's asses.

That's what the Law of Rent will do for you once you understand it. It will take you, the casual observer, and make you more qualified to run a country than anyone currently attempting it. And that feeling of frustration as you watch everyone else fail at it? Well, welcome to being a geoist. (There's a chance that knowing the Law of Rent could also turn you into a geo-snob like me.)

Let's Formulate!

The most beautiful aspect of the Law of Rent, given how foundational it is to economics – and how critical its implications are for the fates of civilizations – is its simplicity. There is perhaps no simpler law of bargaining power in all of economics. I'm convinced that anyone, presented with a little bit of context, can formulate it for themselves.

Ready to give it a try? Put on your thinking caps, little Ricardos.

1. Assume that land cannot be produced. (In the real world, this is true. It's the First Law of Thermodynamics.)


2. Assume that land is necessary for all life and production. (Also true.)


3. Imagine you are a living thing – say, a human – who therefore needs to use land. (If this isn't true, contact me about my Imaginary Persons Tea and Cupcake Social.)


4. Now let's say you have two choices: (a) Live and work in the city at Parcel A where your work can get you $60,000 per year, or (b) Live and work at Parcel B in the remote countryside – where nobody else lives, works or wants to – and where your same line of work can get you $10,000 per year.

Question: What is Parcel A's market rental value? Hint: This is not a trick question.

Answer: As you probably intuited, the rent for Parcel A will be the extra earning power it grants you: $50,000 per year.


Did you get it right? Congratulations! You've formulated the Law of Rent*. You now know more about economics than 99% of the population. Would you like to increase that percentage? Consider the implications of this law. You can start with the following considerations:

• Did we mention the word "landowner" anywhere above? No. The rental value of a parcel of land has nothing to do with the name on a title to it. It is determined by users alone.


• What might happen on a large scale if landowners could arbitrarily keep you and other land users off Parcel A?


• What might happen on a large scale if landowners allowed the use of Parcel A but by inefficient users?


• "Good" or "bad," in describing land, refers to its productivity. What allows a user to produce more at a good location than a bad one?


• As more land comes into artificial use -- due to people's arbitrary exclusion from the good land -- what happens to the earnings available on the best unused land? How low can they go? Remember that this is important because it determines what landless workers throughout the economy will be able to keep after paying rent.


• To whom should the rent rightfully go? If it doesn't go to its rightful recipients, what kind of activity is being incentivized? What kind of social and economic diseases might arise?

*Disclaimer: Admittedly, there's a little more going on here. Example: We're assuming that you're the best user for Parcel A -- in other words, that nobody would be able to earn more at the location than you. I wanted to simplify things a little. Sue me.

Hong Kong, Singapore, Geoism & Income Inequality

Geoists, or anyone who has an idea of the magnitude of land rent in modern economies, know that sharing the full rental value of land -- and therefore having an "geonomic" system based on equal land rights -- would result in significantly lower income disparities.  We know this because we know that a third or more of developed economies' GDP is land rent -- value that is collected by a relative few, and value that is unearned because it is collected, imputed or otherwise realized for monopoly control of something costless.

I consider Hong Kong and Singapore the "most geoist" places on Earth; they collect a much higher-than-average amount of land rent publicly and tax wages and capital at much lower rates than average.

A skeptic of geoism might point to the overall income inequality in these jurisdictions (Hong Kong's overall Gini coefficient is 0.54; Singapore's is 0.46) and say that geoism has failed, if that skeptic is looking to geoism as an answer to income inequality.

First, it should be noted that income equality is not the goal of geoism; economic justice is.

Second, it is severely flawed logic to read much into these numbers. Geoism implemented on a widespread scale will likely (1) Raise the economic floor, and (2) Reduce income inequality.  When implemented locally, however, in a greater world of feudalism, it is only capable of the first point: raising that local jurisdiction's floor.


1. Raising the floor

In a feudal system (one of land privilege), the average landless worker will be left with the margin of production after he works and then pays his landlord.  Geoism raises the floor by (a) raising the margin of production itself by effectively prohibiting the inefficient use of land, and (b) making every resident share equally in the jurisdiction's land rent -- either directly via Residents' Dividend, or in-kind through government goods and services.


2. Reducing Income Inequality

While local geoism will evenly distribute income from local land (land rent gini coefficient), it will not necessarily lower overall income inequality.  It isn't difficult to figure out why.  Our example cities, Hong Kong and Singapore (HK&S), have prohibited their locally-produced rents -- a fair amount of them, anyway -- from being claimed by outside rent-seekers, but the rest of the world has not.  There is no law in HK&S saying, "Thou shalt not steal land rent from outside jurisdictions."  Bankers, hedge fund managers and real estate investment vehicles are free to set up shop in HK&S and do what they would do in any other global financial center; they are free to rake in the resulting, lop-sided salaries, and there is simply no reason to expect that HK&S would have income inequality any lower than in New York or London.

New York's gini coefficient is 0.55.  Published figures for London are based on a methodology that includes only wage earners.  This methodology leads to an artificially low gini, so I'm simply not going to reference any of those figures here.  The point is that HK&S have overall gini figures consistent with other global financial centers, and that's the best it's reasonable to expect of them.  Only as more and more of the world's land rent is made common property can we expect greater overall income equality.

And that's fine.  It would be pointless for HK&S to try to force more equal incomes by, for example, imposing a very high income tax on the top bracket.  It would simply drive these global rent-seekers to outside locations.  Keep them in town and there is at least a chance that some of their takings will trickle into local businesses and, eventually, publicly collected rents.


Evidence of Singapore's Higher Floor

Singapore is sometimes lambasted for "relying on" outside labor forces to perform undesirable construction work in the city.  Of course, this is loaded language: Singapore doesn't "rely on" outside workers.  The fact is that Singaporean construction companies simply seek them out because they will accept lower wages than Singaporean residents; Singaporean residents, having a cut of the local surplus (land rent), can simply refuse to do shit work for shit wages.  Without cheap external labor, the construction would still happen; it would simply happen with higher wages being paid to Singaporeans who have accepted them.

Singapore is far from perfect, of course, but anybody who criticizes its employers for "exploiting foreign labor" in this case is focusing his energy in the wrong place.  It is these workers' home cities and countries, through land dispossession, that have forced them to look for shit work at shit wages in a place that actually has employment.  Tell the country of Bangladesh, for example, to mimic Singapore's economic policies, and your effort will be much more likely to help Bangladeshi nationals.

The Land Rent Gini Coefficient

People often talk about the "Gini coefficient" for total income.  But some income is earned (wages and capital yields), while some is not (land rent).  Discussing the Gini coefficient as it applies to all of the income in a nation is a distraction from the real issue, which is how fairly people are being compensated for their exclusion from valuable land.

The Land Rent Gini Coefficient (LRGC) is the only objective measure of true fairness and equality of opportunity in a given jurisdiction.

A Geolibertarian Perspective on Immigration

The immigration "problem," like most problems in the modern world, is not in fact a problem; it is the illusion of a problem.  People perceive the need to exclude foreigners from their own nation's land because they themselves have been excluded, without compensation, from their own nation's land.

In a feudalist state, like the modern United States, residents pay the rental value of land -- "land rent" -- to title holders in exchange for permission to exist.  The only guaranteed existence the average American has is on rent-free land, the worst land in use.  This is called the "margin of production" in economics, and to help you imagine what this is, I'll use the example of an acre of prairie in western Nebraska.

Americans, dispossessed of their own country, constantly perceive their own existence in peril and perceive that they themselves might someday need to escape to rent-free western Nebraska to try to extract more wages from the prairie than their current landlords are allowing them to keep.  In this absurd state of affairs, people are tricked into viewing other human beings always as competitors, never collaborators.  Allowing more immigrants into the country will simply increase the amount of people who might be interested in western Nebraska; if this happens, rent will arise there, meaning that the quality of rent-free land falls.  If western Nebraska is no-longer rent-free, the best rent-free land might become central Wyoming, God help us.  This process is called lowering the margin of production.

(Side note: Land rent has sometimes been referred to as "the value of human collaboration," and although I wouldn't use this description to introduce people to the economic concept, it's accurate in many ways.)

The Real Problem: In a feudalist land ownership society, an increase in population lowers the margin of production.  The problem is not the increase in population; it's the feudalism.


In a fair economic system, United States residents would rent their land from each other.  A resident would always be able to afford land of average value.  Given that as of 2014 the national land rent was upwards of 33% of GDP, or $20,000 per person per year, and rising, this means that people could perpetually afford to live in a city if they wanted to.

Because people live in cities today despite seeing only the intangible psychological and social benefits -- and none of the economic benefits, which are absorbed by land title owners via land rent -- it is reasonable to expect that populations would tend to aggregate more densely around urban cores.  This would draw demand away from the countryside, meaning more efficient land use, which would raise the margin of production.

So long as real, per-capita land rent is rising (which it is even now, despite our grossly inefficient use of land), and as long as that land rent is shared instead of used to fund an aristocracy, we can expect that increases in population will raise the general, national quality of life.

The Real Solution: Open all borders and share the rental value of land.  Whether this sharing happens at a local, regional, state or national level matters little.

Economics is all about alternatives.  All else equal (like the land ownership paradigm), people will seek to leave countries with low margins of production and move to countries with higher ones.  Given that the world's land is all claimed and that all modern nation-states are fundamentally feudalist, we have entered a period of history in which all nations have roughly the same, lowest-possible margin of production: subsistence.  There is nowhere left to go -- nowhere left for a landless person to produce without paying most of his labor to a landlord.  With emigration no longer a beneficial option for the average person, the incentive is to do whatever is necessary to try to raise his own country's margin of production.  Without the knowledge of geoism -- land rights -- the only way to do this is to "keep the foreigners out."

Links on Geoism and Land Economics

(to be expanded and organized with HTML at a later date)


Introductory Stuff

Georgism in 300 Words
Why is the Rent So High? (Video)
Geoism FAQ

Land Economics*

The Law of Rent
All Taxes Come Out of Rents (ATCOR)
The Henry George Theorem

*The latter two concepts follow logically from The Law of Rent.  The Law of Rent simply points out the bargaining power of land -- that title owners can suck up all the economy's extra wealth (beyond the margin of production).  In the macroeconomic short-run, taxes simply reduce the amount of wealth available for landlords to take (ATCOR).

The Henry George theorem states that, per the Wiki page, "...under certain conditions, beneficial investments in public goods will increase aggregate land rents by at least as much as the investments cost."  In my opinion, this has little to do with "beneficial investments in public goods"; rather, it is simply the fact that government is spending wealth back into the economy, where wealth beyond the margin of production will go either to (1) Government in taxes, to be looped into future cycles, or (2) Landlords in rents, to disappear.  In other words, ATCOR describes the short-term, single-cycle action of taxes' diverting wealth from capture by landlords, and the Henry George Theorem describes the long-term action of the taxed wealth being spent and becoming subject once again to the Law of Rent, flowing to its inevitable resting place: the pockets of landlords.

It is important to note that these laws pertain to macroeconomic averages and should not be used to justify taxation (except land value taxation, of course).  Production taxes in rural areas do not come out of rents because in rural areas there are no rents.  In rural areas, only wages exist to be stolen.  Taxes on people using marginal land only make those people simultaneously slaves to and wards of the State.  When you start to understand land economics, you'll start to understand ... well, pretty much everything, but namely, maps like this:

Funny coincidence (not): People tolerate higher taxation
where land rents are higher.

That's a cartogram of the 2012 presidential election returns at the county level, but it may as well be a cartogram of 2012 land values, high and low.


Recessions and Depressions

The 18-year Boom-Bust (Land) Cycle

Although monetary policy can exacerbate it, this cycle is due to the real economics of land.  If you understand that a land price is just the estimated, capitalized value of future rents, then you'll understand the cycle so: (1) The economy chugs along, boosting land values, (2) Because land rent collection is always a free ride, land speculation becomes the only game in town, diverting wealth from wages and capital, (3) Land prices soon reflect more capitalized rents than the dispossessed, underpaid, unemployed producers of the area are capable of producing and paying in the future, especially now that they have no access to highly-priced land, and of course (4) Land prices crash.

Title Owners Are Not Residents

Often, models that seem like solutions are just continuations of the status quo.  Here is an article discussing developer profit-sharing among "residents" ...

As Detroit is Revitalized ...

And my response to the author:

==============================================

Dear Ms. Peters,

I'm writing in response to your article about developers' profit-sharing in Detroit.  Since you seem interested in the topic of urban housing, I should inform you that the model you described is at its core simply a Real Estate Investment Trust (REIT), an entity whose private shareholders own equity in a bundle of land titles.  This model is very much the status quo and represents the fundamental error in our economic system as a whole.

At the end, you mention how the model "could be adapted" to include other residents.  First, it should be noted that a parcel's title owner should never be assumed to be a resident at all -- an assumption your article seems to hold; a community's residents are simply its residents.  Second, I applaud you because by saying it could be adapted to include all residents, you have touched upon the beginnings of economic justice and the concept of equal land rights.

Please keep researching and writing about this issue, and I highly recommend you try to understand the concept of "geoism," a.k.a. "georgism" (which is anti-monopolism, and as a result anti-feudalism) and the following related concepts:

• Citizens' Dividend.  The equal distribution of land rent.  The literal economic implementation of equal land rights.  First requires the public collection of land rent.  Possible methods include the following.
• Location Value Covenants (LVC's). Ideally, these would be implemented alongside 100% income tax exemptions for the owners and occupants of LVC sites.  Best large-scale option, in my opinion.
• Land Value Taxation (LVT).

Community Land Trusts (CLT's) also represent a potential path toward land rights on a smaller scale, although they must be set up the right way.

For practical purposes, "land" most relevantly means "real estate location."  FYI.  Whenever we discuss "housing" affordability, it is actually land affordability and land rights that are at the core of the issue.

Thank you for your time,
+++

A Letter to the Government of Ontario

To Ontario's Public Servants,

It has come to my attention that you want to provide your citizens affordable housing and are entertaining the idea of a basic income. I have good news: a basic income can make "housing" (land) affordable if it is funded the right way.

It is in Ontario's best interest to implement a basic income and fund it with the market rental value of land titles ("land rent"). To occupy land (that is, to exist) is an equal human right, and Ontario is currently on par with the rest of the world in failing to grant that right equally to its citizens, creating poverty and unemployment, artificially reducing wages and destroying its economy. You can choose the path of continued economic failure, like the rest of the world -- a situation that any other funding mechanism for a basic income will NOT fix in the long run -- or you can serve as a shining example to the rest of the world, making it impossible for anyone to compete with you unless they adopt your model, known as geoism.

The few times this model has been attempted -- making land rent common property, or public property in place of taxation -- it has worked economic wonders exactly to the extent it has been attempted; think of the post-WWII "Asian Tiger" economies, for example.

The quickest top-down way to achieve this is through land value "taxation" (LVT), but this is politically almost impossible because of vested interests and a general lack of education. You may want to consider slower, more politically feasible approaches like location value covenants (link below) or the establishment of community land trusts (CLT's) that operate on geoist principles, which not all do.

http://www.sfrgroup.org/Home/location-value-covenants

However you decide to collect land rent, it should be either (1) distributed as a Citizens' Dividend, or (2) used for the public purse in place of income, payroll and sales taxes. I hope you'll do the right thing.

Regards,
+++

A Dirge for LaVoy Finicum

A Dirge for LaVoy Finicum

A working man took some marginal land;
People shrieked, their fury aglow,
Then paid rent to an idle rich man with a title
Who took better land longer ago.



https://www.youtube.com/watch?v=itO7OoKtNUc