Evaluating Georgism: Opening Notes

After the winners of the ACX Book Review Contest were announced, I took a closer look at the gold medalist, Lars Doucet's review of Henry George's Progress and Poverty. Reading it, I was surprised to find the outline of a birds-eye political philosophy which didn't make me want to tear my hair out.

I brought this up with family, and immediately got stuck on whether or not Bitcoin counted as Wealth in the Georgist framework, as expected. 

So before I read the text itself, I wanted to jot down some early thoughts. Much of this post is taken directly from Doucet's review. 

First, I'll need to examine George's definition of Wealth, why money doesn't fit the bill, and what it means for money to be a claim on wealth, and whether digital currencies are closer to dollars or gold bars. This has less to do with Georgism and more with settling a personal argument.

Second, before Georgism, the high-level political philosophy which made the most sense to me was David Friedman's anarchism, as described in the Machinery of Freedom. However, I never fully committed to it, in large part because of the question of land as property, with which Friedman didn't concern himself. 

This leaves open the question of how one acquires ownership of things that are not created or that are not entirely created, such as land and mineral resources. There is disagreement among libertarians on this question. Fortunately, the answer has little effect on the character of a libertarian society, at least in this country. (pg. 5)

[The flexibility of supply] is less true for the airwaves, which are, in one sense, a fixed and limited resource, like land. But, as with land, a higher price effectively increases the supply by causing people to use the existing quantity more intensively. In the case of airwaves, if the price of a frequency band is high, it becomes profitable to use improved equipment, to squeeze more stations into a given range of frequencies, to coordinate stations in different areas more carefully so as to minimize 'fringe' areas of interference, to use previously unused parts of the spectrum (UHF television, for instance), and eventually to replace some broadcast stations with cable television or radio. (pg. 9)

(Note that Lars also draws a comparison to the EM spectrum as an extension of the Georgist idea of Land)

I couldn't commit myself to a notion of property rights which included Land regardless of development or improvement. 

This is exactly the tension which George focuses on. In the Georgist framework, Land has to be considered as a category separate from Capital (unlike in certain other frameworks), and neither can it be likened to Wealth, since it cannot be created by human Labor, only improved or made accessible.

(Lars brings up Dutch land reclamation, and insists that it's not the same thing as making new Land. Seas and lakes are Land as well, you see, so it's only the improvement of preexisting land. George would likely claim the same extends to efforts such as seasteading, orbital habitats and exoplanet colonization. Someone should write a sci-fi novel about Georgist Martians)

Since Land cannot be made by human effort, it cannot be considered private property. George is very quick to disclaim that he doesn't want to seize land. 

I do not propose either to purchase or to confiscate private property in land. The first would be unjust; the second, needless. Let the individuals who now hold it still retain, if they want to, possession of what they are pleased to call their land. Let them continue to call it their land. let them buy and sell, and bequeath and devise it. We may safely leave them the shell, if we take the kernel. It is not necessary to confiscate land; it is only necessary to confiscate rent.

Rather, his One Big Thing™is the Land Value Tax, a tax which captures the value of Land absent the value of improvements to it. So if you've got a perfectly good piece of urban land but refuse to develop it until prices rise further and you can sell it off, the tax will cut you deep. If you have the same land but have already developed it (say by building an apartment complex) and are earning rent, George wants to take exactly as much as if you hadn't developed at all, so the damage to your bottom line will be hopefully quite small. 

George and his followers claim that this tax would combat urban blight, eliminate land speculation, ensure landlords contribute to the value of their buildings, and consequently cut down on ridiculous increases to cost of living, as seen in America's largest and most prosperous cities, then and now. 

Refer to the second Friedman quote above, how he describes increased prices encouraging more efficient use of existing inflexible resources. LVT would be that, in such a way which avoided the downsides of land speculation.

To the extent that this is plausible, it hinges on an assumption that mammoth real estate prices, say in Silicon Valley or Manhattan, aren't just driven by high demand and low supply, but that supply is deliberately limited by land speculators. I was aware of this to a lesser degree, in the case of overly restrictive zoning laws preventing the construction of new buildings, but George would predict that even laissez-faire reforms would only mitigate the problem. 

To what degree should libertarians, anarchists and their ilk consider a tax-based solution? Well, Milton Friedman called LVT the 'least worst tax' (source: wikipedia), and Lars plausibly claims that it has no deadweight loss. If you were unsure about the anarchist position for the same reasons I was, you might be willing to accept LVT as the only morally acceptable tax and be an anarchist everywhere else. 

So going in, I have a few questions in need of answering:

1. What is the nature of currency vs commodity in a Georgist framework?

2. How is the value of land absent improvements calculated, how reliable is it, and how subject to corruption?

3. Do major urban centers with skyrocketing housing prices have considerable tracts of undeveloped land held by speculators?

4. Does the Georgist argument for LVT stand on its own axioms after critique from other schools of eceonomics?

5. Have Georgist policies been implemented anywhere, and what are the results?