When people ask me whether I’m an athiest I typically say something vague and unintelligible which might lead the casual observer to conclude (hopefully mistakenly) that I’m an idiot.
But in actuality I don’t have a definitive opinion as I don’t think I could confidently argue down this guy:
Essentially I’m the religious equivalent of an agnostic, which is pretty much me asking to be left alone.
Now before you decide to tune out under the assumption that this post is a rant about religion vs. atheism, it’s not.
In fact it’s about something much more practical (snap!), it’s about ‘Georgism’, an economic theory popularized by the late Henry George.
You see, I’m a Henry George agnostic, not because I don’t think he had some great ideas, but because I doubt I could comprehensively argue his case.
Why Georgism is the new black
So let me give you a run-down: Although I’ve dipped my toes in all types of economics, at this point I’d say I’m predominantly a development economist. What interests me is why (ignoring their colonial past… and present) some countries have trouble becoming economically self-sufficient.
Why is it capitalism works so well in one country, but doesn’t in another?
As you might have guessed this is a rhetorical question, I can’t hear you.
But it’s also actually less clear-cut than most people think, which is why I find it interesting. If I don’t know something I can always stare off into the distance and look wistfully at the horizon to give myself an air of depth.
Personally, it’s the entire point of economics, and although everybody tries to claim some affiliation with Adam Smith, they’re wrong. Adam Smith was a development economist.The Wealth of Nations was trying to explain why some countries accrue masses of wealth and others don’t.
So Henry George was of this ilk. The story goes that while growing up in America he wondered why affluence could exist alongside poverty.
Although his investigation into the topic was more extensive than I’ll give him credit for, his conclusion was essentially that under a system of private land ownership people were encouraged to hold onto land for the purposes of speculation, rather than productive employment. See here for a good summary.
So as a consequence, fat cats buy and hold land in order to reap an expected return from it. At the time he wrote this made a lot of sense, after all, agriculture was an important contributor to industry and a community’s material well being.
It also meant ‘landless’ men were denied an opportunity to independently establish any form of industry without paying rent. Not only that, they were beholden to the owners of land and had to work even when they were paid poorly.
However, even if they did manage to secure some land, the level of rents was not necessarily a reflection of its productive capacity. In particular as landowners could hold land for purposes other than making productive use of it, such as speculation, the price and rent would not reflect its productive capacity.
George had a number of solutions to this problem. Two of these were that labour should not be taxed and that land should be.
The idea is that by taxing labor you reduce a person’s take home pay thereby reducing the incentive to work hard. On average then we might expect that an economy which taxes labor more heavily would find it harder to get people to work.
Because economists assume that anything which is mucking up the functioning of free exchange is bad, taxes which change behavior as little as possible are preferred.
So because taxes on labor might just screw around with how much people work, they should probably be avoided if alternatives are available.
Enter HG’s land tax.
Because the supply of land is fixed if we chose to slap a tax on it suppliers can’t change their behavior. But users of the land can. So if a landlord tried pass forward the cost of the tax to his tenant he’ll face competition from other landowners.
Furthermore, because the land tax would be payable regardless of how the land is used, a landlord would have to rent it or sell it. If they don’t they will still have to pay the tax and they’ll be losing income while they hold onto it which means the user of the land holds the power.
The other benefit of a land tax is that it could capture some of the benefits an owner gets from the local community. You know that burnt-out car and funny smell coming from your neighbors property? Well so can potential buyers and it will be reflected in the price of your land.
In the same way a good community, hospitals, public infrastructure and a neighbor who gives you vegetables from their garden are all things which would increase the price of your land without you having to lift a finger.
But because society does lift a finger (in the form of paying for all that stuff), imposing a land tax can be a good way to return some of the value to the community.
Of course it’s more complicated than I’m making out. But there is something I like about making people who aren’t me pay.
If you really want to learn more about Henry George, you can also download his book ‘Progress and Poverty’ for free here.