Economist Josh Ryan-Collins: How Land Disappeared from Economic Theory

For classical economists, it was a factor of production, and the source of “rent.”

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By Josh Ryan-Collins

Anyone who has studied economics will be familiar with the ‘factors of production’. The best known ‘are ‘capital’ (machinery, tools, computers) and ‘labour’ (physical effort, knowledge, skills). The standard neo-classical production function is a combination of these two, with capital typically substituting for labour as firms maximize their productivity via technological innovation. The theory of marginal productivity argues that under certain assumptions, including perfect competition, market equilibrium will be attained when the marginal cost of an additional unit of capital or labour is equal to its marginal revenue. The theory has been the subject of considerable controversy, with long debates on what is really meant by capital, the role of interest rates and whether it is neatly substitutable with labour.

But there has always been a third ‘factor’: Land. Neglected, obfuscated but never quite completely forgotten, the story of Land’s marginalization from mainstream economic theory is little known. But it has important implications. Putting it back in to economics, we argue in a new book, ‘Rethinking the Economics of Land and Housing’, could help us better understand many of today’s most pressing social and economic problems, including excessive property prices, rising wealth inequality and stagnant productivity. Land was initially a key part of classical economic theory, so why did it get pushed aside?

Classical economics, land and economic rent

The classical political economists – David Ricardo, John Stuart Mill and Adam Smith – that shaped the birth of modern economics, emphasized that land had unique qualities, distinct from capital and labour, that had important influence on the dynamics of production.

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They recognized that land was inherently fixed and scarce. Ricardo’s concept of ‘economic rent’ referred to the gains accruing to landholders from their exclusive ownership of a scarce resource: desirable agricultural land. Ricardo argued that the landowner was not free to choose the economic rent he or she could charge. Rather, it was determined by the cost to the labourer of farming the next most desirable but un-owned plot. Rent was thus driven by the marginal productivity of land, not labour as the population theorist Thomas Malthus had argued. On the flipside, as Adam Smith (1776: 162) noted, neither did land rents reflect the efforts of the land-owner:

“The rent of land, therefore, considered as the price paid for the use of the land, is naturally a monopoly price. It is not at all proportioned to what the landlord may have laid out upon the improvement of the land, or to what he can afford to take; but to what the farmer can afford to give.”

The classical economists feared that land-owners would increasingly monopolise the proceeds of growth as nations developed and desirably locational land became relatively more scarce. Eventually, as rents rose, the proportion of profits available for capital investment and wages would become so small as to lead to economic stagnation, inequality and rising unemployment. In other words, economic rent could crowd out productive investment.

Marxist and socialist thinkers proposed to deal with the problem of rent by nationalizing and socializing land: in other words destroying the institution of private property. But the classical economists had a strong attachment to the latter, seeing it as a bulwark of liberal democracy and encouraging of economic progress. They instead proposed to tax it. Indeed, they argued that the majority of taxation of the nation should come from increases in land values that would naturally occur in a developing economy. Mill (1884: 629-630) saw taxation of land as a natural extension of private property:

“In such a case …[land rent]… it would be no violation of the principles on which private property is grounded, if the state should appropriate this increase of wealth, or part of it, as it arises. This would not properly be taking anything from anybody; it would merely be applying an accession of wealth, created by circumstances, to the benefit of society, instead of allowing it to become an unearned appendage to the riches of a particular class.”

Ricardo and Smith were mainly writing about an agrarian economy. But the law of rent applies equally in developed urban areas as the famous Land Value Tax campaigner Henry George argued in his best-selling text ‘Progress and Poverty’. Once all the un-owned land is occupied, economic rent then becomes determined by locational value. Thus the rise of communications technology and globalisation has not meant ‘the end of distance’ as some predicted. Instead, it has driven the economic pre-eminence of a few cities that are best connected to the global economy and offer the best amenities for the knowledge workers and entrepreneurs of the digital economy. The scarcity of these locations has fed a long boom in the value of land in those cities.

Neoclassical economics and the obfuscation of land

The classical economists were ‘political’ in the sense that they saw a key role for the state and in particular taxation in preventing the institution of private property from constraining economic development via rent. But at the turn of the nineteenth century, a group of economists began to develop a new kind of economics, based upon universal scientific laws of supply and demand and free of normative judgements concerning power and state intervention. Land’s uniqueness as an input to production was lost along the way.

John Bates Clark was one of the leading American economists of the time and recognised as the founder of neoclassical capital theory. He argued that Ricardo’s law of rent generated from the marginal productivity of land applied equally to capital and labour. It mattered little what the intrinsic properties of the factors of production were and it was better to consider them ‘…as business men conceive of it, abstractly, as a sum or fund of value in productive uses… the earnings of these funds constitute in each case a differential gain like the product of land.’ (Bates Clark 1891: 144-145)

Clark developed the notion of an all-encompassing ‘fund’ of ‘pure capital’ that is homogeneous across land, labour and capital goods. From this rather fuzzy concept, developed marginal productivity theory. Land still exists in the short-run in this approach – and indeed in microeconomics textbooks – when it is generally assumed that some factors may be fixed. For example, you cannot immediately build a new factory or develop a new product to respond to new demands or changes in technology. But in the long run – which is what counts when thinking about equilibrium – all factors of production will be subject to the same variable marginal returns. All factors can be reduced to equivalent physical quantities – if a firm adds an additional unit of labour, capital good or land to its production process, it will be homogeneous to all previous units.

Early 20th Century English and American economists adopted and developed Clark’s theory in to a comprehensive theory of distribution of income and economic growth that eventually usurped political economy approaches. Clark’s work became the basis for the seminal neoclassical ‘two-factor’ growth models of the 1930s developed by Roy Harrod and Bob Solow. Land –defined as locational space – is absent from such macroeconomic models.

The reasons for this may well be political. Mason Gaffney, an American land economist and scholar of Henry George, has argued that Bates Clark and his followers received substantial financial support from corporate and landed interests who were determined to prevent George’s theories gaining credibility out of concerns that their wealth would be wittled away via a land tax. In contrast, theories of land rent and taxation never found an academic home. In addition, George, primarily a campaigner and journalist, never managed to forge an allegiance with American socialists who were more focused on taxing the profits of the captains of industry and the financial sector.

The result was the burden of taxation came to fall upon capital (corporation tax) and labour (income tax) rather than land. A final factor preventing theories of land rent taking off the U.S. may have been the simple fact that at the beginning of the 20th century, land scarcity and fixity was perhaps less a political issue in the still expanding U.S. than in Europe, were a land value tax came closer to being adopted.

Why land is different

At first glance, neoclassical economics’ conflation of land with a broad notion of capital does seem to follow a certain logic. It is clear that both can be thought of as commodities: both can be bought and sold in a mature capitalist market. A firm can have a portfolio of assets that includes land (or property) and shares in a company (the equivalent of owning capital ‘stock’) and swap one for another using established market prices. Both land and capital goods can also be seen as store of value (consider the phrase ‘safe as houses’) and to some extent a source of liquidity, particularly given innovations in finance that have allowed people to engage in home equity withdrawal.

In reality, however, land and capital are fundamentally distinctive phenomena. Land is permanent, cannot be produced or reproduced, cannot be ‘used up’ and does not depreciate. None of these features apply to capital. Capital goods are produced by humans, depreciate over time due to physical wear and tear and innovations in technology (think of computers or mobile phones) and they can be replicated. In any set of national accounts, you will find a sizeable negative number detailing physical capital stock ‘depreciation’: net not gross capital investment is the preferred variable used in calculating a nations’s output. When it comes to land, net and gross values are equal.

The argument made by Bates Clark and his followers was that by removing the complexities of dynamics, the true or pure functioning of the economy will be more clearly revealed. As a result, microeconomic theory generally deals with relations of coexistence or ‘comparative statics’ (how are labour and capital combined in a single point in time to create outputs) rather than dynamic relations. This has led to a neglect of the continued creation and destruction of capital and the continued existence and non-depreciation of land.

Indeed, although land values change with – or some would say drive – economic and financial cycles, in the long run land value usually appreciates rather than depreciates like capital. This is inevitable when you think about it – as the population grows, the economy develops and the capital stock increases, land remains fixed. The result is that land values (ground rents) must rise, unless there is some countervailing non-market intervention.

Indeed, there is good argument that as economies mature, the demand for land relative to other consumer goods increases. Land is a ‘positional good’, the desire for which is related to one’s position in society vis a vis others and thus not subject to diminishing marginal returns like other factors. As technological developments drive down the costs of other goods, so competition over the most prized locational space rises and eats up a greater and greater share of people’s income as Adair Turner has recently argued. A recent study of 14 advanced economies found that 81% of house price increases between 1950 and 2012 can be explained by rising land prices with the remainder attributable to increases in construction costs

Consequences of the neglect of land

Today’s economics textbooks – in particular microeconomics – slavishly follow the tenets of marginal productivity theory. ‘Income’ is understood narrowly as a reward for one’s contribution to production whilst wealth is understood as ‘savings’ due to one’s productive investment effort, not as unearned windfalls from being the owner of land or other naturally scarce sources of value. In many advanced economies land values – and capital gains made from increasing property prices – are not properly measured and tracked over time. As Steve Roth has noted for Evonomics, the U.S.’ National accounts does not properly take in to account capital gains and changes in household’s ‘net worth’, much of which is driven by changes in land values.

Even progressive economists such as Thomas Piketty have fallen in to this trap. Once you strip out capital gains (mainly on housing), Piketty’s spectacular rise in the wealth-to-income ratio recorded in advanced economics in the last 30 years starts to look very ordinary (Figure 1 shows the comparison for great Britain since 1970).

Figure 1: Piketty’s Wealth to income ratio including and excluding capital gains (Great Britain, 1970-2010)

Source: Ryan-Collins et al (2017) Rethinking the Economics of Land and Housing, Zed Books: London, p172

In the UK, land is not included as a distinct asset class in the National Accounts, despite being one of the largest and most important asset classes in the economy. Instead, the value of the underlying land is included in the value of dwellings and other buildings and structures, which are classed as ‘produced non-financial assets’ (Figure 2)

As shown in Figure 2, the value of ‘dwellings’ (homes and the land underneath them) has increased by four times (or 400%) between 1995 and 2015, from £1.2 trillion to £5.5 trillion, largely due to increases in house prices rather than a change in the volume of dwellings. In contrast the forms of ‘capital’ that we associate with increases in wealth and productivity – commercial buildings, machinery, transport, Information and communications technology has grown much more slowly. 

Figure 2: Growth in the value of non-financial assets in the UK, 1995-2015

Thus this huge growth in wealth relative to the rest of the economy originates not from the saving of income derived from people’s contribution to production (activity that would have created jobs and raised incomes), but rather from windfalls resulting from exclusive control of a scarce natural resource: land.

This may help us explain – at least in part – the great ‘productivity puzzle’– that is, why productivity (and related average incomes) been flat-lining, even as ‘wealth’ has been increasing. The puzzle is explained by the fact that the majority of the growth in wealth has come from capital gains rather than increased profits (or savings) derived from productive investment, Savings are at a fifty year low in the UK even as the wealth to income ratio hits record highs.

When the value of land under a house goes up, the total productive capacity of the economy is unchanged or diminished because nothing new has been produced: it merely constitutes an increase in the value of the asset. This may increase the wealth of the landowner and they may choose to spend more or drawn down some of that wealth via home equity withdrawal. But they equally many not. Moreover, the rise in the value of that asset has a corresponding cost: someone else in the economy will have to save more for a deposit or see their rents increase and as a result spend less (or, in the case of the firm, invest less).

In current national accounts, however, only the increase in wealth is recorded, whilst the present discounted value of the decreased flow of resources to the rest of the economy is ignored as Joe Stiglitz has pointed out. Rising land values suck purchasing power and demand out of the economy, as the benefits of growth are concentrated in property owners with a low marginal propensity to consume, which in turn reduces spending and investment. In addition, most new credit creation by the banking system now flows in to real estate rather than productive activity. This crowds out productive investment, both by the banking system itself and non-bank investors who see the potential for much higher returns on relatively tax free real estate investment.

Land values also fundamentally effect the impact of monetary policy, particularly in financially liberalized economies. If a central bank lowers interest rates to try and stimulate capital investment and consumption, it is likely to simultaneously drive up land prices and the economic rent attaching to them as more credit flows in to mortgages for domestic and commercial real estate. This has a naturally perverse effect on the capital investment and consumption effects that the lowering of interest rates was intended to achieve.

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But for mainstream economists and policy makers these connections between the value of land and the macroeconomy are ignored. Housing demand is assumed to be subject to the same rules that drive desire for any other commodity: its marginal productivity and utility. Rising house prices or rents (relative to incomes) – an urgent problem in countries such as the United Kingdom – can be attributed to insufficient supply of homes or land. As with other policy challenges, such as unemployment, the focus of is on the supply side. The distribution of land and property wealth across the population, its taxation and the role of the banking system in driving up prices through increases in mortgage debt are neglected. Planning rules and other easy targets such as immigration are then blamed for the loss of control people feel as a result of insecure housing rather than its true structural causes in the land economy.

Land rents: there is a ‘free lunch’

Although presented as an objective theory of distribution, in fact marginal productivity theory has a strong normative element. Ultimately it leads us to a world, where, so long as there is sufficient competition and free markets, all will receive their just deserts in relation to their true contribution to society. There will, in Milton Friedman’s famous terms, be ‘no such thing as a free lunch’.

But marginal productivity theory says nothing about the distribution of the ownership of factors of production – not least land. Landed-property is implicitly assumed to be the most efficient organisational form for enabling private exchange and free markets with little questioning of how property and tenure rights are distributed nor of the gains (rents) that possession of such rights grants to its holders. Ultimately, this limits what the theory can say about the distribution of income, particularly in a world where such economic rents are large. Land is the ‘mother of all monopolies’ as Winston Churchill once put it – and hence the most important one for economists to understand.

But if economists are to focus on land, they must get their hands dirty. They must start examining the role of institutions, including systems of land-ownership, property-rights, land taxation and mortgage credit that are historically determined by power and class relations. In fact it is these inherently political, social and cultural developments that determine the way in which economic rent is distributed and with it, macroeconomic dynamics more generally.

2017 April 4

Smith, Adam (1776) An Inquiry into the Nature and Causes of the Wealth of Nations. W. Strahan and T. Cadell.

Mill, John Stuart (1884) Principles of Political Economy, D. Appleton

Bates Clark, John Bates. (1891) ‘Marshall’s Principles of Economics’. Political Science, Quarterly 6 (1): 126–51. 


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  • IMustLearn

    Good article but as of April 2017 Robert Solow is not “recently departed”… He’s alive and well. Perhaps you are thinking of Kenneth Arrow.

  • Ben Jamin’

    When we violate property rights, we not only get an unfair distribution of resources, but an inefficient allocation of them too. Which is why property rights are the foundation upon which we can build a prosperous and civilised society.

    Given that by definition nobody created natural resources (Land), it is an infringement of basic human rights that we can be excluded from their use without being compensated for our loss.

    From this loss arises excessive inequalities and market dysfunction. The symptoms of which includes the so called “Housing Crisis”, which is usually blamed on planning regulations and a lack of supply, when in reality the only culprit is a lack of economic justice. After all, as land costs nothing to produce, high land values cannot make housing unaffordable in aggregate.

    In fact, high location values are the best economic indicator we have. They are not so much a measure of scarcity, but the efficient exploitation of agglomeration effects. Resources are more efficiently utilised by being channelled through networks rather than spread out evenly. It is this difference between marginal and inframarginal location that aggregate land values measure. So the higher they are the better.

    So when economists say that we need to build more housing in order to bring down land values, they are betraying a fundamental lack of understanding of the role of land in economics and why it is different from capital.

  • SCIdirector

    I look forward to reading this new book. As a long-time teacher of political economy based on the writings of Henry George, it has been clear to me for many years that George’s analysis of economic cycles is extremely valuable (or should be) to policy analysts and elected officials.

    One assertion in this article not consistent with the manner that rent arises on particular tracts or parcels of land. Mr. Ryan-Collins writes:

    “Once all the un-owned land is occupied, economic rent then becomes determined by locational value.”

    What actually occurs is that the best locations for whatever is “highest, best use” of land begin to yield rent as soon as these locations are fully controlled (even if not actually developed to highest, best use or any use). If the next, best locations are available to claim, then the potential difference is how much in wealth can be produced between these locations and the best locations is what the rent is.

  • Dan Sullivan

    The Hudson article that this article cited was fundamentally wrong on just about every point. It was basically a hatchet job against Georgists by an angry socialist who thinks he was not treated fairly by us. HIs opening paragraph:

    “Twelve political criticisms of George were paramount after he formed his own political party in 1887: (1) his refusal to join with other reformers to link his proposals with theirs, or to absorb theirs into his own campaign; (2) his singular focus on ground rent to the exclusion of other forms of monopoly income, such as that of the railroads, oil and mining trusts; (3) his almost unconditional support of capital, even against labor; (4) his economic individualism rejecting a strong role for government; (5) his opposition to public ownership or subsidy of basic infrastructure; (6) his refusal to acknowledge interestbearing debt as the twin form of rentier income alongside ground rent; (7) the scant emphasis he placed on urban land and owneroccupied land; (8) his endorsement of the Democratic Party’s freetrade platform; (9) his rejection of an academic platform to elaborate rent theory; (10) the narrowness of his theorizing beyond the land question; (11) the alliance of his followers with the right wing of the political spectrum; and (12) the hope that full taxation of ground rent could be achieved gradually rather than requiring a radical confrontation involving a struggle over control of government.”

    1. He joined with many other reformers, and learned the hard way that socialists would join his campaign to attack his non-socialist supporters.

    2. George was famously critical of railroads, even before he became known for his work on land monopoly, and consistently proposed that public rights of ways should be publicly owned.

    3. It’s a Marxist notion that capital is the natural enemy of labor. George opposed all sorts of capitalized privileges, including patents, that enjoyed value at the expense of labor.

    4. George had a very solid view of “The Functions of Government,” that can be considered “anti-government” by comparing it with Marxism. He supported free public education before that was a reality.

    5, He clearly and consistently argued that all right-of-way infrastructure (roads, railroads, streetcar lines, water, sewer, etc.), “In their nature monopolies,” must be publicly owned. This was the origin of the term “natural monopoly.”

    6. He proposed to dramatically decrease debt by taking away the creation of money by banks and supporting the direct issue of all currency by government.

    7. He talked about urban land all the time. Heck, he ran for mayor of NY City and nearly won.

    8. He supported the free-trade platform with the caveat that there can be no such thing as true free trade where land is monopolized and labor is taxed.

    9. No “academic platform” had been offered to him, so he could only have rejected one in Hudson’s imagination.

    10. He advocated abolishing patents, the direct issue of currency, public ownership of railroad lines, streetcar lines, water, sewer, etc., stripping the army and navy to “a small constabulary,” giving women the vote, making one house of Congress all male and the other all female, replacing contract patronage with the direct employment of government workers, and many, many more.

    11. The right wing constantly denounced him, and he them, unless you define everyone who is not a socialist as right-wing. We’re talking 1880s America here, so that doesn’t wash.

    12. There are moral reasons, as well as economic and political, as to why the Marxist revolutionary approach was inappropriate. Also, this country had a violent civil war only two decades earlier, and was universally disgusted with Marxists trying to foment violence here.

    He goes on to misrepresent George in many details, but there is not enough room to rebut that here. The fact that his initial 12-point central thesis is way off base should be enough to give pause.

    Dan Sullivan, president
    Council of Georgist Organizations

    • I love and hate Henry George. His insight to how the economy functions was great. His solutions were terrible. I actually think economic reform needs to begin by eliminating property tax, which is the worst of the three taxes (sales, income, property). Property tax is the most regressive tax of all, since we all need the land, and the government should be a mechanism to give us all what we need when we need it, not a system of penalizing anyone. I am not a Marxist, btw. Like George, Marx had great insights too, but his solutions are just contradictions.

      • Dan Sullivan

        It is a big lie that property tax is regressive, particularly as it falls on land. In Pittsburgh, the 1/2 square mile called “The Golden Triangle” contains about 1/4 of the land value for the entire 53-sqcity.

        • Dan, you misunderstand me. There can be more than one problem simultaneously. Property tax is regressive because you are taxed on what you own. It is also a flat tax, which is also regressive. To that, as per your example, is the problem of values applied, which is your golden triangle. We should not tolerate or encourage this type of value or value discrepancy. Then there is the problem of debt and banking, etc. George missed a lot of parts of the cycle of inflation and wealth concentration, which is why he solution doesn’t really work. Inflation is THE problem, as the Monopoly model demonstrates. Even with everyone making the same$200 and starting even the majority loses.

          • Dan Sullivan

            You are simply wrong factually. Wealthy people pay more under a property tax than under any other broad-based tax. There is no “value discrepency” in the Golden Triangle. The land is valuable because the roads, rivers, transit lines, etc., converge there, as they should.

            Debt and banking is a separate problem, but George did not ignore that problem even if you are ignorant about what he wrote about it. George was a Greenbacker, and advocated that all new money be spent directly into circulation by government, with banks lending only from deposits at the risk of the depositors. He also argued that government should not enforce the collection of debts incurred by borrowers.

            Ironically, the game Monopoly was invented by Georgists to illustrate his teachings. It was originally called The Landlord’s Game, and there were two sets of rules: the Prosperity rules, in which just about everyone succeeded, and the Monopoly rules, which are the rules you are citing.

          • Do you have any information about these Prosperity Rules? I’d like to see them. I’ve never come across them or heard about them before.

            I am not an expert of George, and it is hard (and pointless) to debate with dead men and how others interpret others. All ideas are fluid anyway. I’d rather discuss with you and your understanding of today; they wrote with less evidence than us, so logically we should be different.

            We don’t really need to value the land at all, imo. If we build a road, then we need to maintain it. We need to build it where its useful, etc. These empirical decisions may make it more useful, popular, etc., but its value is in its use, not in the accounting. Most (all) accounting is based on an exploitive desire, because inflation creates a vicious circle that makes accounting more and more important. The Native Americans could sell the island of Manhattan cheaply because they used all land at its maximum usefulness, whereas we define usefulness based on an accounting ledger that is based on 2+2=5. Our math makes no sense. They were right. George wrote at a time when both systems still existed somewhat, serfdom existed in Russia, etc. Our politics and technology are vastly different, and we should not look to the past for answers, but for understanding and insight and maybe a good direction, but policies should be crafted in the present, and need to break with the past to be new. More property tax isn’t really new, it is just more of the same.

          • Dan Sullivan

            Google Landlord’s Game Lizzie Magie Phillips.

            Meanwhile, at least a dozen Nobel economists have endorsed land value tax, making it hardly a 19th century phenomenon. Cities that have shifted to land value tax have enjoyed increased growth in both the number and value of building permits.

          • Roderick Oates

            Perhaps a land tax might motivate farmers to grow things, not just use the land to collect subsidies for things like replacing hedgerows they themselves dug out. This leaves the environmentally aware farmer worse off, because the subsidies are finite. When Brexit occurs the farmers of Britain expect the Common Agricultural Policy payments to continue, in a country where the poor worker needs to be subsidised through food banks while the supermarkets don’t buy vegetables they consider the public might not like the look of. The rest get ploughed back in.

          • Dan Sullivan

            First of all, it’s a land value tax, not a land acreage tax, and it shifts the tax burden to the most urban land, not the most rural. Second, it gives organic farming a competitive advantage over conventional farming because organic farming requires a lot more labor, which would be untaxed. Finally, the advantage of low taxes gets capitalized into the price, and the wealthiest are therefore able to out-bid the would-be organic farmer. Economist Mason Gaffney found that the 9 US states with the highest taxes on farmland had far less concentration of farmland ownership than the 9 states with the lowest taxes.


          • John Burns

            “Property tax is regressive because you are taxed on what you own”

            Land Value Tax, a levy on the `values` of the land, not the buildings, is not taxing what you own at all. It is reclaiming the commonly created wealth, the result of our economic activity, that soaked into the land. The land values are not manna from heaven, they were created by us, not the landowner.

          • John, Earlier I said to Dan that all prices are ‘made up.’ He eloquently disagreed and said I was wrong. Now you say that prices were created by us.

            Here is another contradiction: you say that wealth is ‘commonly created’ but you also “Keep private wealth in private pockets.” So which is it?

            A tax is paid to the government, profit is paid to a business, wages are paid to an individual; mathematically, they are all the same, a percentage added.

            Poverty/bust/recession are when income is less than the cost of living. The Monopoly model shows how this occurs mathematically. Even if the players don’t go broke, then the bank will. LVT is not going to stop people from going broke. It is the same ‘buy low-sell high’ model that we have now. While I am not an expert on all the points of LVT,(I suspect there are variations within the Georgeist school) I get the general gist of the approach and I see major structural flaws. To be clear, I see similar major structural flaws in most schools of economic thought. Maybe I am my own school. While I have run into a lot of good analysis in my survey of other peoples ideas, I haven’t run into myself anywhere.

            I might be nuts, or I might be right. A lot of people are complaining about “rents” in the economy, including the original article. Rent is primarily a stewardship issue. The next generation doesn’t own anything and must ‘earn’ their way, but as the Monopoly model shows, even starting off even and making the same $200 for passing Go, the game ends up as a disaster. The problem is deeper and simpler than most people realize. It’s an accounting issue.

          • Dan Sullivan

            Created and “made up” are two different things. Concrete is created; it is not “made up.”

            Land value is commonly created, but land value is not wealth. Wealth is privately created.

            Taxes, profits and wages might be the same “mathematically” in some meaningless sense, but they are not the same in any real sense. Even profits can be the return to capital goods (interest) the return to land (rents) or the return to the entrepreneur’s efforts (wages). The distinctions are important whether you understand them or not.

            The rest of your post is ranting on things that have already been answered. Don’t let a game confuse you about reality. It doesn’t have to be like that. Even the game doesn’t have to be like that.

      • Ben Jamin’

        For the LVT to be regressive, the poorest would have to own a disproportionate amount of valuable natural resources. Like Central Park apartments, oil reserves or airport landing slots.

        In which case, why are they poor?

      • John Burns

        Steve, it is best to take in and understand what others are eloquently explaining to you. They really do know what they are talking about.

        • Hi John, please don’t confuse disagreeing with not understanding.
          If the goal is “progress not poverty” then property tax is regressive. A progressive tax, by definition, expects more from those who have more and less from those who have less. Since a property tax is fixed, it must be regressive, since owning the property is not fluid income, and as the price of property appreciates and the tax rises, taxes become more expensive while the individual may be earning less.
          There is also the problem of stewardship, since the next generation must pay for increasing property costs. I could go on, but the LVT accommodates inflation rather than controlling it. It also requires a mythical genius in government to determine full use and fair rates without any mathematical theory of how to determine such values. There is genius in Henry George but not in his solution. LVT does not work.

          • John Burns

            You concluded on much ignorance of the matter. Many have explained it to you but you still are still obstinate that your are right in the face of clear logic.

            LVT does not actually tax land. LVT reclaims commonly created wealth that soaked into the land crystallising as land values. The wealth was created by us the community, we are just reclaiming to pay for common services. The mechanism to collect LVT is similar to VAT (sales tax), in that the shopkeeper gets the money, then has to hand it over to the state.

            Currently, we:
            • Privatise socially created wealth – appropriation of common wealth;
            • Socialise private wealth (income & sales taxes);

            We need to do the opposite:
            • Keep private wealth in private pockets;
            • Keep socially created wealth in the social purse;

            Anyone can see the current economic system just does not work, as it is a trickle up economy, creating a layer of grinding poverty, in a society that creates so much wealth. LVT would put a stop to that. Those who work keep what they earn. LVT promotes enterprise.

            Where LVT has been implemented it has been a success. I can give you countless example but I will not for now.

          • Dan Sullivan

            You clearly do not understand. You say things that are demonstrably false both logically and empirically, and that have been overwhelmingly rejected by economists. You clearly do not know what “regresssive” means, because your arguments have nothing to do with regressivity. Regressive means poorer people pay a larger share of their incomes toward that tax than richer people do. That is simply false.

            Renters pay nothing at all, because they are already paying what the market will bear. That’s nearly half the population (the bottom half) paying nothing. Home owners pay less under land value tax than under any other broad-based tax, and even property tax costs them less than income taxes. It also keeps real estate prices from going up into bubbles that ruin middle income people.

            Corporations pay a hefty share of the land value tax, and the people who own stocks and bonds have less revenue from which to draw because the corporations themselves had to pay property tax on their land holdings before they had anything left to pay as dividends.

            LVT has been proven to work over and over, your ignorance on the matter not withstanding.

          • If renters are paying what the market will bear, then how does that help the poor? They are still stuck in same market-driven inequality.
            You say LVT is working, where?
            Stocks and bonds still exist, which means unearned income still exists, so what exactly has changed?
            I have never understood the mechanics of how this would work in practice as far as determining rates, value, etc., so please provide a link to where it exists and how these things are determined and adjusted.
            Besides telling me that I am wrong you haven’t responded to my criticisms nor have you presented evidence or a full argument. We agree on the definition of regressive, how does my application not fit regarding current property taxes which you want to distance yourself from. You could easily agree on that point couldn’t you? Then explain how LVT is not current like property tax. You say renters don’t pay any, but they must be paying by proxy through the landlord, the same as today, right. Btw, are you in USA or elsewhere? I have questions on VAT.

          • Dan Sullivan

            “What the market will bear” is not a fixed amount. LVT increases the supply of housing and drives down rent. 17 Pennsylvania cities have shifted in varying degrees to LVT and they all had construction surges. Australian municipalities shifted to LVT by voter referendum in the ’60s and ’70s, and also had construction surges. (This was undermined by shifts to federal income taxes in the ’90s.)

            All across the US, the cities that rely most on property taxes are the most affordable.

            Hong Kong, Singapore, Taiwan, Makow and the Pacific-rim city-states generally get most of their revenue from charges against land values. They are expensive only because of massive immigration from less dynamic economies.

            “I have never understood the mechanics of how this would work…”

            Yeah, that’s what we’ve been trying to tell you.

            Property taxes are not regressive. They drive down rents, so renters – the poorest segment of the population – get a net cost reduction. Home owners pay less under property tax than under flat income taxes and sales taxes, and people who own commercial properties, or own stock in corporations that own commercial properties, pay more. I don’t know how to say this clearly enough that someone who doesn’t want to understand it will understand anyhow.

          • Just to be clear, you are saying that relying on property tax exclusively works best, right?But LVT is no different than conventional property tax? The state of NH does not have sales tax or income tax; I believe they have two property taxes, one state, one local. Is this what you consider to be ideal?

          • John Burns

            LVT is NOT property tax. LVT does not tax you for holding land. Income tax is the same rate wherever you live. A tax for holding land would be the same. LVT is Land VALUE Tax. If you hold an acre of land that is valued near to nothing you pay near to nothing in LVT, but no income and sales taxes, etc. If you hold an acre in the middle of London or New York, you pay LVT on its value which is will be high as the land’s value is amongst the highest in the world. Get it?

          • Um, maybe not. You pay property tax based on its assessed value according to the assesses interpretation of its value in today’s market. How does LVT differ?

          • Dan Sullivan

            You pay on the assessed value of the land, and pay less (or nothing) on the assessed value of the improvements.

          • John Burns

            LVT differs because:
            ♦ It takes into account all land, whether a building is on it or not, or people on it or not.
            ♦ a forest will come under LVT as will mashland.
            It does not take in account anything on the land, only the LAND.
            ♦ It is assessed every year.

          • John and Dan, thank you for clarifying.

            I don’t think the difference between LVT and Property tax (land and buildings) is as big as you think, nor do I see how it could have a significant impact on the status quo.

            One of my biggest complaints against property tax is that it puts local authorities in the state of mind where they encourage real estate inflation. I see the rise in real estate values as THE largest problem. Prop 2 1/2 controlled increase in the tax percentage, but did nothing about housing value. Increase in assessed values is essentially a tax increase (and why property and LVT are regressive, because the increase has no relation to income or ability to pay).

            While I would like to see property tax eliminated, I think more needs to be done to constrain values. Eliminating the tax, by itself, won’t do much.

            The Monopoly model, and the legend that Henry George’s insight that the condition of the poor in the city being worse in the city than the country because of the higher real estate prices, demonstrates my view. The LVT does nothing to actually control values, but people running around thinking that high real estate values is a good thing is a huge fundamental problem. I don’t understand how George missed that his solution didn’t control values. The solution, imo, is as basic as rent control. The local authorities, rather than private individuals, set the prices. One workable scheme is to have the town/city act as the middle man in all real estate transactions. When you want to sell, you sell to the town, when you want to buy, then you buy from the current available inventory from the town. You only ‘own’ it when you occupy it. When you sell, it goes back to the town. By separating the buyer and seller, real estate values are easily controlled and managed for best effect. You still have private property, freedom of movement, etc., but you no longer have inflationary pressures, speculation. The goal is that everybody should own where the live. It eliminates the renter issue that the article discusses. There will be no more renters.

            Dan, you mentioned that sales tax is regressive. I agree. But, you also were against income tax, but income tax is the easiest to establish in a progressive manner (it is also one of the easier ones to cheat on, but that is a separate issue).

            Let’s not forget that all income is someone else’s expense. That is why we have a vicious circle. For everyone to have revenue (workers, business, non-profit, gov’t, etc) then everyone must give off expense onto someone else. This is why we have a $19T national debt and inflation. The math can’t possibly work so we keep using debt/inflation as the pressure relief valve.

            If I were a king, this would be an easy fix. But since I’m not, it is necessary to get people to see the problem differently. LVT and property tax are essentially the same thing. In my town there is a split rate between residential and commercial property. Every year it gets reclassified and they beat a dead horse and change the rate .025% as if it were meaningful. We need to stop beating dead horses. Eliminating one whole class of taxes is a good start. We should start with property tax.

            Btw, I had breakfast in New Hampshire last week. They have no sales tax, but my meal managed to have two taxes on it, one for food and one for beverages. How dumb! But, understandable. No matter what revenue system people use it soon becomes inadequate because inflation is created by trade, therefore it is impossible to keep up with inflation. Every act of consumption is ‘buy high.’ We must trade, we must consume. We are really good at both, but we suck at accounting and economics. We keep splitting hairs. A LVT vs property and land values is splitting hairs too.

            It’s almost like we are playing Government Revenue Bingo. Make a 3×3 grid. There is local, state and federal government at the top, and sales, income and property taxes on the side. Within each box there are a million ways of constructing that particular tax. But, it doesn’t change the fact that it makes no sense for the government to create a currency and then try to collect it back. It’s an accounting absurdity.

          • Dan Sullivan

            The difference is big enough that every municipality that made even a partial shift had a huge construction surge.

            You are wrong about politicians inflating real estate values. The market does that whenever real estate taxes are curtailed. Assessment increases after Massachusetts Prop 2 1/2 lagged far behind actual market value increases, and politicians have traditionally avoided reassessment because the most politically prominent neighborhoods (the richest ones) get the biggest increases.

            The rise in real estate values, which you call “THE problem” occur precisely because property tax rates are lowered. Until you grasp that, you will be confused about the whole issue. Everything else you wrote was wrong because you don’t understand this fundamental point.

            Holding land out of use drives up property values, and the portion of the property tax that falls on land is the only cost that land speculators have. If they expect land values to grow by, say, 2% more than the return on a productive investment, they will buy and hold the land instead of investing in production. However, if there is a more than a 2% tax on land value, they will invest in production. That leaves the land available, at a lower price, to someone who will put it to use.

            Income tax, on the other hand, is far more burdensome to the people who invest in productivity than the people who buy up land. Until they sell the land or lease it out, which is what we want them to do, they generate no income tax at all.

          • Dan, you are using market theory to prove market theory, when in fact no correlation between cause and effect can be substantiated or explained. Remember my GDP example? Anything can have any price at any time simultaneously. The mark-up percentage is only based on what people believe works. It is a self-fulfilling prophecy until the math forces a collapse.

            You are pretty much ignoring every criticism and point I make, but the ‘surge in construction’ is just the boom before the bust, which the Monopoly model demonstrates so well. (I think George’s desire to utilize all land productively is horrible stewardship. One generation has no right to all of the world’s resources).

            It was Franklin who criticized interest because people would not invest in commerce if they could get a guaranteed return by lending (i.e. renting money). He was arguing in favor of paper money. Taxes, comparatively, are a secondary issue. It is the private sector that creates volatility in the private sector, not government or the type of tax. Just another reason why eliminating property taxes completely are not enough to fix the economy. You are engaging in confirmation bias, seeing results and proof where it does not exist. There is no mathematical model that makes LVT a possible solution, since the tax percentage will always be a made-up number the same as the land value. There is no ‘true’ price for anything. For example, how many eggs is a chicken worth? There is no hard answer to this barter. Any two people can determine any exchange. Likewise, any profit, wage or tax rate is similarly infinite. We need to understand the math behind the totals, not use the totals as proof.

            Paper money has made debt and inflation infinite, but we have all the same problems that existed before the birth of modern finance. Colored paper, colored dirt, it still makes no sense for the government to collect back its own currency. The poverty problem is an inequality problem. We can’t grow the economy to an equilibrium; as the economy scales up, the inequality scales, too. LVT is just one of the 9 squares previously mentioned. You are giving it far too much credence. Any and every change will have some effect, but the same old issues return quickly. That is because inflation and debt are the underlying problem. We can’t escape the consequences of our own actions. If 2+2=5, the 5=2+2. Every boom becomes a bust. Math must balance.

          • Dan Sullivan

            You are relentlessly wrong, as the correlation is overwhelming. Within 18 months of California passing Prop 13, foreign ownership of California land doubled. California’s affordability index, which had been 10% higher than the national average, is now more than 300% higher than the national average. The correlation between affordability and property tax rates is also overwhelming.


            Meanwhile, cities that shifted to land value taxes, even partially, all enjoyed real estate construction surges WITHOUT land price surges. This is the case for all of the 17 cities in Pennsylvania and for hundreds of municipalities in Australia.

          • So affordability is good. We agree on that. But you also say that an increase in property values is good. Isn’t that a contradiction?

            Also, why change the tax rate and wait for it to change values. Why not just set the cost of real estate so it is affordable?

            Real estate pricing is just one of many things that reflects inequality. As far as foreign ownership goes, they are easy to exclude, but when we at the point where everybody owns their own property, including accommodation for the next generation, it is somewhat moot.

            You want to preserve the nonsensical free market and influence it, I want to regulate it more directly so that inequality, which the Monopoly model demonstrates, can’t occur. Monopoly is a regulated market with fixed pricing. If you introduced a tax into the game it would not change the outcome of wealth concentration. It is the buying and selling that is the problem. Whether we are buying or selling real estate, healthcare, education or food the concentration of wealth would occur. Capitalism has a fundamental error but it is just an accounting problem. We need to change all the accounting to ‘buy low-sell low.” Real estate is the most logical place to start since it drives a tremendous amount of inflation and unearned income. Eliminating the 30 mortgage, and 100% ownership is a better sign of affordability than just changes in property values.

            A surge in construction just means speculators see an opportunity. It doesn’t support your argument at all. Speculators are myopic about taxes, so if you lower them they invest, but they plan on extracting it all back. If the government didn’t increase debt to match private sector inflation the entire system would collapse. The lucky ones who hold all the wealth are creating a self fulfilling cycle. Like the stock market it is a herd mentality based on their own projections.

          • Dan Sullivan

            Not a contradiction at all. Higher property taxes does not mean higher total taxes, as the average home owner pays more under income or sales taxes raising the same revenue than he would pay under a property tax. So, both housing prices and total tax burdens on home owners are lower under a property tax, and lower still under a land value tax.

            No central power can “set” the value of real estate. It can neither force the seller to let go of a property at a particular price, nor force a buyer to purchase at a particular price. The only way to keep real estate affordable is to tax the people who are holding real estate. Those who are actually using the real estate will pay less than they would pay in taxes that fall on the uses, and those who are holding the land idle will get out of the market.

            Perhaps Cuba would be more to your liking, as nothing short of communism will achieve your ends by your methodology. Even China has seen serious real estate price booms lately.

          • China is a mess. Capitalism and socialism both don’t work because they have the same structure: a central government, a central bank and a standing army. Inflation must win. Eliminating private ownership is as dumb as claiming private ownership is the only thing that can work. It is the math that is the problem not who makes the decision. If LVT is 100 or property tax is 100 the effect is the same regardless of what it is called. Taxes, profits, wages, interest and rents are all the same: An attempt to buy low and sell high. Trade by different names is still trading numbers. Paper money eliminates one problem and creates new ones, but with infinite inflation and debt we can now see the mathematical structural problem more clearly than ever. That is the beauty of Monopoly. It reveals the math so clearly. Unfortunately people play to win. It should scare the hell out of them.

            Dan, is saving communities your website? We obviously care about the same things but I see flaws in your analysis. I can be more specific if you are interested. For my part, I have adopted and abandoned many positions over the years. I am always willing to alter my views when better facts and ideas present themselves. I know how hard it can be to let go of some things too. I used to think if we eliminated interest then the economy would run almost perfectly. I was wrong. It is just one pillar. The better question was why do people need to borrow? Native Americans didn’t have the problems we do three hundred years ago. So what did we do wrong? We are living on the same land.

          • Dan Sullivan

            We need to change the way we issue money, but the topic here is land. I’m not interested in going all over the map with you. My point is that you clearly do not understand the land question, and are advocating things that have the opposite effect you claim you want to see.

            The only reason China was mentioned it that it’s a communist country and still can’t control land prices the way you advocate they be controlled. Their “mess” is another issue entirely.

            You might want to read Adam Smith’s “On the Rent of Land” from Wealth of Nations*, Or David Ricardo’s chapter of the same name from *Principles of Political Economy and Taxation*. They are foundational to understanding land economics.

            More recent works include Sameuelson’s “Taxation of the Rental Value of Locations,”

            and Joseph Stiglitz on land and pollution taxes:


          • MilkywayAndromeda

            Well expressed: [Eliminating private ownership is as dumb as claiming private ownership is the only thing that can work. ]

            Could you, please, develop this part [ I used to think if we eliminated interest then the economy would run almost perfectly. ] I wonder if your thoughts are related with fiction creation such as EEZ…


          • I don’t understand EEZ and never heard of it.
            My foray into interest was a result of 9/11. I reversed engineered the thinking of Osam bin Laden, figuring that his complaint was about interest and conservative morality. This was confirmed when I discovered his Letter to America. He quotes Ben Franklin, neither a lender or borrower be. And says, accurately, that we have built our economy on usury. I then found this complaint going back thousands of years. I took it to heart, sold my stocks and no longer accept interest, and kept writing about economics and thinking. I had developed an alternative but then realized that it didn’t offer a solution to seniors complaining about property tax. Paying taxes based on inflated real estate prices is hard when you are on a fixed income. While one can shop elsewhere or buy less, since we can control government it is a logical lightning rod. That made realize the importance of property tax and inflation generically. Without interest we would still have inflation and property tax. The problem was bigger than my solution. At some point I realized that the profit on money is the same as profit on anything. That is what the Monopoly game model really demonstrates. It doesn’t matter what you are buying and selling. Boom is bust and wealth concentrates because of the underlying geometric progression taking place. Profit is inflation. It is not “trade.” Every transaction has a winner and loser. If you sell more you win. If you sell less than you consume you lose. With trade this is a non-issue, with profit inequality can only grow. Suddenly I had the answer I spent my life searching for, but to my surprise it was in the Bible the whole time. In Leviticus God told the Hebrews “Do not lend your money for interest or sell your food for profit.” For years I saw the warning on interest, but being self-employed most of my life, completely missed the admonition against profit. God is right, but how to create a society without profit and how to transition without killing each other? That was why I wrote my book. Sure, it could be better written, but as I explain in the introduction, it is an act of redemption. “How could I have been so stupid?” Modern finance is only three hundred years old. We have the power to fix these problems and they aren’t hard to do either. Happy Easter!

          • MilkywayAndromeda

            Thank you for additional clarification.
            What is the name of your book, please?

          • “Tax Your Imagination!”

            You can download it free at or order a hardcopy from Amazon

          • MilkywayAndromeda
          • MilkywayAndromeda

            Thank you!

          • Dan Sullivan

            Tom Paine solved the problem of seniors and property tax. He proposed to collect a land value tax and distribute the proceeds on a per capita basis to those over 50. This is far better than giving a tax break to those seniors who own a lot of property while giving nothing to those who own little or no property.


          • Thanks for the link, Dan, but your confirmation bias is in full throttle. I like Paine, but he never figured out why there was such a difference between the equality of the Native Americans and the not-so-civilized civilized peoples.

            Franklin complained about a lot of things, but his mind did not grasp an idea then refuse to let it go. He promoted paper money at age 26, and in the Constitution as an old man advocated a single currency as a way to fix his own mistake.

            All the problems are easy to see. Solving them is not so easy, which is why we have been struggling with them for so long. Finding random strands of the past to support a view isn’t hard. Like I said, I did it with interest. See example

            Also, where money comes from has no connection to how it is spent. So collecting it through a LVT to pay people over age 50 has no bearing on anything. So, no, Tom didn’t solve it.

            If we eliminate property tax, then nobody will need a break on property tax anyway. Still plenty of other problems to solve though.

          • Dan Sullivan

            You are the last person who should be talking about confirmation bias. You have offered nothing but empty assertions and have dismissed evidence from myriad sources. All economic theory is against you, the history of philosophical thought is against you, and the empirical evidence is against you. Still you pontificate as if your opinion were Gospel.

          • Dan Sullivan

            You cannot eliminate interest by fiat any more than you can eliminate or control rent by fiat. However, you can issue all new money directly to the people instead of allowing banks to create money and lend it into circulation. If you do that, there will be far less borrowing and the amount if interest (as opposed to the rate of interest) will fall dramatically.

            Similarly, you cannot regulate rents or land prices by fiat, but taxing the value of land causes people who are not using land to let go of it, and this causes rents and land prices to fall.

          • Yep, we can only do dumb things by fiat rule. We can’t do intelligent things by fiat rule. Sorry Dan, but I don’t embrace your pessimism. You need to tax your imagination. The marketplace isn’t real, it’s just a reflection of the math we use. The Native Americans didn’t use double-entry bookkeeping, that is why they were equal and free. They never paid rent, or interest, nobody was in debt, etc. We have all these machines working, and all this intelligent labor, yet we can’t solve what is essentially a mathematical problem without compounding the problem. As Thoreau wrote: Simplify! Simplify!
            You want to keep LVT and eliminate sales and income taxes, I want to do the exact opposite, eliminate property and sales and keep income. Well, we have met our mirror. lol

            To be clear, we can eliminate all three taxes. For me it’s just a question of where to start. We don’t need to play Government Revenue Bingo.

          • Dan Sullivan

            The native Americans traded and had a marketplace. The people who observed them directly had many interesting comments about why they had greater freedom and equality, but a lack of double-entry bookkeeping was not among them. That is just something wishful thinkers like yourself invented long after the fact.

            They did have property in land, but it was conditional, and there were tribal rents (land value taxes). The tribes in the Iroquois Federation also paid national rents. These were largely paid in services to the nation, much as in Saxon Common Law. Among the many endorsers of land value tax was American Indian Movement activist Russell Means, who spoke on the subject at a Georgist conference. If you have no idea who he is, look him up on Wikipedia.

            You also have at least a dozen Nobel economists against you, from across the political spectrum. I believe you mentioned James Tobin, for example. Tobin was one of several Nobel Laureates who co-signed a letter urging Gorbachev to collect the rent of land for public purposes.


          • a long habit of not thinking a thing WRONG, gives it a superficial appearance of being RIGHT, and raises at first a formidable outcry in defense of custom. But the tumult soon subsides. Time makes more converts than reason. -Thomas Paine

            Yes, Native Americans traded. They had no need of double entry accounting because they didn’t use money. The conversion to the abstract never occurred. Taxes (as goods given) are just a way of making the division of labor work. General Gage in Boston would requisition flour, etc. those were taxes, but not modern taxes. LVT is not a breakthrough. Sorry, but it isn’t. It’s just the same old same old.

          • Macrocompassion

            This above list is not all the factors involved which are given below.

            The most basic cause of continuing poverty in our society is the lack of properly paid work and the reason for this is the lack of opportunity of access to the land on which the work must be done. The useful land is monopolized by a landlord who either holds it out of use (for speculation in its rising value), or charges the tenant heavily for its right of access. In the case when the landlord is also the producer, he/she has a monopolistic control of the land and of the produce too, and can charge more for this access right than what an entrepreneur, who seeks greater opportunity, normally would be able to afford.

            A wise and sensible government would recognize that this problem derives from lack of opportunity to work and earn. It can be solved by the use of a tax system which encourages the proper use of land and which stops penalizing everything and everybody else. Such a tax system was proposed 136 years ago by Henry George, a (North) American economist, but somehow most macro-economists seem never to have heard of him, in common with a whole lot of other experts. (I would guess that they don’t want to know, which is worse!) In “Progress and Poverty” 1879, Henry George proposed a single tax on land values without other kinds of tax on produce, services, capital gains etc. This regime of land value tax (LVT) has 17 features which benefit almost everyone in the economy, except for landlords, tax-men and banks, who/which do nothing productive and find that land dominance has its own reward.

            17 Aspects of LVT Affecting Government, Land Owners, Communities and Ethics

            Four Aspects for Better Government:

            1. LVT, adds to the national income as do other taxation systems, but it should replace them.

            2. The cost of collecting the LVT is less than for all other production-related taxes, since tax avoidance becomes impossible–the various sites are visible to all, and their ownership is public knowledge.

            3. Consumers pay less for their purchases due to lower production costs (see below). This creates greater satisfaction with the management of national affairs.

            4. The speculation in and withholding of unused land is eliminated, see item 7 and the national economy stabilizes. It no longer experiences the 18 year business boom/bust cycle, due to periodic speculation in land values (see below).

            Six Aspects Affecting Land Owners:

            5. LVT is progressive–owners of the most potentially productive sites pay the most tax. Urban sites provide the most usefulness and resulting tax. Big rural sites have less value and can be farmed appropriately to their ability to provide useful produce.

            6. The land owner pays his LVT regardless of how his site is used. A large proportion of the present ground-rent from tenants becomes the LVT, with the result that land has less sales-value but a significant “rental”-value (even when it is not used).

            7. LVT stops speculation in land prices because the withholding of land from proper use is not worthwhile.

            8. The introduction of LVT initially reduces the sales price of sites, even
            though their rental value can still grow over a longer term. As more sites
            become available, the competition for them is less fierce.

            9. With LVT, land owners are unable to pass the tax on to their tenants as rent hikes, due to the reduced competition for access to the additional sites that come into use.

            10. With LVT, land prices will initially drop. Speculators in land values will
            want to foreclose on their mortgages and withdraw their money for reinvestment. Therefore LVT should be introduced gradually, to allow these speculators sufficient time to transfer their money to company-shares etc., and simultaneously to meet the increased demand for produce (see below, items 12 and 13).

            Three Aspects Regarding Improved Communities:

            11. With LVT, there is an incentive to use land for production or residence, rather than it being unused.

            12. With LVT, greater working opportunities exist due to cheaper land and a greater number of available sites. Consumer goods become cheaper too, because entrepreneurs have less difficulty in starting-up their businesses and because they pay less ground-rent–demand grows, unemployment decreases.

            13. Investment money is withdrawn from land and placed in durable capital goods. This means more advances in technology and cheaper goods too.

            Four Aspects About Kinder Ethics:

            14. The collection of taxes from productive effort and commerce is socially unjust. LVT replaces this national extortion by gathering the surplus rental income, which comes without any exertion from the land owner or by the banks–LVT is a natural system of national income-gathering.

            15. The previous bribery and corruption for gaining privileged information about land cease. Before, this was due to the leaking of news of municipal plans for housing and industrial development, causing shock-waves in local land prices (and municipal workers’ and lawyers’ bank balances).

            16. The improved use of the more central land of cities reduces the
            environmental damage due to a) unused sites being dumping-grounds, and b) the smaller amount of fossil-fuel use, when traveling between home and workplace.

            17. Because the LVT eliminates the advantage that landlords currently hold over our society, LVT provides a greater equality of opportunity to earn a living. Entrepreneurs can operate in a natural way– to provide more jobs because their production costs are reduced. Then untaxed earnings will correspond to the value that the labor puts into the product or service.

            Consequently, after LVT has been properly and fully introduced as a single tax, it will eliminate poverty and improve business ethics.

          • Dan Sullivan

            Not ideal, but property tax is certainly superior to sales and income taxes. After Massachusetts curtailed property taxes in 1980, they had to raise sales and income taxes. The greatest migration across county lines in the ’90s was from the northern-tier counties of Massachusetts to the southern-tier counties of New Hampshire.

            Land value tax would be better, but property tax is still much better than any non-real-estate taxes.

          • Art Arfons

            I piece of land undeveloped (just dirt) in no. Va, (Springfield) zoned for retail was taxed at $12,000 a month. All of that tax was based in the value of the land as zoned. Call it a property tax or land tax the land sold for $12 million. I know this for a fact as having a broker agreement from a buyer should they buy it. They did not but was in regular contact with the trustee.

    • MilkywayAndromeda

      Taxing property is fine.
      The challenge is how to tax something that is not liquid.
      How do you solve that?

      • Dan Sullivan

        It becomes more liquid when you tax it, and that is a good thing. That is, people who were sitting on land they were not using let go of it so others can use it. Those who are actually using their land find that lower taxes on the uses more than offset higher taxes on the land values.

        Aristotle also spoke of Salon the law-giver breaking up the great estates and enriching the people by giving them access to land. That is what land value tax does as well.

        • MilkywayAndromeda

          I see the beauty of your reasoning. It seems to me that once you “force/stimulate” the selling to generate liquidity the “value” vanishes and then the tax is over something than property but capital gains…

          • Ben Jamin’

            Those that opposed the abolition of slavery employed exactly the same arguments as those that oppose LVT today.

            The LVT is merely the way by which we equally share the scarcity value derived from resources supplied for free by nature/god.

            If we do not share those values equal, humans cannot share this Earth as equals.

            Perhaps you’d care to justify why some people should enjoy more than their fair share at the expense of others?

          • MilkywayAndromeda

            I am sorry I thought you were capable of expressing deeper thoughts. I was wrong. Have a nice day. Keep on playing chess as you would be alone.

          • Dan Sullivan

            I do hope this parting cheap shot will be followed by parting.

          • Dan Sullivan

            He has no desire to help. His only desire is to make snotty remarks.

          • MilkywayAndromeda

            “He has no desire to help.” – So you know my desires. Amazing how much knowledge you have. A little question for you. Have you superior powers to know ONLY me so well that you are capable of producing such statements or have you such superior powers regarding other persons?

            If you have such superior powers you should not be commenting on economic subjects only. You should be a magician.

            By the way instead ad hominem why not answer the question I made to you?


          • Dan Sullivan

            Your desires are pretty obvious; you are more transparent than you seem to realize. Also, anyone who tells people to get professional help is in no position to whine about ad hominems.

          • MilkywayAndromeda


            This is my last comment to you.
            I wish you to keep on growing the path of wisdom so you improve your mental model.
            Life is too short. Do not spend it with non senses. They are professionals who can help you as well.

          • John Burns

            You have no desire to break out of your conditioned mind. You must realise that you ultimately are in control of your mind. Unfortunately others control it at the moment.

          • Ben Jamin’

            I see you have no answer to my question. That’s ok.

            Well, go away and have a think. Take as much time as you like.

          • MilkywayAndromeda

            Please, address your questions to a health professional. I am sorry. I can not help you.

          • Ben Jamin’

            Why can’t you help? You are the deep thinker, and I’m not, after all.

            It was a very simple question. Shouldn’t trouble you at all, I’d have thought.

          • John Burns

            The one who needs help is you. Your mind is conditioned. Free it up.

          • John Burns

            You confuse LVT, and Geonomics really, with a political movement. Geonomics is an economic system. Get that out of your head straight away. LVT is merely a tax shift, ownership and business behaviour stays the same.
            Many people thought economist Karl Marx was a political figure, and most still do.

          • MilkywayAndromeda

            Please, read my comments. I never mentioned LVT or Geonomics. Regarding Karl Marx being an economist even though most of people accept that standard I have some doubts about it.

          • John Burns

            I read your comments and the pictures you put up. You think this is some kind of political reactionary, revolution type of thing. It is not.

            Marx was an economist. The only political he was involved in was slight, as he co-authored the Communist manifesto. Geoism is not political. Read the piece by Gaffney It put up. Firstly, understand what many here are explaining to you. Get the basics. Read my posts, most of them go to the root. That you cannot comprehend is not their fault.

            They are into Economic Justice which does not need a change in politics, in a way that has proven to work.

          • John Burns

            Your doubts are unfounded. Release yourself from indoctrination.

          • MilkywayAndromeda


            Thank you for all the comments you make addressed to me. I am sorry I can not follow all of them and reply. I appreciate your care.

            By the way if you are in Lisbon next Monday maybe we can interact one to one. We organized a dinner after the launching of the book.


          • John Burns

            Thanks for the offer, unfortunately I will be many, many miles away. 🙂

          • MilkywayAndromeda

            Whenever you are in Europe please tell because it would be interesting to listen your thoughts personally. You think.
            Have a great weekend.

          • George Carty

            Indeed – while slavers essentially treated labour as capital, Home-Owner-Ists treat land as capital.

          • Dan Sullivan

            Marx treated everything as capital, and the defenders of privilege embraced Marx’s definitions to defeat more analytically rigorous definitions from classical liberals and early progressives.

            Economics has been a mess ever since.

          • Dan Sullivan

            Nope. The value does not vanish. The price, which is a capitalized progression of future privatized rents, comes down as land is taxed, but also goes up as other things are untaxed. A new equilibrium is reached where all the prime land is available for use. The rent, which is the real value, can be assessed directly from market data, which can include leases and subleases as well as transfer prices.

            Government does not “force” landlords to pay the rent any more than landlords “force” tenants to pay the rent. If you want to hold the land, you pay the rent. If not, you don’t.

          • MilkywayAndromeda

            This is a interesting line of though if the correct framework (?) institutional could be put in place. How would you think to make it happen, please?

          • John Burns

            “George’s blend of radicalism and conservatism can puzzle one, until it is seen as a reconciliation of the two. The system is internally consistent, but defies conventional stereotypes.”
            – Professor Mason Gaffney (US economist)

          • John Burns

            You fail to see that common economic activity soaks into the land surfacing as land values. Do not lose sight of that. The land is always being topped up with value. Value WE created. LVT reclaims that value. LVT is not taking anything off the occupier of the land, as his capital and earnings are untouched. LVT is not actually a tax. Sales tax is clearly a tax.

            Understand the basics.

      • John Burns

        “Taxing property is fine. The challenge is how to tax something that is not liquid.
        How do you solve that?”

        Firstly, distinguish between property and LAND. Property is the buildings, or anything man made, on the land. LAND is well…the LAND. They are conflated which confuses most.

        It is best to tax things that do not move and accumulate value. Land comes to mind – it is perfect. The levy cannot be avoided. It cannot be taken offshore.

        • MilkywayAndromeda

          Yes, that is true. Even in accounting you take one part of value of the building so you do not depreciate/amortize that part corresponding to the land.

          What I am curious to find out is on ways to equate tax on “things” which are not liquid per se.

          For example, some years ago with European Common Agriculture Policy (CAP) they made some computation and they found out that Queen Elizabeth II she would be a large beneficiary (of CAP) of her lands in UK. In that case she receives cash out of it and she could pay (however she has got tax exemptions). However, the case that for a person to pay a tax it has to sell the land, the stocks, whatever, I am curious on how the transition period would be among other technical questions.

          Congratulations for making this dialogue an intelligent one!

          • John Burns

            LVT does not care a hoot about capital on the LAND. A building can be jacked up, wheels put on and moved to another plot. You cannot move land.

            Two identical sized plots next to each other. One with a one floor shack on it, one with a 100 floor skyscraper on it. If both have outline planning permission to build 100 floor buildings on them (one does have the building) the land value is exactly the same for both plots.

            What you are assuming is that LVT is so high everyone will have to sell their land. If someone is underusing, or holding land for years on end for speculation purposes they have to pay the LVT. So, harmful land speculators (who were responsible for the 2008 crash) will be virtually eliminated. As land was gaining in value, speculative debt after debt was poured into land. Create the conditions that it is not worth speculating in land or its resources, then money will be diverted to enterprise. This happened in Denmark during the ground tax government.

            George Harrison of the Beatles owned Friar park of 64 acres, on the edge on Henley which has a popn of 11,500 with very high house (Land) prices. Under LVT he would pay more than property tax for sure and with 64 acres of land in a prime location the value will be high, so a high levy. `Why should he be penalised?`, I hear them all shout. Well under LVT he would pay no sales taxes or income taxes on his substantial income. He would be better off and still kept Friar Park.

            Anomalies like the Queen are not worth taking into account.

          • MilkywayAndromeda

            Thank you. You present valid points.

            I have the idea that non-linearity plays a important so I gave that example. Regarding Karl Marx I prefer Charles Dickens.

            Regarding the pictures. They are useful for me when I navigate around the comments.

  • “in the long run land value usually appreciates rather than depreciates like capital. This is inevitable when you think about it – ”

    This was a good article, but I think this is a VERY flawed assumption. IMO, all economic problems can be traced to the banality of something. Buy low-sell high doesn’t work mathematically in either the short or long-term, but we have accustomed ourselves to economic desperation. Then, we added a whole new class of property: intellectual property. I don’t think you grasp what a farce the entire system is, but you are right to focus on the importance of land.

    Land values, and the interest payments on land, pretty much drive the entire economic system. It was why George Washington was surveying the wilderness, and the Native Americans thought the white men were strange but harmless. You might enjoy my book (free download) at

    To get to New Economics, we really need to stop allowing land to appreciate and control this false market that perpetually screws the next generation, who by definition are always born into a world where all the land is owned by previous generations. Inflation and debt are the mechanisms of coping and exploitation. Eliminate them both and you have a new and good economy for all.

    • Dan Sullivan

      The only way you can stop land value from appreciating is to tax it. You don’t get to “allow” anything.

      • Taxing anything causes its price to increase faster. That is the blind spot of the Left. If inflation is causing wealth to concentrate, then taxes will create more inflation and more concentration. Can’t distribute wealth fast enough in a vicious circle. Inflation wins.
        I realize this may not make sense, but new ideas seem crazy at first blush. This is just tip of iceberg

        • Dan Sullivan

          Nope, you are dead wrong again. All economists who have analyzed the question, from Adam Smith and David Ricardo to Paul Samuelson and Milton Friedman, agree that taxes on land value are not passed on in higher prices. You can also look at it empirically. The states with the lowest property taxes had the worst housing bubbles and the greatest number of foreclosures.

          Taxes on *production* are passed on as a production cost. Land is not produced, and taxes on land value are a cost of holding land out of use, not a cost of putting land into use.

          We’re talking textbook economics here:

          • John Burns

            “Taxes on *production* are passed on as a production cost. Land is not produced, and taxes on land value are a cost of holding land out of use, not a cost of putting land into use.”
            Dan, being a tax on holding land out of use is just another benefit of LVT, not the prime aim which is, reclaiming commonly created value.

    • Ben Jamin’

      High land values are a good thing. The higher the better as they are the result of efficient exploration off agglomeration effects one one hand and a preference for spending on locational amenity over alternative goods and services on the other.

      Which is only common sense if you think about all the places in the World where people most want to live and do business.

      Problems only arise when those land values are capitalised into selling prices and private rental incomes, rather than being shared equally as public spending or a Basic Income.

      • Whom do high land values serve when people need to go into debt for 30 years to buy a home? I see nothing good in high land values. All the appreciation lands in the hands of the bankers, You pay for 30 years, sell the house or drop dead, and the bank picks up the mortgage for the next generation again. To me, it is still a feudal system, cleverly disguised.

        • Dan Sullivan

          You are confusing value with price. The natural measure of land value is what it rents for, not what it sells for. High prices, relative to rental value, are a result of failing to levy property taxes, especially on land. That is why California prices are so ridiculously high.

          Value comes from genuine benefits. You might not want your land to go up in value, but do you want low crime? Do you want good transit systems? Good schools and hospitals nearby? Job opportunities? Those advantages manifest themselves in land value. To say that you don’t want high value is to say that you don’t want those things.

          • That is a ridiculously false choice and correlation. Land PRICES go up, wages go up, consumer good prices rise, etc. Inflation advances, but zero is still a fixed point. If you are retired, ill, or unemployed or a young student, inflation makes you poorer. You didn’t respond to my point about the 30 year mortgage. Obviously land prices are not ‘affordable.’ Plus, the government can tax through income or sales tax to pay for all that stuff too. There is no logical link to property tax, property values, and source of funds for expenditure on roads, schools, etc. So, no, to say that I don’t want high values is not to say that I don’t want those things. Economics is about planning a system that works. The ends and means must be congruent. IMO, property values are too high, should not be allowed to inflate, and taxing property makes it all worse. That doesn’t mean that George didn’t have some good insights, but he had some huge, serious flaws. Seeing and acknowledging a problem is not the same as diagnosing its cause or finding a solution. Three separate things.

          • Dan Sullivan

            They don’t go up and down together, and land prices don’t go up the same in different places. Land is least affordable where it is undertaxed. Really, you are not teachable, because I have indeed answered your questions and referred you to economic textbooks. You clearly didn’t read them. Sales and income taxes do not keep land affordable, but land value tax does.

            “There is no logical link to property tax, property values, and source of funds for expenditure on roads, schools, etc.” That is the most ridiculous thing you have said yet. Where do you think land value comes from if not accessibility to roads, schools, etc.?

          • All prices on everything are just made up. There is nothing ‘real’ about any price. The pattern is just ‘buy low-sell high’ as best as possible. In desperation, people will lose money, but they try not to. However, the final act of consumption is always ‘buy high.’ This is an idea that all economists and pundits are missing.

            Here is an example of what a farce economic theory is: The GDP isn’t real. If a nation sells a billion apples at .50 cents, the GDP is $500 million. If the apples are sold at one dollar, then the GDP is $1 Billion. There is no difference between the economy of a nation with a 500M vs 1B. It is just a reflection of the mark-up on the apples. There same is true of the mark-up on land, etc. That volatility is the cause of boom & bust, wealth concentration, generation squeeze, etc. The micro is the macro, but all we are measuring are the numbers we wrote down. The marketplace is not actually real; it is just a reflection of our behaviors. What we have is an accounting methodology problem. It isn’t so much that I am unteachable, but more that I have seen past all the BS that we have all been taught. I wrote a book that explains what I mean; it’s a free download, but like the title, it will Tax Your Imagination. It is much harder to unlearn stuff. if you are interested. Nothing good comes from land appreciation, it just forces everything we do to become more expensive.

          • Dan Sullivan

            You are just doubling down on your fantasy. Land prices are not “made up.” They are arrived at by willing buyers and willing sellers. They are higher where crime is low and public services are high. Either private people freely negotiate rent or some central authority assigns land to people in arbitrary ways.

            There is a way to prevent land from becoming *artificially* expensive, and that is to tax the value of land instead of taxing labor. Of course, this one thing that all economists agree on is the one thing you oppose.

          • Ben Jamin’

            Rents are set by wages at the margin of production. Wages are not set rents.

            This is basic econ 101.

          • Dan Sullivan

            Yes, but in econ 102 you find out that the margin of production is not a static thing, and that people holding land out of use drives down the margin to poorer land and, hence, lower wages.

            The biggest advantage of land value tax is that it throws unused and grossly underused land back on the market. This lowers rents and raises the land margin to more productive locations. That, in turn, raises wages.

        • Ben Jamin’

          “Problems only arise when those land values are capitalised into selling prices and private rental incomes, rather than being shared equally as public spending or a Basic Income.”

          As I already wrote.

          With the LVT the selling price of land and and rental income derived from it would drop to zero.

  • MilkywayAndromeda

    The book seems interesting. I added it to my list of books to buy. Congratulations. I am expecting to read there developments on this [The reasons for this may well be political. Mason Gaffney, an American
    land economist and scholar of Henry George, has argued that Bates Clark
    and his followers received substantial financial support from corporate
    and landed interests who were determined to prevent George’s theories gaining credibility out of concerns that their wealth would be wittled away via a land tax.].

    The trick associated with any “great” business plan (or should I say plane?) is making sure that negative externalities do no affect Profit and Loss account and Balance Sheet BUT positive externalities have a positive impact on the business plan.

    Regarding whealth, the persons are not whealthy! There is a mechanism imposed by few (not all of the few are conscient of the mechanism) and accepted by almost all (no me among the accepting people) which states that person A (Bill Gates, for example) is richer than person B (You, for example). As long you accept the lie you live it!

  • Postkey

    “Rising . . . rents (relative to incomes) – an urgent problem in countries such as the United Kingdom – can be attributed to insufficient supply of homes or land.”

    Does this series, IPHRP, when measured in real terms, show this?

  • Nicholas Gruen

    Thanks for this. The increasing significance of positional goods should surely feature increasingly in our economics.

  • Patrick cardiff

    Fantastic piece. I learned a lot. At the fundamental level is the way we account for macro effects, and especially the long-term health of the economy. I’ve been skeptical about what macro measures mean for long now: I just didn’t piece together the income/wealth angles, productivity, capital gains. I’ve cited Piketty for incomes. Clearly we need a stronger term for “appreciation.” And what does “purchasing power” mean in the context of mis-measuring “everything else?”