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Georgism

Here’s an email exchange Wintercow and I would like to share with you:

Me:

What was it that pulled you away from Georgism? I just bumped into it in Wikipedia, and it seemed to mesh with everything I believe [about normative economics]. It seems like many of the people who’ve influenced my worldview (including you!) were influenced by that set of ideas. Smith and Ricardo knew about taxing land and natural resources, but it looks like Mr. George was really the apex of that broader school of policy thought. I get that we have public choice reasons to cut spending at almost every opportunity, but it still seems that shifting the tax burden in Georgist fashion is desirable to cover what spending we do find desirable. Eh?

Rizzo:

I even once sat on the board of a Georgist organization and a dear late friend of mine Lowell Harriss was largely a land taxer. He was Herbert Stein’s teacher, who was a great economist and also father of Ben Stein.

Progress and Poverty (original edition) is well worth a read. I’m a closet Georgist these days for several reasons I find it unwise to go whole hog.

(1) The Georgists are mistaken if they think all rent taxation is DWL-free particularly in a non-agrarian world.

(2) Almost everything creates rents, so we rapidly get into a murky territory about what, exactly, to tax.

(3) Practicing Georgists totally oversell the gains to be had from movements in that direction, though virtually all movements are guilty of that. The mildly successful versions of two-rate taxation are in Pennsylvania- see Harrisburg.

(4) The modern Georgist movement has either been hijacked or has attracted neo-Marxists who practice a very strange kind of economic methodology pioneered by Dewey and Bentley.

Yes, there is much good stuff in its pure form and movements in a Georgist direction I would nonetheless support with additional caveats, not all public choice related.

An updated version of my reply:

Hahaha, a closet Georgist! I like that.

I see what you mean about ubiquitous rents–if real life were perfect competition, nothing would work. If everything were in equilibrium, there would be nothing to do! The frictions and bargaining spectra and information imperfections are critical for making reality a thing worth engaging. And short-run “Schumpeterian rents” to innovators (stealing that phrase from Wikipedia), e.g. Steve Jobs, are arguably socially beneficial.

Essentially I see you disliking the arbitrariness of the selection of undesireable rents and externalities targeted for taxation. If they’re everywhere, how do we pick them in a consistent fashion? Honestly I see Georgism as part of a broader philosophy geared to buffer the excesses of democracy, even if it can never achieve a consistent ideal. I don’t see ‘equality of opportunity’-seeking intuitions for broadly progressive taxes and transfers going away any time soon. Same thing for interventions on pollution and drugs. I think the role of economists is to be like Dutch flooding engineers for democracy. There are going to be these waves of activist popular energy, and our job is to set up the floodplains and dikes to handle the flow. “I don’t make the weather, I just help to channel the floods”, or something. So at some thresholds we’ll bump into through time, people are going to get pissed off about pollution and threaten to prompt policy along the lines of the inefficient chunks of the Clean Air/Water acts. They’re going to get pissed off about drug-related crime. They’re going to get pissed off about healthcare, to the extent the rich and the genetically lucky are visibly spared but the genetically unlucky and the poor visibly go bankrupt and die. There will always be some of this natural injustice, but there has to be a plausible assurance that the bankruptcy-death combos weren’t easily and somewhat cheaply preventable.

Which rents and externalities are taxed? Which hard-luck inequalities are targeted for spending? It’s a messy, emergent, often inconsistent and therefore probably irrational democratic process. Still, the idea that rents/spillovers are the only appropriate channels for regulatory policy may bring an upper bound on “Frenchifying” government ratchet. It’s critical to embed into the public consciousness the important distinction between policies that force individuals to bear the publicly measurable costs of their decisions and no further, versus manipulating people’s incentives to promote conformity with a particular aesthetic/ideological vision. It’s a tiny step in practice but a massive step in principle: a commute-optimizing congestion charge based on traffic analysis differs critically from an arbitrary toll imposed ‘just because urbanists and environmentalists think cars are icky and gross’. The former is a technical choice bounded by measurable reality; the latter is an aesthetic choice which can push as far as the political process will bear it. Our job is to help the public understand the difference.

The same slogans and feelings that drive voters to support income and wealth taxes could be satisfied by more efficient choices. Perhaps we can redirect the support for progressive personal and corporate income taxes into land value taxes and progressive consumption taxes. Perhaps we can redirect command and control pollution solutions into excise taxes. And at every turn we keep fighting rent-seeking spending, and channel popular regulatory/spending priorities to less-bad places (e.g. Earned Income Tax Credit, not minimum wage). And so on and so forth.

Don’t scream at the tides; build a seawall and a desalination plant. Government is not going away.

If we’re lucky we’ll end up with $5 gasoline, universal austere catastrophic health coverage, and a big EITC–instead of a stagnating over-regulated under-immigrated husk formerly known as America, identifiable only by the unbelievable Medicare bills and the distinctive excess of aircraft carriers and tanks.

 

4 Responses to “Georgism”

  1. Harry says:

    Thanks for the info, WC. Evidently Mr. George is one of the great philosophical godfathers of real estate taxes. It is reassuring to know that I have been doing my part for social justice for forty years. I used to think I was just being screwed.

    As you tweeted, you are doing your part by keeping your kids out of the government-run school system. The cost is not merely the tuition, but the foregone (after-tax) return from investing all that money, which I admit might be chicken feed these days. Gotta make sure we all don’t become aristocrats.

  2. Harry says:

    I did not understand your reference to two-rate taxation in Pennsylvania. Do you mean Act 319? Or did Harrisburg do something clever to finance its trash enterprise? Not trying to be a smart***.

    • wintercow20 says:

      Harrisburg in particular set a two-rate property tax system. On existing land, they set a somewhat larger tax rate that is paid every year (hence the taxing of “rent”) and then they lowered dramatically the tax rate on the actual structures that are applied to the land so that we don’t have a disincentive, as we do now, to make improvements to the actual structures that stand on the property. It has been deemed “successful” by those that want to view it as successful – as a method for establishing urban renewal.

      • Harry says:

        Thanks, WC.

        Just to add to your thought, a friend in Maine once pointed out to me the reason why the grounds around many houses were shabby was you got a higher assessment if your yard looked like a million bucks, not to mention if the stone fence was in good repair, sort of a reverse Harrisburg.

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