Wealth and Want
... because democracy alone is not enough to produce widely shared prosperity.
Home Essential Documents Themes All Documents Authors Glossary Links Contact Us



Most of us are used to thinking of "rent" as the monthly payment a tenant makes to a landlord, and most of us tend to think of it being largely a payment for the use of a building and its amenities. But as economists use the term, rent is the return to land (just as wages are the return to labor, and interest is the return to capital), so from the point of view of the landlord, one's apartment rent is a combination of rent and interest. And in places where land's share of real estate value (LSREV) is high, most of an apartment's rent is actually what the economist calls rent, the return on land. That same apartment, located 10, 20 or 500 miles away, would rent for considerably less.

Land values, and therefore rent, vary widely. An acre of good agricultural land might be worth $2,500, while an acre in midtown Manhattan can easily be worth $250,000,000 — or 100,000 times what that agricultural land is worth, and rent varies similarly. (In fact, construction costs — and therefore building values — vary considerably less: a modest house can be built for $50 per square foot or less, and a deluxe one (much larger, better made and better equipped) might cost, at the extreme, $500 per square foot to build — and it takes considerable effort to spend at the high end on actual construction. So from low to high, on a per-square-foot basis, is a factor of 1:10. Similarly, a studio apartment might be 300 square feet, and a mansion 10,000 square feet, a factor from low to high, is a factor of 1:33. Finally, there is depreciation. An older home might be worth only 25% of what a similarly constructed, similarly sized new home is worth, due to the aging and obsolescence of its systems and technologies — a factor of 1:4 from low to high. Multiplying those factors together, the range on housing might be 1:1,330, at the extreme — quite a bit narrower than the range of land values of 1:100,000!

As a quick-and-dirty rule of thumb, economic rent is about 5% of the market value of a property. A lot that sells for $250,000 would rent for $12,500 per year. (That rent is a good deal less than what one would pay a lender to borrow those funds.)

Everett Gross: Explaining Rent

Sometimes it's difficult for people to understand the meaning of "rent" as an economic concept. One way I have of explaining it doesn't use the word rent. I just use a little analogy.

I'm from Crete, Nebraska. It's a small town of 5,000 people.

Suppose a man comes to Crete, and he wants to start a business. He needs a building, but first he needs a piece of ground to build this new building on. So he looks up a real estate agent, describes what he wants, and the real estate agent shows him a parcel that's just right for his needs. The man asks the agent, "All right, now how much money do you want for this land?" The agent says, "It's worth $50,000." The man says, "Why is it worth $50,000?" And the real estate agent points out that "The school is good, the roads are good, the police department is good, the rescue crew is good and very fast, and business is good here."

So the man says "Yeah, I believe that $50,0000 is a fair price. I'll take it. How do I pay the $50,000 to the school people, and the road people, and the police department? To whom do I pay the $50,000?" And the real estate agent says, "Oh no. You don't pay it to them. You pay it to the person who owned the land before."

The man says, "But who supports the schools, and the roads, and the police, and the other good things?" And the real estate agent says, "If you build, then you'll pay for them again."

The buyer then asks, "And what will the previous owner do for me for my $50,000?"  The real estate man answers, "Nothing!  Nothing at all!"

Now I don't need to use the word "rent" in that explanation.

[see several other versions at the same link!]

H.G. Brown: Significant Paragraphs from Henry George's Progress & Poverty, Chapter 5: The Basic Cause of Poverty (in the unabridged: Book V: The Problem Solved)

The truth is self-evident. Put to any one capable of consecutive thought this question:

"Suppose there should arise from the English Channel or the German Ocean a no man's land on which common labor to an unlimited amount should be able to make thirty shillings a day and which should remain unappropriated and of free access, like the commons which once comprised so large a part of English soil. What would be the effect upon wages in England?"

He would at once tell you that common wages throughout England must soon increase to thirty shillings a day.

And in response to another question, "What would be the effect on rents?" he would at a moment's reflection say that rents must necessarily fall; and if he thought out the next step he would tell you that all this would happen without any very large part of English labor being diverted to the new natural opportunities, or the forms and direction of industry being much changed; only that kind of production being abandoned which now yields to labor and to landlord together less than labor could secure on the new opportunities. The great rise in wages would be at the expense of rent.

Take now the same man or another — some hardheaded business man, who has no theories, but knows how to make money. Say to him: "Here is a little village; in ten years it will be a great city — in ten years the railroad will have taken the place of the stage coach, the electric light of the candle; it will abound with all the machinery and improvements that so enormously multiply the effective power of labor. Will, in ten years, interest be any higher?"

He will tell you, "No!"

"Will the wages of common labor be any higher; will it be easier for a man who has nothing but his labor to make an independent living?"

He will tell you, "No; the wages of common labor will not be any higher; on the contrary, all the chances are that they will be lower; it will not be easier for the mere laborer to make an independent living; the chances are that it will be harder."

"What, then, will be higher?"

"Rent; the value of land. Go, get yourself a piece of ground, and hold possession."

And if, under such circumstances, you take his advice, you need do nothing more. You may sit down and smoke your pipe; you may lie around like the lazzaroni of Naples or the leperos of Mexico; you may go up in a balloon, or down a hole in the ground; and without doing one stroke of work, without adding one iota to the wealth of the community, in ten years you will be rich! In the new city you may have a luxurious mansion; but among its public buildings will be an almshouse. ... read the whole chapter

The value of land, as we have seen, is the price of monopoly. It is not the absolute, but the relative, capability of land that determines its value. No matter what may be its intrinsic qualities land that is no better than other land which may be had for the using can have no value. And the value of land always measures the difference between it and the best land that may be had for the using. Thus, the value of land expresses in exact and tangible form the right of the community in land held by an individual; and rent expresses the exact amount which the individual should pay to the community to satisfy the equal rights of all other members of the community.

Thus, if we concede to priority of possession the undisturbed use of land, taxing rent into the public treasury for the benefit of the community, we reconcile the fixity of tenure which is necessary for improvement with a full and complete recognition of the equal rights of all to the use of land.

Consider what rent is. It does not arise spontaneously from land; it is due to nothing that the land owners have done. It represents a value created by the whole community.

Let the land holders have, if you please, all that the possession of the land would give them in the absence of the rest of the community. But rent, the creation of the whole community, necessarily belongs to the whole community. ... read the whole chapter

H.G. Brown: Significant Paragraphs from Henry George's Progress & Poverty: 11 Effect of Remedy Upon the Sharing of Wealth (in the unabridged P&P: Part IX Effects of the Remedy — Chapter 2: Of the Effect Upon Distribution and Thence Upon Production

But great as they thus appear, the advantages of a transference of all public burdens to a tax upon the value of land cannot be fully appreciated until we consider the effect upon the distribution of wealth.

Tracing out the cause of the unequal distribution of wealth which appears in all civilized countries, with a constant tendency to greater and greater inequality as material progress goes on, we have found it in the fact that, as civilization advances, the ownership of land, now in private hands, gives a greater and greater power of appropriating the wealth produced by labor and capital.

Thus, to relieve labor and capital from all taxation, direct and indirect, and to throw the burden upon rent, would be, as far as it went, to counteract this tendency to inequality, and, if it went so far as to take in taxation the whole of rent, the cause of inequality would be totally destroyed. Rent, instead of causing inequality, as now, would then promote equality. Labor and capital would then receive the whole produce, minus that portion taken by the state in the taxation of land values, which, being applied to public purposes, would be equally distributed in public benefits.

That is to say, the wealth produced in every community would be divided into two portions.

  • One part would be distributed in wages and interest between individual producers, according to the part each had taken in the work of production;
  • the other part would go to the community as a whole, to be distributed in public benefits to all its members.

In this all would share equally — the weak with the strong, young children and decrepit old men, the maimed, the halt, and the blind, as well as the vigorous. And justly so — for while one part represents the result of individual effort in production, the other represents the increased power with which the community as a whole aids the individual.

Thus, as material progress tends to increase rent, were rent taken by the community for common purposes the very cause which now tends to produce inequality as material progress goes on would then tend to produce greater and greater equality.

Who can say to what infinite powers the wealth-producing capacity of labor may not be raised by social adjustments which will give to the producers of wealth their fair proportion of its advantages and enjoyments! With present processes the gain would be simply incalculable, but just as wages are high, so do the invention and utilization of improved processes and machinery go on with greater rapidity and ease.

But I shall not deny, and do not wish to lose sight of the fact, that while thus preventing waste and thus adding to the efficiency of labor, the equalization in the distribution of wealth that would result from the simple plan of taxation that I propose, must lessen the intensity with which wealth is pursued. It seems to me that in a condition of society in which no one need fear poverty, no one would desire great wealth — at least, no one would take the trouble to strive and to strain for it as men do now. For, certainly, the spectacle of men who have only a few years to live, slaving away their time for the sake of dying rich, is in itself so unnatural and absurd, that in a state of society where the abolition of the fear of want had dissipated the envious admiration with which the masses of men now regard the possession of great riches, whoever would toil to acquire more than he cared to use would be looked upon as we would now look on a man who would thatch his head with half a dozen hats.

And though this incentive to production be withdrawn, can we not spare it? Whatever may have been its office in an earlier stage of development, it is not needed now. The dangers that menace our civilization do not come from the weakness of the springs of production. What it suffers from, and what, if a remedy be not applied, it must die from, is unequal distribution!

Nor would the removal of this incentive, regarded only from the standpoint of production, be an unmixed loss. For, that the aggregate of production is greatly reduced by the greed with which riches are pursued, is one of the most obtrusive facts of modern society. While, were this insane desire to get rich at any cost lessened, mental activities now devoted to scraping together riches would be translated into far higher spheres of usefulness. ... read the whole chapter

Henry George: The Condition of Labor — An Open Letter to Pope Leo XIII in response to Rerum Novarum (1891)

Nor do we hesitate to say that this way of securing the equal right to the bounty of the Creator and the exclusive right to the products of labor is the way intended by God for raising public revenues. For we are not atheists, who deny God; nor semi-atheists, who deny that he has any concern in politics and legislation.

It is true as you say — a salutary truth too often forgotten — that “man is older than the state, and he holds the right of providing for the life of his body prior to the formation of any state.” Yet, as you too perceive, it is also true that the state is in the divinely appointed order. For He who foresaw all things and provided for all things, foresaw and provided that with the increase of population and the development of industry the organization of human society into states or governments would become both expedient and necessary.

No sooner does the state arise than, as we all know, it needs revenues. This need for revenues is small at first, while population is sparse, industry rude and the functions of the state few and simple. But with growth of population and advance of civilization the functions of the state increase and larger and larger revenues are needed.

Now, He that made the world and placed man in it, He that pre-ordained civilization as the means whereby man might rise to higher powers and become more and more conscious of the works of his Creator, must have foreseen this increasing need for state revenues and have made provision for it. That is to say: The increasing need for public revenues with social advance, being a natural, God-ordained need, there must be a right way of raising them — some way that we can truly say is the way intended by God. It is clear that this right way of raising public revenues must accord with the moral law.


  • It must not take from individuals what rightfully belongs to individuals.
  • It must not give some an advantage over others, as by increasing the prices of what some have to sell and others must buy.
  • It must not lead men into temptation, by requiring trivial oaths, by making it profitable to lie, to swear falsely, to bribe or to take bribes.
  • It must not confuse the distinctions of right and wrong, and weaken the sanctions of religion and the state by creating crimes that are not sins, and punishing men for doing what in itself they have an undoubted right to do.
  • It must not repress industry. It must not check commerce. It must not punish thrift. It must offer no impediment to the largest production and the fairest division of wealth.

Let me ask your Holiness to consider the taxes on the processes and products of industry by which through the civilized world public revenues are collected — the octroi duties that surround Italian cities with barriers; the monstrous customs duties that hamper intercourse between so-called Christian states; the taxes on occupations, on earnings, on investments, on the building of houses, on the cultivation of fields, on industry and thrift in all forms. Can these be the ways God has intended that governments should raise the means they need? Have any of them the characteristics indispensable in any plan we can deem a right one?

All these taxes violate the moral law. They take by force what belongs to the individual alone; they give to the unscrupulous an advantage over the scrupulous; they have the effect, nay are largely intended, to increase the price of what some have to sell and others must buy; they corrupt government; they make oaths a mockery; they shackle commerce; they fine industry and thrift; they lessen the wealth that men might enjoy, and enrich some by impoverishing others.

Yet what most strikingly shows how opposed to Christianity is this system of raising public revenues is its influence on thought.

Christianity teaches us that all men are brethren; that their true interests are harmonious, not antagonistic. It gives us, as the golden rule of life, that we should do to others as we would have others do to us. But out of the system of taxing the products and processes of labor, and out of its effects in increasing the price of what some have to sell and others must buy, has grown the theory of “protection,” which denies this gospel, which holds Christ ignorant of political economy and proclaims laws of national well-being utterly at variance with his teaching. This theory sanctifies national hatreds; it inculcates a universal war of hostile tariffs; it teaches peoples that their prosperity lies in imposing on the productions of other peoples restrictions they do not wish imposed on their own; and instead of the Christian doctrine of man’s brotherhood it makes injury of foreigners a civic virtue.

“By their fruits ye shall know them.” Can anything more clearly show that to tax the products and processes of industry is not the way God intended public revenues to be raised?

But to consider what we propose — the raising of public revenues by a single tax on the value of land irrespective of improvements — is to see that in all respects this does conform to the moral law.

Let me ask your Holiness to keep in mind that the value we propose to tax, the value of land irrespective of improvements, does not come from any exertion of labor or investment of capital on or in it — the values produced in this way being values of improvement which we would exempt. The value of land irrespective of improvement is the value that attaches to land by reason of increasing population and social progress. This is a value that always goes to the owner as owner, and never does and never can go to the user; for if the user be a different person from the owner he must always pay the owner for it in rent or in purchase-money; while if the user be also the owner, it is as owner, not as user, that he receives it, and by selling or renting the land he can, as owner, continue to receive it after he ceases to be a user.

Thus, taxes on land irrespective of improvement cannot lessen the rewards of industry, nor add to prices,* nor in any way take from the individual what belongs to the individual. They can take only the value that attaches to land by the growth of the community, and which therefore belongs to the community as a whole.

* As to this point it may be well to add that all economists are agreed that taxes on land values irrespective of improvement or use — or what in the terminology of political economy is styled rent, a term distinguished from the ordinary use of the word rent by being applied solely to payments for the use of land itself — must be paid by the owner and cannot be shifted by him on the user. To explain in another way the reason given in the text: Price is not determined by the will of the seller or the will of the buyer, but by the equation of demand and supply, and therefore as to things constantly demanded and constantly produced rests at a point determined by the cost of production — whatever tends to increase the cost of bringing fresh quantities of such articles to the consumer increasing price by checking supply, and whatever tends to reduce such cost decreasing price by increasing supply. Thus taxes on wheat or tobacco or cloth add to the price that the consumer must pay, and thus the cheapening in the cost of producing steel which improved processes have made in recent years has greatly reduced the price of steel. But land has no cost of production, since it is created by God, not produced by man. Its price therefore is fixed —

1 (monopoly rent), where land is held in close monopoly, by what the owners can extract from the users under penalty of deprivation and consequently of starvation, and amounts to all that common labor can earn on it beyond what is necessary to life;
2 (economic rent proper), where there is no special monopoly, by what the particular land will yield to common labor over and above what may be had by like expenditure and exertion on land having no special advantage and for which no rent is paid; and,
3 (speculative rent, which is a species of monopoly rent, telling particularly in selling price), by the expectation of future increase of value from social growth and improvement, which expectation causing landowners to withhold land at present prices has the same effect as combination.

Taxes on land values or economic rent can therefore never be shifted by the landowner to the land-user, since they in no wise increase the demand for land or enable landowners to check supply by withholding land from use. Where rent depends on mere monopolization, a case I mention because rent may in this way be demanded for the use of land even before economic or natural rent arises, the taking by taxation of what the landowners were able to extort from labor could not enable them to extort any more, since laborers, if not left enough to live on, will die. So, in the case of economic rent proper, to take from the landowners the premiums they receive, would in no way increase the superiority of their land and the demand for it. While, so far as price is affected by speculative rent, to compel the landowners to pay taxes on the value of land whether they were getting any income from it or not, would make it more difficult for them to withhold land from use; and to tax the full value would not merely destroy the power but the desire to do so.

To take land values for the state, abolishing all taxes on the products of labor, would therefore leave to the laborer the full produce of labor; to the individual all that rightfully belongs to the individual. It would impose no burden on industry, no check on commerce, no punishment on thrift; it would secure the largest production and the fairest distribution of wealth, by leaving men free to produce and to exchange as they please, without any artificial enhancement of prices; and by taking for public purposes a value that cannot be carried off, that cannot be hidden, that of all values is most easily ascertained and most certainly and cheaply collected, it would enormously lessen the number of officials, dispense with oaths, do away with temptations to bribery and evasion, and abolish man-made crimes in themselves innocent.

But, further: That God has intended the state to obtain the revenues it needs by the taxation of land values is shown by the same order and degree of evidence that shows that God has intended the milk of the mother for the nourishment of the babe.

See how close is the analogy. In that primitive condition ere the need for the state arises there are no land values. The products of labor have value, but in the sparsity of population no value as yet attaches to land itself. But as increasing density of population and increasing elaboration of industry necessitate the organization of the state, with its need for revenues, value begins to attach to land. As population still increases and industry grows more elaborate, so the needs for public revenues increase. And at the same time and from the same causes land values increase. The connection is invariable. The value of things produced by labor tends to decline with social development, since the larger scale of production and the improvement of processes tend steadily to reduce their cost. But the value of land on which population centers goes up and up. Take Rome or Paris or London or New York or Melbourne. Consider the enormous value of land in such cities as compared with the value of land in sparsely settled parts of the same countries. To what is this due? Is it not due to the density and activity of the populations of those cities — to the very causes that require great public expenditure for streets, drains, public buildings, and all the many things needed for the health, convenience and safety of such great cities? See how with the growth of such cities the one thing that steadily increases in value is land; how the opening of roads, the building of railways, the making of any public improvement, adds to the value of land. Is it not clear that here is a natural law — that is to say a tendency willed by the Creator? Can it mean anything else than that He who ordained the state with its needs has in the values which attach to land provided the means to meet those needs?

That it does mean this and nothing else is confirmed if we look deeper still, and inquire not merely as to the intent, but as to the purpose of the intent. If we do so we may see in this natural law by which land values increase with the growth of society not only such a perfectly adapted provision for the needs of society as gratifies our intellectual perceptions by showing us the wisdom of the Creator, but a purpose with regard to the individual that gratifies our moral perceptions by opening to us a glimpse of his beneficence.

Consider: Here is a natural law by which as society advances the one thing that increases in value is land — a natural law by virtue of which all growth of population, all advance of the arts, all general improvements of whatever kind, add to a fund that both the commands of justice and the dictates of expediency prompt us to take for the common uses of society. Now, since increase in the fund available for the common uses of society is increase in the gain that goes equally to each member of society, is it not clear that the law by which land values increase with social advance while the value of the products of labor does not increase, tends with the advance of civilization to make the share that goes equally to each member of society more and more important as compared with what goes to him from his individual earnings, and thus to make the advance of civilization lessen relatively the differences that in a ruder social state must exist between the strong and the weak, the fortunate and the unfortunate? Does it not show the purpose of the Creator to be that the advance of man in civilization should be an advance not merely to larger powers but to a greater and greater equality, instead of what we, by our ignoring of his intent, are making it, an advance toward a more and more monstrous inequality? ... read the whole letter

Rev. A. C. Auchmuty: Gems from George, a themed collection of excerpts from the writings of Henry George (with links to sources)

WHEREVER land has an exchange value there is rent in the economic meaning of the term. Wherever land having a value is used, either by owner or hirer, there is rent actual; wherever it is not used, but still has a value, there is rent potential. It is this capacity of yielding rent which gives value to land. . . . No matter what are its capabilities, land can yield no rent and have no value until some one is willing to give labor or the results of labor for the privilege of using it; and what anyone will thus give, depends not upon the capacity of the land, but upon its capacity as compared with that of land that can be had for nothing. — Progress & Poverty Book III, Chapter 2 — The Laws of Distribution: Rent and the Law of Rent

STATED reversely, the law of rent is necessarily the law of wages and interest taken together, for it is the assertion, that no matter what be the production which results from the application of labor and capital, these two factors will only receive in wages and interest such part of the produce as they could have produced on land free to them without the payment of rent — that is the least productive land or point in use. — Progress & Poverty Book III, Chapter 2 — The Laws of Distribution: Rent and the Law of Rent

PRIVATE property in land, no less than private property in slaves, is the violation of the true rights of property. They are different forms of the same robbery — twin devices, by which the perverted ingenuity of man has sought to enable the strong and the cunning to escape God's requirement of labor by forcing it on others. — The Condition of Labor, an Open Letter to Pope Leo XIII 

ROBINSON CRUSOE, as we all know, took Friday as his slave. Suppose, however, that instead of taking Friday as his slave, Robinson Crusoe had welcomed him as a man and a brother; had read him a Declaration of Independence, an Emancipation Proclamation and a Fifteenth Amendment, and informed him that he was a free and independent citizen, entitled to vote and hold office; but had at the same time also informed him that that particular island was his (Robinson Crusoe's) private and exclusive property. What would have been the difference? Since Friday could not fly up into the air nor swim off through the sea, since if he lived at all he must live on the island, he would have been in one case as much a slave as in the other. Crusoe's ownership of the island would be equivalent of his ownership of Friday. — Social Problems — Chapter 15, Slavery and Slavery

THEY no longer have to drive their slaves to work; want and the fear of want do that more effectually than the lash. They no longer have the trouble of looking out for their employment or hiring out their labor, or the expense of keeping them when they cannot work. That is thrown upon the slaves. The tribute that they still wring from labor seems like voluntary payment. In fact, they take it as their honest share of the rewards of production — since they furnish the land! And they find so-called political economists, to say nothing of so-called preachers of Christianity, to tell them so. — Social Problems — Chapter 15, Slavery and Slavery

IF the two young Englishmen I have spoken of had come over here and bought so many American citizens, they could not have got from them so much of the produce of labor as they now get by having bought land which American citizens are glad to be allowed to till for half the crop. And so, even if our laws permitted, it would be foolish for an English duke or marquis to come over here and contract for ten thousand American babies, born or to be born, in the expectation that when able to work he could get out of them a large return. For by purchasing or fencing in a million acres of land that cannot run away and do not need to be fed, clothed or educated, he can, in twenty or thirty years, have ten thousand full-grown Americans, ready to give him half of all that their labor can produce on his land for the privilege of supporting themselves and their families out of the other half. This gives him more of the produce of labor than he could exact from so many chattel slaves. — Protection or Free Trade — Chapter 25: The Robber That Takes All That Is Left - econlib 

OF the two systems of slavery, I think there can be no doubt that upon the same moral level, that which makes property of persons is more humane than that which results from making private property of land. The cruelties which are perpetrated under the system of chattel slavery are more striking and arouse more indignation because they are the conscious acts of individuals. But for the suffering of the poor under the more refined system no one in particular seems responsible. . . . But this very fact permits cruelties that would not be tolerated under the one system to pass almost unnoticed under the other. Human beings are overworked, are starved, are robbed of all the light and sweetness of life, are condemned to ignorance and brutishness, and to the infection of physical and moral disease; are driven to crime and suicide, not by other individuals, but by iron necessities for which it seems that no one in particular is responsible.

To match from the annals of chattel slavery the horrors that day after day transpire unnoticed in the heart of Christian civilization, it would be necessary to go back to ancient slavery, to the chronicles of Spanish conquest in the New World, or to stories of the Middle passage. — Social Problems — Chapter 15, Slavery and Slavery

... go to "Gems from George"

Louis Post: Outlines of Louis F. Post's Lectures, with Illustrative Notes and Charts (1894)

a. Explanation of Wages and Rent

Differences in the desirableness of land divide Wealth into the two funds, Wages and Rent. Labor naturally applies its forces to that land from which, considering all the existing and known circumstances, most Wealth can be produced with least expenditure of labor force. Such land is the best. So long as the best land exceeds demand for it, laborers are upon an equality of opportunity, and the entire product goes to them as Wages in proportion to the labor force they respectively expend. But when the supply of the best land falls below demand for it, some laborers must resort to land where with an equal expenditure of labor force they produce less wealth than those who use the best land. The laborers thus excluded from the best land naturally offer a premium for it, or what is the same thing, offer to work for its owners for what they might obtain by working for themselves upon the poorer land. This condition differentiates Rent from Wages. Rent goes to land-owners as such, irrespective of whether they labor or not; Wages go to laborers as such, irrespective of whether they own land or not.85

85. Land of every kind may vary in desirableness from other land of the same kind. Certain farming land, for example, is so fertile that it will yield to a given application of labor two bushels of wheat to every bushel that certain other farming land will yield; and it is obvious that, other things being equal, farmers would prefer the more fertile land. But some fertile land lies so far away from market that less fertile land lying nearer is more productive, because it costs less to exchange its products for what their producer demands; in such cases farmers would prefer the less fertile land. The same principle applies to all kinds of land. Building lots at or near a center of residence or business are preferable for most purposes of residence or business to lots equally good in other respects which are far away.

Now, the land that is preferable is of course most in demand; and if it be all in use, with demand for it unsatisfied, competition for the preference sets in, and gives value to it.

All land cannot be equally desirable. Some excels in fertility. Some is rich with mineral deposits, a species of fertility. On some, towns and cities settle, thereby adding to the productiveness of the labor that uses it, because these sites are thus made centers of co-operation or trade. And yet production in the civilized state requires that the producer shall have exclusive possession of the land lie needs. This necessity inevitably gives to some people more desirable land than others have, even though all should have an abundance. Consequently the returns to equal labor are unequal. The man who has land that is more fertile or better located than that of another gets more wealth than the other in return for a given expenditure of labor. If, for example, one with given labor produces 10 bushels of corn from fertile land, equal, say, to $5 worth of any kind of wealth in the market, and the other with the same labor produces 8 bushels of corn, or $4 worth of any kind of wealth in the market, the first receives 2 bushels (or $1) more for his labor than the other receives for his, though each labors with equal effort, skill, and intelligence. Or, if the fertility of the land be the same, but its situation in reference to the market be such that the cost of transportation still preserves the relation of $5 to $4, the same inequality of wages results. It is this phenomenon that gives rise to Rent. Rent is the market value of just such differences in opportunity as are here illustrated. It is a premium for choice land, for preferential locations, for site, for space.

This premium is a very different thing from compensation for labor. Nor is the difference modified when premium owners first obtain Wages for work and with them buy the premium-commanding land. Rent can no more be turned into compensation for labor by exchanging labor products for the power to exact it, than a man can be turned into Wealth by exchanging Wealth for him. Whether the fruits of purchase or of conquest, or of fraud, Rent always constitutes that part of Wealth which is deducted from current production as premiums for superior opportunities for production.

Wages and Rent are both drawn from Wealth, and both go often to the same individual and in the same form of payment, as when a freehold farmer enjoys the use of the grain he raises from more fertile land than his neighbors have, or a city freeholder occupies or receives hire from his house and lot: but Wages flow from Wealth to labor as compensation for production, while Rent flows from Wealth to land-owners in premiums for allowing labor to produce Wealth from superior locations. Wages are appurtenant to Labor; Rent is appurtenant to Land. It is as laborer that the individual takes Wages, but as land-owner that he takes Rent. ...

This illustrates the elementary principle of Distribution, that Wages fall and Rent rises as demand for land forces labor to land of lower productiveness.90 The principle may be more graphically illustrated by supposing that demand for spaces in the chart advances so far as to include all the closed spaces, except part of the poorest one. Thus: [chart]

90. Though figures are used, these charts are to be understood not as mathematical demonstrations, but simply as illustrations.

We now find that all Wages have fallen to the level of Wages on the poorest land that yields anything to the given unit of labor force; while the Rent of all but that has, at the expense of Wages, risen in proportion to its superior productiveness.91

91. The labor that was forced to the poorest lands would continually bid for the opportunities that the better lands offered, until an equilibrium was reached at the point shown in the preceding chart, where the given expenditure of labor is as well compensated in one place as in another.

If laborer and land-owner be different persons, the laborer receives what is distinguished as Wages, and the land-owner what is distinguished as Rent. If the same person, he receives Wages as laborer and Rent as land-owner.

Reflection will convince us that this must be so. Wages for a given expenditure of labor force are no more anywhere, for any length of time, all things considered, than the same expenditure of labor force will produce from the best land to be had for nothing. Rent absorbs the difference.92

92. But we must not jump to the conclusion that there is any essential wrong in Rent. Rent is nature's method of measuring the value of the differences in natural opportunity which different laborers, owing to variations in land, are obliged to accept. And, what in practice is more important, it is nature's method of measuring the value to each individual of those advantages which consist in accumulations of common knowledge, in co-operative effort, in good government, in a word, in the benefits that society as a whole confers as distinguished from those which each individual earns. The question is not one of the rightfulness or the wrongfulness of Rent. Personal freedom necessitates Rent, for it necessitates the private possession of land, and private possession of land makes Rent inevitable. Nothing short of communism could abolish it. The real question is, What shall society do with Rent? Shall it give it to individuals, or use it for common purposes?

"Were there only one man on earth, he would have a right to the use of the whole earth.

"When there is more than one man on earth, the right to the use of land that any one of them would have, were he alone, is not abrogated; it is only limited. . . It has become by reason of this limitation, not an absolute right to use any part of the earth, but (1) an absolute right to use any part of the earth as to which his use does not conflict with the equal rights of others (i. e., which no one else wants to use at the same time), and (2) a co-equal right to the use of any part of the earth which he and others may want to use at the same time." — Perplexed Philosopher, p. 45.

It is in adjustment of this co-equal right that rent occurs. ...

b. Normal Effect of Social Progress upon Wages and Rent

In the foregoing charts the effect of social growth is ignored, it being assumed that the given expenditure of labor force does not become more productive.93 Let us now try to illustrate that effect, upon the supposition that social growth increases the productive power of the given expenditure of labor force as applied to the first closed space, to 100; as applied to the second, to 50; as applied to the third, to 10; as applied to the fourth, to 3, and as applied to the open space, to 1. 94 If there were no increased demand for land the chart would then be like this: [chart]

93. "The effect of increasing population upon the distribution of wealth is to increase rent .. . in two ways: First, By lowering the margin of cultivation. Second, By bringing out in land special capabilities otherwise latent, and by attaching special capabilities to particular lands.

"I am disposed to think that the latter mode, to which little attention has been given by political economists, is really the more important." — Progress and Poverty, book iv, ch. iii.

"When we have inquired what it is that marks off land from those material things which we regard as products of the land, we shall find that the fundamental attribute of land is its extension. The right to use a piece of land gives command over a certain space — a certain part of the earth's surface. The area of the earth is fixed; the geometric relations in which any particular part of it stands to other parts are fixed. Man has no control over them; they are wholly unaffected by demand; they have no cost of production; there is no supply price at which they can be produced.

"The use of a certain area of the earth's surface is a primary condition of anything that man can do; it gives him room for his own actions, with the enjoyment of the heat and the light, the air and the rain which nature assigns to that area; and it determines his distance from, and in great measure his relations to, other things and other persons. We shall find that it is this property of land, which, though as yet insufficient prominence has been given to it, is the ultimate cause of the distinction which all writers are compelled to make between land and other things." — Marshall's Prin., book iv, ch. ii, sec. i.

94. Of course social growth does not go on in this regular way; the charts are merely illustrative. They are intended to illustrate the universal fact that as any land becomes a center of trade or other social relationship its value rises.

Though Rent is now increased, so are Wages. Both benefit by social growth. But if we consider the fact that increase in the productive power of labor increases demand for land we shall see that the tendency of Wages (as a proportion of product if not as an absolute quantity) is downward, while that of Rent is upward. 95 And this conclusion is confirmed by observation. 96

95. "Perhaps it may be well to remind the reader, before closing this chapter, of what has been before stated — that I am using the word wages not in the sense of a quantity, but in the sense of a proportion. When I say that wages fall as rent rises, I do not mean that the quantity of wealth obtained by laborers as wages is necessarily less, but that the proportion which it bears to the whole produce is necessarily less. The proportion may diminish while the quantity remains the same or increases." — Progress and Poverty, book iii, ch. vi.

96. The condition illustrated in the last chart would be the result of social growth if all land but that which was in full use were common land. The discovery of mines, the development of cities and towns, and the construction of railroads, the irrigation of and places, improvements in government, all the infinite conveniences and laborsaving devices that civilization generates, would tend to abolish poverty by increasing the compensation of labor, and making it impossible for any man to be in involuntary idleness, or underpaid, so long as mankind was in want. If demand for land increased, Wages would tend to fall as the demand brought lower grades of land into use; but they would at the same time tend to rise as social growth added new capabilities to the lower grades. And it is altogether probable that, while progress would lower Wages as a proportion of total product, it would increase them as an absolute quantity.

c. Significance of the Upward Tendency of Rent

Now, what is the meaning of this tendency of Rent to rise with social progress, while Wages tend to fall? Is it not a plain promise that if Rent be treated as common property, advances in productive power shall be steps in the direction of realizing through orderly and natural growth those grand conceptions of both the socialist and the individualist, which in the present condition of society are justly ranked as Utopian? Is it not likewise a plain warning that if Rent be treated as private property, advances in productive power will be steps in the direction of making slaves of the many laborers, and masters of a few land-owners? Does it not mean that common ownership of Rent is in harmony with natural law, and that its private appropriation is disorderly and degrading? When the cause of Rent and the tendency illustrated in the preceding chart are considered in connection with the self-evident truth that God made the earth for common use and not for private monopoly, how can a contrary inference hold? Caused and increased by social growth, 97 the benefits of which should be common, and attaching to land, the just right to which is equal, Rent must be the natural fund for public expenses. 98

97. Here, far away from civilization, is a solitary settler. Getting no benefits from government, he needs no public revenues, and none of the land about him has any value. Another settler comes, and another, until a village appears. Some public revenue is then required. Not much, but some. And the land has a little value, only a little; perhaps just enough to equal the need for public revenue. The village becomes a town. More revenues are needed, and land values are higher. It becomes a city. The public revenues required are enormous, and so are the land values.

98. Society, and society alone, causes Rent. Rising with the rise, advancing with the growth, and receding with the decline of society, it measures the earning power of society as a whole as distinguished from that of the individuals. Wages, on the other hand, measure the earning power of the individuals as distinguished from that of society as a whole. We have distinguished the parts into which Wealth is distributed as Wages and Rent; but it would be correct, indeed it is the same thing, to regard all wealth as earnings, and to distinguish the two kinds as Communal Earnings and Individual Earnings. How, then, can there be any question as to the fund from which society should be supported? How can it be justly supported in any other way than out of its own earnings?

If there be at all such a thing as design in the universe — and who can doubt it? — then has it been designed that Rent, the earnings of the community, shall be retained for the support of the community, and that Wages, the earnings of the individual, shall be left to the individual in proportion to the value of his service. This is the divine law, whether we trace it through complex moral and economic relations, or find it in the eighth commandment. ... read the book

Charles B. Fillebrown: A Catechism of Natural Taxation, from Principles of Natural Taxation (1917)

Q2. What is meant by the single tax?
A. The payment of all public expenses from economic rent, the normal revenue, thus eventually abolishing all taxes.

Q9. Does not the single tax mean the nationalization of land?
A. No; as Henry George has said, "the primary error of the advocates of land nationalization is in their confusion of equal rights with joint rights. ... In truth, the right to the use of land is not a joint or common right, but an equal right; a joint or common right is to rent."* It means rather the socialization of economic rent. It simply proposes gradually to divert an increasing share of ground rent into the public treasury.
*A Perplexed Philosopher, Part III, Chapter XI: Compensation

Q42. Should not all people pay taxes for the protection of their property?
A. Yes, and that is what they are doing when they pay their ground rent. To tax them again, as is now done, is double taxation.

Q59. Is it correct to say that "land" is one thing, and the "rent of land" another and quite different thing, and that to take in taxation the rent of land it is not necessary to take the land itself?
A. Ninety-one professors of political economy have answered "Yes." Twenty-three have answered "No." ... read the whole article

Fred E. Foldvary — The Ultimate Tax Reform: Public Revenue from Land Rent

“Land,” in the language of economics, includes all natural resources: the three-dimensional space on the surface of the Earth (including space in and on water); material land such as minerals, water, and oil; the electromagnetic spectrum; wildlife (including wild animals and forests); and satellite orbits.

The most important potential source of public revenue from land is real estate sites. The income from land has been called “ground rent,” “economic rent,” or just “rent.” The term “rent” here will refer to the income only from the land, excluding what is paid for the use of the improvements. The “economic rent” with respect to land refers to the maximum that a tenant would bid for the use of the site. I have called this “geo-rent” to differentiate it from “rent” as a payment for any resource or from the actual amount a tenant may pay, which could be less than what the market could bear.

Land value taxation taps the geo-rent. Like today’s real property tax, a land value tax would have some tax rate that would tap some percentage of the land value or rent. I suggest 80 percent of the geo-rent be used for public revenue. The landowner would pay it from the rental he collects from the tenant, or if owner-occupied, from the implicit rental value he obtains from the site. The 80 percent rate would leave some of the land rent with the landowner to have a margin for assessment error and also to maintain a positive price for the land to facilitate its sale. ... read the whole document

Charles T. Root — Not a Single Tax! (1925)

Every community, whatever its political name and extent -- village, city, state or province or nation -- has its own normal, unfailing income, growing with the growth of the community and always adequate to meet necessary governmental expenditure.

To explain: Every community has an indefeasible original right to the land on which it exists, and to all the natural, unmodified properties and advantages of that particular area of the earth's surface. To this land in its natural state, undrained, unfenced, unfertilized, unplanted and unoccupied, including its waters, its contents and its location, every individual in the community (which may consist of any political unit selected) has an equal right, while all the individuals together have a joint right to the value for use which society has conferred upon these natural advantages.

This value for use is known as "Land Value," or by the not particularly descriptive but generally adopted name of "Economic Rent."

Briefly defined the land value or economic rent of any piece of ground is the largest annual amount voluntarily offered for the exclusive use of that ground, or of an equivalent parcel, independent of improvements thereon. Every holder or user of land pays economic rent, but he now pays most of it to the wrong party. The aggregate economic rent of the territory occupied by any political unit is, as has been stated above, always sufficient, usually more than sufficient, for the legitimate expenses of the government of that unit. As also stated above, the economic rent belongs to the community, and not to individual landowners. ...

Let us roughly restate the proposition: All members of the community having a joint right to the income which the social advantages of the land will command, they are all partners in this income.

Therefore, when one of their number wishes to take for his private use a parcel of this land, he should buy out his partners, i.e., the rest of the community, by paying regularly into the common treasury the economic rent of that parcel, instead of paying, as at present, the purchase price, i.e., the right to collect the economic rent, in a lump, to some other individual who has no more original right to it than himself. ... read the whole article


Ted Gwartney:  Estimating Land Values
What are the factors that cause land to have market value and to whom does this market revenue advantage properly belong? Land has market value for three reasons:
  • the limited supply and "natural" productivity of the soil and natural resources,
  • the publicly provided services, including planning, improvements that increase the market value of land and
  • the growth of communities and peoples' competitive demand for the exclusive use of prime locations.

Land rent is the price that people and businesses are willing to pay for the exclusive right to possess and use a good land site for a period of time. For example, people prefer to use sites of good location because it gives them an advantage of spending less time in travel by being near what they choose to do and where they work. A businessman can sell more goods at a site where many people pass each day, compared to a site where only a few people would pass.

The collection of land rent should be used as revenue, by the community for supplying public needs. This returns the advantage an individual land possessor receives from the exclusive use of a land site, to the balance of the people who live within the community and have allowed the land possessor the exclusive use of the land site for the period of time. ...

Adam Smith, in The Wealth of Nations, suggested that any "tax" should be a charge for services which benefit all people and are more efficiently preformed by a single cooperative effort. He postulated four principles of taxation which any source of revenue should meet:

1. Light on the production of wealth, and does not impede or reduce production;

2. Cheap to collect, requiring few collectors, and easy to understand;

3. Certain; can't be avoided, little opportunity for corruption, and provides adequate revenue;

4. Equitable and fair, payment for benefits received, impartial, and just.

Collecting public revenue from land rent is the only revenue source, or "tax", that meets these criteria.

While the major argument for raising public revenue from land rent and natural resources is because it is equitable and fair, it is also the most efficient method of raising the revenue which is needed for public facilities and services. Land is visible, can't be hidden and its valuation is less intrusive than valuations of income and sales. Taxes on labor and capital cause people to consider alternative options, including working with less effort, which produces less real goods. For example, a tax on wages will reduce after-tax net wages and weaken the incentive to work. A person might be willing to work hard for a wage of $20 per hour, but decide to drop out if the taxes take $8 and the net wage is only $12 per hour. Economists claim that present taxes account for a 25% loss in production in the United States. Production and consumption would be greatly improved if public revenue came primarily from land rather than a wage tax. The same would occur when buildings and machinery are taxed. The tax on building reduces the quantity and quality of buildings produced. A tax on sales, commerce or value added reduces consumption, production and net wealth. Sales tax evasion in the United States has exceeded 30% in recent years.

As new inventions and more efficient ways of producing goods are discovered, people's economic well-being is not improved, because they have lost access to land and must pay both rent and taxes. (5) Instead of rent being used to provide community services, capital and wages must be depleted, which obstructs private enterprise.

When the rent of land is taken for public purposes production and distribution are not held back. This is because the same amount of rent would otherwise have been taken by some private individual. The rent would be the same, the difference is how it is utilized. There is evidence that communities who raise their revenue from land, rather than from labor and capital, are more prosperous, many increasing productivity by more than 25%   ... Read the whole article

Winston Churchill: The People's Land  
Every form of enterprise only undertaken after the land monopolist has skimmed the cream off for himself   It does not matter where you look or what examples you select, you will see that every form of enterprise, every step in material progress, is only undertaken after the land monopolist has skimmed the cream off for himself, and everywhere today the man or the public body who wishes to put land to its highest use is forced to pay a preliminary fine in land values to the man who is putting it to an inferior use, and in some cases to no use at all. All comes back to the land value, and its owner for the time being is able to levy his toll upon all other forms of wealth and upon every form of industry. A portion, in some cases the whole, of every benefit which is laboriously acquired by the community is represented in the land value, and finds its way automatically into the landlord's pocket. If there is a rise in wages, rents are able to move forward, because the workers can afford to pay a little more. If the opening of a new railway or a new tramway or the institution of an improved service of workmen's trains or a lowering of fares or a new invention or any other public convenience affords a benefit to the workers in any particular district, it becomes easier for them to live, and therefore the landlord and the ground landlord, one on top of the other, are able to charge them more for the privilege of living there. ... Read the whole piece
Edmund Vance Cooke: Uncivilized
An ancient ape, once on a time,
Disliked exceedingly to climb,
And so he picked him out a tree
And said, "Now this belongs to me.
I have a hunch that monks are mutts
And I can make them gather nuts
And bring the bulk of them to me,
By claiming title to this tree."  ...

To gather nuts, he made his claim:
"All monkeys climbing on this tree
Must bring their gathered nuts to me,
Cracking the same on equal shares;
The meats are mine, the shells are theirs."  .... Read the whole poem
The rent of land represents a return to ownership over and above the return which is sufficient to induce use — it is a premium paid for permission to use.  ...   read the whole article
Henry George: The Crime of Poverty  (1885 speech)

I am talking too long; but let me in a few words point out the way of getting rid of land monopoly, securing the right of all to the elements which are necessary for life. We could not divide the land. In a rude state of society, as among the ancient Hebrews, giving each family its lot and making it inalienable we might secure something like equality. But in a complex civilisation that will not suffice. It is not, however, necessary to divide up the land. All that is necessary is to divide up the income that comes from the land. In that way we can secure absolute equality; nor could the adoption of this principle involve any rude shock or violent change. It can be brought about gradually and easily by abolishing taxes that now rest upon capital, labour and improvements, and raising all our public revenues by the taxation of land values; and the longer you think of it the clearer you will see that in every possible way will it be a benefit.

Now, supposing we should abolish all other taxes direct and indirect, substituting for them a tax upon land values, what would be the effect?

  • In the first place it would be to kill speculative values.
  • It would be to remove from the newer parts of the country the bulk of the taxation and put it on the richer parts. It would be to exempt the pioneer from taxation and make the larger cities pay more of it.
  • It would be to relieve energy and enterprise, capital and labour, from all those burdens that now bear upon them. What a start that would give to production!
  • In the second place we could, from the value of the land, not merely pay all the present expenses of the government, but we could do infinitely more. In the city of San Francisco James Lick left a few blocks of ground to be used for public purposes there, and the rent amounts to so much, that out of it will be built the largest telescope in the world, large public baths and other public buildings, and various costly works. If, instead of these few blocks, the whole value of the land upon which the city is built had accrued to San Francisco what could she not do?... read the whole speech
Henry George: The Wages of Labor
The most important of all the material relations of man is his relation to the planet he inhabits, and hence, the “impious resistance to the benevolent intentions of his Creator,” which, as Bishop Nulty says, is involved in private property in land, must produce evil, wherever it exists. And, further, as by virtue of the law, unto whom much is given, from him much is required, “the very progress of civilisation makes the evils produced by private property in land more widespread and intense.”

What is producing throughout the civilised world the present condition of things is not this and that local error or minor mistake. It is nothing less than the progress of civilisation itself; nothing less than the intellectual advance and the material growth in which our century has been so pre-eminent, acting in a state of society based on private property in land.

It is nothing less than the newer gifts that in our time have been showered on man, being turned into scourges by man’s impious resistance to the benevolent intentions of his Creator....  read the whole article

Nic Tideman: Basic Tenets of the Incentive Taxation Philosophy
The Proper Disposition of Returns to Different Factors of Production
The idea that the rent of land is properly collected by governments is an example of the more general idea that it is important to distinguish the different "factors of production" identified by classical political economy. The return to each factor has a proper destination.
  • The contributions of human abilities to productive efforts are called "labor," the return to labor is called "wages," and the appropriate recipients of wages are those whose labor contributes to productive activities.
  • The contributions of past human products to productive efforts are called "capital," the return to capital is called "interest," and the appropriate recipients of interest are those who past saving made the creation of capital possible.
  • The contributions of government-assigned opportunities to the productive process are called "land," the return to land is called "rent," and the appropriate recipient of rent is the public treasury.
Replacing Existing Taxes
When we say that the appropriate recipient of rent is the public treasury, it should be understood that this is not in addition to existing sources of public revenue, but rather instead of existing sources of public revenue.
  • Those who contribute labor to productive processes should be allowed to keep the wages that result from their labor.
  • Those whose saving makes the creation of capital possible should be allowed to keep the interest that accrues from the use of capital.
  • But there is no one who has a corresponding claim to the return to land. This is the reason that fees for the use of land and other opportunities assigned by government ought to be the primary source of government revenue.
While one might call such fees "taxes," we consider that designation inappropriate, because the word "tax" connotes an exaction from someone of something to which he or she has a just claim, and we deny that there are such just claims with respect to land. We expect that the collection of fees for the full value of opportunities assigned by governments would provide adequate revenue for all necessary government expenditures. ...  Read the whole article

Nic Tideman:   The Case for Taxing Land
I.  Taxing Land as Ethics and Efficiency
II.  What is Land?
III.  The simple efficiency argument for taxing land
IV.  Taxing Land is Better Than Neutral
V.  Measuring the Economic Gains from Shifting Taxes to Land
VI. The Ethical Case for Taxing Land
VII. Answer to Arguments against Taxing Land

There is a case for taxing land based on ethical principles and a case for taxing land based on efficiency principles.  As a matter of logic, these two cases are separate.  Ethical conclusions follow from ethical premises and efficiency conclusions from efficiency principles.  However, it is natural for human minds to conflate the two cases.  It is easier to believe that something is good if one knows that it is efficient, and it is easier to see that something is efficient if one believes that it is good.  Therefore it is important for a discussion of land taxation to address both question of efficiency and questions of ethics.

This monograph will first address the efficiency case for taxing land, because that is the less controversial case.  The efficiency case for taxing land has two main parts. ...

To estimate the magnitudes of the impacts that additional taxes on land would have on an economy, one must have a model of the economy.  I report on estimates of the magnitudes of impacts on the U.S. economy of shifting taxes to land, based on a mathematical model that is outlined in the Appendix.

The ethical case for taxing land is based on two ethical premises:  ...

The ethical case for taxing land ends with a discussion of the reasons why recognition of the equal rights of all to land may be essential for world peace.

After developing the efficiency argument and the ethical argument for taxing land, I consider a variety of counter-arguments that have been offered against taxing land.  For a given level of other taxes, a rise in the rate at which land is taxed causes a fall in the selling price of land.  It is sometimes argued that only modest taxes on land are therefore feasible, because as the rate of taxation on land increases and the selling price of land falls, market transactions become increasingly less reliable as indicators of the value of land.  The answer to this argument is that collecting a large percentage of the rental value of land through taxes will require new assessment methods based on observing the rental price of land rather than the selling price.  I describe how such methods can be devised.

Another basis on which it is argued that greatly increased taxes on land are infeasible is that if land values were to fall precipitously, the financial system would collapse.   ...

Apart from questions of feasibility, it is sometimes argued that erosion of land values from taxing land would harm economic efficiency, because it would reduce opportunities for entrepreneurs to use land as collateral for loans to finance their ideas.  ...
Another ethical argument that is made against taxing land is that the return to unusual ability is “rent” just as the return to land is rent.  This argument represents a refusal to make a distinction that begs to be made.  The first principle of economic justice is that people have rights to themselves.  While some scholars have asserted that people have rights to them­selves but not to their talents, this is nonsensical.  Without talents, there is no self.  Talents are fundamentally different from land.  The equal rights of all to land can consistently be asserted while still asserting that every person has right to the use of his or her talents.

But before developing any of these arguments, I must discuss what land is. ...

The fact that structures are durable and immobile also means that care must be taken in defining the value of the flow of land services.  There is a tendency to think of “the rent of land” as the amount of money that land yields to those who have exclusive use of it.  How­ever, this formulation is not always useful for defining the rent of land over a particular interval of time.  If an investor spends a year and £20 million erecting a building that is expected to last for 30 years, what was the rent of the land under the building during the year of construction?  It is not sensible to say that, if the best possible use of the land produces a negative cash flow over a given interval of time, then land has no rental value over that interval.  If markets were perfect and the decision to construct the structure was optimal, the finished building would have a value that was greater than its cost of construction by the rent of the land it occupied and the accumulated interest on construction costs and land rent.  But if a non-optimal construction decision is made, that does not reduce the rent of land. 

To give a meaning to ‘the rent of land’ that does not depend on when construction happens to occur, it is useful to define ‘the rent of land’ as the opportunity cost of leaving vacant land vacant.  Thus in the case of the year of construction discussed above, one would ask, ‘Suppose that the construction had been postponed for a year.  Perhaps by that time it would be appropriate to invest in a £21 million building rather than a £20 million building.  If one developed the most profitable possible plan for the land, subject to the constraint that the land be left vacant for the first year, how much lower would the present value of net returns be?’  The answer to this question, the loss of the present value of net returns from postponing use of land for a year, would be the rent of the land for the year.  This is the amount of money that one would need to get in net returns from some pre-existing use to justify postponing redevelopment for a year.  Thus the rent of land for any developed site, for any year, is defined to be the answer to the question, ‘If this site were undevel­oped, what would be the cost of leaving undeveloped and unused for a year?’

Land also differs from labor and capital in the origin of claims to own it. 
  • Labor can be defined as the factors of production that own themselves. 
  • Ownership of capital is derived originally from organizing its production and paying the various factors that are employed to produce it. 
  • Ownership of land, by contrast, derives from rights of exclusive use and access that are granted by governments.

Ownership of land is thus a form of privilege.  The word ‘privilege’ comes from the Latin prive + legis, meaning ‘private law’.  A private law is a law that has someone’s name it, that is, a law that authorizes one person to do what others are not permitted to do.  In a just world, there would be no privilege.  (Thus no one is underprivileged.)  In a just world, land would not be ‘owned’, but rather ‘held’ or ‘possessed’, subject to a payment that reflected the value given up by others in allowing one person to have exclusive use of a site. ... Read the whole article

Nic Tideman:  Farm Land Rent and the Renewal of Rural Society: The Self-Financing Model
there is a way of raising revenue for local public services that does not have these disadvantages. That way is to use a combination of fees for services and public collection of the rent of land.

The rent of land is the amount of money that would be bid for the use of land in an auction. It can be thought of as 100 rubles more than the second-highest bid, that is, the amount of money that the person for whom the use of land is most valuable must bid to outbid the person who places the second-highest value on it.

What land is worth to a person who wants to use it depends on the length of time for which he will be allowed to use it. For the purpose of defining rent, this length of time should be indefinitely long, but with provision for revising the rent as market conditions change. In other words, if similar land rents for 20% more three years from now, then the person who secures the use of a site this year would be required to pay that additional 20% at that time.

The rent of land also depends on the condition of the land. The rent of land is what people would bid for unimproved land. In a town, unimproved land is land without any structures on it. In an agricultural area, many things other than structures can count as improvements--drainage, stone removal, fertilization, leveling, etc. It might be hard to find agricultural land that had no such improvements. Thus in agricultural areas, one must subtract something from observed payments for the use of land, to account for the value that is being paid for such improvements.

The comments above describe how one might observe the rental value of land. Economics can also say something about how a bidder would decide how much to bid. A bidder would decide how he could use the land most profitably, compute the net revenue from the most profitable use after all costs including the cost of his own entrepreneurial effort and a premium for the risk to his finances, and what was left would be the total rent of the land for the period of the investment. The bidder would then estimate future rent, subtract that from the total rent, and what was left would be rent for the current period. Read the whole article

Mason Gaffney: Land Rent in a Tax-free Society  (Outline of remarks by Mason Gaffney, for use at Moscow Congress, 5/21/96) 
1. Rents are a taxable surplus. I estimate that this taxable surplus constitutes 35% or more of the national income in most nations with market economies, and more in resource-rich nations. ...
 2. The value of rent is huge. Every economy produces a large excess over wages. To be sure, not all of it is surplus. Some of it goes to replace capital that wears out each year. This is not part of the net surplus, nor income to the capitalist; it is a return of capital. ...
 3. Rent will become huger yet when you abate taxes presently levied on production and exchange, because these now depress the rent of land. That is, in a tax-free market economy, the benefit of abating present taxes will lodge mainly in land rents. The taxable surplus simply shifts from one form to another.
This is more than a simple shift of a fixed amount. When you substitute land revenues for existing taxes, the surplus actually grows, as if by synergy. You gain more revenue base than you lose, because existing taxes now suppress much latent production. Payroll taxes directly drive workers from taxable jobs to untaxed gains from crime. Abating those taxes will unleash suppressed economic giants, along with all the new surplus values their latent production will generate. "Monetarists" warn you that "there are no free lunches." In fact, however, good policy creates lots of "free lunches." It makes the whole greater than the sum of its parts. Imagine the benefits, alone, of turning people from destructive careers in crime to useful jobs producing goods.
4. Some of the benefit of abating existing taxes will lodge in higher after-tax wage rates, rather than higher rents. ...
 5. Many varieties of natural resources generate rents. City land is the greatest single source. For example, one city, Vancouver, contains half the value of taxable property in B.C. - a province of 934,000 sq. kilometers, or 70% larger than France. ... read the whole article

Karl Williams:  Social Justice In Australia: INTERMEDIATE KIT
We've just seen how returns from land are, by nature, monopolistic and, by rights, should be returned to the community. But how do we calculate this amount?

It's perhaps best illustrated by the Robinson Crusoe scenario, where he finds himself alone on a desert island. Rob naturally settles on the best available land which, for argument's sake, can produce 20 coconuts per acre per month. Along comes Man Friday, who gets the second-best land producing 18 coconuts per acre. This best, freely-available land of Friday is called the marginal land and, as we'll see, determines both the level of wages and that of rent.

For how much could Rob rent out his land - 2 coconuts or 20 coconuts per acre? Friday would only be prepared to pay 2, because he can already get 18 from his. So here's our first definition, that of the Law of Rent: The application of labour and capital equipment being equal, the rent of land is determined by the difference between the value of its produce and that of the least productive land in use. So if Man Saturday comes along (the next day?!) and finds that the best available land can only produce 15 coconuts per acre, Rob could rent his land out to Saturday for 5 coconuts per acre, and Friday for 2.

What then determines the level of wages? When Friday came along and could work land yielding 18 coconuts per acre in a month, then he wouldn't accept wages offered by Rob for less than 18 coconuts. But when Saturday arrived, suddenly Friday could only command 15 per month, because Rob knows that the going rate (that applicable to Saturday at the margin) is only 15. So here we have the Law of Wages, which is the corollary of the law of rent: Wages are the reward that labour can obtain on marginal land, i.e. the most productive land available to it without paying rent.

Of course it all gets more complicated by technology, trade unions, immigration, the existence of a pool of unemployed, personal preferences, levels of education etc., but these strong underlying laws always hold. But let's now tie up the factors of production. Rent is the return to land, wages are the return to labour, and interest is the return to capital. The law of interest can be stated thus: Interest is the return that the use of capital equipment can obtain on marginal land, i.e. the most productive land available to it without paying rent.

So here's the alarming paradox of progress marching side by side with poverty. Those who have grabbed the best land get richer and richer (from increasing rent) while the tenants and wage-earners get poorer and poorer for having to accept lower and lower wages as the margin is pushed out to less productive land). Henry George, in his classic Progress and Poverty drove home this point, but took about 600 pages to deal with all the complications and fine details not examined here. It's no wonder that the unmasking of this great paradox - the title of his book - hit the 19th century world like a great revelation. And it's no wonder that vested interests, through the neoclassical economics that they fostered, knew they had to shut him up. And, by successfully silencing him, it's no wonder that, despite all efforts, increasing and ever more alarming disparities of wealth are the norm world-wide.

But, anyway, how many coconut-basketsful of LVT should we collect? Chuck away all those calculators, guys, for the answer is simple: Collect the rent, the whole rent, and nothing but the rent. Assuming that everyone has to do the same amount of work to produce their differing yields of coconuts, when Friday came along then we'd collect 2 coconuts per acre from Rob. This would leave 18 coconuts in each of their hands, and 2 coconuts of rent or LVT collected. When Saturday arrived we'd collect 5 from Rob and 3 from Friday, which would leave 15 coconuts in everyone's hands and 8 coconuts of rent collected. Result: everybody effectively shares equally in the bounty of Our One Earth, and we have a natural, non-punitive form of revenue raising with which to fund infrastructure.

We've already seen how speculators can presently hold on to idle parcels of land, waiting for unearned increases in their value to accrue to them. But here's another curse of land speculation: by locking up productive land, it forces newcomers out to less productive land. By "pushing back the margin", the evil of speculation simultaneously raises rents and lowers wages. LVT makes it impossible for speculators to enjoy unearned income.  Read the entire article

Fred Foldvary:  The Rent, the Whole Rent, and Nothing but the Rent
Rent is the highest bid that a normal tenant would pay for the use of land. Economists have divided the resources that go into production into land, labor, and capital goods. The wealth that is produced is distributed to the owners of these three "factors of production." That portion that goes to landowners is rent. ...

Professor Nicolaus Tideman defines rent more precisely as the "second highest bid for the use of land when it is unimproved, when the user has an option on continued use into the indefinite future." In an ideal auction, we want the good to go to the highest bidder but at the price set by the second-highest bid, to avoid penalizing too-high bidding. In practice, if the folks who want to rent land have no special emotional attachment to a site, then the highest bids will be similar.

Land includes all natural resources, including
  • the spatial surface of the earth,
  • material resources such as water and minerals,
  • the radio spectrum,
  • the atmosphere used for travel or as a dump,
  • all wildlife, and
  • the genetic information in living beings.
A tenant's payment for a site has two components.
  • The pure land rent is the natural rent, the payment for the resource as provided by nature.
  • The second component is a rental for the advantages of a site due to the civic works. This is the infrastructure such as streets, parks, utilities, security, schools, and the legal system which makes real estate much more useful. This rental is really a return to capital goods and labor services rather than land.
Real-estate land rent and rentals arise from the differing productivity of various sites: rent is the differential between the productivity of a site relative to the least productive marginal sites. ...

If we regard human beings as having equal moral worth, then it is morally wrong for some to be masters and others slaves. Each person therefore has proper moral ownership of his labor and wage. Such self-ownership does not extend to land, but people may properly have individual rights to possess land, since this is necessary for the application of labor, and it is efficient for land to be under private title and control.

But it is not necessary for efficiency for the pure land rent to belong to the individual title holder. Economists use the term "economic rent" for payments beyond what is needed to put a factor of production to efficient use. Land rent is economic rent, since the land is already there, and for real estate, the amount of land within some boundary line is fixed. So when rent is used for the public finances, it does not reduce the quantity of land. The rent will not be passed on to the tenant, since the payment of the rent to a community does not change the supply or demand for land.

The use of rent for public revenues therefore has no excess burden, no burden on society or the economy. Taxes on income, goods, and transactions do have an excess burden, since by raising the price and reducing the quantity of goods, resources do not get allocated to where the people most want them. Taxes on labor and goods raise prices, while rent-based payments do not affect the rent, and they lower the price of land rather than raise it.

Rent is therefore the ideal source of general public and community revenue. Tax reform should therefore shift to rent as the primary source of general funds. Pollution charges can supplement the rent, and indeed can be considered a rental charge for using and abusing the atmosphere, land, soil, and other forms of land. There could also be user fees for services specific to users, fines for violating traffic rules, and profits from enterprises.

The economic rent from minerals, water, and oil would be natural resource royalties that could be paid by bidding for the rights to extract, from payments based on the amount of mining, and the profits from the operations, depending on the circumstances.  ...

The public and community collection of rent puts land at its most productive use, maximizing the wages of workers while minimizing sprawl as well as boom/bust cycles. We need to understand rent to fully understand the market process and the cause and remedy of many of today's social problems
. Read the whole article
Fred Foldvary: Geo-Rent: A Plea to Public Economists
The term “rent” is most generally defined as a payment for the use of any resource (Alchian, 1991). “Land rent” could refer either to the actual amount paid by tenants or to the potential or economic rent. My analysis here is based on an assessment or estimate of what the plot-devoid-of-improvements would rent for in a market or auction. This has been called "ground rent" or “economic land rent,” but those names and others are easily misunderstood. To ensure against the hazard of reasonable but erroneous inference, I propose an exotic label, geo-rent. “Geo” in Latin means earth or ground, and it also suggests George, as in Henry George.

A site’s geo-rent is not based on the particular activity at that site. The geo-rent of a site containing lavish buildings and gardens equals what the geo-rent would be if, for some strange reason, those improvements suddenly disintegrated. A fully developed site has about the same geo-rent (per acre) as an adjacent vacant lot.

Suppose I own a 50-acre site that is pristine, unimproved. That site would rent for $100,000. Hence, the geo-rent is $100,000. The next year I build a large beautiful and successful shopping center on the site. My geo-rent is still only $100,000 (assuming the amount for which my site unimproved would rent has not changed). However, if my shopping center makes neighboring land more valuable, it does increase my neighbor’s geo-rent.

The interrelation between one landowner’s improvements and his neighbor’s geo-rent is an interesting matter. Another interesting matter is a landowner’s contribution to improvements on neighboring lands, such as sponsoring a new road. If the new road would increase his geo-rent tax bill, geo-rent taxation, it would seem, would reduce his incentive to sponsor such an improvement.1 But here I leave these tangents aside, with the summary judgment that I do not think that such issues do much, if anything, to weaken the case for tapping geo-rent.
1 The effect on geo-rent would be smaller if the road is a toll-road, because then more of the value added is internalized, i.e., capture by the road owners. ... Read the entire article

Mason Gaffney: Land as a Distinctive Factor of Production
Land rents are subject to common forces that differed from and are generally reverse to those that determine interest rates (the price of capital).

Interest rates around the world rise and fall in sympathy.  They are subject to common, interconnecting forces of supply and demand, transmitted swiftly even in past centuries, and today instantaneously.

Land rents, too, rise and fall together in response to common forces.  However, the forces are different for land rents than for interest rates, so they do not vary in sympathy.  Even though the lands are not mutually convertible, they are subject to common forces, the greatest of which is the interest rate itself.  Capital and land are rivals for the same pie, so usually their returns vary inversely.  Ground rent equals operating cash flow less interest on the cost of building, and less building depreciation.  A rise of interest rates lowers ground rents.

It is hard to see how any forecast of the results of economic policy, or any forecast for investment purposes, could have any value without keeping focused on this distinction.  Sometimes it is handled by distinguishing old" from "new" assets or issues.  Yet, in general, neoclassical doctrine tells us to meld land and capital in economic thinking of all kinds. ...

High land price guides investors to prefer kinds of capital that substitute for land.  Although capital cannot be converted into land, it can substitute for land, and does so when rents and land prices are high.  John Stuart Mill long ago pointed out that the structure and character of capital is determined by the level of rents and wages.19  Such substitution is an integral part of the equilibrating function of markets; the human race could never have attained its present numbers and density without it.  High wages evoke labor-saving capital; high rents evoke land-saving capital.  It is useful to carry this farther, and recognize five kinds of substitutive capital evoked by high rents and land prices:
a.      Land-saving capital, like high buildings.
b.      Land-enhancing capital, meaning capital used to improve land for new, higher use.
c.      Land-linking capital, like canals and rails and city streets.
d.      Land-capturing (rent-seeking) capital, like squatters' improvements, and canal and rail lines built to secure land grants, and dams and canals built to secure water rights.
e. Rent-leading capital. ...

Land rent is nearly identical with taxable surplus.  This follows from simply observing that the supplies of labor and capital are highly elastic, while the supply of land (within any given taxing jurisdiction ) is totally inelastic, because  a "jurisdiction" is defined as a specific area of land.

François Quesnay and the “Physiocrats,” and their fellow-traveler A.R. Jacques Turgot, deduced from the above that almost all taxes, whatever the nominal base, are shifted to land rents, and lodge there.  Market forces tend to equalize all AFTER-tax returns to labor and capital, because of their mobility or, in the case of some labor, the inability of humans to survive on less than subsistence wages. 

As a corollary, if there is no rent there is nothing to tax.  E.R. A. Seligman in one of his exhortations against the single tax, warned that a marginal community --one on land of no value -- can have no tax base if it taxes only land. However, this hypothetical community can have no tax base anyway.  Whatever labor or capital it tries to tax will leave, or never arrive, because their supplies are elastic.

Capital will only appear to bear a tax if it can shift it to land in the form of lower rent, or a lower purchase price.  If rent and land values are already zero, there is nowhere to shift a tax.  Mobile factors will not bear it, but turn away.  Customers will not bear it, but buy elsewhere.

    Seligman does not consider the interesting possibility that public services paid by taxation might create the very rents that are taxed to support the public services.  That complex question would make an interesting book, but one too long to insert here.

b.  The surplus is much more than usually stated.
... The failure of modern economists, whether neo-classical or heterodox, to acknowledge the Himalayan Range of land values in their faces, and to reckon its role in theory and policy, is denial and delusion on a scale at which one can only marvel.   ....

Amassing land is always done, can only be done, by shrinking the holdings of others.  To expand is to preempt.  If A is to have more then B, C, D et al. must have less, there is no other way.  A can amass more capital by saving, creating new capital, leaving B, C, D et al. with as much as before.  A can increase his labor income by working longer, or harder, or smarter, producing more, leaving others with as much as before.  He and she together can also spawn more children: labor, like capital, is reproducible, and indefinitely augmentable.  Possessing land, however, means just one thing: bumping others.

In the region of the mind, the thing possessed may be shared by all with no diminution to anyone.  No one's pleasure In Shakespeare, or Beethoven, or understanding physics is any less because at the same time millions of others have the same pleasure.  Art, letters and science are the common property of mankind, open to all who care to acquire them.  The creative producer's pleasure is in proportion to the number with whom he shares.  The gratification is from sharing, not excluding.  The contrast with landholding is nearly total.35
35.     Paraphrased from Upton Sinclair, 1923, The Goose Step.

Amassing claims on wealth by creating and producing is not, therefore, a threat to others.  Amassing capital through saving does not weaken or impoverish others.  Producing goods does not interfere with others' doing the same.  One producer may drive another from a particular limited market, but glutting one market increases real demand for the products of other markets, and raises the real value of others' incomes by lowering prices.  Amassing land, however, has to deprive others, both relatively and absolutely.  Concentrated holding and control of land, therefore, have always been threats to the well-being of those left out.

Conversely, the only way the landless, e.g. in South Africa, can get land is from those who now have it.  "Growth" is often advanced as the solution to maldistribution, injustice and poverty, but that is mere temporizing because land does not grow.  When production and demand grow, land rents rise.  Of land it is starkly true, "the problem is not production, but distribution".  There is no production; only distribution. ...

Consuming land means preempting its time
To consume most goods and services is to use them up.  Land is not used up.  "Consuming" land must have some other meaning, therefore, than the intuitive and common idea that consuming means turning-to-waste.  To consume land is rather to preempt its service flow without impairing its substance.  To consume land is to occupy it for a time-slot, which may be as brief as beating a red light or (rarely) as long as the pyramids last.40  After us life goes on, on the land once left to us which we then leave to others. "Time-sharing" was not invented by the holiday industry but is inherent in the nature of land and life.
40. The other six "Wonders of the Ancient World" have all disappeared without a trace.  Relative to land, human works are evanescent.  "Like snow upon the desert's dusty face, lighting a little hour or two" they are gone.

How shall we measure land-consumption by owners, where no rent is paid?  Is it purely subjective?  Does it vary with the owner's mood and health?  It is simpler than that, and fully practicable.  The essence of consuming land is preempting the time-slot from others.  Thus, holding land without using it, or using it below capacity, is a form of consumption.  The measure is the market opportunity cost of land, i.e. the price times the interest rate.

Holding an urban site has been likened to holding a reserved seat at a play, sporting event, or concert.  The ticket holder properly helps pay for the event, whether or not he is there to enjoy it.  As a result, very few paid customers fail to show up.  Likewise, people who pay cash rent for land seldom leave it vacant.  Doubtless if people paid regular cash taxes to hold land, they, too, would consume (preempt) less.

... Land's rent is its opportunity cost, regardless of use
Land is a prior claimant on the product.  This has been obscured by calling rent "a residual."  Land income is not a residual, but a prior claimant.  This means land rent is a much larger share of national income than national. accounts presently show.

The unreaped harvests of idle land flow like water wasting through a desert into a salt sea.  Lost water may sometimes be useful downstream; lost time never returns.  To keep others from using a time-slot is to consume it.

A great deal of land in fact is not allocated to its highest and best use.  The value of preempting this land is the highest and best use that might have been made of the land preempted.  That is the economic cost.  The land is not responsible if the manager fails to realize its value at optimal capacity.  Neither are the persons who are excluded.  Only the preemptor is responsible, as a manager.  This person is the residual imputee who deserves credit for performing above par and blame for failing below.

Most economic theorizing has failed to bring out this point.  The tendency is to treat ground rent as a residual, a waste basket for all the errors and dereliction of responsible economic actors.  (Note dereliction of those who say cost is opportunity cost, but fail to apply that properly to land, when estimating its value.)  This has resulted in greatly understating the value of land relative to other factors of production.  Institutional and social factors, too, often obscure the opportunity cost of land.

This is a case where theorizing lags behind practice.  In dividing value between land and a building affixed to it the standard practice of appraisers, and speculative buyers too, is the "building-residual method." The land is appraised as though vacant; the building gets the remaining value, if any.  The building, once attached to a specific site, loses the mobility of place and form that fluid capital possesses and has no opportunity cost but scrap value, which is often negative.  Land, always lacking mobility of place, retains mobility of reuse because of its versatility, permanence, and irreproducible location. Read the whole article
Mason Gaffney:  Rent, Taxation, Dissipation and Federalism
I. The issue
II. Sources of rent
III. Dissipation of rent before the fisc takes it: what and how?
A. Dissipation means waste and destruction or suppression.
B. How rent is dissipated.
C. Open access followed by tenure: rent-seeking institutions.
IV. Dissipating rent via public spending
A. Taxes and lease provisions need not twist incentives.
B. Public spending of tax proceeds may dissipate rent.
C. History of recognition of this spending effect
D. Successful compromises with the principle.
1. Barriers to immigration or sharing.
2. Selling voters on the benefits of immigration
E. Less successful compromises with the principle
1. Public works.
2. Subsidized public works in tandem with exclusionary zoning
3. Hocking the revenues
V. Solutions
A. Socialize rent at the national level.
B. Limit benefits to citizens per se (not to landowners per se).
C. A social dividend to citizens is the obvious route.
D. Return rents to local school districts in inverse proportion to local tax base per capita (the Colin Clark principle).
E. Promote James Madison and Neville Chamberlain to elder statesmen emeritus.

I premise resource rents are the joint product of three distinguishable factors:

  • nature;
  • complementary private activity; and
  • public works and services, publicly financed.
Triffin's epigram says "Surpluses are either competed away or imputed away." Rent is what we call it when they are imputed away. He might have added, they may also be frittered away: that is what we seek to avoid.

Imputed rent is the foregone gain of withholding land from the market, i.e. from others. It is equal to the marginal product of land. I premise (some others differ) that rent is the prior distributive claim, not a "residual." Thus, unused valuable land costs the owner as much rent as though he were paying cash to a landlord. Failure to realize this rent is imputable to management, not land as such.

Rent is a levelized concept to give a unitary, commensurable expression to costs and yields that have variable time patterns. Selecting time patterns optimally is part of maximizing rent. That is a fortiori true of exhaustible resources. ...

A. Dissipation means waste and destruction or suppression.  It means incurring needless costs, or aborting surplus-yielding activities. Redistribution is not, per se, dissipation. No incentive is required to produce land, or able to make more be created, so who collects rent is a distributive choice. However the manner of collection may twist incentives and interfere with efficient use; so may the method of tenure, or tenure-creation.

B. How rent is dissipated. Open access, tragedy of commons. Arthur Young, Scott Gordon, Garrett Hardin, et al. Simple cases like open range, fisheries, public parks and beaches, freeways: a principle easily perceived (although not usually by undergraduates).

C. Open access followed by tenure: rent-seeking institutions.
Rent is dissipated through prematurity of investments. Squatters' Rights (Preemption Act of 1841), and residence requirement of Homestead Act (1862), traditional examples. Prior appropriation doctrine of water rights, simple example. Air routes; broadcast licenses; extending utility franchises; zoning; offset rights to pollute; other modern examples.

Offset rights to pollute are doubly effective in dissipating rent. By generating a nuisance and lowering the value of surrounding land, a polluter is rewarded by receiving a valuable vested right to continue the nuisance in perpetuity, or sell it.

Internationally, rent-seeking via warfare, or big-stick policies threatening warfare, may be seen to dissipate rent when we deduct the public cost from the private gain. Read the whole article

Nic Tideman: The Structure of an Inquiry into the Attractiveness of A Social Order Inspired by the Ideas of Henry George
 I. Ethical Principles
A. People own themselves and therefore own what they produce.
B. People have obligations to share equally the opportunities that are provided by nature.
C. People are free to interact with other competent adults on whatever terms are mutually agreed.
D. People have obligations to pay the costs that their intrusive behaviors impose on others.
II. Ethical Questions
A. What is the relationship between justice (as embodied in the ethical principles) and community (or peace or harmony)?
B. How are the weak to be provided for?
C. How should natural opportunities be shared?
D. Who should be included in the group among whom rent should be shared equally?
E. Is there an obligation to compensate those whose presently recognized titles to land and other exclusive natural opportunities will lose value when rent is shared equally?
F. Can a person who is occupying a per capita share of land reasonably ask to be left undisturbed indefinitely on that land?
G. What is the moral status of "intellectual property?"
H. What standards of environmental respect can people reasonably require of others?
I. What forms of land use control are consistent with the philosophy of Henry George?
III. Efficiency Questions
A. Would public collection of the rent of land provide enough revenue for an appropriate public sector?
B. How much revenue could public collection of rent raise?
C. Is it possible to assess land with sufficient accuracy?
D. How much growth can a community expect if it shifts taxes from improvements to land?
E. To what extent does the benefit that one community receives from shifting taxes from buildings to land come at the expense of other communities?
F. What is the impact of land taxes on land speculation?
G. How, if at all, does the impact of shifting the source of public revenue to land change if it is a whole nation rather than just a community that makes the shift?
H. Is there a danger that the application of Henry George's ideas would lead to a world of over-development?
I. How would natural resources be managed appropriately if they were regarded as the common heritage of humanity?    Read the whole article

Jeff Smith and Kris Nelson: Giving Life to the Property Tax Shift (PTS)
John Muir is right. "Tug on any one thing and find it connected to everything else in the universe." Tug on the property tax and find it connected to urban slums, farmland loss, political favoritism, and unearned equity with disrupted neighborhood tenure. Echoing Thoreau, the more familiar reforms have failed to address this many-headed hydra at its root. To think that the root could be chopped by a mere shift in the property tax base -- from buildings to land -- must seem like the epitome of unfounded faith. Yet the evidence shows that state and local tax activists do have a powerful, if subtle, tool at their disposal. The "stick" spurring efficient use of land is a higher tax rate upon land, up to even the site's full annual value. The "carrot" rewarding efficient use of land is a lower or zero tax rate upon improvements. ...

In real estate there are two basic tautologies.

  • One, land value is unrealized rent and rent is realized land value.
  • Two, the annual rental income from a parcel is its market price multiplied by the interest rate, and land price is capitalized land rent (usually over a 30 year term). Since collecting land rent shrinks, even eliminates, land price, it becomes necessary to determine annual rent and use that as a basis for the rate on land.
A big problem needs a big solution which in turn needs a matching shift of our prevailing paradigm. Geonomics -- advocating that we share the social value of sites and natural resources and untax earnings -- does just that. Read the whole article

Jeff Smith Share Rent, Transform Society
If society decided to share among its members all the annual value of society's sites and resources and air space, what would happen?

... It doesn't matter who owns what. What matters is who gets the rent. We have millions of acres of forest we Americans own together, and we are losing rent on it.  ...

... Assuming that is true, if not allowed to collect in the wrong pockets, but redirected to everybody's pockets, we can expect a solution.  ...

In the past, land owners owed services to king, but in this age of equality then we owe our neighbors. We have an equal right to the earth.

The community creates rent. Land value rises when infrastructure goes on land. Technology progresses when the community becomes more tranquil and density goes up. Density is a really good measure of land value. No one owner by himself is responsible for density. Rent from land value is justified because all should share in the rent.
If the community collected the rent, it would motivate owners not to speculate in anticipation of a higher future return. There would be a tendency to infill in the city and make cities more efficient. It would make mass transit more efficient.  ...

It is not just collecting ground rent but also untaxing other systems. Untax labor and make it more affordable. ...

If you take taxes off labor and capital, more investment flows into jobs, and we would have close to full employment, so labor could demand full market value for services. We could double the income of the average worker with no loss in standard of living. ...  Read the whole article

Jeff Smith: What the Left Must Do: Share the Surplus
Meanwhile, ignoring our common assets guarantees that we continue to pay rent rather than begin to receive rent. Conversely, insisting upon a fair share could win us the world we want. While it breaks an old habit to leave jobs behind in favour of fair distribution, just recognizing surplus empowers people. It reaffirms the very existence of our commonwealth and challenges the narrow view of property as exclusively private. While the Left gets excoriated for wanting to be big spenders, demanding a dividend in lieu of waste and a shift of taxes from individual effort to social surplus helps refurbish the Left’s image.

The call to share the commonwealth enjoys an unshakable moral base and gets high marks for real world success, unlike taxes upon true earnings. Once implemented, sharing rent will grant us leisure – time enough to evolve and reconnect with friends, family, and neighbours – and drain away fortunes rather than let the fortunate continue to soak society. Hence support for shifting taxes and paying dividends to the citizenry grows already, without the Left’s leadership. It’s time to run with the banner of an extra income for everyone, in the halls and capitols of governments everywhere. To liberate humans from exploitive labor, let us advance the sharing of society’s surplus. Read the whole article
Jeff Smith: Sharing Natural Rents to Sustain Human Society
To get rich, or more likely to stay rich, some of us can develop land, especially sprawling shopping centers, and extract resources, especially oil. While sprawl and oil depletion are not necessary, they are more profitable than a car-free functionally integrated city. Under the current rules of doing business, waste returns more than efficiency. We let a few privatize rent -- ground rent and resource rent -- although rent is a social surplus. As if rent were not profit enough, winners of rent have also won further state favors -- tax breaks, liability limits, subsidies, and a host of others designed to impel growth (20 major ones follow herein).

If we are to sustain our selves, our civilization, and our eco-system, we must make some hard choices about property. What we decide to do with rent, whether we let it reward our exploiting or our attaining eco-librium, matters. Imagine society waking up to the public nature of rent. Then it would collect and share its surplus that manifests as the market value of sites, resources, the spectrum, and government-granted privileges. Then we could forego taxing labor and capital. On such a level playing field, this freed market would favor efficiency - the compact city - not waste - the mall and automobile. ...

Drawing their cue from the public, governments tolerate "rentention", the private retention of publicly-generated land values. Lacking this Rent, states turn to taxes. But to grow the economy, all governments -- left, right, or undecided -- hustle to stimulate development; they cut taxes and slop subsidies. Going beyond the call of duty, the state excuses producers' their routine pollution and limit liability, thereby cutting the cost of insurance. Companies that don't impose on nature, worker, or customer are not benefited at all but lose a competitive advantage. On this tilted playing field, one with the lumps of subsidies and the tilts of taxes, technologies lean and clean have a hard time competing as suppliers of materials, homes, food, rides, and energy. ...

Now wipe out the taxes, subsidies, liability limits, and rent retention. Instead, replace all that with running government like a business. Charge full-market value for state acknowledgements (the seven secret subsidies):

  • corporate charters,
  • standards waivers,
  • utility franchises,
  • monopoly patents,
  • communication licenses,
  • resource leases/claims, and
  • land titles/deeds

Collecting rent for government-granted privileges would not only raise trillions but also whittle corporations down to a competitive size, less hazardous to democracy.

Besides charging what privileges are worth, government should also replace license with responsibility ("internalize the externalities"). To temper the temptation to use lands both fragile and valuable, society could impose surcharges - an Ecology Security Deposit, Restoration Insurance, Emission Permits, and fines when users exceed standards. To minimize all these charges, producers would seek sustainable alternatives. Getting and sharing rent from land titles is the centerpiece of this geonomic revenue reform. Each phase of such a revenue shift motivates sustainable choices in its own way. ...

Noticing rent, realizing its social nature, accepting that it's to be shared, and understanding that wages and interest should not be expropriated, for most people that's a new way of thinking. Thinking such thoughts leads to a new way of conceiving economics, too. Ecological economics becomes not just a branch of economics but a whole new discipline, needing a new name. In geonomics we maintain the distinction between items bearing exchange value that come into being by human effort - wealth - and those that don't - land. Keeping this distinction in the forefront makes it obvious and non-controversial that speculating in land drives sprawl, that hoarding land retards Third World development, that borrowing to buy land plus buildings engorges banks, that so-called "interest" is quasi-rent, that the cost of land inflates faster than the price of produced goods and services, that over half of corporate profit, says the Urban Land Institute, is from real estate.

Summing up these analyses, geonomists offer a Grand Unifying Theory, that the flow of rent pulls all other indicators in its wake. Geonomics differs from economics as chemistry from alchemy, as astronomy from astrology. The acid test of any science is prediction, a test that economics fails and geonomics passes. Plugging in the land price cycle of 17+ years lets geonomists crank out predictions more accurate than those generated by "the experts" who missed, for example, the collapse of mighty Japan. When the land of the Rising Sun was on the market for four times the assessed value of all America, that's when a few geonomists, like voices in the wilderness, countered conventional wisdom by proclaiming that the Japanese boom would bust. According to these geonomic prognosticators, don't expect America's next downturn for at least another five years, despite the tech wreck or any other stock market fluctuations. ...  Read the whole article

Jeff Smith: Leaking Economic Value of Communities

Wearing pajamas outdoors in the winter, one wouldn’t expect to retain body heat. Yet, people do try to sustain community while hemorrhaging its commonwealth. Losing it, residents must work more than necessary.

When residents import food and energy, they deprive others in the community of income. Yet, the loss pales when compared to paying mortgages and [income] taxes. A recent study of Oakland, CA found torrents of dollars pumped out of town headed for the treasuries of distant capitols and the bank vaults of distant lenders.

While mortgages and interest elevate an elite elsewhere, they keep debtors on a treadmill at home. To those anxious over every next payment, how appealing is an economy no longer expanding its girth? In addition, what’s their debt for? Credit? The total savings of all members of a community should suffice. Local bank "used to" be the norm.

The other major drain, taxes, at about 40% of the average worker’s income, usually total more than the value of government services received. And who receives them? Corporate loggers, miners, factory farms, and tractor trailers. Lose such subsidies, leveling the playing field, and local recyclers, family farmers, and freight haulers could compete. Their success would plug the visible leaks - imported food, energy, and materials.

While a community might not be able to command a distant capitol to turn off the subsidies, a locality may be able to avoid federal and state taxes. ...

Cutting out outsiders’ taxes means the locality would have to take over providing the outsiders’ services: nuclear power plants, toxic dumps, scarifying freeways, submarines, whatever. To pay for whatever desired services, from where will the city or county get the money? From themselves, their commonwealth. It’s the money they spend on the nature they use, the prices and rents paid for sites and resources.

How can communities capture that flow of natural values and keep it circulating locally? Get local government to charge some kind of land use fee. Depending on state law, the locality could replace the property tax with a site value tax, raise the fee for defending deeds, levy a fee for resource use, and/or resurrect ancient land dues. ...

Community, where we live, and economy, how we live, cannot be separated. As long as communities leak economic value, they cannot sustain themselves in a steady-state, like the skinny guy with a tapeworm wondering why he’s always hungry. By reclaiming land values, a community plugs its leaks so residents can sustain the lives of nature and neighborhood. ...  Read the whole article

Jeff Smith: What To Do About the Real Estate Bubble

What’s bubbling, and until when?

Sellers are happy. So are developers and speculators. Real estate has gone all bubbly, and that bubble has gone ballistic. What goes up, however, must soon do something else. ...

Actually, it’s not housing whose price has entered the stratosphere. Buildings age – get older, more worn out. What’s getting more valuable is the land, the location – whether it has a building on it or not. Buildings you can make more of, but land you can not, especially locations along the coasts or on the good side of town. None of that would matter if you could ever get buildings to hover around in the air. Meanwhile however, speculators are happy.

... What’s seemingly good for landowners is not necessarily good for the economy. As people spend more on land, something nobody produced, they spend less on output, things people do produce. As producers get less money spent on their products, eventually they take the hint and produce less. "Produce less" is another way of spelling recession.

Plus, more expensive land means heavier borrowing to buy it. More debt means more inflation and less stability. When producers cut back, borrowers have a much harder time paying back their debts. As people go bankrupt, they drag others down with them. A collapsing house of cards is another way of spelling depression.

Preventing bubbles?

If land values didn’t get inflated, of course they would not have to get deflated.Call it mutual compensation for deprivation from part of our common natural heritage. While in rhythmic systems, prices must rise and fall, but they need not boom then bust; they could climb then glide. What would temper economies, preventing bubbles? Rather than let a few lucky owners collect land values, neighbors would have to recover land values for themselves. Nobody made land, and no lone owner made its value; the presence of society in general did that. Plus, for excluding everyone else from their sites, owners owe everyone else, as each one of us owes everyone for excluding them.

To recover land value, government could either transform the property tax into a land tax or replace it and other taxes with land dues or land use fees or an annual deed fee. ...

To pay the land dues, owners use their land efficiently; owners who had been speculating get busy and develop. No longer allowed to tax anything that moves, local governments, too, which presently let acres of abandoned urban land and buildings lie fallow, get busy, too, and make sure to get those acres into the hands of ambitious owners who’ll pay land dues. More locations put to use and more buildings put up increases supply, which dampens price.

Better still, as government recovers land rent, that leaves owners with less land rent to capitalize into land price. Hence buyers need not borrow so much.  ...

Land would still rise in value. With every discovery of a nearby natural resource. With the opening of every new bridge. With every techno-advance, as silicon wafers did for Silicon Valley. With every jump in income and drop in crime, land value rises. But no longer into a bubble. Because every rise would find its way – via land dues and rent dividends – into everyone’s pockets. ...

If the 18-year average holds for this cycle, then real estate still has a few more years of sucking all the investments and purchasing power out of the rest of the economy. Land is still able to soak it all up, and lenders are still willing to pump more in. So despite the premature panic (markets almost never do what everybody says they’re going to do), Mankiw’s 2007 would be the earliest that the current bubble would burst, and 2008 is just as likely.

Then land prices will fall for a few years. Since the run-up was steep, the drop will be, too – after correcting for inflation, maybe as much as 50%. Which will be an enormous relief for the economy – just what the doctor ordered. With land affordable again, a new cycle can get under way. Whether the new one will be boom and bust or climb and glide is up to us, whether we’re willing to practice geonomics, to forego taxes and subsidies in favor of land dues and a Citizens Dividend.

While I don’t mind the current gambling, I do mind the widening of the cavernous gulf between haves and have-nots, and I boil over while workweek grows more onerous, and just seethe watching vacant lots and abandoned buildings push development out from urban cores to sprawl on suburban farmland. To reverse that, let’s let go of the individual owner’s hold on land rent and share Earth’s worth equitably among us all. We’ll all be glad we did. ...  Read the whole article
Michael Hudson and Kris Feder: Real Estate and the Capital Gains Debate
On the other hand, the Fed statistics37 understate land values for methodological reasons. Starting with estimates for overall real estate market prices, Fed statisticians subtract estimated replacement prices for existing buildings and capital improvements to derive land values as a residual. These replacement prices are based on the Commerce Department’s index of construction costs. Thus, building values are estimated to increase steadily over time, on the implicit assumption that all such property is worth reproducing at today’s rising costs.
37 Balance Sheets for the U.S. Economy, 1945-94, Tables B. 11, B. 12 and R 11.

However, the value of any building tends eventually to decline, until finally it is scrapped and replaced. It is the value of land which tends to rise as population and income grow (over the long run, with cyclical swings), precisely because no more land can be produced. Thus, capital gains in real estate result mainly from land appreciation.

Building values fall because of physical deterioration, but also because buildings undergo locational obsolescence as neighborhood land uses change over time, so market prices tend to fall below replacement costs. It would not be economical to rebuild many types of structures on the same site if they were suddenly destroyed.38 In particular, where land use is intensifying over the long run, rising land values effectively drain the capital value out of old buildings. This is because the salvage value of land (its worth upon renewal) tends to rise, while the scrap or salvage value of most immovable improvements is negligible. Where land has alternative uses, rent is not its current net income but its opportunity cost -- the minimum yield required by the market to warrant keeping the land in its present use instead of converting it to the best alternative use. As the land value rises, a rising share of the property income must be imputed to the land and a falling share remains to be imputed to the improvements.Read the whole article

Henry George: The Land for the People (1889 speech)

I said that rent is a natural thing. So it is. Where one man, all rights being equal, has a piece of land of better quality than another man, it is only fair to all that he should pay the difference. Where one man has a piece of land and others have none, it gives him a special advantage; it is only fair that he should pay into the common fund the value of that special privilege granted him by the community. That is what is called economic rent.

BUT over and above the economic rent there is the power that comes by monopoly, there is the power to extract a rent, which may be called monopoly rent. On this island that I have supposed we go and settle on, under the plan we have proposed each man should pay annually to the special fund in accordance with the special privilege the peculiar value of the piece of land he held, and those who had land of no peculiar value should pay nothing. That rent that would be payable by the individual to the community would only amount to the value of the special privilege that he enjoyed from the community. But if one man owned the island, and if we went there and you people were fools enough to allow me to lay claim to the ownership of the island and say it belonged to me, then I could charge a monopoly rent; I could make you pay me every penny that you earned, save just enough for you to live; and the reason I could not make you pay more is simply this, that if you would pay more you would die. 

THE power to exact that monopoly rent comes from the power to hold land idle -- comes from the power to keep labor off the land. Tax up land to its full value and that power would be gone; the richest landowners could not afford to hold valuable land idle. Everywhere that simple plan would compel the landowner either to use his land or to sell out to some one who would; and the rent of land would then fall to its true economic rate--the value of the special privilege it gave would go not to individuals, but to the general community, to be used for the benefit of the whole community. ...  

... THE way to secure equality is plain. It is not by dividing the land; it is by calling upon those who are allowed possession of pieces of land giving special advantage to pay to the whole community, the rest of the people, aye, and including themselves--to the whole people, a fair rent or premium for that privilege, and using the fund so obtained for the benefit of the whole people. What we would do would be to make the whole people the general landlord, to have whatever rent is paid for the use of land to go, not into the pockets of individual landlords, but into the treasury of the general community, where it could be used for the common benefit.

Now, rent is a natural and just thing. For instance, if we in this room were to go together to a new country and we were to agree that we should settle in that new country on equal terms, how could we divide the land up in such a way as to insure and to continue equality? If it were proposed that we should divide it up into equal pieces, there would be in the first place this objection, that in our division we would not fully know the character of the land; one man would get a more valuable piece than the other. Then as time passed the value of different pieces of land would change, and further than that if we were once to make a division and then allow full and absolute ownership of the land, inequality would come up in the succeeding generation. One man would be thriftless, another man, on the contrary, would be extremely keen in saving and pushing; one man would be unfortunate and another man more fortunate; and so on. In a little while many of these people would have parted with their land to others, so that their children coming after them into the world would have no land. The only fair way would be this-- that any man among us should be at liberty to take up any piece of land, and use it, that no one else wanted to use; that where more than one man wanted to use the same piece of land, the man who did use it should pay a premium which, going into a common fund and being used for the benefit of all, would put everybody upon a plane of equality. That would be the ideal way of dividing up the land of a new country.

THE problem is how to apply that to an old country. True we are confronted with this fact all over the civilized world that a certain class have got possession of the land, and want to hold it. Now one of your distinguished leaders, Mr. Parnell in his Drogheda speech some years ago, said there were only two ways of getting the land for the people. One way was to buy it; the other was to fight for it. I do not think that is true. I think that Mr. Parnell overlooked at that time a most important third way, and that is the way we advocate.

That is what we propose by what we call the single tax. We propose to abolish all taxes for revenue. In place of all the taxes that are now levied, to impose one single tax, and that a tax upon the value of land. Mark me, upon the value of land alone -- not upon the value of improvements, not upon the value of what the exercise of labor has done to make land valuable, that belongs to the individual; but upon the value of the land itself, irrespective of the improvements, so that an acre of land that has not been improved will pay as much tax as an acre of like land that has been improved. So that in a town a house site on which there is no building shall be called upon to pay just as much tax as a house site on which there is a house.

I said that rent is a natural thing. So it is. Where one man, all rights being equal, has a piece of land of better quality than another man, it is only fair to all that he should pay the difference. Where one man has a piece of land and others have none, it gives him a special advantage; it is only fair that he should pay into the common fund the value of that special privilege granted him by the community. That is what is called economic rent. BUT over and above the economic rent there is the power that comes by monopoly, there is the power to extract a rent, which may be called monopoly rent. On this island that I have supposed we go and settle on, under the plan we have proposed each man should pay annually to the special fund in accordance with the special privilege the peculiar value of the piece of land he held, and those who had land of no peculiar value should pay nothing. That rent that would be payable by the individual to the community would only amount to the value of the special privilege that he enjoyed from the community. But if one man owned the island, and if we went there and you people were fools enough to allow me to lay claim to the ownership of the island and say it belonged to me, then I could charge a monopoly rent; I could make you pay me every penny that you earned, save just enough for you to live; and the reason I could not make you pay more is simply this, that if you would pay more you would die. 

THE power to exact that monopoly rent comes from the power to hold land idle -- comes from the power to keep labor off the land. Tax up land to its full value and that power would be gone; the richest landowners could not afford to hold valuable land idle. Everywhere that simple plan would compel the landowner either to use his land or to sell out to some one who would; and the rent of land would then fall to its true economic rate--the value of the special privilege it gave would go not to individuals, but to the general community, to be used for the benefit of the whole community.

I cannot pass on without mentioning the name of one of the distinguished Irishmen who have declared for the principle long before they heard of me. I refer to only one name. Many of you know, and doubtless all of you have heard, of Dr. Nulty, the Bishop of Meath.

IN 1881, before I had ever been in Ireland or Dr. Nulty had ever heard of me, he wrote a letter on the Land Question to the clergy and laity of the diocese of Meath. Dr. Nulty lays down precisely the principle that I have endeavored to lay down here before you briefly, that there is a right of ownership that comes from work, from production; that it is the law of nature, the law of God,

  • that all men should work;
  • that what a man produces by his labor belongs to him;
  • that the reservoir from which everything must come -- the land itself -- can belong to no man, and
  • that its proper treatment is just as I have proposed to let there be security of possession and to let those who have special privileges pay into the common fund for those privileges, and to use that fund for the benefit of all.

Dr. Nulty goes on to say what every man who has studied this subject will cordially endorse, that the natural law of rent -- that law by which population increases the value of land in certain places and makes it grow higher and higher -- that principle by which, as the city grows, land becomes more valuable -- that that is to his mind the clearest and best proof, not merely of the intelligence but of the beneficence of the Creator. For he shows clearly that that is the natural provision by virtue of which, if men would only obey God's law of justice, if men would only obey the fundamental maxim of Christianity to do to others as they would be done to them: that by virtue of that provision, as the advance of civilization went on, it would be towards a greater and greater equality among men-not a now to a more and more monstrous inequality.  Read the whole speech

The Most Rev. Dr Thomas Nulty, Roman Catholic Bishop of Meath (Ireland): Back to the Land (1881) 

How Political Economists Define Rent
Adam Smith says: "Rent may be considered as the produce of those powers of nature the use of which the landlord lends to the farmer. It is the work of nature which remains after deducting or compensating all that can be regarded as the work of man. It is seldom less than a fourth, and frequently more than a third of the whole produce." The part then of the agricultural products of the land which is the result of the operations of the powers of nature is sometimes more than a third of the whole -- and that is the Rent of the landlord.

Ricardo, the inventor of the celebrated theory of Rent, called after his name (Ricardo's "Theory of Rent"), defines Rent to be: "That portion of the produce of the earth which is paid to the landlord for the use of the original and indestructible powers of the soil. It is often confounded with the interest and profit of capital… In the future pages of this work, then, whenever I speak of the Rent of land, I wish to be understood as speaking of the compensation which is paid to the owner of the land for the use of its original and indestructible properties."

Scrope writes of it: "The value of land and its power of yielding a Rent are due to two circumstances. 1. The appropriation of its natural power. 2. The labour applied to its amelioration. Under the first of these relations Rent is a monopoly. It restricts our usufruct and enjoyment of the gifts which God has given to men for the satisfaction of their wants."

Senior thus speaks of Rent: "The instruments of production are labour and natural agents. Natural agents having been appropriated, proprietors charge for their use under the form of Rent, which is the recompense of no sacrifice whatever, and is received by those who have neither laboured nor put by, but who merely hold out their hands to accept the offerings of the rest of the community."

McCulloch defines it: "What is properly termed Rent is the sum paid for the use of the natural and inherent powers of the soil. It is entirely distinct from the sum paid for the use of buildings, enclosures, roads or other ameliorations." Rent is, then, always a monopoly.

Lastly, Mill says: "The land is the principal of the natural agents which are capable of being appropriated, and the consideration paid for its use is called Rent. . . .It is at once evident that Rent is the effect of a monopoly."   Read the whole letter
A.J.O. [probably Mark Twain]: Slavery

Suppose I am the owner of an estate and 100 slaves, all the land about being held in the same way by people of the same class as myself.  ...
Suddenly a brilliant idea strikes me. I reflect that there is no unoccupied land in the neighbourhood, so that if my laborers were free they would still have to look to me for work somehow.  ...

Most of them think they would like to have a piece of land and work it for themselves, and be their own masters.  ...
"But," softly I observe, "you are going too fast. Your proposals about the tools and seed and your maintenance are all right enough, but the land, you remember, belongs to me. You cannot expect me to give you your liberty and my own land for nothing. That would not be reasonable, would it?"  ...
Still I am ready to do what I promised — "to employ as many as I may require, on such terms as we may mutually and independently agree."  ...
So they all set to at the old work at the old place, and on the old terms, only a little differently administered; that is, that whereas I formerly supplied them with food, clothes, etc., direct from my stores, I now give them a weekly wage representing the value of those articles, which they will henceforth have to buy for themselves. ...

Instead of being forced to keep my men in brutish ignorance, I find public schools established at other people's expense to stimulate their intelligence and improve their minds, to my great advantage, and their children compelled to attend these schools. The service I get, too, being now voluntarily rendered (or apparently so) is much improved in quality. In short, the arrangement pays me better in many ways.


But I gain in other ways besides pecuniary benefit. I have lost the stigma of being a slave driver, and have, acquired instead the character of a man of energy and enterprise, of justice and benevolence. I am a "large employer of labour," to whom the whole country, and the labourer especially, is greatly indebted, and people say, "See the power of capital! These poor labourers, having no capital, could not use the land if they had it, so this great and far-seeing man wisely refuses to let them have it, and keeps it all for himself, but by providing them with employment his capital saves them from pauperism, and enables him to build up the wealth of the country, and his own fortune together."

Whereas it is not my capital that does any of these things. ...
But now another thought strikes me. Instead of paying an overseer to work these men for me, I will make him pay me for the privilege of doing it. I will let the land as it stands to him or to another — to whomsoever will give the most for the billet. He shall be called my tenant instead of my overseer, but the things he shall do for me are essentially the same, only done by contract instead of for yearly pay.  ....
For a moderate reduction in my profits, then — a reduction equal to the tenant's narrow margin of profit — I have all the toil and worry of management taken off my hands, and the risk too, for be the season good or bad, the rent is bound to be forthcoming, and I can sell him up to the last rag if he fails of the full amount, no matter for what reason; and my rent takes precedence of all other debts. ...

If wages are forced down it is not I that do it; it is that greedy and merciless man the employer (my tenant) who does it. I am a lofty and superior being, dwelling apart and above such sordid considerations. I would never dream of grinding these poor labourers, not I! I have nothing to do with them at all; I only want my rent -- and get it. Like the lillies of the field, I toil not, neither do I spin, and yet (so kind is Providence!) my daily bread (well buttered) comes to me of itself. Nay, people bid against each other for the privilege of finding it for me; and no one seems to realise that the comfortable income that falls to me like the refreshing dew is dew indeed; but it is the dew of sweat wrung from the labourers' toil. It is the fruit of their labour which they ought to have; which they would have if I did not take it from them.

This sketch illustrates the fact that chattel slavery is not the only nor even the worst form of bondage. When the use of the earth — the sole source of our daily bread — is denied unless one pays a fellow creature for permission to use it, people are bereft of economic freedom. The only way to regain that freedom is to collect the rent of land instead of taxes for the public domain.

Once upon a time, labour leaders in the USA, the UK and Australia understood these facts. The labour movements of those countries were filled with people who fought for the principles of 'the single tax' on land at the turn of the twentieth century. But since then, it has been ridiculed, and they have gradually yielded to the forces of privilege and power — captives of the current hegemony — daring no longer to come to grips with this fundamental question, lest they, too, become ridiculed.

And so the world continues to wallow in this particular ignorance — and in its ensuing poverty and debt.  Read the whole essay

a synopsis of Robert V. Andelson and James M. Dawsey: From Wasteland to Promised land: Liberation Theology for a Post-Marxist World
"The profit of the earth is for all" (Eccles. 5:9). The Old Testament ethic, to assure everyone the same natural opportunity, asserts that all people have an equal right to economic rent, and the Levite tithe demonstrates that the socialization of rent offsets the ethical and practical harm resulting from private land ownership. But there is another basis for its advocacy: Rent should be taken by society because it is a social product. Rent arises in large measure from two societal phenomena: the mere presence of population, and community activity in a particular area. More people means more demand for space on which to live and work. Community activities such as roads, schools, protection, parks, sewage, utilities and other public services, as well as the totality of private commercial and cultural operations, all make land more productive or desirable. It follows that a community which funds such improvements out of its rent fund will be provided with a stable and growing fund with which to maintain and improve them. And unlike conventional taxes, the collection of this fund will enhance, not penalize, the production of wealth.

Individuals, in their bare capacity as landowners, do nothing to produce land value. By withholding sites from use, whether for speculation or for other reasons, they may generate scarcity, artificially inflating rent, but this does not reflect any positive contribution to production on the part of landowners.

While land value is not the only type of unearned increment, unearned income resulting from such advantages as talent, genes or luck is not at the expense of others. Even Karl Marx admitted: "The monopoly of property in land is even the basis of the monopoly of capital." Marx could have -- but did not -- champion the abolition of land monopoly; instead he advocated its transfer from private into state hands. It was left to Henry George to expound how the universal principles of justice found in the Mosaic model could be applied to the modern age in all its economic aspects -- rural and urban, agricultural and industrial, technologically undeveloped or advanced.

What George advocated was to leave land titles in private hands but to appropriate land rent via the existing machinery of property taxation. "I do not propose either to purchase or to confiscate private property in land. The first would be unjust; the second, needless....It is not necessary to confiscate land; it is only necessary to confiscate rent." No owner or tenant would be expropriated or evicted. No limit would be placed on the quantity of land one could hold, as long as the annual rent were paid.

Coordinately with the capture of rent as public revenue, taxes on products of human labor -- improvements, personal property, services, commodities, wages, etc. -- would be reduced and ultimately eliminated.

George considered his remedy no mere human contrivance. He saw the growth of land value and the easy means of equitably distributing it as an expression of benevolent supernatural design: "As civilization goes on... so do the common wants increase and so does the necessity for public revenue arise. And so in that value which attaches to land, not by reason of anything the individual does, but by reason of the growth of the community, is a provision intended -- we may safely say intended -- to meet that social want."

George's remedy goes a long way to stop current inequity and prevent future inequity. While past inequity, in the form of accumulations of capital based on previous land speculation and monopoly cannot be accurately redressed, these fortunes can be impelled to serve the needs of the public via investment in production, not by further investment in land speculation and monopoly.  ...

To recognize that "the earth is the Lord's" is to see that the same God who established communities has also in his providence ordained for them, through the land itself, a just source of revenue. Yet, in the Wasteland in which we live, this revenue goes mainly into the pockets of monopolists, while communities meet their needs by extorting individuals the fruits of their honest toil. If ever there were any doubt that structural sin exists, our present system of taxation is the proof. Everywhere we see governments penalizing individuals for their industry and creativity, while the socially produced value of land is reaped by speculators in exact proportion to the land which they withhold. The greater the Wasteland, the greater the reward. Does this comport with any divine plan, or notion of justice and human rights? Or does it not, rather, perpetuate the Wasteland and prevent the realization of the Promised Land?

This not meant to suggest that land monopolists and speculators have a corner on acquisitiveness or the "profit motive," which is a well-nigh universal fact of human nature. As a group, they are no more sinful than are people at large, except to the degree that they knowingly obstruct reforms aimed at removing the basis of exploitation. Many abide by the dictum: "If one has to live under a corrupt system, it is better to be a beneficiary than a victim of it."

But they do not have to live under a corrupt system; no one does. The profit motive can be channeled in ways that are socially desirable as well as in ways that are socially destructive. Let us give testimony to our faith that the earth is the Lord's by building a social order in which there are no victims.  Read the whole synopsis

Does all land have rent?  Not necessarily! Farmland on the fringe may be rent-free, or very close to it, particularly if it requires irrigation. But as soon as more than one person wants to use it, it has rent.

Henry George: The Great Debate: Single Tax vs Social Democracy  (1889)

The ideal plan would allow every man who wished to use land to obtain it, and to possess what he wished to use so long as no one else wished to use it, and if the land be so superior that more than one wanted to use it, a proper payment according to its superiority should be made to the community, and by that community used for the common benefit. (Hear, hear.) ...
Whether the rent is large or small is not of importance to the principle. I would take rent – always meaning by rent economic rent – for the community because it belongs to the community. (Cheers.) I would not abolish it; I would exact it from anyone who used land wherever it was used; because that is the only way in which all can be put upon an equality. (Hear, hear.)

If you are to leave to the man who gets possession of a piece of land in the centre of London the whole rent you give him an enormous advantage over the man who for his purposes, to get his land, has to go to some out of the way district or up to the Highlands of Scotland. (Hear, hear.)

The importance that we attribute to this taking of rent is that it is not merely taking that much from a source that will not restrict industry, will not oppress labour, will not hamper production; but it will make mere landownership utterly valueless. (Applause.) By taking the rent

  • we make it unprofitable to hold land in expectation of future increase in its value. (Cheers.)
  • We make it impossible to extort from the worker a monopoly rent (Hear, hear.)
  • We make it impossible for great landowners to hold vast tracts of land – which their fellow citizens would be glad to make fruitful – in idleness or for purposes of pleasure. (Loud cheers.)
Tax land values up to the full and what would you have? The land that has no value, that is to say, the land that two men do not want to use could be had by labour not merely without price, but without tax. The selling value of land would be destroyed, and all that the user of land need pay would be a price amounting to the special advantage that he had above his fellows by the possession and use of a particular piece of land. ... Read the entire article

Mark Twain   Archimedes
I know of a mechanical force more powerful than anything the vaunting engineer of Syracuse ever dreamed of. It is the force of land monopoly; it is a screw and lever all in one; it will screw the last penny out of a man's pocket, and bend everything on earth to its own despotic will. Give me the private ownership of all the land, and will I move the earth? No; but I will do more. I will undertake to make slaves of all the human beings on the face of it. Not chattel slaves exactly, but slaves nevertheless. What an idiot I would be to make chattel slaves of them. I would have to find them salts and senna when they were sick, and whip them to work when they were lazy.

No, it is not good enough. Under the system I propose the fools would imagine they were all free. I would get a maximum of results, and have no responsibility whatever. They would cultivate the soil; they would dive into the bowels of the earth for its hidden treasures; they would build cities and construct railways and telegraphs; their ships would navigate the ocean; they would work and work, and invent and contrive; their warehouses would be full, their markets glutted, and:

The beauty of the whole concern would be
That everything they made would belong to me.

It would be this way, you see: As I owned all the land, they would of course, have to pay me rent. They could not reasonably expect me to allow them the use of the land for nothing. I am not a hard man, and in fixing the rent I would be very liberal with them. I would allow them, in fact, to fix it themselves. What could be fairer? Here is a piece of land, let us say, it might be a farm, it might be a building site, or it might be something else - if there was only one man who wanted it, of course he would not offer me much, but if the land be really worth anything such a circumstance is not likely to happen. On the contrary, there would be a number who would want it, and they would go on bidding and bidding one against the other, in order to get it. I should accept the highest offer - what could be fairer? Every increase of population, extension of trade, every advance in the arts and sciences would, as we all know, increase the value of land, and the competition that would naturally arise would continue to force rents upward, so much so, that in many cases the tenants would have little or nothing left for themselves.... Read the whole piece

Fred Foldvary: A Geoist Robinson Crusoe Story

Once upon a time, Robinson G. Crusoe was the only survivor of a ship that sunk. He floated on a piece of wood to an unpopulated island. Robinson was an absolute geoist. He believed with his mind, heart, and soul that everyone should have an equal share of land rent.

Since he was the only person on this island, it was all his. He surveyed the island and found that the only crop available for cultivation was alfalfa sprouts. The land was divided into 5 grades that could grow 8, 6, 4, 2, and zero bushels of alfalfa sprouts per month. There was one acre each for 8, 6, and 4, and 100 acres of 2-bushel land. For 8 hours per day of labor, he could work 4 acres. So he could grow, per month, 8+6+4+2 = 20 bushels of alfalfa sprouts, much more than enough to feed on.

One day another survivor of a sunken ship floated to the island. His name was Friday George. Friday was a boring talker and kept chattering about trivialities, which greatly irritated Robinson. "I possess the whole island. You may only have this rocky area," said Robinson. ... Read the whole piece

Bill Batt: The Compatibility of Georgist Economics and Ecological Economics
In the United States, the definition of real property as explicated in the legal Commentaries of Sir William Blackstone may have been pivotal in the adoption of freehold interpretations of ownership over leasehold.21 For several years after this nation was founded which system of title would prevail hung in the balance.22 Thomas Paine was certainly an advocate of the latter,23 as was Jefferson.24 Hamilton, on the other hand, was a defender of propertied interests and titles in fee simple, and especially to his in-laws, the landowning families of upstate New York known as the Patroons.25 Leaseholds were used in several of the colonies, with the fees paid to governors.26 

Rent becomes critically important in Georgist economics, because rent is the increment of market gain that accrues to choice land parcels. This insight arose originally in the context of agricultural societies, where differential qualities of land were recognized by varied payment in rent. An individual’s return on investment was represented by his labor — that was his and his alone to keep. So also were whatever capital goods he acquired through the efforts of his past labor. On the other hand, whenever land offered a higher yield separate from whatever the individual’s labor investment might represent, this constituted a windfall gain above and beyond what might be minimally expected. This is land rent, and it exists even if it isn’t collected. Today, as earlier noted, the greatest land rents derive from their location, grown out of nearby social investment.

The concept of rent needs further explication precisely because it is so foreign to 20th century students, even those who have been schooled in economics at it is currently taught. Land rent has no relationship to the word rent as it is used in contemporary vernacular, that is, when one rents a car or an apartment. Rather, rent is a surplus, defined as the return on investment above and beyond what is minimally required to bring a service into production. To take just an elementary example, consider that there are three parcels of land available for farming and three farmers of equal ability and enterprise. But suppose the parcels differ in their productive capacity, due perhaps to their fertility, access to water, and so on. If planted with similar quality seed, the three parcels will yield different quantities of harvest, the one with the highest quality land having the best return. The one with the lowest quality land would in like fashion have the lowest return. Economic rent is defined as the amount of surplus harvest qualitatively measured by the difference between the parcel with the highest return and that with the lowest return. ...

As with all nineteenth century moral philosophers, Henry George subscribed to a belief in natural law. The natural order of things as he saw it required that land be held in usufruct and that rent from such should be returned to society. The theory was inspired by his deeply religious roots and grounded in his reading of the prominent thinkers that predated him. The natural order was also a moral order, and the failure to comply with the order of nature and society as he saw it was a perversion of justice. The fruits of the land belonged to everyone, just as the fruits of one’s own labor were uniquely one’s own. Since one owned one’s body, one was entitled to keep the product of one’s physical efforts. Society had no more right to confiscate the earnings of one’s sweat and brow than it ought to leave in the hands of rich landowners the rent that was everyone’s inherent birthright to be shared. There were just and unjust taxes, and the only just tax was that which grew out of rent, of the unearned increment that visited certain land sites as windfall gains because of the efforts and investments by the community. Income and excise taxes were unjust and confiscatory— even theft, as especially were tariffs. Taxing or collecting land rent alone was the means of ending poverty and restoring progress. Indeed many Georgists reject use of the word tax entirely, preferring instead to talk instead about rent collection. There is even a lapel button Georgists use that says “Abolish all taxes; collect ground rent instead.” ... read the whole article

Bill Batt: Who Says Cities are Poor? They Just Don't Know How to Tax Their Wealth!

The premises of discourse

What is most called for today is a return to basic analysis. Elementary economics starts with the recognition that there are three factors of production in the creation of social wealth. Each of those factors are mutually exclusive and, taken together, are jointly exhaustive of all sources of market value. The first of these is what classical economics from Adam Smith on called land. Land meant every aspect of nature to which industry can be applied; it meant not just locations of space but air, water, and mineral wealth. Today sunlight, radio waves, and even time, on occasion, would be added. The second factor of production is labor, referring quite simply to the effort applied by people's minds or bodies to land. The third factor is the product of past application of land and labor to current production: capital. Each factor in classical economics has its price, the product of which is the creation of wealth as we commonly understand it. The price of labor is wages; the price of capital is interest, and the price of land is rent. Rent, as understood in economics, is not payment for the use of property owned by others; it has, rather, a more technical meaning, one which will require greater explication below.

We have largely lost sight of these basic premises of economic thought, and it has led to our general inability to address the urban challenge of taxation with a perspective that offers an easy solution. Returning to these fundamental building blocks makes things much simpler and more comprehensible. Labor continues to be easily understood; its meaning has not changed in the course of a shift from classical to neoclassical economic thought. But capital, which had earlier encompassed only those creations that were the result of human enterprise— the product of labor and land, has now been redefined to include land. Land by itself in contemporary neoclassical economics has dropped out of the equation altogether, and so for the most part has the concept of economic rent.[4] Mathematical formulas in neoclassical economics are entirely changed.

There is good reason, however, to recover the use of the terms land and rent as they were employed in 19th century classical economics: rent is the surplus produced by the collective enterprise that can provide the necessary revenue to easily support public services, if it were only collected in the form of taxes.[5] In fact, by shifting taxes off labor and capital and onto land rent, the performance of markets would be made fully efficient and would be essentially painless to taxpayers. This is the thesis I am arguing here, and which is now possible to demonstrate with the advent of computer power and available data. It amplifies and validates what has been for a century only a plausible theoretical claim. We can now show that collecting economic rent can provide for all the services demanded of cities and avail themselves of the proper tax base that exceeds all others.[6] And unlike other taxes there is no downside impact; in fact it's positive. Economic rent is the surplus created by the community, and it circulates through the markets until it ultimately comes to settle on land sites.[7] The result of its accretion to land sites is to raise their market price. Economic rent is sometimes called land rent or ground rent for this reason, and comes about not through any titleholder's individual enterprise but by the consequence rather of society's collective effort. British political economist David Ricardo first conceived of land rent in terms of its relationship to agricultural production in the early 1800s, but its applicability today is understood far more easily with regard to the site values in cities. Whereas ground rent to Ricardo reflected the differential gifts of nature inherent in various land sites, it is today better understood as reflective of locational differentials in the capacities of communities. ... read the whole article

Bill Batt: Stemming Sprawl: The Fiscal Approach

Land Rent

From the standpoint of an economic geographer and for some land economists, land rent is simply capitalized transportation cost. Land rent is the surplus generated by social activity on or in the vicinity of locational sites that accrues to titleholders of those parcels. Whether or not it is recaptured by public policy, rent is a natural factor deriving from the intensive use of natural capital. One must return to nineteenth-century classical economics to appreciate the importance of economic rent or land rent; neoclassical economic frameworks have largely discarded it.[13] More intensive use of high-value land sites leads to site configurations that are less dependent on transportation services. Land rent is highest where the greatest traffic and market exchanges occur, that being at the center of large conurbations. Comparing land values of urban property parcels, the highest land rent in the urban cores and traffic junctures are analogous to the contours of land elevations. Mountain peaks gradually slope down to valleys and flatland regions and continue outward until at distant points — perhaps at the poles of the earth — land sites have no market value at all.

The differentials in land values are profound, even more than most people realize. In 1995, in the small city of Ithaca, New York, the highest quintile of land had a value of over $56,000 per acre in the downtown center, whereas the lowest quintile only a mile away falls to less than $3,000.[14] Large city centers have far higher site prices. Even in Polk County, Iowa (which includes Des Moines), in the middle of cornfields where I did a study two years ago, the highest urban value land site was $31.3 million per acre, which quickly declined to about $20,000 per acre only about a mile away. In the spring of 1998, one land parcel (the building was to be razed) of less than an acre in New York City's Times Square and split in two pieces by Broadway was sold by Prudential Life to Disney for roughly $240 million.[15] To take another instance, a nine-acre tract on the East River in New York City occupied by an obsolete power plant was purchased by Mort Zuckerman to build high-rise condominiums two years ago. The sale price was in the neighborhood of $680 million and would have been higher were it not for some enormous costs associated with the demolition of the old structures.[16] It should be noted that the overwhelming proportion of land value is in cities; relatively speaking, the site values of peripheral lands, typically used for agriculture and timber growth, are negligible. Land values are high in urban areas because, over time, rent accrues to a site. Each improvement in proximity to a property parcel enhances the value of all other parcels. This makes even unimproved sites attractive objects for speculation, particularly when land sites surrounding it are to be improved by adding either transportation service or new structures. One nine-mile stretch of interstate highway in Albany, New York, costing $125 million to construct, has yielded $3.8 billion in increased land values (constant dollars) within just two miles of its corridor in the forty years of its existence.[17] This is a thirty-fold return in a time span typically used for bond repayment! The Washington Metro created increments in land value along much of the 101-mile system completed by 1980 that easily exceeded $3.5 billion, compared with the $2.7 billion of federal funds invested in Metro up until that time.[18] Any major building construction project, private or public, will have a similar effect on adjacent land sites. Differentials in land value can have a profound effect on decisions made by titleholders, either positively by inducing appropriate development in urban cores or negatively by giving monopoly titleholders power to hold sites out of use for long-term speculative gain. Such decisions of course determine the character of urban configurations and society as well. ...

Just as recovering the costs of transportation service equilibrates costs and benefits on one side of the equation, recovering the economic rent accruing to land value facilitates efficient space configurations on the other side. Figure 10.2, again conceptually, portrays how the collection of various transportation user fees as well as the recovery of land rent corrects the economic distortions that today result in sprawl development. The shaded area indicates the pricing correctives necessary to ensure that neither urban nor rural land sites are disadvantaged in travel or location choices that individuals make for either residential or commercial purposes.

As it happens, collecting land rent is a relatively simple operation: It involves a small computer adjustment in the assessment base of what is now the local real property tax. The real property tax to an economist is really two separate taxes: that put on land value and that put on improvement values. A gradual phaseout of the tax on the improvement component, shifting totally to a tax on the land, recovers economic rent in a way that satisfies all the principles of sound tax theory.[35] It is efficient, neutral, equitable, administrate, stable, and simple. It is also absolutely foolproof: One cannot hide land or take it to a remote tax haven. It relieves poor households (who typically own no land) of any tax burden and rewards those titleholders who use their sites efficiently. High-value sites are induced to construct high-value improvements, and low-value sites are left alone. In this way, central locations, where commercial enterprises typically locate, pay according to their intensity; home owners, who typically locate at the periphery of a neighborhood community, pay moderately; and agricultural land and forestlands pay little if anything. By an automatic and natural process, the centrifugal forces of sprawl development are reversed, and investment is encouraged in core locales. The higher density resulting affords the necessary ten to twelve households per acre (or the commercial equivalent) that makes public transportation service economically viable, lessening the prospect of automobile dependency.[36] ... read the whole article

Bill Batt: Water and Privatization
... But only recently, with the advent of data availability and increased computer power, is it possible to demonstrate that Henry George was right: i.e. that taxing what he called "land" - really meaning all natural capital and resources rather than labor or human capital - constitutes the best possible tax design we could have.

If these natural resources are a "commons" worthy of being preserved as the birthright of all humanity, their use can be rented at rates sufficient to cover the costs of not only the provision of those services but for all public needs. All taxes are ultimately shifted through the economy to rest on what classical economists call land rent in any case, and levying the taxes directly on rent improves efficiency by eliminating "deadweight loss." Moreover, taxing or collecting what classical economists call economic rent bears all the hallmarks of a perfect tax -- fairness, simplicity, stability, administrability, neutrality, and efficiency.... read the whole article

Bill Batt: How the Railroads Got Us On the Wrong Economic Track
As recently as a century ago classical economic thought still regarded land for the most part as the common heritage of mankind. From Adam Smith, through Thomas Malthus, David Ricardo, and finally with John Stuart Mill economic productivity was regarded as a function of three interacting factors: land, labor, and capital. John Locke also accepted these premises. To achieve optimal economic productivity, one had to exact the appropriate price from each of those factors. The price of labor was in wages; the price of capital was interest; and the price of land, particularly following the thinking of David Ricardo, was rent. Rent in its classical sense means payment for the use of something in fixed supply, or, more generally, payments above the costs incurred for its creation. Disequilibriums and inefficiencies in economic development resulted if the appropriate prices were not paid for each factor. But, as we shall see, there were powerful interests in this country, bent on not seeing any rent extracted from land use, that persuaded the nascent economics profession at the end of the 19th century no longer to regard land as a separate factor and to redefine the terms of production instead in two-factor theory. This was concurrent with the inclusion of land as property, since called "real property."... read the whole article
Mason Gaffney: Canada's System of Revenue Sharing

But the most delightful distinction about Canadians is the strong and explicit recognition among almost everyone, even if he's an economist, who discusses this subject, that different resource endowments are the basis of inter-provincial differences. Equalisation in Canadian politics means sharing the economic rent. Everybody talks that way. Canadian economists even when they come to the States talk that way. Just as though rent were a permissible word in polite discourse. It's very refreshing. However there's a very selective attitude towards rent -- towards what rents are shareable, I should say.

  • Rents from oil and gas are fair game.
  • Forest revenues are fair game.
  • Mineral revenues of other kinds are fair game.
  • Water power is fair game.

But now how about the rents that are generated by the valuable lands of Montreal, or Toronto, or some of those other big and powerful cities in the east? They are not fair game. As a matter of fact, if you pore through the fine print of the equalization law, which I did on the airplane, you find the most interesting exception to what's included in the formula. I'll explain the formula to you in a moment if you are still awake.

The formula says that the greater the capacity to raise taxes that a province enjoys, the less will be its equalization payment. And various potential tax bases are included in this formula. And one of those is the property tax. But then you look at the fine print and only the improvements are included. The land is specifically excluded. Very pecular. In the formula as it's commonly printed you don't see that exclusion; it's only in the footnote. But in the footnote it says 'Instead of the value of land we will substitute the gross provincial product.' Of course, all right thinking people know that land value is in direct proportion to the growth of the provincial product. Or do they? I always thought that was the product of other inputs. What it means is that if a province has a great deal of valuable land which is not being used to a highest and best use, that valuable land will not be included in its potential tax base, and it can continue to get subventions from the federal government. Whereas on the other hand if its potential tax base includes oil and gas, then the revenues that it receives from that, or the ability it has to receive revenues from that, is counted against it in the sharing formula. So this is a very peculiar sort of rent sharing. Some rents are shared and others are not. You might even call it a conspiracy against Alberta. I'm sure that's the way they look at it.... read the whole article

Nic Tideman: Land Taxation and Efficient Land Speculation

III. Effects of Land Taxes on Speculation

A. Taxes on the Rental Value of Land

The rental value of land is sometimes defined as the net return from possessing land, after paying the costs of other factors. Such a definition suffices if land has unchanging opportunities. However, when the use to which land can best be put varies with the time when the use begins, such a definition leads to ambiguity regarding the rent of land at any specified time. This ambiguity can be resolved by defining the rent of a site as the opportunity cost of leaving it unused. That is, the rent of a site for the span of time from a to b is the present value of net returns from use of the site beginning at a, minus the present value, discounted to time a, from use of the site beginning at time b (Tideman, 1990). Another way of expressing this is that the rental value of a site for the year beginning now is the amount of money that a person would be willing to pay for the use of the site for one year beginning now, if use carried with it an option to use the site into the indefinite future, upon payment of future rent, which would be defined in the same way. To implement such a recursive definition of rent, there would need to be similar recurring transactions involving similar land, so that amounts due in the future could be specified.

The initial effect on the sale value of land of a tax on the rental value of land (disregarding general equilibrium effects and the value of any services financed by the tax), is to reduce the value of all land by the same percentage as the tax rate. That is, the tax is capitalized into the purchase price of land. It is borne by those who hold land at the time the tax is announced. Feldstein (1977) has shown that in a closed economy, a tax on rent can generate income effects that produce a new equilibrium with higher saving and lower interest rates, which have an upward effect on land prices, thereby shifting at least part of the tax. These effects do not arise in a small open economy, as when a single urban area taxes land. Furthermore, if the proceeds of the tax are used to finance public services that add to the value of land, it is possible for those who hold land to be better off with the combination of taxes and public expenditures than they would be with neither. In any case, income effects do not constitute economic distortions. A tax on the rental value of land has no distorting effects as long as it is assessed in such a way that there is no action that possessors of land can take that will increase or decrease their taxes.

The effect on land speculation of a tax on the rental value of land is to reduce the return from being the one who possesses land when its improved prospects become known. Less effort will be spent in seeking to discover what land will rise in value and in seeking to acquire land in advance of when the rise in value becomes generally known. Because the winner's curse will be less prominent, less land will be withheld from development. ... read the whole article

Nic Tideman: Market-Based Systems for Assigning Rental Value to Land

Selling land-use rights for annual rent allows each year's population to claim that year's rent. While the proceeds of sales can be invested for the benefit of future generations, not collecting the money in advance helps preserve the heritage of the future against political predations. For all of these reasons, I assume that what is desired is not a purchase price but a rental price to be assigned to each site for each year. ...

The idea of renting sites one year at a time may sound unpromising at first. The efficient use of land generally requires improvements that last for many years. How can entrepreneurs be expected to improve land if they are only permitted to rent it for one year at a time? The answer is that entrepreneurs can be expected to make durable improvements to land even under these circumstances, provided that they have the opportunity to continue to use the land they have improved, for a price that is determined in a fair and impartial manner. ... read the whole article

Peter Barnes: Capitalism 3.0 — Chapter 6: Trusteeship of Creation (pages 79-100)

Commons Rent

It shouldn’t be thought that the commons is, or ought to be, a money-free zone. In fact, an important subject for economists (and the rest of us) to understand is commons rent.

By this I don’t mean the monthly check you send to a landlord. In economics, rent has a more precise meaning: it’s money paid because of scarcity. If you’re not an economist, that may sound puzzling, but consider this. A city has available a million apartments. In absolute terms, that means apartments aren’t scarce. But the city is confined geographically and demand for apartments is intense. In this economic sense, apartments are scarce. Now think back to that check you pay your landlord, or the mortgage you pay the bank. Part of it represents the landlord’s operating costs or the bank’s cost of money, but part of it is pure rent — that is, money paid for scarcity. That’s why New Yorkers and San Franciscans write such large checks to landlords and banks, while people in Nebraska don’t.

Rent rises when an increase in demand bumps into a limit in supply. Rent due to such bumping isn’t good or bad; it just is.We can (and should) debate the distribution of that rent, but the rent itself arises automatically. And it’s important that it does so, because this helps the larger economy allocate scarce resources efficiently. Other methods of allocation are possible. We can distribute scarce things on a first come, first served basis, or by lottery, political power, seniority, or race. Experience has shown, though, that selling scarce resources in open markets is usually the best approach, and such selling inevitably creates rent.

Rent was of great interest to the early economists — Adam Smith, David Ricardo, and John Stuart Mill, among others — because it constituted most of the money earned by landowners, and land was then a major cost of production. The supply of land, these economists noted, is limited, but demand for it steadily increases. So, therefore, does its rent. Thus, landowners benefit from what Mill called the unearned increment — the rise in land value attributable not to any effort of the owner, but purely to a socially created increase in demand bumping into a limited supply of good land.

The underappreciated American economist Henry George went further. Seeing both the riches and the miseries of the Gilded Age, he asked a logical question: Why does poverty persist despite economic growth? The answer, he believed, was the appropriation of rent by landowners. Even as the economy grew, the property rights system and the scarcity of land diverted almost all the gains to a landowning minority. Whereas competition limited the gains of working people, nothing kept down the landowners’ gains. As Mill had noted, the value of their land just kept rising. To fix the problem, George advocated a steep tax on land and the abolition of other taxes. His bestselling book Progress and Poverty catapulted him to fame in the 1880s, but mainstream economists never took him seriously.

By the twentieth century, economists had largely lost interest in rent; it seemed a trivial factor in wealth production compared to capital and labor. But the twenty-first century ecological crisis brings rent back to center-stage. Now it’s not just land that’s scarce, but clean water, undisturbed habitat, biological diversity, waste absorption capacity, and entire ecosystems.

This brings us back to common property rights. The definition and allocation of property rights are the primary factors in determining who pays whom for what. If, in the case of pollution rights, pollution rights are given free to past polluters, the rent from the polluted ecosystem will also go to them. That’s because prices for pollution-laden products will rise as pollution is limited (remember, if demand is constant, a reduction in supply causes prices to go up), and those higher prices will flow to producers (which is to say, polluters).

By contrast, if pollution rights are assigned to trusts representing pollutees and future generations, and if these trusts then sell these rights to polluters, the trusts rather than the polluters will capture the commons rent. If the trusts split this money between per capita dividends and expenditures on public goods, everyone benefits.

At this moment, based on pollution rights allocated so far, polluting corporations are getting most of the commons rent. But the case for trusts getting the rent in the future is compelling. If this is done, consumers will pay commons rent not to corporations or government, but to themselves as beneficiaries of commons trusts. Each citizen’s dividend will be the same, but his payments will depend on his purchases of pollution-laden products. The more he pollutes, the more rent he’ll pay. High polluters will get back less than they put in, while low polluters will get back more. The microeconomic incentives, in other words, will be perfect. (See figure 6.1.)

What’s equally significant, though less obvious, is that the macroeconomic incentives will be perfect too. That is, it will be in everyone’s interest to reduce the total level of pollution. Remember how rent for scarce things works: the lower the supply, the higher the rent. Now, imagine you’re a trustee of an ecosystem, and leaving aside (for the sake of argument) your responsibility to preserve the asset for future generations, you want to increase dividends. Do you raise the number of pollution permits you sell, or lower it? The correct, if counterintuitive answer is: you lower the number of permits. ... read the whole chapter


Bill Batt: Comment on Parts of the NYS Legislative Tax Study Commission's 1985 study “Who Pays New York Taxes?”

The problem as I see it is the mixing of two separate dimensions of economic value – what are frequently referred to as stock and flow. Stock value is a variable that has no time dimension, e.g., the stock of capital, or what in real estate is typically understood as the market price of a parcel.19 Flow, by contrast, is the quantity of an economic variable measured over a period of time. So the flow of an investment may be measured as the amount of investment expenditure or the amount of income return in a given time, such as in a yearly period.20 We can easily understand stock when looking at the value of a house or an office building just as we can for a car or a computer, as it represents the investment of labor and capital, and can be priced based on market supply and demand, depreciation, and replacement value much as with any other manufactured good.

The other component of a real property parcel is the land value, which reflects a market price based on very different criteria. Despite the apparent reality that land is visible and tangible, land prices reflect the value of location more than they do the material content they contain. This is easy to understand when one reflects that if some earth is removed from a site and brought to another place, the prices of each site is largely unaffected.21 Location value has duration, and the value of this flow of rights for exclusive use of a site requires a flow price rather than a stock price. This flow is really what classical economists refer to as ground rent or economic rent.22 Also known as “land rent,” it is defined as “a payment to a factor beyond what is needed to put that factor into use; [it is a price for use] beyond what is needed to maintain a market for land.”23 Land has a selling price because we have come to regard land sites as objects, as commodities to be traded,24 and they are understood to have a static price, as a stock rather than as a flow. That stock price really needs to be understood instead as the “present value” of the flow of ground rent minus taxes. “Present value” is an economic term that refers to “the worth of a future stream of returns or costs in terms of their value now.”25 Consideration in this way brings to the fore other concerns and factors. ... read the whole commentary




To share this page with a friend: right click, choose "send," and add your comments.

related themes:

economic rent and building rent


factors of production


rent defined

rent and wages

the law of rent

land different from capital

sources of rent

not passed on

land defined

land includes

land excludes

two-factor economics

three-factor economics

warping of economics

land share of real estate value

urban land values relative to rural

rent and wages

rent as God's provisioning

land as God's provisioning

natural resources

not passed on

land prices

necessity of taking rent

effect of taxing land value

effects of not collecting rent



absentee ownership


land common property

land monopoly

land monopoly capitalism


equity for the landless


underused land

highest and best use


all benefits

free lunch


in one's sleep

paying twice

margin of production

Robinson Crusoe

three parcels

private property

property rights




Native Americans and land


unearned increment


barriers to entry

prolonged adolescence

housing affordability

cost of living

canons of taxation

annual value

Red links have not been visited; .
Green links are pages you've seen

Essential Documents pertinent to this theme:

Top of page
Essential Documents
to email this page to a friend: right click, choose "send"
Wealth and Want
... because democracy alone hasn't yet led to a society in which all can prosper