Astral Codex Ten

the Netherlands

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the Netherlands

Article

the Netherlands is a recurring place in the Astral Codex Ten archive, appearing 4 times across 4 issues between April 16, 2021 and March 30, 2022. The archive places it in contexts such as “Okay, smarty-pants, what about the Netherlands? They’ve been making land for centuries!”; “the top tier would include … the Netherlands”; “could include Germany, the Netherlands, Norway, and Taiwan”. It most often appears alongside China, Netherlands, Belgium.

Metadata

  • Category: Places
  • Mention count: 4
  • Issue count: 4
  • First seen: April 16, 2021
  • Last seen: March 30, 2022

Appears In

Source Context

Recovered passages from the original issue text. When the raw archive preserved outbound links inside the source passage, they are listed directly under the quote.

Your Book Review: Progress And Poverty
April 16, 2021 · Original source
In modern times, George would grant electromagnetic spectrum and orbital real estate for satellites the same status of "land" that already applies to farmland and terrestrial real estate. We don't even need to speculate about whether he'd attach this status to sunlight because he straight-up predicted solar power: Even the lack of rain which makes some parts of the globe useless to man, may, if invention ever succeeds in directly utilizing the power of the sun's rays, be found to be especially advantageous for certain parts of production. (That's from Protection or Free Trade, footnote 19) The important thing to grasp about land is that it comes before everything humans do or make, and is itself a thing no human can make. Okay, smarty-pants, what about the Netherlands? They've been making land for centuries! Well, land in the Georgist sense doesn't refer simply to "dry land", but also the sea bed, the oceans, and the skies above. The "new land" in the Netherlands counts as an improvement to land that already existed. The seabed was always there, but by filling it in so you can walk around on it, now it's more useful to us (George has a lot to say about improvements to land, which we'll get to later). Okay, what is land not? nothing that is freely supplied by nature can be properly classed as capital By George, land is not wealth. And since it's not wealth, it's not capital. Okay, we get it. Land is very special to Mr. George and we must never put it in the same category as wealth, labor, capital, wages, production, money, or anything else. Why exactly is this so damn important? Well, by George, if you treat land the same way you would a bar of pig iron, an hour of work, or a dollar bill, before you know it you'll get poverty paradoxically advancing alongside progress, inexplicable bouts of industrial depression, literal genocides and holocausts (he's dead serious about this), and The Rent Being Too Damn High. With terminology now firmly established, George moves on to the relationship between wages and capital. 3-for-1 special on Wages, Capital, and Labor I'm condensing three chapters here because they all deal with the same basic thing. The question George wants to answer is: Why, in spite of increase in productive power, do wages tend to a minimum which will give but a bare living? The conventional wisdom of George's time is that wages are governed by a fixed ratio between the number of laborers and the amount of capital devoted to their employment, because "the increase in the number of laborers tends naturally to follow and overtake any increase in capital." So it doesn't matter how much capital you throw at employing workers, it'll just attract even more workers splitting it up, so although wages might temporarily wiggle a bit in the long term they'll always settle back to a "natural" minimum. (As we'll see in the next section, this argument stems from Malthusianism). George spends some time methodically poking holes in the theory (it's predictions don't line up with the facts he observes), and then sets out to prove his replacement theory (emphases mine): wages, instead of being drawn from capital, are in reality drawn from the product of the labor for which they are paid. He pulls a G.K. Chesterton to make his point: During the time [the laborer] is earning the wages he is advancing capital to his employer, but at no time, unless wages are paid before work is done, is the employer advancing capital to him. He starts by identifying the source of confusion: Because wages are generally paid in money, and in many of the operations of production are paid before the product is fully completed, or can be utilized, it is inferred that wages are drawn from pre-existing capital I mean, the old theory seems sensible: the employer has capital and uses it to pay wages. But however you slice it, capital's investment gets paid back by production when it takes its cut, so does it even make a difference to talk about where wages are "drawn" from? Value goes out, value comes in, isn't it all a wash? By George, it isn't: in the old theory, because capital "must come first", it follows that "industry is limited by capital - that capital must be accumulated before labor is employed", which leads to a reductio ad absurdum – We are told that capital is stored-up or accumulated labor – "that part of wealth which is saved to assist future production." If we substitute for the word "capital" this definition of the word, the proposition carries its own refutation, for that labor cannot be employed until the results of labor are saved becomes too absurd for discussion. George anticipates the following rejoinder – Well, when we say 'labor is paid out of capital' we don't mean it as an absolute statement for all stages of human development (or else we have a chicken-and-the-egg problem and civilization could never have begun), we just mean it applies to, say, every civilization that's left the stone age. George will have none of it and spends three entire chapters relentlessly beating to death the idea that wages are drawn from capital instead of from production. He starts with the simple case where wages are paid in the form of direct, concrete wealth, then moves on to the more complex case where people are paid in money and other instruments. Laboring for wages: Imagine a fishing village where nobody cooperates – each person digs their own bait and catches their own fish. Then they discover labor specialization and realize they can catch more fish together if one specializes in digging and the other in catching. So the digger digs, the catcher catches, and they share the fish. The digger really contributes as much to the catch as the one who physically pulls the fish off the hook even though the digger never directly "caught" a fish, and the fish he gets for his work is directly paid out of his contribution to the total production. Later, our fisherfolk invent canoes, and one stays home making and repairing canoes. This increases the haul of the digger and catcher, and the canoe-er gets paid out of her contribution to the increased production. And so it goes as society continues to advance. The work the specialist puts in causes more fish to be caught, and that person's wages is drawn from the growing pile of fish. As George puts it: "Earning is making." George gives another example: If I take a piece of leather and work it up into a pair of shoes, the shoes are my wages – the reward of my exertion. Surely they are not drawn from capital – either my capital or any one else's capital – but are brought into existence by the labor of which they become the wages; and in obtaining this pair of shoes as the wages of my labor, capital is not even momentarily lessened one iota... As my labor goes on, value is steadily added, until, when my labor results in the finished shoes, I have my capital plus the difference in value between the material and the shoes. And another: If I hire a man to gather eggs, to pick berries, or to make shoes, paying him from the eggs, the berries, or the shoes that his labor secures, there can be no question that the source of the wages is the labor for which they are paid. George goes on to say it doesn't matter if you're paid in money or directly in wealth, because the money is a direct claim on the underlying wealth. It also doesn't matter if you get paid on commission. Imagine a whaling ship where each crewman gets paid a share out of whatever the ship catches. When the ship sails back into port with a hold full of whale oil and bone, the crew gets paid in money, the owner simultaneously adds to his capital oil and bone. The crew's money directly represents their share of the concrete wealth that is the oil and bone. The owner's capital hasn't decreased, and the workers drew their wages directly from the production. So let's get to the point, Mr. George – wages aren't drawn from capital but instead from production. Great, let's grant that – so what? George hammers away at this because thinking wages are drawn from capital leads to a false conclusion, namely that "labor cannot exert its productive power unless supplied by capital with maintenance." "Maintenance?" Well, workers need food and clothing and they get paid by their employers, so you could imagine capital as a limiting factor on labor. But by George, food and clothing isn't capital, it's just wealth, as we said before. And with regard to wages, the point is that the employer always gets "paid" first, because the second the laborer produces value, the employer's capital increases: As in the exchange of labor for wages the employer always gets the capital created by the labor before he pays out capital in the wages, at what point is his capital lessened even temporarily? Okay, but what if I'm just a terrible businessman and I pay somebody $500 an hour to smash Ming vases, then sell the fragments as aggregate to a construction crew for a few pennies a pound, all at a tremendous loss? Surely then the laborer's wages must be drawn from my capital, because there's not enough productive value generated by the labor to draw them from! George says okay, sure, but only because I'm an idiot and will soon be out of business: Yet, unless the new value created by the labor is less than the wages paid, which can be only an exceptional case, the capital which he had before in money he now has in goods – it has been changed in form, but not lessened. Fair enough, Mr. George, but what if I'm building some enormously expensive multi-decade project, like a dam or a nuclear power plant or a cathedral? The kind of thing we call a "capital-intensive" project? What do you have to say to that? George points out that as laborers labor, they progressively add value to whatever they're producing. Take the case of a shipwright building ships for an employer – even if the boss can't sell a half-finished ship, it still holds value (for one, it costs less to finish a half-finished ship then no ship at all). And with every stroke of the laborer's work, the employer who owns the shipyard gets an incremental increase in his stock of capital. It is not the last blow, any more than the first blow, that creates the value of the finished product – the creation of value is continuous, it immediately results from the exertion of labor. A pedant would point out that the "last hit" that finishes the product which makes it ready for market adds disproportionate value, but George's point is just to establish that value is continuously created, and doesn't magically come into being allat once right at the end. George further points out that if you look at things like agriculture you'll see the market directly acknowledging his theory: As a plowed field will bring more than an unplowed field, or a field that has been sown more than one merely plowed... It is tangible in the case of orchards and vineyards which, though not yet in bearing, bring prices proportionate to their age. George freely admits that capital can be required for certain kinds of work, but he disagrees with what its purpose is. It's not a pool that wages get paid out of. He goes on for another chapter on "The Maintenance of Laborers Not Drawn From Capital" but I think we can safely skip it and move on. TL:DR – George hammers to absolute death the idea that Laborers derive their own maintenance (food/shelter/clothing/etc) from their wages, with George insisting it is drawn from production and... you guessed it, not from capital. At least some of George's ideas will not seem so radical to modern readers (especially those already critical of capitalism or neoclassical economics), but it's important to understand that at the time almost everything he was saying was considered deeply radical and shocking. Capital was the fundamental driving force of the economy and labor was utterly dependent on it, and the Malthusian theory of overpopulation was the accepted explanation for why wages were low and workers were starving. Political Cartoon literally demonizing Henry George – Puck magazine Oct. 20, 1886 The Real Functions of Capital Okay, Mr. George. You've spent three whole chapters beating me over the head with what the functions of capital aren't. So what are the functions of capital? Capital "increases the power of labor to produce wealth." How? By enabling labor to apply itself more effectively (power tools go brrrr)
Inline links: Protection or Free Trade, https://substackcdn.com/image/fetch/$s_!aeD5!,f_auto,q_auto:good,fl_progressive:steep/https%3A%2F%2Fbucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com%2Fpublic%2Fimages%2F348d4d74-8c98-42e6-b5f7-7bd79b30a816_960x611.png
(source, CC BY-SA 3.0, author: Explodicle) A vertical supply curve means no matter what the price of land is, the same amount will always be supplied. This is because you can't make land – the supply is effectively fixed. Remember, the Netherlands doesn't count because the sea bed is land, and filling it in is just an improvement to land that already existed. And even if we granted "The Netherlands occasionally makes land" for the sake of argument, the amount of land "created" in this way is pretty darn negligible in the grand scheme of the economy, and almost exclusively the domain of governments or state-owned actors. The supply of land being fixed has some really interesting properties. By contrast, consider oil, the supply of which is not fixed. If we tax oil, some of the more marginal wells will be too expensive to operate and make a profit, so producers shut those down and the supply of oil decreases. Deadweight loss comes from a producer's ability to change the amount of product they supply in response to price signals. You'll notice the above graph of land tax has no deadweight loss at all! Since nobody produces land, it's the one thing you can tax without getting less of it. This drives out speculators entirely. Speculators can no longer distort rents by bidding up the price of land and holding it out of use, and can no longer compete with those who actually intend to use the land. This restores the proper balance of land, labor, and capital. Now if you work harder, or invest more capital, you can actually expect to see an increasing return without it all being gobbled up by ever-increasing rent. If you think about it this way, land value tax has negative deadweight loss, because it eliminates the speculative distortion that is the unearned privilege of landownership. Okay, but won't the landlords just pass the land tax on to their tenants? By George, no. Rent is a price, and price is governed by supply and demand. Supply of land is fixed, so land value tax has no effect on supply. What about demand? Except in cases where it causes the economy to boom (a good thing), land value tax won't increase land value – what it always does, however, is reduce the demand for land by speculators. If it costs nothing to hold on to land, of course I'm going to want to grab some and HODL. If the rent I could hope to gain is taxed away, I won't bother. Consider the case of oil again, where a tax reduces the supply. Reduced supply, given unchanged demand, causes a rise in price. And you'll find the increase in price tracks very closely with the amount of tax. Land value tax is just about the only kind of tax that can't be passed off to someone else. For more on deadweight loss and the land value tax, see Welfare Economics of the Land Value Tax by BlueRepublik. So does this mean there can never be profitable landlords ever again? Of course not – they just have to earn their living honestly like everyone else. Remember, we don't tax the improvements, just the "ground rent." So Ms. Nguyen still gets paid for all her honest work and judicious investments, but Mr. Slumlord doesn't make a dime until he gets off his lazy butt and does something productive. This is really important, because aside from speculation, the principal cause of land value increase is the productivity of your neighbors. An empty lot in the middle of nowhere is worthless, but an otherwise identical empty lot in the middle of New York city is priceless. As they say in real estate - "location, location, location." The reason location is valuable is because of the activity and contributions of the community, and yet the landlord claims the right to seize it all as rent. Modern economists have some interesting things to say about George's ideas, too. In 1977 Joseph Stiglitz demonstrated that land rents have a tendency to almost perfectly equal the value of investment in public goods. He called this the Henry George Theorem. Milton Friedman famously called land value tax the "Least Worst" tax. But one of my all-time favorite endorsements will always be that one time the economist Ramin Shokrizade unwittingly re-derived land value tax from first principles to (successfully!) fix recessions in EVE Online. Okay, so we tax all the ground rent. It will remove the speculative component of the rent (because there will no longer be any incentive to jack the prices up artificially), but it won't drive the price down to zero. That's because 100% LVT is only achievable on a frictionless plane populated by spherical cows; here in the real world you'll be left with a small sliver of land value. And of course regardless of the LVT rate, houses and buildings will still have a price. And that's fine. Land in Times Square will still be a lot more valuable than land in Podunk, Saskatchewan, but both will approach the same price as the LVT rate gets closer to 100%. This encourages people to actually make use of valuable land rather than holding it out of use, blighting the urban core and forcing development to sprawl out for miles in every direction, leading to worse transportation and more pollution. But... doesn't this mean that if people aren't putting land to productive use, they'll eventually be pressured to sell it off to someone who will? George sees this as a good thing. Without land value tax you get situations where somebody can anticipate that an empty lot will become valuable in the future, buy it, HODL forever, lobby against future development that would depress their property values, and now you have the Bay Area's housing crisis. Or buy an apartment block, do the absolute minimum the tenants will tolerate without killing you, constantly jack up the rent as the city grows, and you get slums. As BlueRepublik observes in No, Georgism is Still Sane: If you look at the commercial blight in New York City (http://www.vacantnewyork.com/) 90%+ is from landlords refusing to lease out to small businesses, waiting for a larger bank or big business to pay a higher rent bill. This causes property values of nearby businesses to drop, equity value to drop, and businesses to move out from the city center, increasing urban sprawl and urban blight. It’s a massive drain on personal wealth, and is very highly linked with poverty and higher crime rates. It’s also not a great model for having a stable social fabric. In a fit of performance art, a Georgist by the name of Fay Lewis once famously bought an empty lot and stuck a big sign on it to demonstrate the principle in action: Okay, but isn't building too much stuff bad for the environment? Won't this encourage over-development? By George, no. What's bad for the environment is sprawl, which the current system encourages and which the land tax would directly attack. If you want dense, walkable cities that don't depend on cars to get around, you should eliminate land speculation. A stronger objection to land value tax is when it's not some shifty speculator or a genocidal English landlord who suffers the brunt of it, but, say, this guy: The premise of Pixar's movie Up is that Carl Fredricksen, a lovably grumpy pensioner, is the last holdout standing in the way of developers bulldozing the rest of his neighborhood in the name of Progress™. He refuses to sell because he can't bear to part with the house which for him is tied up with all the cherished memories of his departed wife. This isn't just sentimental fiction, this is something that really does happen. Isn't Georgism just going to price the poor Carl Fredricksens out of their homes so that someone with a more """productive""" use can have it instead? There's several good response to this. For starters, if you're worried about kindly old people losing their homes, that's a thing that's happening already, and most of the time it's because The Rent Is Too Damn High, and our existing system is net worse on this score. We are currently facing an unprecedented crisis of evictions in tandem with the COVID pandemic, and it's not like things were peachy before. And even though homelessness seems to be declining in the US overall, it's getting worse in the most prosperous cities, exactly as George predicted. Okay, maybe it's better for renters, but what about people who own their homes, like Carl? Isn't it unfair to stick them with land taxes that might kick them out? What if they're retired? Remember, let's not confuse land tax with land confiscation, Here's George (emphases mine): I do not propose either to purchase or to confiscate private property in land. The first would be unjust; the second, needless. Let the individuals who now hold it still retain, if they want to, possession of what they are pleased to call their land. Let them continue to call it their land. let them buy and sell, and bequeath and devise it. We may safely leave them the shell, if we take the kernel. It is not necessary to confiscate land; it is only necessary to confiscate rent. Okay, but you have to admit that even if the state isn't confiscating everybody's land, if you can't pay your land taxes you have no choice but to sell your land, right? Isn't this morally unjust to the Carl Fredricksens of the world? First, it's not a given that Mr. Fredricksen will be worse off on net: he already pays income and sales taxes, capital gains on any investments, as well as property tax which taxes both land value and the value of his house. As speculators leave the real estate market the land tax that replaces his property tax drop will drop, and his house is an improvement that goes entirely untaxed. Also, if the speculators holding onto all the most valuable real estate in the downtown districts are forced to give it up, there won't be as much competition for land and so there's a good chance developers won't be interested in trying to buy up land in a bedroom community in the first place. BlueRepublik further points out that LVT can be used to fund a Universal Basic Income, which should soften the blow considerably: Keep in mind also that the Georgist Land Value Tax is pair with a "Citizen's Dividend" or what we see as UBI, so that it's not the government claiming land rent, rather the land rent is taxed and split up equally for all men. But as a matter of political practicality, in the rare event that after all that Mr. Fredricksen still somehow finds himself in the hole after LVT is applied, Nate Blair suggests a deferment option to grandfather the Carls of the world through the transition: The LVT gets assessed annually for everyone, but owner occupiers (businesses and homeowners) can apply to defer the sum of those payments until they sell or transfer the land. Government can charge a nominal interest. A final point of modern application of land value taxes is to level the playing field between different areas by eliminating "cost of living" discrepancies that arise entirely from speculative rent. This is pretty relevant given the "location pay" debate going on in Silicon Valley right now in response to increased remote work as a direct consequence of the COVID pandemic. Back to George. Great, we've taxed ground rent at 100% and eliminated speculation and all other manner of social ills. Now what do we do with the money? Lots of things! For one, you can get rid of some other taxes. Back in George's day it was even argued that a 100% land value tax on ground rents should be the only tax – the "Single Tax," replacing all other tariffs, duties, and other taxes (keep in mind this was in the late 1800's and Federal income tax wasn't introduced until the 16th amendment in 1913). Remember, all these other taxes have deadweight loss. Income tax is a tax on labor, and so taxing it means we really do get less productive labor. The portion of property tax that targets improvements punishes you for investing in improvements, and sales tax is just straight up regressive, hitting the poor harder than the rich. There's some argument today about whether the "Single Tax" would be enough to fund the modern US budget, with some Georgists saying it would be sufficient and others saying we would still need some other taxes but could at least significantly offset what we already have. But by George, another thing we could do is just give all the money back to the people, as BlueRepublik mentioned above. This could be used as a straightforward Universal Basic Income – what George calls a Citizen's Dividend, or what Andrew Yang calls the Freedom Dividend. It could also be used for the funding of public goods. George doesn't see this as an act of charity on the state's behalf – the value of the land has its origin in the productive labors of the entire community, so it's a simple act of justice to give the returns to those who actually produced the value, which is society at large. Another effect George asserts is that once land is no longer monopolized, labor is no longer forced into one-sided competition, so wages start to go up. Even better, laborers now have far more opportunity to go into business for themselves, which spurs innovation and investment. So to sum up, if we tax the ever loving hell out of ground rent, George says we'll see the following benefits: Make housing much more affordable
Inline links: source, Welfare Economics of the Land Value Tax, Henry George Theorem, to (successfully!) fix recessions in EVE Online, https://substackcdn.com/image/fetch/$s_!ZKi0!,f_auto,q_auto:good,fl_progressive:steep/https%3A%2F%2Fbucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com%2Fpublic%2Fimages%2F4fd890f3-35ce-415d-a461-2e507eff4ed9_680x709.png, No, Georgism is Still Sane, http://www.vacantnewyork.com/, https://substackcdn.com/image/fetch/$s_!gVc9!,f_auto,q_auto:good,fl_progressive:steep/https%3A%2F%2Fbucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com%2Fpublic%2Fimages%2F0eccd663-f37b-44b6-ba75-469069befa34_1863x1268.jpeg, https://substackcdn.com/image/fetch/$s_!mVYl!,f_auto,q_auto:good,fl_progressive:steep/https%3A%2F%2Fbucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com%2Fpublic%2Fimages%2F80f4b70f-b472-47b0-b46d-e74b3190ddfd_536x554.png, https://substackcdn.com/image/fetch/$s_!G2qa!,f_auto,q_auto:good,fl_progressive:steep/https%3A%2F%2Fbucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com%2Fpublic%2Fimages%2Fa948c9cc-5271-4b71-8c74-de55e126f16a_640x360.png, really does happen, crisis of evictions, getting worse in the most prosperous cities, "location pay" debate going on in Silicon Valley, Citizen's Dividend, the Freedom Dividend
Will solve all our problems once and for all Why the Remedy is Just George asks, "what constitutes the rightful basis of property?" What gives you the right to say "this is mine?" George asserts as self-evident the principle that a person is entitled to the fruits of their labor. What you make on your own time with your own resources, is yours to do with as you please – use it, give it away, trade it, destroy it. You don't harm anyone else doing so. It follows that neither I nor anyone else am entitled to the product of your labor. If we're both independent hunter-gatherers, and you pick some berries from a bush, I don't have any fundamental right to demand them from you. If you improve land in some way, you're entitled to own and use that, of course. That's the product of your labor. But to claim exclusive and permanent ownership of the land itself – from which all wealth springs and without which labor is impossible – is to demand the product of other's labor. So to invoke the sanctity of private property to defend private land ownership is self-refuting. But what about the right of "I was here first?" Well, George points out that in most cases someone was there before you were, too (and often they were removed by force). Just because you arrived one second, one minute, one year, or one decade before someone else doesn't give you some fundamental right to exclude others from access to nature's free gifts. (Note: this doesn't give people the right to just come in your house and rifle through your underwear drawer at any time of day, we'll get to that). And what about native populations? Isn't this just an excuse for colonialists to come in and steal their land by denying their claim of being on the land first? By George, no – this is a good time to point out that many Native Americans already had a roughly Georgist understanding of land – treating it as common property, and it was precisely the colonialists' conception of land as private property that was the mechanism by which the indigenous population was expelled and their lands seized. The English first practiced this on their own people – once upon a time wide swaths of land in England were held in common until the government privatized those lands and gave them out to well-connected gentry in a process called Enclosure. If you've ever heard of the Luddites, you should know they weren't merely rebelling against the march of technology, they were also fighting against the forcible seizure of their lands by industrialists, who far from being salt-of-the-earth free-enterprise entrepreneurs, were in actual fact crony capitalists stealing the people's land with the aid of anti-free-market subsidies and armed thugs, all supported by Big Government™. As a practical matter though, if you want to impose a Georgist policy, that only applies to territory your state has authority over. Indian reservations in the United States are supposed to be sovereign enclaves with their own jurisdiction. Native Americans should decide for themselves whether they want to adopt any particular policy. The other reason the remedy is just, is that private ownership of land leads to serfdom. The essence of slavery is that it takes from the laborer all he produces save enough to support an animal existence, and to this minimum the wages of free labor, under existing conditions, unmistakably tend. George points out that even though Slavery was abolished, the Southern landowners just changed the brand name to "sharecropping" and were able to continue to extract tremendous wealth from "free" Black Americans in the form of rent. Okay, but excluding evil Southern plantation owners, don't landlords deserve compensation for their work? What about Ms. Nguyen, the nice lady who manages your apartment block and went the extra mile for you when your A/C went out last summer? I like Ms. Nguyen too, but let's contrast her with Mr. Slumlord, who owns the apartment block next door that's superficially identical, but who won't help you when your A/C goes out in the middle of summer. Ms. Nguyen charges higher "rent" for her much better maintained units because part of that "rent" is actually her justly compensated wages for her labor in managing them, as well as interest from returns on the capital she's invested in their ongoing improvement and maintenance. She also collects a good bit of true Georgian rent because she is, after all, a landlord. Mr. Slumlord puts in as little work as he can get away with and invests as little capital into maintenance as will keep the state off his back. His return is almost entirely rent. And the only reason he can charge rent in the first place is because of the valuable location – value the community produced, not him. And that's the real injustice of land rent – the community produces the value, but the landlord charges rent to access it. Practical Application of the Remedy Okay, land as common property, rent must die, I'm sold. How do we actually do it? George proposes a land value tax, or LVT. Note I didn't say property tax. Property tax is a tax on the value of a piece of land and it's improvements. So if you're a homeowner, when you pay property tax, you pay tax for both the value of your house and the lot it's sitting on. With land value tax you only pay tax on the "ground rent", which is the value of your land, but not the improvements. What's an improvement? By George, a little green house is an improvement. A fancy red hotel is an improvement. A garage, a sidewalk, a public park, a Starbucks, a hotdog stand, are all improvements. Installing a bunch of dikes in the Netherlands and dumping landfill into the seabed to turn wet land into dry is an improvement. All improvements come from labor, and optionally capital, and so its fair for those factors to take their return. If I "rent" you my hotdog stand (but not the lot it sits on) my return would be classified as interest in George's framework because the hotdog stand isn't land, it's capital – the stored-up fruits of my labor that I'm using to get more wealth. (Modified from source, CC BY 2.0, author: Philip Taylor) The problem with our current system is that when anyone in the community builds improvements, it makes adjoining land more valuable, and then those adjoining landlords jack up the rent. This makes things worse for everybody but the landlords. George's insight is that extra value from my improvement "spills over" from my land and is soaked up by the ground rent of your land. So under a land value tax, we can correct for the perverse economic incentives, distortions, and oppressions that come from land rent, without having to actually take your land from you. We may safely leave them the shell, if we take the kernel. It is not necessary to confiscate land — only to confiscate rent. You also are 100% the owner of the improvements on your land, which won't be taxed. This is why Georgism doesn't mean people have the right to barge into your house in the middle of the night even though land is "held in common." Your house is still private property, but the value of the land it sits on is common property. What if I plant some nice trees, and invest in some landscaping to stop erosion? Where's the line between "improvements" and "ground rent?" In most cases it's pretty straightforward to separately assess the value of a plot from the value of what sits on it (modern property tax assessors do this already), but George grants that in some edge cases with the passage of time at least some improvements will be subsumed into the land value and that's okay: But it will be said: There are improvements which in time become indistinguishable from the land itself! Very well; then the title to the improvements become blended with the title to the land; the individual right is lost in the common right. It is the greater that swallows up the less, not the less that swallows up the greater. Okay, ground rent bad. How much should we tax it? By George, One Hundred Percent. Take the rent the tenant has to pay each month, calculate the portion attributable to the value of the unimproved land itself, and send it to the taxing agency. Effects of the Remedy Wow! 100% tax rate on ground rent! Can we really do that? In practice Georgists often talk about rates closer to 85+% given real-world limitations in assessment, but the point is to hit it as hard as you possibly can. Get close enough and you still have good effects. Won't land taxes jack up land prices? No, actually - in fact it will do the opposite, because such a tax is laser-calibrated to eliminate speculation, which makes up the bulk of inflated land values, and thus rent. Tax land for the full ground rent and you make real estate more affordable, not less. Won't it enable an all-powerful centralized nanny state? Quite the opposite – land value assessment is a fundamentally bottom-up, localized task, so it naturally empowers local municipalities at the expense of distant central authorities. Also, income taxes, wealth taxes, investment taxes, etc, require an ever-vigilant centralized bureaucracy peeking into every aspect of an individual's life to catch tax evaders, who have every incentive to hide their assets or even just flee. Perversely, the IRS currently audits the poor at the same rate as the top 1%, even though higher earners are responsible for withholding the vast majority of tax money in fraud. Land can't move or hide, and nowadays we have tools like GIS to make it even easier to assess. Under land value tax, nobody needs to pry into your personal life or impose burdensome accounting rules on your small business that actually entrench the power of giant corporations (who have entire departments devoted to serving up the Double Irish with a Dutch Sandwich). A Brief Interlude From the Future Today land value tax is widely considered to be the only tax that doesn't suffer from Deadweight Loss. Deadweight Loss is the lost economic activity or value caused by some policy. It's often summarized by the phrase "If you want less of something, tax it." Look at this chart, for example: (source, CC BY-SA 2.5, author: SilverStar) The place where the demand curve (red) and supply curve (blue) meet is the equilibrium point that the market naturally tends towards. But if we impose a price control lower than what the market will bear, the yellow area of the curve shows economic activity that can't happen. If you put price controls on gasoline, for instance, you'll get shortages because there's more demand than supply, and supply can't profitably rise to meet the extra bit of demand that's willing to pay a little more. But here's how things look with a land value tax, notice that the supply curve is vertical – that's weird, what does that mean? (source, CC BY-SA 3.0, author: Explodicle) A vertical supply curve means no matter what the price of land is, the same amount will always be supplied. This is because you can't make land – the supply is effectively fixed. Remember, the Netherlands doesn't count because the sea bed is land, and filling it in is just an improvement to land that already existed. And even if we granted "The Netherlands occasionally makes land" for the sake of argument, the amount of land "created" in this way is pretty darn negligible in the grand scheme of the economy, and almost exclusively the domain of governments or state-owned actors. The supply of land being fixed has some really interesting properties. By contrast, consider oil, the supply of which is not fixed. If we tax oil, some of the more marginal wells will be too expensive to operate and make a profit, so producers shut those down and the supply of oil decreases. Deadweight loss comes from a producer's ability to change the amount of product they supply in response to price signals. You'll notice the above graph of land tax has no deadweight loss at all! Since nobody produces land, it's the one thing you can tax without getting less of it. This drives out speculators entirely. Speculators can no longer distort rents by bidding up the price of land and holding it out of use, and can no longer compete with those who actually intend to use the land. This restores the proper balance of land, labor, and capital. Now if you work harder, or invest more capital, you can actually expect to see an increasing return without it all being gobbled up by ever-increasing rent. If you think about it this way, land value tax has negative deadweight loss, because it eliminates the speculative distortion that is the unearned privilege of landownership. Okay, but won't the landlords just pass the land tax on to their tenants? By George, no. Rent is a price, and price is governed by supply and demand. Supply of land is fixed, so land value tax has no effect on supply. What about demand? Except in cases where it causes the economy to boom (a good thing), land value tax won't increase land value – what it always does, however, is reduce the demand for land by speculators. If it costs nothing to hold on to land, of course I'm going to want to grab some and HODL. If the rent I could hope to gain is taxed away, I won't bother. Consider the case of oil again, where a tax reduces the supply. Reduced supply, given unchanged demand, causes a rise in price. And you'll find the increase in price tracks very closely with the amount of tax. Land value tax is just about the only kind of tax that can't be passed off to someone else. For more on deadweight loss and the land value tax, see Welfare Economics of the Land Value Tax by BlueRepublik. So does this mean there can never be profitable landlords ever again? Of course not – they just have to earn their living honestly like everyone else. Remember, we don't tax the improvements, just the "ground rent." So Ms. Nguyen still gets paid for all her honest work and judicious investments, but Mr. Slumlord doesn't make a dime until he gets off his lazy butt and does something productive. This is really important, because aside from speculation, the principal cause of land value increase is the productivity of your neighbors. An empty lot in the middle of nowhere is worthless, but an otherwise identical empty lot in the middle of New York city is priceless. As they say in real estate - "location, location, location." The reason location is valuable is because of the activity and contributions of the community, and yet the landlord claims the right to seize it all as rent. Modern economists have some interesting things to say about George's ideas, too. In 1977 Joseph Stiglitz demonstrated that land rents have a tendency to almost perfectly equal the value of investment in public goods. He called this the Henry George Theorem. Milton Friedman famously called land value tax the "Least Worst" tax. But one of my all-time favorite endorsements will always be that one time the economist Ramin Shokrizade unwittingly re-derived land value tax from first principles to (successfully!) fix recessions in EVE Online. Okay, so we tax all the ground rent. It will remove the speculative component of the rent (because there will no longer be any incentive to jack the prices up artificially), but it won't drive the price down to zero. That's because 100% LVT is only achievable on a frictionless plane populated by spherical cows; here in the real world you'll be left with a small sliver of land value. And of course regardless of the LVT rate, houses and buildings will still have a price. And that's fine. Land in Times Square will still be a lot more valuable than land in Podunk, Saskatchewan, but both will approach the same price as the LVT rate gets closer to 100%. This encourages people to actually make use of valuable land rather than holding it out of use, blighting the urban core and forcing development to sprawl out for miles in every direction, leading to worse transportation and more pollution. But... doesn't this mean that if people aren't putting land to productive use, they'll eventually be pressured to sell it off to someone who will? George sees this as a good thing. Without land value tax you get situations where somebody can anticipate that an empty lot will become valuable in the future, buy it, HODL forever, lobby against future development that would depress their property values, and now you have the Bay Area's housing crisis. Or buy an apartment block, do the absolute minimum the tenants will tolerate without killing you, constantly jack up the rent as the city grows, and you get slums. As BlueRepublik observes in No, Georgism is Still Sane: If you look at the commercial blight in New York City (http://www.vacantnewyork.com/) 90%+ is from landlords refusing to lease out to small businesses, waiting for a larger bank or big business to pay a higher rent bill. This causes property values of nearby businesses to drop, equity value to drop, and businesses to move out from the city center, increasing urban sprawl and urban blight. It’s a massive drain on personal wealth, and is very highly linked with poverty and higher crime rates. It’s also not a great model for having a stable social fabric. In a fit of performance art, a Georgist by the name of Fay Lewis once famously bought an empty lot and stuck a big sign on it to demonstrate the principle in action: Okay, but isn't building too much stuff bad for the environment? Won't this encourage over-development? By George, no. What's bad for the environment is sprawl, which the current system encourages and which the land tax would directly attack. If you want dense, walkable cities that don't depend on cars to get around, you should eliminate land speculation. A stronger objection to land value tax is when it's not some shifty speculator or a genocidal English landlord who suffers the brunt of it, but, say, this guy: The premise of Pixar's movie Up is that Carl Fredricksen, a lovably grumpy pensioner, is the last holdout standing in the way of developers bulldozing the rest of his neighborhood in the name of Progress™. He refuses to sell because he can't bear to part with the house which for him is tied up with all the cherished memories of his departed wife. This isn't just sentimental fiction, this is something that really does happen. Isn't Georgism just going to price the poor Carl Fredricksens out of their homes so that someone with a more """productive""" use can have it instead? There's several good response to this. For starters, if you're worried about kindly old people losing their homes, that's a thing that's happening already, and most of the time it's because The Rent Is Too Damn High, and our existing system is net worse on this score. We are currently facing an unprecedented crisis of evictions in tandem with the COVID pandemic, and it's not like things were peachy before. And even though homelessness seems to be declining in the US overall, it's getting worse in the most prosperous cities, exactly as George predicted. Okay, maybe it's better for renters, but what about people who own their homes, like Carl? Isn't it unfair to stick them with land taxes that might kick them out? What if they're retired? Remember, let's not confuse land tax with land confiscation, Here's George (emphases mine): I do not propose either to purchase or to confiscate private property in land. The first would be unjust; the second, needless. Let the individuals who now hold it still retain, if they want to, possession of what they are pleased to call their land. Let them continue to call it their land. let them buy and sell, and bequeath and devise it. We may safely leave them the shell, if we take the kernel. It is not necessary to confiscate land; it is only necessary to confiscate rent. Okay, but you have to admit that even if the state isn't confiscating everybody's land, if you can't pay your land taxes you have no choice but to sell your land, right? Isn't this morally unjust to the Carl Fredricksens of the world? First, it's not a given that Mr. Fredricksen will be worse off on net: he already pays income and sales taxes, capital gains on any investments, as well as property tax which taxes both land value and the value of his house. As speculators leave the real estate market the land tax that replaces his property tax drop will drop, and his house is an improvement that goes entirely untaxed. Also, if the speculators holding onto all the most valuable real estate in the downtown districts are forced to give it up, there won't be as much competition for land and so there's a good chance developers won't be interested in trying to buy up land in a bedroom community in the first place. BlueRepublik further points out that LVT can be used to fund a Universal Basic Income, which should soften the blow considerably: Keep in mind also that the Georgist Land Value Tax is pair with a "Citizen's Dividend" or what we see as UBI, so that it's not the government claiming land rent, rather the land rent is taxed and split up equally for all men. But as a matter of political practicality, in the rare event that after all that Mr. Fredricksen still somehow finds himself in the hole after LVT is applied, Nate Blair suggests a deferment option to grandfather the Carls of the world through the transition: The LVT gets assessed annually for everyone, but owner occupiers (businesses and homeowners) can apply to defer the sum of those payments until they sell or transfer the land. Government can charge a nominal interest. A final point of modern application of land value taxes is to level the playing field between different areas by eliminating "cost of living" discrepancies that arise entirely from speculative rent. This is pretty relevant given the "location pay" debate going on in Silicon Valley right now in response to increased remote work as a direct consequence of the COVID pandemic. Back to George. Great, we've taxed ground rent at 100% and eliminated speculation and all other manner of social ills. Now what do we do with the money? Lots of things! For one, you can get rid of some other taxes. Back in George's day it was even argued that a 100% land value tax on ground rents should be the only tax – the "Single Tax," replacing all other tariffs, duties, and other taxes (keep in mind this was in the late 1800's and Federal income tax wasn't introduced until the 16th amendment in 1913). Remember, all these other taxes have deadweight loss. Income tax is a tax on labor, and so taxing it means we really do get less productive labor. The portion of property tax that targets improvements punishes you for investing in improvements, and sales tax is just straight up regressive, hitting the poor harder than the rich. There's some argument today about whether the "Single Tax" would be enough to fund the modern US budget, with some Georgists saying it would be sufficient and others saying we would still need some other taxes but could at least significantly offset what we already have. But by George, another thing we could do is just give all the money back to the people, as BlueRepublik mentioned above. This could be used as a straightforward Universal Basic Income – what George calls a Citizen's Dividend, or what Andrew Yang calls the Freedom Dividend. It could also be used for the funding of public goods. George doesn't see this as an act of charity on the state's behalf – the value of the land has its origin in the productive labors of the entire community, so it's a simple act of justice to give the returns to those who actually produced the value, which is society at large. Another effect George asserts is that once land is no longer monopolized, labor is no longer forced into one-sided competition, so wages start to go up. Even better, laborers now have far more opportunity to go into business for themselves, which spurs innovation and investment. So to sum up, if we tax the ever loving hell out of ground rent, George says we'll see the following benefits: Make housing much more affordable
Inline links: treating it as common property, Enclosure, Luddites, https://substackcdn.com/image/fetch/$s_!N5h2!,f_auto,q_auto:good,fl_progressive:steep/https%3A%2F%2Fbucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com%2Fpublic%2Fimages%2F01d73228-7c8a-4e35-9d3b-a90ba99d62bc_400x200.png, land value tax, https://substackcdn.com/image/fetch/$s_!0zK_!,f_auto,q_auto:good,fl_progressive:steep/https%3A%2F%2Fbucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com%2Fpublic%2Fimages%2F7aea36c2-328c-4231-b50f-f4eed87e1c53_500x375.png, source, Philip Taylor, property tax assessors do this already, audits the poor at the same rate as the top 1%, GIS, Double Irish with a Dutch Sandwich, Deadweight Loss, https://substackcdn.com/image/fetch/$s_!MSUe!,f_auto,q_auto:good,fl_progressive:steep/https%3A%2F%2Fbucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com%2Fpublic%2Fimages%2F9e01d1dd-61fa-4c1b-8f90-6669f2c20d81_632x632.png, source, SilverStar, https://substackcdn.com/image/fetch/$s_!WZ7g!,f_auto,q_auto:good,fl_progressive:steep/https%3A%2F%2Fbucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com%2Fpublic%2Fimages%2F730bd7b8-6dbf-4e23-a799-91187ec8b9ed_520x520.png, source, Welfare Economics of the Land Value Tax, Henry George Theorem, to (successfully!) fix recessions in EVE Online, https://substackcdn.com/image/fetch/$s_!ZKi0!,f_auto,q_auto:good,fl_progressive:steep/https%3A%2F%2Fbucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com%2Fpublic%2Fimages%2F4fd890f3-35ce-415d-a461-2e507eff4ed9_680x709.png, No, Georgism is Still Sane, http://www.vacantnewyork.com/, https://substackcdn.com/image/fetch/$s_!gVc9!,f_auto,q_auto:good,fl_progressive:steep/https%3A%2F%2Fbucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com%2Fpublic%2Fimages%2F0eccd663-f37b-44b6-ba75-469069befa34_1863x1268.jpeg, https://substackcdn.com/image/fetch/$s_!mVYl!,f_auto,q_auto:good,fl_progressive:steep/https%3A%2F%2Fbucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com%2Fpublic%2Fimages%2F80f4b70f-b472-47b0-b46d-e74b3190ddfd_536x554.png, https://substackcdn.com/image/fetch/$s_!G2qa!,f_auto,q_auto:good,fl_progressive:steep/https%3A%2F%2Fbucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com%2Fpublic%2Fimages%2Fa948c9cc-5271-4b71-8c74-de55e126f16a_640x360.png, really does happen, crisis of evictions, getting worse in the most prosperous cities, "location pay" debate going on in Silicon Valley, Citizen's Dividend, the Freedom Dividend
Book Review: Which Country Has The World's Best Health Care?
January 19, 2022 · Original source
Emanuel hates having to give a clear answer to that question, but when confronted with the fact that he’s writing a book with that title and can’t really weasel out, he grudgingly admits that “the top tier would include Germany, the Netherlands, Norway, and Taiwan”.
4: Single Payer Channeled Through Private Insurance is typical of Germany and the Netherlands. I think this is kind of like how charter schools work in the US: the government pays 100% of your costs, but you get to choose which insurance company (out of various heavily-regulated and basically identical plans) to go with. Then the insurance company pays private doctors and hospitals as usual.
Single-payer implemented through private insurance - Germany and the Netherlands - comes out looking pretty good: these are 2 of the 4 countries Emanuel puts in his top tier. I’m confused here. The US has at least three major problems that Germany/Netherlands lack: nonuniversal coverage, high costs, and poor patient choice (ie you have to worry about “out of network” providers). I can see why single-payer eliminates the first: if the government buys coverage for everyone, of course it will be universal. But why does it eliminate the second two? Germany and the Netherlands have dozens of different insurance providers - why doesn’t that decrease bargaining power and raise costs? Why doesn’t it mean that sometimes they fail to reach an agreement with a hospital, and their patients can’t go there without facing “out-of-network” costs? I thought I understood the reasons why US health care doesn’t work, but Germany and the Netherlands seem to replicate its apparent disadvantages without running into the same problems. Why? Maybe I just don’t fully understand what “single-payer” means?
Highlights From The Comments On Health Care Systems
January 27, 2022 · Original source
Wrt. to other countries, there's not a lot of difference between regulation and socialism. Sure, in Germany and the Netherlands insurance is provided by private companies (my wife is Dutch). But if all companies are required by law to charge the same rates, and offer the same coverage, then it doesn't really matter whether a private company or the government pays for it. A really easy way to lower costs in the U.S. would be to require all insurance companies to offer the same coverage and costs as Medicare. All hospitals would be forced to accept that, because otherwise they'd have no customers.
The Netherlands, starting with Majuscule:
I’m an American and lived in the Netherlands for several years (2012-2018). The Dutch and also the expats loved to complain about it, but I thought the Dutch system was pretty great. By far the best part of it was the transparency. My health insurance actually covered my needs- I never saw a bill. No copays, no surprise mystery bills of the kind I’ve always received in the US, even with “Cadillac” level insurance.
Who Gets Self-Determination?
March 30, 2022 · Original source
Now, it’s true that any LARP sustained long enough eventually becomes real. The Netherlands for instance was once German, and there’s even a parallel there with how Dutch consistently looks and sounds worse than German. So an independent Ukraine could, over time, become a real country. But to what end? Do we really need another mediocre Slavic country? It reminds me of Latin America, where you have dozens of barely distinguishable nonentity countries serving no real purpose. The entire region should be consolidated into maybe five states at most. Russia, Poland, and Serbia are the only Slavic states needed by the world.
I appreciate hearing ideas I never would have thought of myself, and I never ever would have thought of this. I like how it simultaneously avoids starry-eyed “all people must be free” romanticism, and hard-headed “the strong do what they will, the weak suffer what they must” realpolitik, in favor of the vibe of some guy from a private equity firm trying to cut operating expenses: “Did anyone here notice that we have 195 countries, some duplicating each other’s portfolios? Do we really need both a Netherlands and a Belgium? And why do we still have an Egypt? People haven’t wanted Egypts for two thousand years!”