Book Review: Progress and Poverty

http://gameofrent.com/content/progress-and-poverty-review

by TimPC • 4 years ago

76 127 4 years ago

TimPC22• 4 years ago

Progress and Poverty was once the most popular economics book ever written. The Georgist Theory in it, and the land value tax proposed by it is still endorsed by economists today.

This review clearly illustrates the ideas from George that land captures gains that in a more fair society we'd want to go to labour.

nickff• 4 years ago

"... the land value tax proposed by it is still endorsed by economists today."

Your comment is somewhat misleading, as it seems to suggest that all or most economists endorse Georgism, which is not true. Some vocal minority of economists are pro-Georgism, but I haven't seen any data suggesting it is the most popular taxation scheme.

aesh2Xa1• 4 years ago

I have wondered this, too. "Is/was Georgism really so popular?"

Do you have any papers/writing which specifically criticise Georgism?

kevinpet• 4 years ago

Economists generally consider LVT the best theoretical tax, but with significant practical challenges. There are several links in the first section of https://en.wikipedia.org/wiki/Land_value_tax as well as further down under Modern economists.

bee_rider6• 4 years ago

I may have to pick this up -- as someone with no economics training at all, a land value tax seems extremely appealing and intuitive to me. I'd already like to become a complete partisan in favor of this policy, but I guess it would make sense to read what the actual justification is, for it, haha.

scythe• 4 years ago

The biggest problem with LVT is surprisingly simple: accurately assessing the value of land is very hard, and ensuring that the assessment process is fair is therefore extremely hard.

LVT experiments in history tend to run into problems when people feel that their land has been valued incorrectly, leading to a vocal minority that despises the law. That results in something like this:

https://nassimtaleb.org/2016/08/intolerant-wins-dictatorship...

mynameishere2• 4 years ago

It seems extremely unappealing to me. It seems like something a wealthy apartment-dweller in a tall building in a dense city would come up with to move taxation from himself to the guy in the country with two acres and a mobile home.

The more I think about it, the more I'm sure that's the actual motivation.

mcguire• 4 years ago

Absolutely! The biggest advantage for most, particularly readers of HN, is described in part II (http://gameofrent.com/content/can-lvt-be-passed-on-to-tenant...): "...landlords cannot pass Land Value Tax (LVT) on to their tenants..." Renting an apartment in SF would therefore both be cheap, because the LVT encourages high-density, and tax-advantaged, especially if the LVT is (as it is supposed to be) the only tax.

The bottom line is that this idea has literally no downside.

snidane5• 4 years ago

From Henry George wikipedia page:

Commentators disagreed on whether it was the largest funeral in New York history or the largest since the death of Abraham Lincoln. The New York Times reported, "Not even Lincoln had a more glorious death."

https://en.m.wikipedia.org/wiki/Henry_George

ur-whale• 4 years ago

For the horse's mouth:

https://cdn.mises.org/Progress%20and%20Poverty_3.pdf

https://www.gutenberg.org/ebooks/55308

at_compile_time• 4 years ago

For the audio-inclined:

https://librivox.org/progress-and-poverty-by-henry-george/

a9h74j• 4 years ago

FWIW, John Michael Greer recently outlined[1] some alternative philosophies in political economy (including cooperatism, distributism and social credit), aiming to spur increased imagination. He cites numerous alternative resources, enough to suggest a study list or initial-study guide.

[1] https://www.ecosophia.net/reimagining-political-economy/

TimPC22• 4 years ago

I think Georgism's main appeal is that if you interfere as best as possible in the mechanism by which land captures the value of labour and use that to reduce other capture of the value of labour you remove the worst excesses of capitalism. You literally don't have to change the rest of the system.

Tenants pay the same rents they do now (perhaps slightly lower due to removal of speculation) but no longer have to pay any income tax. Property owners pay more in LVT but no longer pay income tax as well. No one gets to hold land value unearned and benefit from the work of others except the government who uses it to reduce other taxes and provide services we've come to depend on in modern society.

This is quite different from various radical re-imaginings of the entire economic system. Those systems are looking to solve almost entirely different problems and introduce far more new ones.

jmole2• 4 years ago

It seems like the biggest challenge to Georgism is that municipality/county/state/federal regulations on land use would have a significant effect on land value.

A landlord might lobby for restrictive land use policy while sitting on a parcel, and then lobby for opening those restrictions when it comes time to sell. Essentially avoiding the tax by using government policy to suppress the true land value.

There are solutions to this of course, but they come down to zoning and land use regulation, which is sort of the core of all our other problems with real estate in America.

zozbot2349• 4 years ago

municipality/county/state/federal regulations on land use would have a significant effect on land value.

That's not "a challenge" it's a positive side effect. Those government institutions would be enabled to internalize the value that they create, which is presently being captured by random private parties that did not create it.

TimPC22• 4 years ago

I agree that there is a positive side effect here in that municipalities now have a strong incentive to rezone in ways that increase land value since they capture a portion of that value from their share of the LVT.

jmole2• 4 years ago

Look at the case of Atherton, CA - multi-million dollar home values due to city ordinances around minimum lot size and land usage. The land value here is created by scarcity, and driven largely by the success of the greater metro area.

But if you are trying to value this land from a Georgist perspective, and one that takes into account property zoning and use requirements, the land is worth much less than it should be due to the restrictions, and would be taxed lower than parcels of similar size in nearby cities.

This seems, in theory, to reward obstinate enclaves of low-density development within larger metros. The homeowners have no reason to elect a council that would vote against their interests in this respect, and their taxes would stay low.

TimPC22• 4 years ago

The problem is current speculation on land is relatively easy. Having to lobby for a change in zoning one-way when you buy the land and having to take on the risk of not being able to get the change of zoning back the other way when you sell it is a significant risk. I'd also argue because LVT rates are much higher as percentages than property tax rates, holding the land would still be more expensive than the solution.

I agree there are also significant issues with zoning, but zoning alone won't solve the problem. A bunch of people capture a bunch of economic rents unearned, and it would be much better for government to capture these economic rents as part of the system and charge us less tax on things that actually are earned.

MiddleEndian3• 4 years ago

On a personal level, I like the LVT as a single tax because then I wouldn't have to do any paperwork. They give me a bill, I pay a bill, there's no exceptions, I can improve (or fuck up) my property, and overall the numbers won't change (unless a ton of people improve or fuck up their properties around me as well). Nice and easy.

But it also seems effective overall. After I quit my last job and before I got my current job, I did not work for several years (some due to choice, some due to circumstance). During this time, I obviously paid no income tax. But I still paid my mortgage (some of which obviously went to property tax, but mostly to the bank). Presumably with a land value tax, my payment to my mortgage company would be notably less less and the tax would notably be more, so during that time instead of paying a bank I would be paying taxes that go to infrastructure and welfare and whatnot.

I think this sort of thing is more accurate than an income-based source of taxes, because I obviously wasn't really in the same economic situation as an underemployed person who truly couldn't find a job for several years. It also allows you to assess your own level of taxation. For instance, I could have sold my place or rented it out, and moved elsewhere to a cheaper place (or I guess a more expensive place, were I so inclined to do so while not having a job).

Of course, the big disadvantage, as mentioned elsewhere in this thread, is that it is difficult to assess land value sometimes. It also seems like it may force people to move a bit more often, and moving is exhausting. And also presumably you'd have to convince people to pair this form of taxation with more lax zoning laws (with some stricter exception for farmland or something to keep the value per square foot low enough for it to still make sense).

Even weighing these factors, it seems like an improvement over the current system. But I guess the real issue is that in the current world of mortgages and such, even if 90% of the population decided it truly did make sense as a form of tax, the transition seems nearly impossible.

TimPC22• 4 years ago

The transition is hard. I'm convinced it has to be both gradual and compensated.

zozbot2349• 4 years ago

Since all taxes are ultimately borne by land (specifically, by resources in fixed supply), it's not at all clear that compensation is required for a neutral tax shift.

snidane5• 4 years ago

Unlikely that georgist system would get adopted gradually. It never worked in history.

Denmark georgist party (Justice party of Denmark) never got a strong popular support. When they got some attention and implemented georgist policies, vested interests would take the new gains and roll the policies back, capturing the profits only for themselves.

There are pockets in the US which are adopting georgist policies out of desperation. https://www.strongtowns.org/journal/2019/3/6/non-glamorous-g...

The only model that was sustainable on a country level was Singapore and the eastern colonies like Hong Kong or Jiaozhou Bay.

Unless there is dire disperation or a threat of a bigger enemy attempting to swallow you, the population gets complacent and always goes back to the humanity default of trying to outcompete their immediate neighbors, instead of working together to survive the threat of the poverty or the surrounding enemy.

I admire your optimism. My hopes are that humanity gives georgism a chance this time. Instead of repeating the cycle by falling into yet another great war and then bringing prosperity back only as a post-war restoration.

t0suj42• 4 years ago

The trouble with value assessment is good enough to dismiss LVT altogether.

I don't want to be forced to liquidate my house to cover LVT bill only because the land value shot up thanks to being a part of future promise from a developer project that doesn't have to fall through.

imtringued7• 4 years ago

What? Assessing the value of land is a much simpler problem than processing income taxes or sales taxes or VAT.

teach• 4 years ago

These were previously published on AstralCodexTen and discussed here: https://news.ycombinator.com/item?id=29493005

GameOfRent is a new site by the author to collect these and similar writings by him and others.

simonebrunozzi• 4 years ago

I suggest to view Scott Alexander's (Astral Codex Ten) review of the same book [0].

https://astralcodexten.substack.com/p/your-book-review-progr...

reducesuffering• 4 years ago

It's not Scott's review, it's a guest series on the blog.

rufus_foreman4• 4 years ago

For those who think a Georgist tax makes sense, why not apply the same type of logic to income?

If someone is employed as say, a teacher making $75,000 a year, but would be most productive as a software developer making $200,000 a year, should we tax them on $200,000 a year?

TimPC22• 4 years ago

Georgists get around this issue by abolishing income taxes entirely.

Regardless, I think there are fundamental differences between the two cases. Most notably land doesn’t have freedom of choice the way people do.

We also currently tax land based on its market value which corresponds to the most productive use of the land so LVT doesn’t change this.

rufus_foreman4• 4 years ago

> land doesn’t have freedom of choice the way people do

I mean that's your best argument, but it's not as clear cut as that to me. What I do with my property and what I do with my labor are both matters of freedom of choice. But yeah, I get you. I don't want to be told what to do with my labor. But I don't want to be told what to do with my land either.

> We also currently tax land based on its market value which corresponds to the most productive use of the land

No, don't agree. If tore down the house I live in and built a 12 story apartment building on the same piece of land, it would be worth more and be taxed more. We currently tax property on its market value, not land on its market value. At least where I live.

notfbi• 4 years ago

1. Theoretically a tax against potential earnings is actually good, but it's much more difficult to estimate than land prices.

2. LVT is mostly about redistributing rents, with the land use efficiency bonus as a big second order benefit.

3. Professions aren't exclusionary. A person doesn't squat on their teacher gig for 20 years in order to see how their claim on being 1 of finite-X allowed software developers might rise in price. Other people would just become software developers.

nwah12• 4 years ago

The logic of LVT isn't to force all of the factors of production to their highest and best use. It is to share the value of the Earth, which no human created, and thus georgists believe it should be shared equally.

That this particular solution to that moral view also happens to put land to its highest use is a nice bonus.

Henry George was a classical liberal, and thus did not believe anyone had a right to the labor of others, or that they should have any say in what kind of labor others should perform.

rufus_foreman4• 4 years ago

Did some human create my ability to work in a factory stacking boxes or to work as a software developer, both things that I have done? Which human created that?

And suppose no human did that, to talk about sharing that value equally? That sounds really creepy to me.

WalterBright• 4 years ago

Consider this: subsidize something societies want more of, tax something society wants less of.

Wouldn't this be a pragmatic way to raise tax revenue? What do we want less of?

Pollution.

What do we want more of?

Jobs, prosperity, the good things in life.

So tax pollution instead of things like jobs, prosperity, etc.

Simon_O_Rourke• 4 years ago

So you'd propose taxing meth, heroin and goodness knows what else too? While tax is merely an inconvenience for the wealthy, for the poor it can be a eat-or-starve decision.

Book Review: Progress and Poverty

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