Tuesday, May 30, 2006

First Post

A time comes when every person needs to stand on their little podium.

I am one semester away from having an undergraduate degree in Economics. I've come to realize that nearly all of our social and financial problems can be traced back to the failure to capture the rent.

Our suburban areas sprawl out for several reasons and we are told by people from different ends of the political spectrum what the problem is and how complicated this problem is, when in fact the explanation to the problem is actually fairly simple. After highways were built in the 50's, we failed to capture the sudden increase in rents from the property further away from the city center, the pollution of the air from the exhaust of cars, and the continual increase in taxes such as the sales tax and income tax. Communities which have abolished the property tax have experienced massive poverty with many an excuse to cover up the true cause of this poverty - that the failure to capture the rents in land has lead to speculators holding this land out of production causing everyone to be worse off.

This is one simple example.

Any economist will tell you that we want to tax things which are supplied inelasticly, however we are told nothing exists with this quality in the long run and so we make due with the income tax and sales taxes. This is false. Land and other land like things such as the electromagnetic spectrum are always supplied inelasticly; in fact they are perfectly inelastic.

Henry George wrote that Land and other gifts of nature are common. Labor and capital are not common. Each of these three factors of production are paid their income. Land gets rent. Labor is Paid wages. Capital is paid interest.

Like the fire triangle, each of these three things is needed for production to occur. When land the rent of land is not taxed, speculators are free to move in and remove parts of this from the production pie, making the pie smaller for everyone. As the rent is taxed away and distributed to the commons or used to fund common programs (military, fire depts., etc) this gives less of an incentive for speculators to hold this land out of production, causing the value of the land to fall and allowing the land to be acquired by those who can most efficiently use the land.

Nearly every cause, every war, every plight is at its core a Georgist problem. This is why I am writing this blog. To bring exposure to Georgist thought and show how seemingly very complex ideas are normally very simple at their core.