Wednesday, November 22, 2006

Rent and Consumer Good Prices

A few weeks ago, I spent some time manning a snack bar on behalf of my mother. The prices were outrageous... which gave much inspiration to this ramble.

When we think about Rent, the concept that generally comes to mind is the money we pay for the place we live. Some might take it a step further and realize that businesses must pay rent, as well, but may not realize the consequences of this. Those consequences are experienced quite intimately whenever we attend a sporting event, a county fair, or go to an amusement park.

Try to buy a hot dog outside the park; you'll likely not pay more than $1.50 for the hot dog... maybe $2.00 if it is somehow REALLY special. I know we charged $3.50 for a regular old misnamed "jumbo" hot dog at the football game. How about a little bag of peanut M&Ms? Probably you pay no more than $.75 at a store. If you buy it from a kid's fund raiser, you might pay a dollar. At the stadium, we charged $3.00. At a mini-mart, you'll pay maybe $.80 to $1.00 for a 24 oz soda; at the stadium, we charged at least $3.00. This is a fact of life, few people question it. I think about these things; what causes prices in the stadium (or at the fair, or Magic Mountain, or inside the movie theater...) to be so much higher than just outside?

The answer, of course, is Rent. There is a massive number of people inside the stadium, crowding around the field to see the game. Their ticket price, of course, contains an element of Rent; they are paying for the privilege of seeing the game up close, without having to push and shove to get a good view. The fact that the stadium was not full shows the effects of Speculation; seats that might otherwise be full remain empty, potential spectators being driven away by a price set according to an overestimated demand.

However, the food prices also contain a large element of rent, as well. With that crowd there, the right to sell food in proximity to the crowd, rather than someone else, is highly valuable. The food prices are inflated by the price one has to pay to the stadium owners in order to do business at that location. People are generally willing to pay these prices because the sort that can afford to attend a sporting event can generally afford to pay outrageous prices (though I recall, when growing up, that my parents absolutely refused to buy food inside Disneyland).

A general increase in rent is like a whole country becoming like the stadium, except instead of football players, you have a society's technical elite. Instead of stadium owners, you have a society's landed elite. Instead of people who are unable to afford the stadium food prices and have the option of buying outside the stadium, you have the desperately poor, who sacrifice much just to afford the basic necessities. And instead of people who have the choice to watch from outside the stadium (or not to watch at all), you have the homeless, who, unable to afford a "ticket" for one reason or another, stand at the edges of society, outcast.

That is Rent.

Thursday, November 16, 2006

PRC: The "Something for Nothing" problem:

Georgism, so far as I can tell, begins with the public collection and distribution of rent, by way of a high tax on the rental value of land. How that money is distributed, what is done with it, who makes the decisions as to what shall be done with it, is where the many divisions within Georgism begin, such as Geo-Socialism, Geo-Anarchism, etc.

I have, in the past, discussed the Geo-Libertarian idea of the public collection and distribution of rent. Very simply put, the tax, rather than going to fund the usual functions of today's government, would simply be paid out as a "citizen's dividend" on a per-capita basis. The idea behind this is that individual motivations are superior to political motivations when it comes to deciding how money should be spent. Under a system in which the collecting entity (government, or PRC) simply redistributes land rent, rather than deciding how it should be spent, the benefits of Anarcho-Capitalism would be within reach of not only the upper classes of society (which would be limited by the tax), but rather would be accessible to everybody. Everybody would have the ability to pay for, for example, private police services.

Now, while I have issues with Anarcho-Capitalism in general, my main discomfort with this program has always been the simple fact that this would give to people "something for nothing." Where would be the incentive to work, under this system? What would prevent it from simply collapsing under the weight of masses of moochers? What is the difference between this idea, and massive wealth transfer programs in general? I've been thinking about it lately, and I think I may actually have an answer.

One aspect is the nature of the tax itself. While most taxes act as a punishment for wealth production (income taxes hit those with high labor values, in addition to the idle rich; sales taxes penalize people for distributing goods; excise taxes target the production of specific kinds of wealth; etc.), a tax on Land rental value is a penalty not for production, but on the monopolization of natural potential. One person who is making far better use of a piece of land than his neighbors is taxed no more than the person who is simply allowing his land to lie unused. The only relation between taxation and production would be the case of a highly productive community in which the natural potential of the Land is proximity to highly productive people... A good place to open up a store, for example. In this case, the tax would simply ensure that such valuable land not be held purely for the increasing value of the area, but rather would be continually available for use.

The fact that the dividend is distributed on a per capita basis, rather than in a means-tested fashion, means that, at the very least, the dividend does not act as a disincentive to productivity. I have been personally acquainted with a disabled man who wished to go back to school and earn the credits he needed to start teaching, but feared to leave the public dole, which he would have to do if he attempted to work again. The impact of welfare programs in discouraging people from starting to work again is well documented.

However, even if a large number of people should start mooching off the productivity of a few, those people are likely not busy driving up the value of Land. The effect is that Land value would remain low; therefore, the Land tax would remain low. In the event that, despite the low level of taxes being redistributed on a per capita basis, people still have the ability to live off the dividend alone (or the dividend plus something they enjoy doing, anyway), we would simply have reached an era of Star Trekonomics, the point where technology enables a few to be so productive that they can literally provide for the needs of thousands of others, and do so by choice. (In Star Trek, it is generally assumed that, despite everybody being provided for, The Federation's economy is still productive enough to support, not only a socialist paradise, but also a substantial fleet of starships.)

In the event that we're simply not there yet, a moocher class would still result in declining Land values, followed closely by declining Land taxes, followed by the dividend being unable to support an individual, followed by individuals increasing their productivity to supplement their dividend income, in a potentially increasing cycle. There would be no penalty for working; no portion of the dividend would be lost. However, as productivity increased, land value would increase, thus the dividend would increase. In the meantime, those who remain productive despite the apparent opportunity to live without being so would not be penalized a bit for remaining productive (and, indeed, would pay decreasing taxes until the economy hit the point where productivity could go down no further).

Personally, I think certain types of things would still need to be funded by what I am going to call the Land Corporation (as opposed to government, since its power to tax would be limited to the power to charge rent for the monopolization of land owned by the community via this corporation, and not a general ability to tax anything and everything it can achieve a majority in favor of). The tendency of people to fully utilize land when not discouraged from doing so may necessitate the public support of certain kinds of recreational areas, such as nature preserves. In the situation where there is a fairly continuous threat for a hostile foreign country, a military may be necessary, or at least a publicly funded deterrant nuclear arsenal. (In the situation where international neighbors are either neutral towards us or powerless, a publicly funded military may well be unnecessary.) Publicly funded police organizations may be necessary to keep mafia-like organizations from filling the gap. There may be other things I am not thinking of.

However, my conclusion is that, if all land were owned by a corporation which had all citizens as shareholders (one share per citizen), which distributed its entire profits as a dividend to its shareholders, the result would not be unmitigated economic disaster, or even a general malaise. The result may well be superior to what we have today.

Friday, November 03, 2006

California Propositions: Continued

Sorry about the lateness of this post. I've been extremely busy lately, and the closer the election gets, the less and less I want to think about politics.

Proposition 85: NO.

I could almost vote in favor of Proposition 85. My instinct is generally to favor parental authority over child liberty. But I prefer for that authority take shape in a state of political and economic freedom for both parties, the natural result of a child's dependence on his parents, and not the result of government mandate.

Another problem is that this proposition furthers the bueraeucratic regulatory model in which the assumption is made that professionals are guilty until proven innocent. I can understand requiring a doctor to notify the parents. I can understand futher the notion that this requirement can be delayed until after the abortion if the doctor notes in her records that to delay would be life threatening. But the doctor would also have to submit notice to a state regulatory board of any and all abortions performed on minors.

Why? What purpose does this serve? If a doctor is going to fudge his records in order to hide an illegal abortion, he's hardly going to submit the paperwork. No, this is nothing more than the continuation of our society's shift from a judicial model in which people are presumed innocent until proven guilty, to a bueraeucratic model in which people are presumed guilty until proven innocent. It would be sufficient to allow parents to take the doctor to court, and each party can provide whatever evidence they have. There is no need to subject the medical community to yet more pointless paperwork.

I sincerely doubt we are in the midst of any kind of minor abortion "crisis" as a result of the absence of this particular law (except insofar as one might consider permitting any abortions whatsoever a crisis). This being the case, I cannot recommend voting in favor of this proposition.

Proposition 86: NO.

This proposition is wrong on many levels.

First off, it would benefit organized crime enormously. Organized crime and terrorist organizations already benefit enormously from the opportunity to smuggle cigarettes across state lines. This proposition would raise cigarette prices by $2.16 a pack. That raises the price by over a third, assuming $4.00 a pack is a good estimate of the current price. That is a massive smuggling opportunity.

In other words, instead of honest businessmen profiting off the few people who don't care about the widely known health risks of smoking, we have cutthroats and killers profitting off this. Very likely, any gains made through the funding of hospitals and clinics would be at least offset by the extra that would have to be spent on law enforcement, not to mention the midnight gunshot wound in the emergency room. And lets not forget terrorists... you know, those guys that want to blow us up just to make a point? (Yes, for those of you who follow this blog, I do believe the exist. I just happen to believe current policies, such as this one, empower them further.)

It is also morally wrong. It amounts to the targeting of an unpopular minority as a revenue tap.

I really don't want to see this one pass.

Proposition 87: NO

As I have said earlier, I am not generally opposed to excise taxes on fossil fuels. I happen to think this the best way to reduce both the consumption of fossil fules (and thefore the production of fossil fuel wastes), as well as potentially the levels of other taxes. However, this proposition does much more than just tax fuel and throw the proceeds into the general fund. It immediately turns around to spend it, potentially in a manner counterproductive to its stated goals.

The basic idea is that the money will be funneled into a bueraucracy that will attempt to encourage the development of alternative energy sources. Now, I'm all for alternative energy sources (indeed, I can be quite enthusiastic), but I happen to think the public funding of the development of such things is ultimately counterproductive. At best, it subverts the process by favoring political connections, rather than technologies. The two can coincide, but there is hardly a guarantee of this.

At worst, it could be used by the oil industry to stifle the development of alternative energy technologies. It is political appointees who would make the decisions regarding who gets funded and who doesn't, and while elected officials make the ultimate decisons as to who get appointements, well funded lobbies exert great influence over the process... particularly in this heavily gerrymandered state. Such lobbies include the oil industry. Given that oil producers would have great interest in the activities of such an authority, it can be expected that they would seek to influence this authority. If they are successful enough, then when it wasn't sponsoring the efforts of the oil companies themselves, it could well be funding the least promising technologies.

All in all, this initiative is yet another extremely bad idea. I'm not even sure it's well intentioned, though I'm sure the intentions of many of the dupes that will vote for this on election day are good.

Proposition 88: NO

Unfortunately, I don't have too much to say about this measure I think will appeal to many. Sure, there is the issue regarding the imposition of a statewide property tax (property taxes traditionally being the purview of counties), and I don't like having more than one level of government tax anything... it can only undermine the lower level, in the long run. Then there is the matter of how the funding would probably go more to bueraucracy than to actual education... but that's a given where public education is concerned. No, my opposition to this measure is rooted in my opposition to public education in general. Such a discussion goes beyond the scope of this ramble, thus I will leave it for another time.

Proposition 89: NO

Campaign funding is such a huge, messy topic I am tempted to throw up my hands on this one and just say I'm voting no by default. There are, however, a few things I would like to say about this.

First off, for those of you thinking this is a great way to get third party cantidates a large war chest, remember that nothing comes without a cost. This proposition is a Trojan Horse. Sure, it'll start out as just a grant of money to a cantidate for public office, but money given never stays that way. Remember that the main way the federal government violates the separation of powers between itself and state governments is by way of funding specific programs. It always starts out as funding for a particular purpose, and then the rules start piling on. The danger is the same.

Secondly, do you really want a cantidate that can't raise enough money from his own supporters to have a huge amount granted by the government? I sure don't. I'm sure the sorts of campaigns we'd see would result in an outcry for new rules and regulations as to what cantidates can do with the money. Imagine if a porn star got the Libertarian nomination, for example.

Finally, all the new regulations as to who can give what to who in what form and all that would accomplish nothing. I am convinced that attempting to patch a basic flaw in our political system doesn't fix it, it merely covers it up. Shady election practices would still exist, they'd just be driven further underground, even more hidden than before. Meanwhile, perfectly legitimate interests would be prevented from having their say.

The new taxes, of course, strike at the worst possible point. Corporate taxes reduce employment. Heck, I don't even know how big a corporation would have to be in order to qualify for the increased tax rate. I know for a fact that higher taxes assessed against the company I work for would probably reduce my chances at getting a raise.

If we really want more competative elections, the thing to do is to require that election districts conform to community boundaries as much as possible. The influence of "special interests" would be much less if our districts were formed on the basis of community, and not on the basis of what's "safe" for the incumbants.

Proposition 90: NO!

I am extremely disappointed that the good version of eminant domain protection did not make the ballot. It's not surprising, though; it didn't have anything in there that would act as a payout to anyone who already has money, so it couldn't possibly get the necessary support. This one, however, does. It has a truly massive payout for its financial backers.

Basically, in addition to outlawing takings for transfer to private parties for whatver reason, it also makes it possible to sue the state for any change in regulation that a property owner can make a case that the regulation damaged the market value of the property. For example, if a zoning change reduces the value of a parcel of land, the owner could sue. If we did away with ag subsidies (something I am very much in favor of), farmers all over the state could sue on the basis of a lower market value for farmland. If a new environmental regulation made it more difficult to do business, the owner could sue. Any change in the tax code could trigger a lawsuit.

Basically, this legislation made the ballot precisely because it is broken. Either developers get a new class of lawsuit that specifically favors them, or the legislation gets rejected. It's a win-win situation, for them. Hopefully, this issue won't just die. This initiative must be rejected, but we can't just forget that eminent domain reform is needed.