Wednesday, May 16, 2012

Re: You're crazy.

A fellow calling myself Dr. Chief recently posted the following on an earlier post on the Broken Window Fallacy:

You're crazy, even if he does spend the money for land, or ownership that benefits what you see as only himself, others will benefit in the future. You're argument takes for granted that at least half of people who have money are dishonest and will take advantage of the system to make "dishonest" honest purchases. It is a moot point either way, there is no morality injected at all and forcing there to be some sort of moral choice is your fallacy.
It got me thinking on how to express these thoughts again, and so I decided to respond. It grew until I decided I needed a full post. Here is my response:

I don't assume dishonesty on the part of any person in this analysis. Access to land must have a price; how else would we allocate this scarce resource? My only assertion (not apparent in this particular piece, as I only analyze the broken window fallacy from the perspective of Geoist economics) is that the particular institution that makes access to physical space as a fully alienable right is, itself, an immoral institution, comparable to slavery. It just that the effects aren't as obvious as slavery.

Perhaps I should have avoided value judgments in this particular piece. It's an old piece, and I'm still developing my rhetorical style. But the whole point of this series was to point out the immoral nature of certain institutions.

At any rate, your error is assuming that buying land has the same social benefit as buying capital or consumer goods. It doesn't. When one buys things, one sends a signal to the market: producing this was a good idea. You compensate those who were involved in the production of that good. One would only produce the good if one expected to receive payment in return.

Land is different. By "land" I am referring, of course, not to fertility or a dug mine or anything like that. I'm referring to physical space. It was there before we got here. It will still be there after we're gone. When one pays for land, one does not reward a producer. Unlike Labor and Capital, it exists, has existed, and will exist regardless of any person's decision. The only social benefit is the benefit the market always provides: efficient allocation. (The market also efficiently allocates slave labor; that does not make slavery a moral, or even efficient, institution.)

To whom should that payment be rendered? It is my belief that, if there be a God who created the Heavens and the Earth, such a being is the only rightful Landlord. In His absence (may His Kingdom come...), if we assume all persons have an inalienable right to life, liberty, and property (or the Pursuit of Happiness, as Thomas Jefferson put it), we must assume that every person has a right to that pre-requisite not merely to life, but to existence itself: physical space, at the very least, the airspace we displace.

But the fact is, in our current society, the right to physical space is a fully alienable right, bought and sold like a commodity. The privilege of existing is held by a subset of society. Some hold a lot of the keys to existence. Others hold only a few. A majority have to pay someone else for the right to exist. I'm not talking about food, water, and shelter here; I fully agree that no person has a right to anybody else's labor... even for such "necessaries" (every man a right to the water, no man a right to force someone else to draw it for him). I'm talking about "land as standing room", as Ludwig Von Mises put it.

If it sounds insane to question the ancient and sacred institution of landownership like this, recall that for most of human history, the notion that a man's freedom of action could be bought and sold like a commodity (and that the condition of slavery was an inheritable status) was also regarded as an unquestionable and necessary institution. All the civilized world has since outlawed the institution... and the cotton continues to be picked.

But what is the alternative to the way we currently allocate land ownership? I have spent the past decade thinking and writing on that very subject. Henry George had a beginning to an answer to that question. It was John Locke (in what some call the "Lockean Proviso") who most famously posed the question in the first place. A short synopsis: the institution that could replace our current land institutions could also completely replace the current welfare state without a single violation of the principles of liberty, without doing even a remote amount of damage to the economy, and without sending a segment of the population social democrat types currently claim as their chief concern spiraling back into desperate poverty.

Possibly irrelevant addenda:

A brief statement to provoke thought: banking (fractional reserve banking, which is what is generally meant by the term "banking") is to Capital, what Slavery was to Labor. The institution of fee-simple landownership (let alone alloidal title) is similarly related to Land. I will leave the explanation of the relationship for a future entry.

I'll also reiterate the analysis of the broken window fallacy, if only because I like the way I wrote it and don't feel like discarding it:

The fact is, when more resources go to landowners, less goes to providers of labor and capital. Less is earned; more is gained by virtue of an indestructible past legacy. ("Capital" might also be described as a legacy, but unlike land, it must be continually replaced, whereas an investment in land has an indefinite lifetime.) When you break the window, a capital and labor expenditure becomes necessary. Overall production of wealth drops... but a (slightly) larger share goes to providers of labor and capital, at the expense of landowners. This is how the "Broken Window Fallacy" actually "works" better than Bastiat concluded... though there is a far better alternative for those who are presently wholly dependent upon their labor and capital for their livelyhood than the welfare/warfare state.

That's how I should have written it, anyway. Thanks for your comment.