Housing Bubble: Land Value Free Lunch: Part 1

[Nostalgia07]

Suppose Jack, found a field full of weeds and he rented that land at a low price. Jack, however, is an entrepreneur who makes use of weed to produce totally clean and very cheap energy resource. Under a Georgist economic system the rent that he has to pay will increase dramatically. Is it fair that he pays more for the rent of the previously useless land? The community did not make the value of the land increase, Jack is the one who increased the value of the land!

[ourearthhome]

Nostalgia:The short answer to your question is that Jack did not raise the value of land, The community did. Only community creates and raises land value. No community no land value. It is not unfair for Jack to have to pay higher land rent but it is unfair for landlords to keep increased land rents since they did not create the land, the value of land, the rental value of land or the circumstances (such as Jack discovering a way to make land more productive) whereby they can increase rents.

[Nostalgia07]

Why isn't Jack the one who increased the value of the land?

The rent had a very low rent because there was no demand for it at all. After Jack's discovery, demand has increased dramatically, thus leading an increase in cost of the rent which Jack must pay. That's the law of supply and demand.

Please point out the fallacy in my reasoning.

[ourearthhome]

Nostalgia: the short answer is that Jack did not himself create the increased demand for land. Increased demand came from others and only exists because of the very existence of others. Jack would have to be able to claim responsibility for the existence of others to be able to say with any truth that he was responsible for increasing demand for land and its increased rental/sale value. This is why it is well recognized that land value is created by the community and not individuals.

[Nostalgia07]

If we use this line of reasoning, then we can also say that Bill Gates should not profit from the increased demand for Windows OS because he did not create the people who demand his product.

[ourearthhome]

Yes and that would be the way it worked if Bill could not patent/copyright his work. One should be able to reap what one sows so patent/copyrights make sense to allow reaping to happen when what one invents/discovers can be easily produced by others. If Jack could patent his discovery he would personally profit but still his rent would go up. Bill Gate's rent has gone up. The increased land rent belongs to the community although it is now mostly pocketed by private owners who do not create it.

[Nostalgia07]

Jack did not create the land thus he does not deserve to own it. The land belongs to the whole community. But the Pareto effect still applies in this situation. A minority (20%) always produce the majority (80%) of the result. 80% of the value of the land was due to the labour of 20% of the community. In our example, I would have to say that Jack created 80% of the value of the rent. Doesn't he deserve to retrieve more benefits from the value of the land than any other person in the community?

[ourearthhome]

Nostalgia07: There is nothing wrong with owning land. The security of tenure aspect of landownership is essential to proper use of land. What Jack does not deserve nor does anyone else is to collect the value of land that only the community creates. Pareto does not apply in my opinion. All equally create land value not just those who produce. Imagine if the 80% disappeared and the effect on land values. Jack produced the crop he produced but by his separate individual self 0% of land value.

[NearAbbeyRoad]

@Nostalgia07

Jack may have contributed to his land's value increase. What made the values rise was activity of the community. They built the road, rail systems, provide security via police, the fire dept, etc. THEY provided the services and created the land value because of their activity. Jack keeps ALL his profit from the weeds. The Land tax on the land's value pays for the services he enjoys. If Jack assisted in increasing the value it is because he is making lots of PROFIT.

[grumbleandgruntmeans]

Keep up the good work. The difficulty, as always, is finding enough people who take an interest in how the country, and world around them, actually works and is run. Without them, the prospects are dire.

Your video, while excellent, has had 517 views. I read that a pop video by someone called Avril Lavigne has had over 95 MILLION.

Therein lies the problem. A dumbed-down society with at least one, if not two, lost generations...

[NearAbbeyRoad]

@grumbleandgruntmeans

Do a search on Fred Harrison on Youtube. He has some well viewed professional videos on LVT.

[grumbleandgruntmeans]

I firmly concur with the proposals of Henry George and Fred Harrison (taxing the economic rent from land that is currently privatised by land owners). One thing though, it is government privilege bestowed on land owners that CREATES the value in land. It is the hard work of entrepreneurs/society at large that PAYS for that value. You cannot change it without a change in govt. fiscal policy i.e. 100% tax on economic rent from land, and abolish ALL other taxes (income, corporation, stealth tax)

[grumbleandgruntmeans]

You can own 'n' acres of agricultural land and it's worth say $5k / acre. It's value only changes if planning permission is granted by the State. Then, it's value increases to say $600k - $1m / acre (depending on use, commercial or residential). That granting of privilege by the State is what CREATES the value in that land, and it is that which is privatised by the land owner. Society pays that rent by developing the land and funding, through taxes, the infrastructure to serve that land.

[ourearthhome]

grumble: Amen, but you seem to be saying that unless we do the whole shift of taxation to community created land values completely and all at once that we, society, would have no right to do any of it at all. If that is what you are saying then it is just another way of guaranteeing that it will never be done not even a little bit. The way it will happen if ever is slowly and a small piece at a time probably starting with reforms of the property tax first in individual cities as in PA.

[karldeeter]

i don't understand why this video is not more popular! great work folks, really brilliant work well done!

[logabob]

Because people are stupid, and usually come to youtube to be entertained, not to have their minds filled with useful information.

[CreatorChannel]

I want to apply this model to a new eco-community that I am creating.