Re: von Mises Institute on Henry George
royls_at_telus.net
Date: 08/24/04
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Date: Tue, 24 Aug 2004 03:02:20 GMT
On Fri, 20 Aug 2004 23:52:45 GMT, Grinch <oldnasty@mindspring.com>
wrote:
>On Fri, 20 Aug 2004 17:21:39 -0400, "RueTheDay" <ruetheday@outgun.com>
>wrote:
>
>>"Grinch" <oldnasty@mindspring.com> wrote in message
>>news:c6mci0p1beu2qlnd2dln4dltec2f37c42i@4ax.com...
>>> On Fri, 20 Aug 2004 10:48:09 -0400, "RueTheDay" <ruetheday@outgun.com>
>>> wrote:
>>
>>> Isn't it a little bit naive to think the *market price* of these cars
>>> will be unchanged? ;-)
>>
>>Of course it would be naive. The supply of cars is elastic.
>
>The supply of cars in the dealer's inventory is NOT elastic.
Sure it is. He can reduce it or increase it at will.
>How much is supplied at $0?
As much as people want to avoid paying the tax on.
>>In the extreme case of 100% taxation that
>>you cite, the supply curve will intersect the demand curve where the demand
>>curve intersects the Y axis
>
>But I'm just as happy using your derivation!
>
>What is your number for "quantity" at the point where the demand curve
>intersects the Y axis?
>
>Does the Y axis mark 0 (zero) on the quantity line?
Of course. But there are not zero cars. Such a mystery. To you,
that is.
>> I suggest you either take a first course in microeconomics or stick
>>to practicing law.
>
>Actually sometimes I have a problem with vertical and horizontal. ;-)
That is not your biggest problem, trust me.
>But, you see, we get the same intersection either way! Where the
>demand line crosses the Y axis. As long as the answer is right! And
>it is...
>
> "quantity produced will be zero."
>
>Very good of you to agree!!!
But the cars in inventory don't need to be produced.
>Now all you have to do is realize that by "quantity produced" we don't
>mean "at the factory" or "at the edge of the tectonic plate" but *in
>the market*.
Nope. All cars in existence are on the supply-demand chart.
>For maximum return of *zero*, why is the auto dealer going to *incur
>costs* to produce his inventory of *existing* cars *in the market*?
To avoid paying the tax on them.
>But they are not produced to and marketed *in the market*, yet. They
>are still stuck in the lot.
Generating tax liabilities...
>There still have to be the supply demand interactions to set their
>price.
>
>But with a net price to the seller set at $0, how many cars does your
>supply-demand line derivation lead you to believe the dealer will
>incur costs to bring *to the market*?
All of 'em.
>>> Some have in the past very naively contended that a 100% tax on profit
>>> from land won't affect the market price of land in the supply-demand
>>> equation because the supply of land is fixed. It is totally inelastic!
>>> And there is no production cost!
>>
>>What does "profit from land" mean? That is a nonsense term that you have
>>thrown into the mix to confuse things.
>
>The point is landlords must *incur costs* to market their properties
>in order to discover the market price for them -- just as all sellers
>must incur costs to do the same.
Yes, well, I'm sure it costs something to put on a property tax lien
auction. But the "owners" only incur that cost if there is some
residue.
>Obviously, they incur these costs *only * because they expect a return
>realized in price or rent -- return, price, rent, those are OK words
>with you aren't they? -- that *exceeds* the cost incurred. They aren't
>always right of course, but either way that's how they discover the
>*market prices* of their properties. And how the tax assessor does
>to.
>
>But if all positive return to owning all land is taken away from them,
>then that is impossible.
No, it isn't, any more than taking the positive return to holding land
away from tenants makes it impossible.
>So why would they incur costs to discover the market price?
>
>And if they don't, what's the market price become?
It's zero, but because of the tax liability, not the lack of marketing
effort by the current holders.
>They are in the position of someone incurring costs to bring something
>*to market* that can only give them a $0 return.
Nope. It will give them a guaranteed negative return if they keep it.
>>A 100% tax on the rent of land will drive the market price of land to zero.
>>No serious Georgist disputes that. The rent of the land will remain the
>>same as it was before the tax, however, 100% of it will go to the taxing
>>body rather than the land owner.
>
>Great!!
>
>So with all 100% of the land rent going to *somebody else*, not him,
>the land owner has 0 (zero) incentive to find either the tenant who
>would pay the highest rent -- or, if he is faced with multiple
>potential tenants making different bids, to select the one offering
>the most rent.
>
>Because it's all worth the same to him after-tax, exactly 0% of the
>rent. $0.
>
>And after this rents will stay exactly the same, you say! No change!
The rent will not change, except as the tax change increases the
efficiency of land use in the longer term.
>In fact, as the land owner can gain exactly $0 increment in rent from
>incurring positive costs to bring the land to market to find a maximum
>market price, he has no reason to participate in the market all!
>
>So you've destroyed the pricing and allocation system.
Nope. Tenants similarly have no incentive to market their
leaseholdings. That doesn't stop their landlords from charging them
rent.
>Here's a clue: the party in your scenario that has *all* the incentive
>to *maximize* rents is the "taxing body" that collects them all -- the
>government.
Bingo.
>You are going to have the government auctioning off all the land
>leases.
Effectively.
>And with the price of land $0, as you say, you are going to
>have no private "land owners" at all, since they will have neither
>equity in the land, nor the ability (nor any incentive) to lease it.
Right.
>So why do you keep talking about the fiction of having "land owners"?
It would be more accurate to call them land "holders." In fact, it
would be more accurate to call them that _now_...
>You aren't going to have any. You are nationalizing the land which
>will be leased off by the government. Something the world has plenty
>of experience with, alas.
Wrong. The world has almost no experience with it; but that little
has been uniformly and spectacularly positive, as in Singapore, HK,
etc.
>And nationalization was of course what George himself was proposing
>his system as an *alternative* to.
It's just a formal difference, a way of achieving the same result
gradually, in order to minimize disruptions.
-- Roy L
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