Re: Don't Forget Mises -- and Dump the Third Way!

royls_at_telus.net
Date: 10/13/04 

Date: Wed, 13 Oct 2004 21:14:05 GMT

On Sun, 10 Oct 2004 20:12:37 -0400, jmh <j_m_h@cox.net> wrote:

>royls@telus.net wrote:
>> On Wed, 06 Oct 2004 16:50:01 -0400, jmh <j_m_h@cox.net> wrote:
>>
>>>royls@telus.net wrote:
>>>
>>>>On Sun, 03 Oct 2004 18:45:28 -0400, jmh <j_m_h@cox.net> wrote:
>>>>
>>>>>royls@telus.net wrote:
>>>>>
>>>>>>That depends on whether you regard the immoral as practical. If the
>>>>>>landowner simply does nothing, the user gets access for free. But he
>>>>>>is then just pocketing the rent in place of the landowner, and while
>>>>>>he is at least contributing something to the community by why of
>>>>>>production, he is not compensating the community for the benefits he
>>>>>>is receiving, and thus has no more _right_ than the landowner to deny
>>>>>>others use of the land.
>>>>>
>>>>>Clearly this is driven by your view that all the
>>>>>additional value generated by network effects
>>>>>are captured by land ownership. Certainly on
>>>>>a ceterus paribus case, where it's only the
>>>>>landowner simply on longs charges a fee, competitive
>>>>>pressures will still function to reduce prices
>>>>>and that "rent" the producers were captuing evaporate.
>>>>
>>>>I can't begin to figure outwhatyouthinkyouaresayinghere.
>>>
>>>Holding everything else equal, if a costs of production
>>>drop one expect to see output prices decrease so the
>>>producers would not simply increase they profits as
>>>you claim.
>>
>> ??? Where did I say anything about production costs dropping?
>> Production costs are not affected by the displacement of the rent from
>> the landowner to the producer, because the rent is itself nothing but
>> relative productivity: the competitive situation is _unaffected_ by
>> the land rent changing hands. The maximum profit point for the
>> producer is therefore likewise _unaffected_ by the opportunity to
>> collect the rent himself rather than turn it over to a landowner, so
>> total production and market prices are likewise unaffected.
>
>Producers initially had to pay rent for the land. That
>is a cost of production.

It's actually a funny kind of "cost" of production, because it only
compensates the advantage to production that is conferred by use of
the land.

>If they are now not paying rent
>then clearly they face lower costs in producing the output.
>Sure sounds to me like total cost of production have
>decreased.

Rent is not actually a cost of production, as it is the same whether
any production goes on or not. It is just a fee that can be charged
for the opportunity of enhancing production.

>Since the cost structure has now changed
>so has the optimal price-output point.

Wrong. He can't do any better by changing his price-output point. He
is now in the position of the landowner, and his profit is maximized
by just doing as he would otherwise have done, and pocketing the land
rent. That is very much the point: diverting land rent to public
purposes _does_not_affect_ production. This is a fact of economics
that has been known for nearly 200 years, and has not been seriously
disputed in well over 100 years.
 
>>>If they could then it's not the land
>>>that is the source of the rents captured.
>>
>> The land is typically just the nexus where myriad economic advantages
>> (sources of rent) are realized, not "the source of the rents." Land
>> has no value and yields no rent except through the context of the
>> economic advantages gained by its use, which in turn depend on the
>> local community and infrastructure, the commercial culture, the state
>> of technology, etc. and how these all interact with the physical
>> qualities of the land, especially its location.
>
>All of which also effect the local real incomes and
>real rates of return relative to other locations.

Yes. And...?
 
>>>>>More importantly though is the validity assumption
>>>>>that all extra value derived from the presence of
>>>>>the network is capitured by landowners.
>>>>
>>>>That is ensured by land's zero elasticity of supply. Unless the
>>>>demand curve is quite odd, any increase in rent leaves consumer
>>>>surplus effectively unchanged.
>>>
>>>Which you might perhasp actually provide more than your
>>>assertion, which is what is asked below, which you didn't
>>>seem to understand. Whether or not it's accurate to describe
>>>the supply of land as totally inelastic is questionable.
>>
>> No, it isn't. The supply of land is fixed.
>
>No it's not.

Yes, actually, it is. You are just wrong. As long as you dispute
this fact you will continue to be wrong.

>One *could* ship bits of the moon, asteroids,
>mars or other solids from space for the right price.

The shipped bits would no longer be land but improvements. You are
just wrong. As long as you claim land can be created by labor, you
will continue to be wrong.

>More
>importantly we're not realy talking about the physical
>surface of earth but the *usable* surface of earth.

Wrong.

>For a
>price--and this was done for the Tokyo airport I hear--we
>can take scrap and waist that normally goes into a landfill
>and use it to build up coastal areas or swamp areas to make
>them suitible for a host of uses that submerged or swamp
>lands cannot be used for.

We can improve land by drying it out, building it up, leveling it off,
etc. Like building two stories instead of one. But that is
_improving_ land, not creating more of it.

>That is increasing the effective
>supply of land. Steep slopes can be leveled.

It is dishonest to talk of the "effective" supply of land. Improving
land makes it more useful. That's all.

>I do agree that I cannot increase the size of my yard--
>thought theoretically it could be done I suspect given
>sufficient energy ;-)--by pushing the perimeter out
>and expanding the mean surface area of the world.

That would be a very large-scale improvement to the land. It would
not create more land.
 
>>>Yes, there is currently only so much land area on earth.
>>
>> You mean, it used to get bigger and smaller?? Fascinating...
>
>Actaully since you're working so hard at being
>a *** about all this, yes.

Ah. So not letting you get away with falsehoods is "being a ***," is
it?

I kinda figured it'd be something like that.

>I'm sure you've heard
>of the moon. Best theory, these days, is the moon,
>or at least a fair portion of it, used to be part of
>the earth but a rather large colision with something
>split it off.
>
>Simialrly, if we've been hit by asteroids then that
>has also increase the mass, and so the size of
>the earth.

<sigh> Speaking of being a ***, the fixity of land's supply is not a
fact of cosmology but of economics. It means that the supply of land
does not respond to price, not that it has always been or always will
be as it is.

>I suppose I could also suggest that plant and animal life,
>which does seem to create matter from energy, has also
>contributed to increasing the surface area of the earth.

Again, this is not a process that responds to price.

>You appear to be totally wrong in your claims about a
>fixed size and the claim of a elacticity of supply eqaul
>to 0.

It only appears that way to you because you refuse to know the
relevant facts.
 
>>>Is that a suitible definition of land?
>>
>> You can take your pick of two definitions of land: the classical one,
>> which is all of the physical universe except human beings and the
>> products of their labor, or a narrower one, which is the various
>> locations on the surface of the earth considered as production
>> factors. Whichever definition you pick, the elasticity of supply for
>> it is still zero.
>
>Or we can take the definition that looks at what is
>actually being used and the existance of non-used area.

Which definition of land is that? Can you provide a quote from a
dictionary to establish the existence of such a definition?

The answer is all too obvious.

>And consider the ability of people to offer money to
>get land used in a production or social context rather
>than a purely private one.

?? Gobbledegook.

>>>Are improvements
>>>and innovations in both building technology and
>>>transportation technology sufficient to make other locations
>>>that previously would never have been suitable for some
>>>activity now reasonable substitutes for land closer
>>>to the community center (or however you're modeling
>>>your theory) sufficient to say that the effective
>>>supply of land in some economic nexus defined by
>>>"comminuty" increased?
>>
>> No. It's only the _value_ of the land that will change thereby. Not
>> the amount. I'm not sure how you are managing to convince yourself
>> that you do not know this fact.
>
>But the issue there was not the quantity but the
>quality--imparted by technological innovation--that
>was the critical aspect here.

?? The issue of the supply of land is not the quantity?? What _is_
the supply of land but the quantity?

>There is now more space
>in which all activities can actually be conducted than
>previously. The price of that now available and usable
>land was the cost of the technology.

Investment in improvements can create more usable space. I'm not sure
why you are striving so mightily to avoid knowing that fact.
 
>>>I would think so as it now
>>>introduces new competitive presures on the existing land
>>>owners.
>>
>> That is of course irrelevant. If I have five pounds of potatoes,
>> various conditions may affect how those potatoes can be used, the
>> price they will command relative to other potatoes, etc., but none of
>> those factors will make five pounds of potatoes into six pounds, or
>> four pounds.
>
>Well if half of that 5 pounds is rotted then you don't
>have 5 pounds any longer.

Sure I do. They're just not as valuable. And if half the earth were
ripped away by some astronomical cataclysm, there'd that much less
valuable land around.

What has that to do with the elasticity of supply?

>You might still call the
>rotten half "potatoes" but it's no longer suitable
>for use as a potatoe. Now consider a process that
>could operate in reverse. You've got those 5 pounds of
>potatoes, half of which cannot be used for anything that
>potatoes are used as, so you can only use 2.5 pounds
>as potatoes. If you could change that quality of rotten
>into not rotten then you'll still have 5 pounds of
>material that is called potato but perhaps 3 pounds
>that can be used as potatoes.
>
>Do you have more potatoes in a meaningful sense of
>more?

No.
 
>>>Well to make you argument work, that the market clears
>>>with a change in rents you need to make some more
>>>assumptions.
>>
>> <yawn> Yeah, yeah, 1+1 = 2 and all that.
>>
>>>If the increase is a supply change
>>>in price--land owner's just raise the rent, then
>>>you will need to have a rather strange demand curve.
>>
>> False. As supply is the same at all prices, any realistic demand
>> curve will do just fine. And lots of unrealistic ones, too.
>
>For the market to clear at that arbitrary price
>you must be arguing that the demand curve is going
>to shift outward due to some wealth effect.

No, you are just equivocating. In economics, the rent of land is not
the periodic fee the owner charges for its use. It's the largest
amount a producer would pay to use it. So landowners can't "just
raise the rent." Producers won't pay a level of rent that guarantees
they will lose money.
 
>>>Also, if
>>>demand is driving the increase we cannot know
>>>that the increase in rents equals the increased
>>>percuniary value within the system which is driving
>>>the increse in land demand.
>>
>> What can an increase in land demand _be_ but an increase in rent?
>
>In your view that is all it could be.

That is the economic viewpoint.

>In my view it could
>also be investment in anything that will either allow more
>to be done in the same space, or the same in a smaller
>space, or investment in something that will allow
>land not previously capible of supporting some activity
>be used for that activity.

So, when you say, "increase in land demand," what you really mean is,
"investment in improvements"? I'd say there's something rotten here,
and it's not those potatoes.

>What I don't expect is that all the benefit of that
>investment to be converted into rents resulting in a
>ROI of < 0.

Which is of course in no way related to what I said.

The owner of the investment will get whatever return it earns. What
he _won't_ get is the increased rent thereby created on _neighboring_
land.
 
>>>But that is in fact your
>>>claim and you cannot make that claim from a partial
>>>equalibrium analysis as your doing with the claim
>>>of a supply elasticity of land being 0.
>>
>> It has nothing to do with partial equilibrium analysis. The supply of
>> land is just fixed. Case closed.
>
>Should I say it? Like your mind at times? ;-)

Sure. My mind is closed to evident falsehoods. Unlike yours, for
example.

>>>>>I posted some
>>>>>rudamentary statistics that, while clearly insufficent
>>>>>to prove or disprove anything, suggested that perhaps
>>>>>you're making too strong a claim.
>>>>
>>>>They suggest nothing of the sort. If anything, the modest increases
>>>>in home ownership relative to real wages would argue in support of my
>>>>claim.
>>>
>>>They most certainly do allow for the condition where
>>>gains from network effects are shared amoung the
>>>factors of production and not all captured by
>>>land.
>>
>> Statistics reflect more than just the bare truths of economics: they
>> result from the mix of actual policies that tend to work in various
>> conflicting and sometimes not very predictable ways. Home ownership
>> statistics, for example, do not reflect the real situation in _land_
>> ownership (much less land rent capture, much less capture and
>> retention of productivity increases through increased land rents),
>> because owned homes now include millions of condominium apartments
>> that in former times would have been rented. Tax code changes that
>> have made one's principal residence an extraordinarily profitable
>> after-tax investment have induced more people to buy their homes,
>> independently of the fact that increases in production all
>> theoretically go to land rent. Changes in labor laws, minimum wages,
>> greatly expanded monopoly privileges covering intellectual property,
>> etc. have mitigated the effects of land rent increases by permitting
>> working people and capitalists to capture some economic rents of their
>> own. Etc.
>
>Yes and economic theory and analysis is a simplification
>of reality that is more illustrative than actually
>reflective of that mess. That's why it only goes so
>far in explaining reality when all that is used are the
>core theoretical, but clear cut, models. You need more
>than merely the eS=0 claim.

It's not a claim. It's true by definition.
 
>>>>>I never saw any
>>>>>response from you and was wondering if perhaps
>>>>>you have some stats to offer indicating the portion
>>>>>of "community" generated value versus privately
>>>>>generated value as it relates for land, capital and
>>>>>labor market value (realizing of course that labor
>>>>>value in this context will ned to be inferred from
>>>>>it's rental rate)?
>>>>
>>>>I don't know what that is supposed to mean, either.
>>>
>>>Put more bluntly, back your claims up with some clear
>>>facts and not assertions and pure theory claimsthat might
>>>have much less to do with real world interactions than you
>>>are claiming.
>>
>> OK. 50 years ago, you could buy a typical single-family building lot
>> for 1-2 years' typical after-tax wages. Now it's 3-5 years' wages,
>> and the lot is smaller, and farther from the city center.
>
>Thank you. Now, is that all the external value that is
>generated by the various "community" factors or just some
>of it?

It's everything that requires use of land to access.

>As for the farther from the city center that seems to
>be a choice people make to get away from most of
>the nonpecuniary costs of crowded urban living.

Not really. It's an artifact of the subsidy to landownership: the
more land you can get under your house, the more money you will be
given for owning it.

>That brings up another issue. The general tendency
>is to assume that these nonpecuniary costs are fully
>reflected in prices but that's not a completely safe
>assumption.

The prices show that the non-pecuniary costs are more than offset (or
are expected to be more than offset) by the benefits.

>The new comers are clearly making choice
>based on expectation and the price they will pay to
>enter should reflect the exectations of the nonpecuniary
>costs--it all gets neted first. The ones who were already
>there are not participating in the market--they just
>keep using their homes, e.g.

They are still participating in the market.

>These existing people
>tend to sell once the non[ecuniary costs they are
>facing outweigh the market price and whatever non-pecuniary
>benefits the land was providing. Given that other's are
>imposing these costs on them, why shouldn't they be able
>to recoup those costs in the form of increase land value?
>Is that necessarily an unjust thing as you present it?

Yes, because what they want compensation for is not a right but a
privilege.

>I'd also be interested in a comment on the oberservation
>that we only have some much of any natural resource and
>things like population growth are driving the prices of
>those items up--including the myria of processed forms
>(like various alloys of steel and iron or aluminium).

Those aren't natural resources, but products.

>Aren't these increases in price nothing more than rents
>deriving from increase population

No, and the real prices of products are generally decreasing.

-- Roy L