Re: The monopolization of the air and Georgism

From: Igor (jjweatherby_at_houston.rr.com)
Date: 01/25/05 

Date: Tue, 25 Jan 2005 17:34:45 GMT

ruetheday@outgun.com wrote:
>>The problem here is Marx uses monopoly wrong. He is refering to
>>collusion of oligolopist NOT A MONOPOLY. He says monopoly but what he
>>meant was collusion by oligopolist. Marx makes the same mistake Roy
>>makes. He says a CLASS of people having ownership makes a monopoly.
>
> This
>
>>is as silly as saying farmers have a monopoly over food but they
>
> control
>
>>the food supply. For a monopoly to exist landowners or farmers would
>>have to collude. A group of people having ownership does not make a
>>monopoly. The farmers are class of people who own all the means of
>>production for farming does not mean they are a monopolist. The
>>individual farmer or the individual land owner HAS LITTLE TO NO POWER
>
> TO
>
>>SET PRICE. Marx is not using the terms as a modern economist would.
>
> Nor
>
>>is using the term as other classical economist would.
>
>
> You are using an extremely narrow definition of the word monopoly
> (i.e., literally an entire market with only one seller). The classical
> economists used the term "land monopoly" to mean that parcels of land
> are sufficiently unique that the seller is in a monopoly position with
> regard to that piece of land.

Wrong. Read the quotation from Marx again. This is not what he is
saying. He is saying landowners form a monopoly.

   Much like modern economists use the term
> "monopolistic competition" to reference markets with product
> differentiation (a weaker use of the term).

Monopolistic competition could be a good explanation of land. You have
many buyers and sellers, the good is differiated, and there is free
entry and exit in the long run(few restrictions on who can buy land).
This is not a monopoly nor is this what Marx was saying. Marx was saying
that the landed class formed a monopoly in that they were the only
sellers. He failed to see that the landed class competed with each other
in the land market. He assumes they would collude.

> They also use the term
> monopoly to refer to situations where the government enforces a barrier
> to entry as in the case of copyrights and patents (a stronger use of
> the term).
>

Sort of. You can have a monopoly over your own product and still be in
monopolistically competitive market. A patent does not imply the MARKET
STRUCTURE will be monopoly.

>
>>>Did the classical economists assume that land was inelastic in
>>>supply? Here's the opinion of one economist:
>
>
>
>>Who cares that is not the point. The point is that Roy assumed that
>
> land
>
>>tax have no effect on MARKET RENT. This can only occur if the supply
>
> of
>
>>land is perfectly inelastic. To reproduce George's analysis in modern
>>understanding of taxation you must assume perfectly inelastic supply.
>>George, to my knowledge, makes no mention of elasticity. I am not sure
>
>
>>of the exact dates but I believe he may have written before the
>
> marginal
>
>>ist revolution took hold. So elasticity would have been somewhat of a
>>foreign concept.
>
>
> George may not have been familiar with the term, but he was certainly
> familiar with the concept. He wrote extensively about why the land tax
> would fall wholly on the landlord and not the renter.
>

The assumption has to be perfectly inelastic supply of land. This is the
only way George's idea will happen.

>>I would need to read the context Samuelson is stating here. My guess
>
> is
>
>>he refering to a certain set of models. Sameulson and others would
>>realize that the supply of land would not be perfectly inelastic at
>
> all
>
>>price ranges. This would imply that if the land were being given away
>>free as many people would part with land if land sold for 10 billion
>>dollars. This is an impossibility. Land or ANY other good will not be
>>perfectly inelastic over all price ranges.
>
>
> Nonsense. Do you understand how a supply curve is derived?

Very well it represents the seller's willingness to sell the good in
question.

> It's just
> a function showing how much of something will be produced given a set
> of assumptions about marginal cost and marginal revenue.

Balderdash. This is only for produced goods. Goods like labor or land
that can not be produced also have supply curves. In these cases, it is
based on the willingness to sell. Landowners like workers will have
reservation prices. That is a minimum price they will sell for. Go below
the minimum price and people will not sell. As price rises more people
are willing to sell. Land nor Labor is inelastically supplied at all
price ranges. One could argue that at a certain high price that land is
inelastic but this does not imply an elasticity of 0 across all prices.
There is absolutely no empirical evidence to support land prices
operating in a perfectly elastic range. In fact Roy's "evidence" for
perfectly inelastic actually said the demand curve had some elasticity.

> However, land
> is not a produced good.

Neither is labor that does not mean they do not have reservation prices.
Would you sell land if price were 0? Would you work for $.50 an hour? I
think not.

> There is no marginal production cost. When
> economists draw a supply curve, they are attempting to represent the
> quantity of something that will be produced at various prices (based
> upon the cost of producing it).

Complete misunderstanding of what a supply is. It is how much people are
willing to sell this does not imply that anyone is producing. A retailer
can have a supply curve and they do not produce anything. Labor has a
supply curve and labor is not produced.

> You are trying (incorrectly) to apply
> that analysis to how many people would be willing to sell an existing
> good at a particular price.

You are incorrectly applying supply curves to production only. Two
simple questions proves it. Would you sell your land if price is 0?
Would you sell your land if prices was $10 billion? If the answer is no
to 1 and yes to 2 then price affects the Quantity supplied and the
supply curve is NOT perfectly elastic. The supply curve exist because
people have different reservation prices for selling. It takes a minimum
price for a person to part with their land. This minimum price is
different for different land holders. Perfectly elastic along all price
ranges means there is no reservation price and landowners would give
away as much land at 0 price as they would sell when price is $10
billion an acre. This is not empirically true.

> If I draw a supply curve for television
> sets, I can say that at a price of $100, TV set manufacturers would
> produce 10 televisions; at a price of $200 they would produce 15. You
> can't apply the same analysis to land.

Of course you can. The land has value to the owner. To buy the land you
have to offer him enough money for him to want to sell. If that were not
true all I would have to do is walk up to your house and say I want you
to give it to me and you would say ok. Even if I offer a $1.00 you are
unlikely to sell the land. I must offer what you perceive the value of
the land to be. I must make a high enough bid for you to be willing to
sell. What you imply defies all logic.

> Whether the price of land is
> $1/acre or $1,000,000/acre, the quantity of land on earth will be the
> same.

Yes but few people will be willing to sell their land at $1.00 than $1
million so less land is supplied on the market at $1 than $1 million. It
is not perfectly elastic.

> People may be more or less willing to part with what they
> already have,

Exactly which is why the Quantity supplied responds to price. To say
that land is perfectly inelastic says people will part with the same
amount of land or rent the same amount regardless of the price recieved
for the land. Again if you are a landowner and you want to rent your
land would you let someone use it for free? Would you let someone use
for $1 million? If the answer to 1 is no and the answer to 2 is yes then
the Quantity supplied on the rental market responds to price.

>but the total amount of land (the coordinate on the X
> axis of your supply curve) will be unchanged, hence the vertical supply
> curve Samuelson referenced.
>

No it is the total amount of land that PEOPLE ARE WILLING TO SELL on the
X axis not how much is out there. Take the example of Monet paintings.
There will never be another produced. Does this mean supply is perfectly
inelastic? No. Why? Because at different prices, different amounts of
owners are willing to part with their collection. It does not matter how
much of the good exist. It is how much people are willing to that
determines supply. If I inhereit a family farm and want to be a farmer
because my family have been farmers and do not want to sell my land at
any price then I DO NOT TAKE PART IN THE LAND MARKET AND MY LAND IS NOT
PART OF THE SUPPLY CURVE.

You completely misunderstand what a supply is and how it is derived. By
your analysis the supply of labor would be perfectly elastic because
there is a fixed number of people at any given time. This is wrong too
because people will not sell their labor at less than a reservation price.

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