Re: Murray Rothbard on Georgist fallacies


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<economically illiterate garbage snipped>

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6. Didn't Austrian economist Murray Rothbard refute the LVT?
No, but not for lack of trying. Rothbard's argument against the LVT is
fatally flawed for at least two reasons -- one moral, the other economic.
From a moral perspective, it completely ignores the unjust interference that
the overextension of law-made property imposes on man-made property. From an
economic perspective, it is based on a false understanding of what
conditions are necessary for land to have rental value.

In Libertarian Party at Sea on Land, LP activist Dr. Harold Kyriazi explains
why Rothbard's attack on the LVT was misguided at best. The following is
from pages 57-61 of that book:

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The only well-known libertarian writer whom I know to have explicitly, and
at great length, opposed the idea of community collected user fees for
natural resources is Murray Rothbard, which is odd, given his admiration for
Albert Jay Nock and Frank Chodorov, who, in turn, revered Henry George.
Rothbard apparently had extensive discussions with Georgists:

"If every man owns his own person and therefore his own labor, and if by
extension he owns whatever property he has "created" or gathered out of the
previously unused, unowned "state of nature," then what of the last great
question: the right to own or control the earth itself? ... It is at this
point that Henry George and his followers, who have gone all the way so far
with the libertarians, leave the track and deny the individual right to own
the piece of land itself, the ground on which these activities have taken
place. (pp. 33-34, For a New Liberty.)"

The following is taken from his The Ethics of Liberty.

"(p. 50, footnote 2): A modified variant of this "Columbus Complex" holds
that the first discoverer of a new island or continent could properly lay
claim to the entire continent by himself walking around it (or hiring others
to do so), and thereby laying out a boundary for the area. In our view,
however, their claim would still be no more than to the boundary itself, and
not to any of the land within it, for only the boundary will have been
transformed and used by man."

With this statement, Rothbard may seem to have carried the "first use"
doctrine to its illogical extreme. (If walking over some land constitutes
transformation and use, then is it just one's footprints that one owns? Or
does one's rightful claim extend out to all the underbrush one has cleared
away? Or, can one claim land as far as the eye can see? This is the very
definition of the word "arbitrary.") But in his defense, to convert the
claim into actual ownership would, Rothbard would say, require actual use
(though we're again faced with the question of what constitutes "use" -- see
p. 79, "Anti-Rothbard..."). For example, earlier, in a Robinson Crusoe
paradigm, he stated that Crusoe's "true property--his actual control over
material goods--would extend only so far as his actual labor brought them
into production. His true ownership could not extend beyond the power of his
own reach."

What, then, would Rothbard say about large American corporations owning, but
not using, millions of acres of land, as some now do? He gives us his answer
in an essay he wrote on Henry George's Land Value Tax idea, entitled "The
Single Tax: Economic and Moral Implications" (FEE "Special Essay Series,"
1957). Here are a few examples from that work:

"Well, what about idle land? Should the sight of it alarm us? On the
contrary, we should thank our stars for one of the great economic facts of
nature: that labor is scarce relative to land...Since labor is scarce
relative to land, and much land must therefore remain idle, any attempt to
force all land into production would bring economic disaster. Forcing all
land into use would take labor and capital away from more productive uses,
and compel their wasteful employment on land, a disservice to consumers."
[Emphasis Rothbard's.]

Of course, LVT would and could do no such thing, as those who strive to put
idle land into productive use would have to bid against other land users for
labor, and only the best uses of labor and land would win out. Thus, rather
than forcing all land into use, LVT would discourage all but the most
productive use of land, just as any market tends to allocate resources most
wisely. Another thing that would happen is that the earnings of labor would
increase due to increased competition for it, and (ideally) none of the
produced wealth would go to landowners qua landowners. Let me rephrase
Rothbard's last sentence in a way that makes sense: Forcing land users to
pass over ideal idle land and utilize marginal land instead, is wasteful of
human labor and natural opportunities, a disservice to all mankind and a
boon only to landlords and land speculators.

But here's the most embarrassing passage:

"A 100% tax on rent would cause the capital value of all land to fall
promptly to zero."

Correct.

"Since owners could not obtain any net rent, the sites would become
valueless on the market."

False! They'd be valueless only to those market participants who wish only
to speculate in land, not to those who wish to use land in some productive
endeavor.

"From that point on, sites, in short, would be free."

Wrong again. While it's true there'd be no sale price for vacant land, one
would still have to pay the ground-rent to use it.

"Further, since all rent would be siphoned off to the government, there
would be no incentive for owners to charge any rent at all."

Wrong yet again. He's assuming the LVT would be set by an actual ground-rent
charged by the landlord, rather than being an assessed value that would have
to be recouped. And, I might add, total rental costs would tend to decrease
as additional units come on the market as the monopoly stranglehold on land
loses its grip.

"Rent would be zero as well, and rentals would thus be free."

He continues to pound a straw man.

"The first consequence of the single tax, then, is that no revenue would
accrue from it."

He took a wrong turn, and just keeps going!

"Far from supplying all the revenue of government, the single tax would
yield no revenue at all! For if rents are zero, a 100% tax on rents will
also yield nothing."

Rothbard then goes on to state,

"Compelling any economic goods to be free wreaks economic havoc...the
result is to introduce complete chaos in land sites."

Completely false. Even if LVT were applied at a national level, and there
were no competition among municipalities for residents, people would still
bid on the leases of occupied property, providing price information. (For
more on this, see p. 97, "How would LVT work?")

In Power and Market: Government and the Economy (second edition, 1977),
Rothbard went even further into the realm of irrationality in his attempt to
refute Georgist land theory (p. 131):

"Contrary to Georgist doctrine, however, the land problem does not stem
from free-market ownership of ground land."

I know of no Georgist who would ever use the phrase "free-market" in
conjunction with our current, individual monopoly market in land.

"It stems from failure to live up to a prime condition of free-market
property rights, namely, that new, unowned land be first owned by its first
user, and that from then on, it become the full private property of the
first user or those who receive or buy the land from him." [my emphasis]

It is an obvious fiction that any use, however small or large the effort,
should grant full private ownership for all time, unless we're talking about
a make-believe world with unlimited land where access to all of it is
instantaneous (i.e., where travel time is zero). This fiction ignores the
fact that someone who, for example, puts up a fence and lets a cow graze, is
much less the rightful "owner" of land than one who builds an industrial
plant or a shopping mall. (For more on this, see p. 79, "Anti-Rothbard...")

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