Re: Murray Rothbard on Georgist fallacies
- From: royls@xxxxxxxxx
- Date: Mon, 07 May 2007 19:49:35 GMT
Not content to have instigated the public demolition and humiliation
of himself, Paul Birch, Geoffrey Gardiner, and other anti-justice
nincompoops at my hands, Lyin' Ryan now seeks cruelly to expose the
ignorance, stupidity and intellectual dishonesty of propertarian icon
Murray Rothbard, for all the world to see.
Does pulverizing these fools give me any pleasure? No, it's nothing
but a chore: a dirty job, but someone's got to do it.
On 5 May 2007 11:47:59 -0700, w_b_ryan@xxxxxxxxx wrote:
Murray Rothbard
Man, Economy and State:
Chapter 4-Binary Intervention: Taxation
(continued)
6=2E The Incidence and Effects of Taxation
Part IV: The "Single Tax" on Ground Rent
We have refuted elsewhere
ROTFL!!
the various
arguments that form part of the Henry Georgist
edifice: the idea that "society" owns the land
originally
Strawman.
and that every new baby has a "right" to
an aliquot part;
Strawman.
the moral argument that an increase
in the value of ground land is an "unearned
increment" due to external causes;
?? Refuted a self-evident and indisputable fact? Don't _think_ so...
and the doctrine
that "speculation" in sites wickedly withholds
productive land from use.
As above.
George waxed eloquent over the harmful effect
taxation has upon production and exchange.
However, these effects can as easily be removed by
eliminating taxation altogether as by shifting all
taxes onto ground rent.[42]
ROTFL!! Yeah, how's the Somalia thing going?
In fact, it will here be
demonstrated that taxation of ground rent also
hampers and distorts production.
<yawn> "Pure ground rent is in the nature of a 'surplus,' which can
be taxed heavily without distorting production incentives or reducing
efficiency."
-- Paul Samuelson, Nobel laureate in Economics
A tax on ground rent would have the effect of a
property tax as described above, i.e., it could not be
shifted, and it would be "capitalized," with the
initial burden falling on the original owner, and
later owners escaping any burden because of the fall
in the capital value of the ground land. The
Georgists propose to place a 100-percent annual tax
on ground rents alone.
One critical problem that the single tax could not
meet is the difficulty of estimating ground rents.
<yawn> Landlords and tenants seem to do it....
The essence of the single tax scheme is to tax
ground rent only and to leave all capital goods free
from tax. But it is impossible to make this division.
Except that appraisers do it every day...
Georgists have dismissed this difficulty as merely a
practical one; but it is a theoretical flaw as well. As
is true of any property tax, it is impossible
accurately to assess value, because the property has
not been actually sold on the market during the
period.
Equivocation. Value is not price.
Ground-land taxation faces a further problem
that cannot be solved: how to distinguish
quantitatively between that portion of the gross rent
of a land area which goes to ground land and that
portion which goes to interest and to wages. Since
land in use is often amalgamated with capital
investment and the two are bought and sold
together, this distinction between them cannot be
made.
Except that it is made every day.
But the Georgist theory faces even graver
difficulties. For its proponents contend that the
positive virtue of the tax consists in spurring
production. They point out to hostile critics that the
single tax (if it could be accurately levied) would
not discourage capital improvements and
maintenance of landed property; but then they
proceed to argue that the single tax would force idle
land into use.
Strawman. It would only force idle _supermarginal_ land into use.
This is supposed to be one of the great
merits of the tax. Yet if land is idle, it earns no gross
rent whatever; if it earns no gross rent, then
obviously it earns no net rent as ground land. Idle
land earns no rent, and therefore earns no ground
rent that could be taxed.
Here Rothbard shows that he is either deeply stupid, disgracefully
dishonest, and/or comprehensively ignorant of the ideas he is
purporting to refute. Land rent is not what is actually paid but what
the most productive users are _willing_ to pay.
It would bear no taxes
under a consistent operation of the Georgist
scheme! Since it would not be taxed, it could not be
forced into use.
"Since 2+2=7, 1+9=4!"
ROTFL!!
The only logical explanation for this error by the
Georgists is that they concentrate on the fact that
much idle land has a capital value, that it sells for a
price on the market, even though it earns no rents in
current use. From the fact that idle land has a capital
value, the Georgists apparently deduce that it must
have some sort of "true" annual ground rent. This
assumption is incorrect, however, and rests on one
of the weakest parts of the Georgists' system: its
deficient attention to the role of time.[43]
Silliness.
The fact
that currently idle land has a capital value means
simply that the market expects it to earn rent in the
future. The capital value of ground land, as of
anything else, is equal to and determined by the sum
of expected future rents, discounted by the rate of
interest. But these are not presently earned rents!
Therefore, any taxation of idle land violates the
Georgists' own principle of a single tax on ground
rent; it goes beyond this limit to penalize land
ownership further and to tax accumulated capital,
which has to be drawn down in order to pay the tax.
Absolute rubbish. Recovering the rent removes the capitalized value
of future rents, leaving exactly the rent the most productive user is
currently willing to pay. The current land rent is easy to determine:
it's the amount that sees the land used without creating any
capitalized value in it.
Any increase in the capital value of idle land,
then, does not reflect a current rent; it merely
reflects an upgrading of people's expectations about
future rents.
Right, and knowing that future rents will be recovered just as current
rents are removes the capitalized value of those future rents.
Suppose, for example, that future rents
from an idle site are such that, if known to all, the
present capital value of the site would be $10,000.
Suppose further that these facts are not generally
known and, therefore, that the ruling price is
$8,000. Jones, being a farsighted entrepreneur,
correctly judges the situation and purchases the site
for $8,000. If everyone soon realizes what Jones has
foreseen, the market price will now rise to $10,000.
Jones' capital gain of $2,000 is the profit to his
superior judgment, not earnings from current rate.
Predictably, Rothbard does not want to know the difference between
producing wealth and redirecting wealth from others to oneself.
The Georgist bogey is idle land. The fact that
land is idle, they assert, is caused by "land
speculation," and to this land speculation they
attribute almost all the ills of civilization, including
business-cycle depressions.
Strawman.
The Georgists do not
realize that, since labor is scarce in relation to land,
submarginal land must remain idle.
Outright lie.
The sight of idle
land enrages the Georgist, who sees productive
capacity being wasted and living standards reduced.
Not idle submarginal land. That is jsut a flat-out lie by Murray
Rothbard.
Idle land should, however, be recognized as
beneficial, for, if land were ever fully used this
would mean that labor had become abundant in
relation to land and that the world had at last
entered on the terrible overpopulation stage in
which some labor has to remain idle because no
employment is available.
More outrageous rubbish.
The present writer used to wonder about the
curious Georgist preoccupation with idle, or
"withheld," ground land as the cause of most
economic ills until he found a clue in a revealing
passage of a Georgist work:
"Poor" Countries Do Not Lack Capital.
Most of us have learned to believe that the people
of India, China, Mexico, and other so-called
backward nations are poor because they lack
capital. Since, as we have seen, capital is nothing
more than wealth, and wealth nothing more than
human energy combined with land in one form or
another, the absence of capital too often suggests
that there is a shortage of land or of labor in
backward countries like India and China. But that
isn't true. For these "poor" countries have many
times more land and labor than they use. . . .
Undeniably, they have everything it takes-both
land and labor-to produce as much capital as
people anywhere.[44]
And so, since these poor countries have plenty of
land and labor, it follows that landlords must be
withholding land from use. Only this could explain
the low living standards.
Strawman.
Here a crucial Georgist fallacy is exposed
clearly: ignorance of the true role of time in
production.
Garbage.
It takes time to save and invest and
build up capital goods, and these capital goods
embody a shortening of the ultimate time period
needed to acquire consumers' goods. India and
China are short of capital because they are short of
time.
ROTFL!!!!
They start from a low level of capital,
Flat false, of course. Both had far higher levels of capital than
Europe until the 19th C, and correspondingly higher levels of
industrial production, too.
and
therefore it would take them a long time to reach a
high capital level through their own savings.
Flat wrong. The problem in both India and China was that their dense
populations and private collection and retention of land rent rendered
idle landowning the principal means of personal economic advancement.
Once
again, the Georgist difficulty stems from the fact
that their theory was formulated before the rise of
"Austrian" economics and that the Georgists have
never reevaluated their doctrine in the light of this
development.[45]
ROTFL!
As we have indicated earlier, land speculation
performs a useful social function. It puts land into
the hands of the most knowledgeable and develops
land at the rate desired by the consumers.
Flat false. It puts land into the hands of the richest, and develops
land only when the owner gets bored with watching its price rise while
he does exactly nothing.
And good
sites will not be kept idle-thus incurring a loss of
ground rent to the site owner-unless the owner
expects a better use to be imminently available.
Translation: he has to figure out which planning officials to bribe.
The allocation of sites to their most value-productive
uses, therefore, requires all the virtues of any type
of entrepreneurship on the market.[46]
Other than productivity, that is...
One of the most surprising deficiencies in the
literature of economics is the lack of effective
criticism of the Georgist theory.
??? Oh, man, that is priceless!! Clue time, Murray, ol' chum!
Economists have
either temporized, misconceived the problem, or, in
many cases, granted the economic merit of the
theory but cavilled at its political implications or its
practical difficulties. Such gentle treatment has
contributed greatly to the persistent longevity of the
Georgist movement. One reason for this weakness
in the criticism of the doctrine is that most
economists have conceded a crucial point of the
Georgists, namely, that a tax on ground rent would
not discourage production and would have no
harmful or distorting economic effects. Granting the
economic merits of the tax, criticism of it must fall
back on other political or practical considerations.
Many writers, while balking at the difficulties in the
full single-tax program, have advocated the 100-
percent taxation of future increments in ground rent.
Georgists have properly treated such halfway
measures with scorn. Once the opposition concedes
the economic harmlessness of a ground-rent tax, its
other doubts must seem relatively minor.
The crucial economic problem of the single tax,
then, is this: Will a tax on ground rent have
distortive and hampering effects? Is it true that the
owner of ground land performs no productive
service and, therefore, that a tax upon him does not
hamper and distort production? Ground rent has
been called "economic surplus," which would be
taxed up to any amount with no side effects. Many
economists have tacitly agreed with this conclusion
and have agreed that a landowner can perform a
productive service only as an improver, i.e., as a
producer of capital goods on land.
And they are right.
Yet this central Georgist contention overlooks
the realities. The owner of ground land performs a
very important productive service. He brings sites
into use and allocates them to the most value-
productive bidders.
Lie. He does not bring sites into use. Users do. The landowner can
only _stop_ others from using land, he cannot _make_ them use it --
and he sure as hell doesn't _pay_ them to use it!
Here Rogthbard again just shows how deeply stupid, ignorant and
dishonest he is.
We must not be misled by the
fact that the physical stock of land is fixed at any
given time. In the case of land, as of other goods, it
is not just the physical good that is sold, but a whole
bundle of services along with it-among which is
the service of transferring ownership from seller to
buyer. Ground land does not simply exist; it must be
served to the user by the owner. (One man can
perform both functions when the land is "vertically
integrated.")[47]
ROTFL!!!!
Yeah, no wonder no one ever used any land until there were landowners
to "serve" it to them!
ROTFL!!
The landowner earns the highest ground rents by
allocating land sites to their most value-productive
uses, i.e., to those uses most desired by consumers.
<yawn> Problem is, this function is just as efficiently discharged no
matter _who_ collects the rent. Ooops.
In particular, we must not overlook the importance
of location and the productive service of the site
owner in insuring the most productive locations for
each particular use.
Oh? And how might he be doing that, pray tell?
The view that bringing sites into use
Owners do not bring sites into use. They merely charge a fee of those
who do.
and deciding on their location is not really "productive"
is a vestige of the old classical view that a service
which does not tangibly "create" something
physical is not "really" productive.[48]
Lie.
Actually,
this function is just as productive as any other, and a
particularly vital function it is. To hamper and
destroy this function would have grave effects on
the economy.
No, it is just as effectively performed by the community recovering
the rent as by the landowner pocketing it.
Suppose that the government did in fact levy a
100-percent tax on ground rent. What would be the
economic effects? The current owners of ground
land would be expropriated, and the capital value of
ground land would fall to zero. Since site owners
could not obtain rents, the sites would become
valueless on the market. From then on, sites would
be free, and the site owner would have to pay his
annual ground rent into the Treasury.
But since all ground rent is siphoned off to the
government, there is no reason for owners to charge
any rent.
??? You mean, other than to avoid having to pay the land rent out of
their own assets??
ROTFLMAO!!!
Rothbard again proves that he is an _ABSOLUTE_ECONOMIC_IGNORAMUS_.
Ground rent will fall to zero as well, and
rentals will thus be free.
<sigh> Ground rent is what the most productive users are willing to
pay. It is not going to be zero. Duh.
So, one economic effect of
the single tax is that, far from supplying all the
revenue of government, it would yield no revenue at
all!
?? Un-freakin'-believable!
Such a claim betrays an idiocy so profound, so breathtakingly
comprehensive, that no amount of ridicule on my part coud possibly
make it look more nonsensical than it already is on its face.
The single tax, then, makes sites free
The words of a liar, fool, or lunatic. What other explanation is
there?
when they
are actually not free and unlimited, but scarce. Any
good is always scarce
False.
and therefore must always
command a price in accordance with the demand for
it and the supply available. The only "free goods"
on the market
?? Free? And on the market? Run that one by me again...
are not goods at all, but abundant
conditions of human welfare that are not the subject
of human action.
The effect of this tax, then, is to fool the market
into believing that sites are free when they are
decidedly not.
Having embarked on it with such misplaced hubris, Rothbard continues
his grand tour of cloud-cuckoo land...
The result will be the same as any
case of maximum price control. Instead of
commanding a high price and therefore being
allocated to the highest bidders, the most value-
productive sites will be grabbed by first comers and
wasted, since there will be no pressure for the best
sites to go into their most efficient uses.
?? "Grabbed"? How? Rothbard simply refuses to know the fact that
the land rent recovered by 100% LVT is just what the high bidder is
willing to pay for use of the site.
People will
rush in to demand and use the best sites, while no
one will wish to use the less productive ones.
"The whales falling from the sky will turn the streets to cherry
Jell-o."
On the free market, the less productive sites cost less to
the tenant;
Likewise under LVT.
if they cost no less than the best sites
(i.e., if they are free), then no one will want to use
them. Thus, in a city, the best, or most potentially
value-productive, sites are in the "downtown" areas,
and these consequently earn and charge higher rents
than the less productive but still useful sites in the
outlying areas. If the Henry George scheme went
into effect, there would not only be complete
misallocation of sites to less productive uses, but
there would also be great overcrowding in the
downtown areas, as well as underpopulation and
underuse of the outlying areas. If Georgists believe
that the single tax would end overcrowding of the
downtown areas, they are gravely mistaken, for the
reverse would occur.
Rothbard continues to build his tower of babble.
Furthermore, suppose the government imposed a
tax of more than 100 percent on ground rents, as the
Georgists really envision,
An outrageous lie.
so as to force "idle" land
into use. The result would be aggravated wasteful
misapplication of labor and capital. Since labor is
scarce relative to land, the compulsory use of idle
land would wastefully misallocate labor and capital
and force more work on poorer land, and therefore
less on better land.
Absurdity piled on absurdity. You can't make people use land by
taxing it more than the rent. You can only make them stop using it.
And then you won't be getting any rent from it at all. Duh.
Rothbard goes on at tedious and uniformly fallacious length, but is
anyone here really interested in any more of his idiotic tripe? I
would certainly hope not.
-- Roy L
.
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