Of Kirk and Ale

I received the following comment today in my “Credo” post and I thought I would respond with another post since his questions warranted a longer response.

Trevor,
Could you clarify some things for me? I am totally confused by what you are advocating. You seem to be approaching these issues from an urban perspective, while I would look at them from more of an agricultural/rural perspective. So respond with that in mind if it makes any difference. My concerns mainly regard land, so points 6, 7, and 8 are the main ones.

In 7) you state “I believe that land and natural resources should be privately held, but I recognize that this denies others their just access to those fixed resources.”

You say you believe in privately held land, but everything else you state seems to contradict this. Can you distinguish between your idea of “privately held” land and owning property (which you are against, right)? Also, is the fact that others are denied access to land an unsolvable dilema (if it really is one), or do you suggest a solution?

“8)I believe that any individual who choses to use land or natural resources should make a payment to the community that reflects the market value of what he is using.”

How exactly does this work out? If you have a farmer who is raising crops on land that he owns/holds, does he pay a fixed payment to the community (who/how/why?), is it based on his profits or on a set value of his land? What if his crop fails, does he still owe the community a payment? What about differences between an industrial farmer or an organic farmer (capital, costs, value of land, input, impact on the land)?

“6)I believe that everyone has an equal right to the access of land and natural resources but I deny that these should be treated as common property.”

This just seems vague and contradictory to me. How would this work out in the county where people depend on the land for their livelihood?

Also on point #9, would you really advocate that for agricultural land as well, or only urban properties?

I know that’s a bunch of questions, so don’t feel like you have to answer them point for point, a general clarification would be a good start. You have definitely peaked my interest in New Urbanism, so thanks.
Christo

I’m not at all against the private holding of land. In fact, I think it is the best way to appropriate land for it’s highest and best use. But, at the same time, I recognize that land is fundamentally different than all other “goods” in that it is not the product of labor and, therefore, one cannot boast the same sort of “rights” over land that might be claimed over a car or a house. Land is special.

When Land is bought and sold privately (in the same way that a car or a house might be) the phenomenon of economic rent begins to accrue to the “owner” of the land. This happens on both urban and rural land. I’ve written at length about economic rent and I encourage you to read those posts. Economic rent results in publicly created value accruing to private individuals due to their illegitimate claim to private property.

One might argue that the best way to solve this is to get rid of privately held property and make all property “common.” Of course, there are a thousand logistical concerns with this and everywhere it has been tried has resulted in more injustices than it solved. A better solution is to allow land to be held privately but to charge the “owner” an annual “rent.” He is granted full rights to the exclusive use of his land as long as he pays the rental fee (also called Land-Value Tax – but it’s technically a “rent” payment). This ensures that the community is compensated for the loss of their equal rights to that specific chunk of land.

As for the farmer, it’s important to recognize two things. 1) A land-Value tax structure would result in an extremely low selling price but high holding cost for land. Nearly anybody could buy land but few could hold onto it unless they could make good use of it. This is also true of farmland. The difference however, is the holding cost of land is a function of the market demand for the land and the ability to pay (this combination results in what we call “Value” or selling price – this is simple supply and demand economics). This means the holding cost of farmland would be much lower than the holding cost of city land since the “value” of city land is much higher per acre. In fact, the holding cost of marginal land would approximate zero over time meaning that farmers would pay the smallest “rent” per year. Also, a portion of the rent payments in a community were returned to the community as a citizen dividend (much like Alaska does with oil profits) than the farmer may see a net rent payment of zero or less (He’ll get a dividend check every year that may be larger than his rent payment).

To answer some of your individual questions:

“If you have a farmer who is raising crops on land that he owns/holds, does he pay a fixed payment to the community (who/how/why?), is it based on his profits or on a set value of his land?”

He’ll pay a percentage of the value of his land. Remember that value is set by the market and is the lowest for farmland and marginal land. Also remember that a tax on land will result in a decrease in the sale price of land. So farmers will be able to buy land without going into huge debt – this will also help them pay their annual rent…if they have any.

What about differences between an industrial farmer or an organic farmer (capital, costs, value of land, input, impact on the land)?

Applying a land value tax on farmland will benefit the small farmer the most by deleting his tax payment for improvements. The small farmer holds more money in tractors/barns/houses/organically-improved soil/etc. on his land as a per/acre amount than do the larger production (big business) farmers and therefore pays more taxes presently. Under a land tax system his payment would be the same per acre as the large industrial farmer.

I hope that answers your questions. Thanks for asking!

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