Fred, I was probably not as clear on the nature of the entrepreneur view 
as I could have been. Thanks for helping me to see this.

Fred Foldvary wrote:
> As population and commerce grow, over time real land
> rent rises, and there is no a priori reason to believe
> that the rise in rent must equal the return on bonds.
> Over the very long run, with perfect knowledge of the
> future, the price of land will anticipate the growth
> of rent, and the return on the price will indeed be
> equal to that of bonds.  However, with uncertainty,
> the most optimistic speculators will buy and make the
> price of land go up more than the long-run average,
> which will then cause a fall when expecations are not
> fulfilled, so what we see is a boom-bust cycle. We are
> now in the bust.
>   

You assume here that speculators are not entrepreneurs. Entrepreneurs, 
in the entrepreneur view, do not choose on the basis of their optimism 
and pessimism. They also do not gamble. They are not risk bearers; they 
are uncertainty bearers. In dealing with uncertainty, each one uses the 
knowledge that she believes is most appropriate for earning profit. She 
appraises potential income streams. Some appraise higher than others.

To represent human choice as we know it, we should not assume that 
whether an entrepreneur is correct or incorrect is a matter of mere 
chance. We should assume that an entrepreneur is more likely to be 
correct than incorrect. Otherwise, there is no reason to think that the 
butcher, baker an brewer would serve their own interests. In the case of 
buying or renting and deciding the use of land, this assumption implies 
that the entrepreneur rate of return in a changing market economy will, 
on average, exceed the rate of interest on loans; which, in turn, 
will.on average exceed the rate of return on random buying of land. I 
assume that random buying of land includes speculation in land that is 
driven only by optimism and pessimism. In a pure capital market and in 
competitive equilibrium, these would all be equal. But the entrepreneur 
view is different from this.

This conception of the entrepreneur view is the basis for my challenge 
to show that, in a real market economy over time, the return on a random 
investment in land is greater than the rate of interest on triple A bonds.

>> The new uses of the land
>> and the space are 
>> not efficient. 
>>     
>
> You privilege the status quo.
> How do you know that the status quo is efficient
> relative to a tax on land space?
> Suppose private owners owned the space and owners of
> buildings paid them land rent.
> Would the use of space be inefficient?
>   

Not so. I want the entrepreneurs alone to determine which use of space 
is most efficient. If space is taxed, entrepreneurs will attempt to 
avoid the tax by economizing on land, or space. The use of land and 
space will be partly determined by government edict (and perhaps by an 
economic theory that lacks appreciation for how prices in a market 
economy are mainly determined -- i.e., through entrepreneur interaction).

Pat Gunning