Mason,
     Land value is not just "a phenomenon of the mind," at least not always.  The measure if sales of vacant lots, and the practical issue becomes how many of those sales occur in an area.  Is the market "thick" enough to make reasonable assessments?  This is something I have actually looked at in terms of data, and a general story is that such markets usually are sufficiently thick near the edges of cities, where lots of vacant land about to be developed gets bought and sold, and prices tend to converge near each other, subject to details of location.  However, the problem arises in central cities where such sales may be quite infrequent, and the variance of prices can be quite extreme.  Without naming the city I looked at, I saw sale prices varying by an order of magnitude on lots very near each other in space and time, so assessing such values for taxation purposes becomes much more of an uncertain crap shoot.

________________________________________
From: Societies for the History of Economics [[log in to unmask]] On Behalf Of mason gaffney [[log in to unmask]]
Sent: Friday, April 16, 2010 12:40 PM
To: [log in to unmask]
Subject: Re: SHOE: QUERY -- Gaffney -- Austrian economics and business cycles

Dear Doug Mackenzie,

        Thank you for the thoughtful response.
        You are right, this is not the place to debate the merits of
Georgism. It is a good place, I think, to define it, and cite some
literature about it.
        I try not to class myself as a "Georgist"; if I have slipped it was
an oversight. I can't stop others from classifying me because I do support
the logic of his main tax proposal, along with Bill Vickrey, Harold
Hotelling, John R. Commons, Harold Groves, Lowell Harriss, Milton Friedman
(sort of!), Karl Marx (at times), Leon Walras, Adam Smith, and various
others one might tick off. OTOH, I deplore his confused attempts at capital
theory, where I find myself more in league with Wicksell, the "Swedish
Austrian".
        No one speaks for "Georgists", a varied lot, ranging from Utopian
libertarians to applied socialists. By "applied" socialists I refer to
various mayors in the U.S. and Canada during the Progressive era, and even
later. An outstanding case was Daniel Hoan, Mayor of Milwaukee 1924-50, a
record tenure. He always ran as a socialist. A prominent socialist theorist,
Morris Hillquit, sneered at him as a "sewer socialist". Meantime, Norman
Thomas always ran for U.S. President on a platform including a tax on land
values.
        As for estimating taxable land value and rents, I have attempted
this in "The Hidden Taxable Capacity of Land", 2009, International J of
Social Economics. It is a long piece that I will send you by email if you
like. I would attach it here but that is probably breaking some reasonable
rule.
        You are right that land value is a phenomenon of the mind. Richard
Hurd said as much in his 1903 classic, Principles of City Land Values: "Land
value is a state of the public mind". He was referring to speculative values
during periods of "Irrational Exuberance". However, this public mind
determines the prices at which land titles trade and are recorded, so it
makes a feasible tax base, and has been so used for thousands of years.
Taxing it has a very sobering effect on wild expectations, so the very act
of taxing it helps make it measurable and reasonable.
        You correctly describe it as an "opportunity cost". As Alfred
Marshall wrote, this makes it exogenous to what the sitting owner does with
it, so it has no depressant effect on incentives, one of its virtues.
Marshall called it "the public value of land", and attributed it to 3
factors:
1. nature,
2. public works and services,
3. synergistic spillovers from other private lands.

Note that "nature" is only one of three. I find Marshall's definition useful
and practical. As to Locke, I have not bothered much with his concept, which
strikes me as primitive and obsolete. However, my good friend Nic Tideman of
Va. Tech. has written a good deal about it, and debated it with some
outstanding philosophers, so for more on Locke let me refer you to him.
        Again, thank you for your thoughtful response.

Mason Gaffney



-----Original Message-----
From: Societies for the History of Economics [mailto:[log in to unmask]] On
Behalf Of Doug Mackenzie
Sent: Thursday, April 15, 2010 1:37 PM
To: [log in to unmask]
Subject: Re: SHOE: QUERY -- Gaffney -- Austrian economics and business
cycles

I'm not sure if this is the place to debate the merits of Georgism, but most
Georgists emphasize that natural land value generate rents that should be
taxed to fund public goods, and possibly a social dividend. Various
Georgists blame all sorts of societal ills on the lack of proper taxes. I
have also heard wildly disparate estimates of the size of this thing called
natural land value.

My main objections are first, that land value is a phenommena of the mind
which contemplated alternative uses for this resources. This is a matter of
subjective opportunity cost, not "natural value". So the usual results about
competition over rents apply, and this copetition is far more productive
than Georgists appreciate. If there is actually such a thing as natural land
value, I see no way of measuring it outside of the market process that
prices land- and this does not involve so called natural value of uniproved
land, but opportunity cost in the Austrian sense.

Georgists often invoke the Lockean proviso in defending their claims.
Private property in land suppsedly deprives "the people" of what is rightly
theirs. Richard Epstein (not Posner)argues in Takings that the gians from
trade in modern commercial society more than compensate people for anything
supposedly lost in ending the state of nature, so the Lockean proviso is of
no consequence. I strongly agree, and would add that problems with
intergenerational tranfers raised by Parfit in his book Reasons and Persons
render discussions as to what people now deserve based on what "we"
suppsedly had in some mythical state of nature completely absurd. I am not
sure if Foldvary or Gaffney really push this Locekan proviso thing, but...

Its been a few years since I have really looked at this Georgist stuff, so
dont quite recall how this relates to the business cycle, but my guess is
that the pursuit of land rents somehow caused the housing boom. Low mortage
rates and loose Fed policy appear to be a better explanation.



--- On Thu, 4/15/10, Humberto Barreto <[log in to unmask]> wrote:

> From: Humberto Barreto <[log in to unmask]>
> Subject: Re: SHOE: QUERY -- Gaffney -- Austrian economics and business
cycles
> To: [log in to unmask]
> Date: Thursday, April 15, 2010, 8:20 AM
> MacKenzie writes that "My own read on
> Georgism is that Posner dealt
> the last fatal blow in his 'Takings' book, and this chapter
> of history
> should end there." Please cite chapter and verse so we may
> find this "last
> fatal blow". Better yet, quote it here, or epitomize it for
> us, to spare us
> a trip to the library.
>
> It is not clear to whom or what you are responding. I urged
> others to read
> Foldvary's accurate forecasts. Foldvary is as much and
> perhaps more an
> Austrian than a Georgist, but all these labels and
> classifications and
> stereotypes of individuals are misleading and lazy.
> Foldvary is Foldvary.
>
> It is wrong, IMHO, to dismiss accurate forecasters by
> calling them stopped
> clocks. It's not as though Foldvary forecasted the crash
> every year. He
> specified 2008, both times. To dismiss a true prophet is
> close to accepting
> the false prophets who were on top of the control system -
> and still are,
> alas, both in D.C. and in academe. Academics have a
> reputation and a history
> of lagging reality, as they did from 1929-36, at least. Now
> is a good time
> to redeem ourselves by becoming headlights, rather than
> tailpipes.
>
> MacKenzie's main point seems to be that he "knows about"
> Georgism, and it is
> "wrong" - period. That tells us nothing substantive.
> Something specific
> would be helpful.
>
> Mason Gaffney
> [log in to unmask]
>