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Political Economy according to Gollum

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Gollum in the Cave

I have been in discussion with someone on the blog of a supporter of LVT who sometimes writes on the subject. His ideas came under attack by an anonymous individual whose views seem to have much in common with those held by Gollum, a character from Tolkien's Lord of the Rings. But since these idea are so widespread, the exchange is worth publishing even though it is not enlightening.

Say that they have got secure occupation (granted by whom?), that still impedes somebody elses access to the land. Say a home occupier builds a perimeter wall around a house for security - or even if you just take the walls of the house - that will impede access to the land occupied by the structure. If you allow for some limitations on land access - no not some - *any* limitations, which you do permit, then you are justifying private ownership of land (though the terms will have a different character). You may restrict how much land is privatised, and allow some commons - though you have then arrived at Paul's point (let me know if you do not know which one I mean).

It was the Professor of Land Economics at Cambridge University, Denman, no supporter of LVT, argued that land ownership is just a bundle of rights. So Birch’s argument has nothing to do with it.

Security of occupation - I agree with the principle, but who has the right to grant it, under Georgism? If I want secure occupation of the field I can see from my window, can I just assert my right to secure occupation? What if my colleague makes the same claim - how would Georgists settle it?

Land rights are settled by whatever arrangements are in force at that time and place. It might be a local court, or you might have a fight, or it might be a title upheld by government authority. George is saying only that when it is government that grants the title, then the holder of the title should pay due recompense to the government for the value that holding gives to the holder. It is called paying for what you get, and getting what you pay for. A sound conservative principle, it is not?

A land ownership title negates the need to constantly resolve such claims. Once you have been granted secure occupation of a patch of land, it is yours *exclusively* according to your wishes, until you trade it, or relinquish it etc.

It is not really. In an extreme case, government can collapse. The continuing value of a landholding depends on continuing action to maintain the rule of law, defend the realm and in modern circumstances to provide an infrastucture. If this constant renewal of land value did not take place the value of your title would be worthless and you would soon have to move away. And the value of your land might collapse due to natural causes. It has happened enough times in the past.

Furthermore, there is the major contradiction in asking why there must be landowners, if your government is going to be funded by a land value tax. The land value tax is exclusively paid by land owners. If there are no land owners, who pays it?

George did not argue for an end to land ownership. He took the view that we are where we are. So the land owner pays the land value tax. But the incidence of the tax is on the occupier who pays it instead of both rent and taxes on his production.

Do you not see that the rental value reflects the value in occupying and utilising a patch of land, and not merely having access to it? A patch of land which is not worth occupying or utilising is worthless - whether it is accessible or not. Although land is fixed in supply, the supply of land worth occupying varies and shifts as the socio-economics and technology of society does. Of course.

Land that is worth occupying and utilising could be by the land owner himself - however if someone else wants to occupy and use his land, he will not be able to. He may accept compensation for this, in the form of rent. You will agree to pay the rent (reflective of site value), as a tenant(if you are smart) only if the value of your occupation and use of the land is more profitable than the cost of it. If it is, the payment of the rent will not make you worse off- but better off. Win-win.

Correct. And the same applies to an ad valorem land value tax. But the difference then is that the tenant does not have to pay any tax, under a single tax system. And in marginal situations the demands of the tax system mean that nothing happens since the land has then become sub-marginal and no production takes place or can take place.

The landowner does not earn the rent from you by producing something - nor should he. It would be as absurd as someone who makes an honest claim to an insurance company for a loss incurred, and then being told he must 'donate' the compensation sum paid out by the insurance company to the local authority as a tax.

Correct. It is the community that has produced the “something” that has given the land its rental value. And the landowner pockets it. At this point one cannot avoid the moral issue – what is yours, what is mine and what is our’s?

The logic is the same. The rent is equivalent to the insurance compensation paid due to a loss - in this case the loss is the landowner's use and occupation of his own land.

Yes but the value of that use arose because of the presence and actions of the community and the money it spent on maintaining the land in a usable condition.

The fact that different sites have different costs, Georgists argue, should come into it. A crappy piece of land will have higher costs of production, so will yield less rent for the land owner. The owner of the good piece of land should compensate everyone for the audacity of owning and making available for use and occupation a good piece of land, so says the Georgist. I say the landowner should not be taxed on his rent for he has provided the community with something of value - making it possible for the use and occupation of his land, superior land, for the use that is of greatest value.

But the landowner as such has provided the community with nothing. The most valuable privately owned land in Britain is the Grosvenor Estate owned by the Duke of Westminster via a private company. Now consider all the infrastructure that is provided to make that estate desirable. The police. The capital’s entire transport, highways, water supply and drainage systems, which must be kept going 24 hours a day. The Thames Barrier. The country’s military forces. The police. The justice system. Most of it is at the taxpayers’ expense. If these services suddenly failed, the Duke’s property would quickly become a ghost town.

Physiocrat - I'll remind you of my advice to Robin - "asserting something doesn't make it true" - which applies to your quip:

"The logic of your arguments is now anything but." And your grounds are?

Check your editing.

I've started to read Poverty & Progress. If you (and others) are prepared not to assert moral superiority, perhaps we can discuss it as I 'progress' through it? Good, but the study of economics demands that moral judgements must be made. What is yours, what is mine and what is our’s and their’s? What is economic activity and what is crime?

The first chapter seems to make some good points, and I remind myself that he was making his points a long time ago. In terms of productivity being the source of wealth, and not capital, we are in agreement.

Where our agreement departs is his reasoning about the wealth being the creation of the community.

For example:

"Consider the example of a primitive fishing village. Under the simplest conditions, they all catch their own fish and dig their own bait. Soon, they realize the advantage of a division of labor. So now one person digs bait while the others go out fishing. It is obvious at this point that the one who digs bait is, in reality, doing as much toward catching fish as those who actually take in the catch."

I understand this point - the goal of catching fish, comes at the end of a 'chain' of co-operation under a situation where labour has been divided. If this chain breaks down, the goal of catching fish is impeded. But there is something missing. The statement "the goal of catching fish *in this manner* is impeded".

If I go fishing and catch my own, and do so under 'the simplest conditions', then by catching fish *in this manner*, labour has not been divided. I have caught the fish by myself. Under 'the simplest conditions' there are activities which are not pursued collectively.

Have you tried diving into the water and catching fish with your bare hands and eating them straight out of the water? Reminds me of Gollum. Come to think of it, the views you are forwarding are Gollum’s.

Though is it only limited to the 'simplest conditions'? Imagine that I invent a new approach in business intelligence. Initially, it is just an idea in my head. However, to achieve the end results, I cannot do it alone. I have to work with others. However, their roles in the achievement of my idea, follow from it, are secondary to it, and so all benefits that everyone involved gets are benefits they have gotten from my idea. I have made those secondary achievements possible, they can, at root, be attributable to me.

And without them, the ideas would have remained in your head. Your Precious.

Physiocrat - I'll remind you of my advice to Robin - "asserting something doesn't make it true" - which applies to your quip:

As Ayn Rand puts it, "Throughout the centuries there were men who took first steps, down new roads, armed with nothing but their own vision."

Nothing could be further from the truth. Take a careful look at an ordinary £2 coin, including the words round the edge. Look up the reference.

The division of labour, and the benefits enjoyed by those involved, are a direct result of the idea which produced the division of labour - it is entirely attributable to *the manner in which labour is divided* - that manner being the product of someone's mind.

Many minds. Mind is not cut up into individual privately-owned estates with walls, fences and hedges round them.

When George writes "As they exchange with each other the product of their labor for the products of others' labor, they are really applying their own labor to the production of the things they use -- just as if each person had made each item alone. They are, in effect, satisfying their own particular desires by the exertion of their own individual powers. That is to say, they genuinely produce whatever they receive" he is simply mistaken.

He is not giving enough credit to the men of ideas, the men of vision.

That is the whole thrust of his book. The purpose of his inquiry is to discover why the great technological inventions of the Industrial Revolution, including the replacement of muscle power by steam power, which increased man’s productive capacity by a factor of ten, did not lead to a corresponding all-round increase in wealth.

Not everyone involved in the division of labour is 'doing as much toward catching fish as those who actually take in the catch' - for the men who discover new and more advanced ways of catching fish (in this example) are doing much more, by improving the productivity of those whose participation is secondary to, and dependent on, his initial work.

In which case they deserve a greater reward. In practice, however, the reward goes to whoever owns the piece of land adjacent to the landing stage.

But in general I agree with him that money is representative of the value of work.

Good start.

Some quotes from the Money Speech in Atlas Shrugged:

"When you accept money in payment for your effort, you do so only on the conviction that you will exchange it for the product of the effort of others. It is not the moochers or the looters who give value to money. Not an ocean of tears nor all the guns in the world can transform those pieces of paper in your wallet into the bread you will need to survive tomorrow. Those pieces of paper, which should have been gold, are a token of honor–your claim upon the energy of the men who produce. Your wallet is your statement of hope that somewhere in the world around you there are men who will not default on that moral principle which is the root of money"

Yes. So?

"Have you ever looked for the root of production? Take a look at an electric generator and dare tell yourself that it was created by the muscular effort of unthinking brutes. Try to grow a seed of wheat without the knowledge left to you by men who had to discover it for the first time. Try to obtain your food by means of nothing but physical motions–and you’ll learn that man’s mind is the root of all the goods produced and of all the wealth that has ever existed on earth."

Yes but have another look at your £2 coin.

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