Thread by @larsiusprime

Does Georgism Work? Is Land a Really Big Deal?

Some highlights from my article that I just posted today:

astralcodexten.substack.com/p/does-georgis…

Some people say Land is not an important thing in the economy. The evidence says otherwise, read this thread for more.

I have five testable hypotheses for whether land is a "really big deal" or not:

1. Most of the value of urban real estate is land
2. America's land rents equal a sizable % of government spending
3. Land represents a significant % of all major bank loans
...

4. Land represents a significant % of all gross personal assets
5. Land ownership is highly concentrated among the wealthy

Let's test them one by one against the evidence.

Point 1 -- Most of the value of urban real estate is land.

The AEI shows us land value heatmaps and as we can see it's concentrated in urban areas.

Manhattan island alone was worth $1.74 trillion in 2014 according to Barr et al.
NYC was worth $2.5 trillion per Albouy et al.

But you can see for yourself. Here's two properties right next to each other in San Francisco. An empty lot and a townhome, similar lot sizes.

Adjust for size and subtract and the share of the townhome's value due to land alone is 76%.

Don't believe me? I have an empty lot in Gerlach, Nevada to sell you. Don't worry it's super cheap, at $0.0054/sqft it's 159,000 times less expensive than land in the heart of San Francisco.

web.archive.org/web/2021080903…

Most of the value of urban real estate is land.

Point 2 -- America's land rents equal a sizable % of government spending.

TL;DR I did some enormous digging into 12 different estimates for the total land value of America, see the linked article up top for the methodology.

All America's land is worth between $24-44 Trillion

Bottom figure is a super pessimistic lower bound. True value could be even higher than our upper bound, but let's roll with it.

Here's how much of our federal budget a Land Value Tax (LVT) on that land value could pay for.

To put that in context, the MOST PESSIMISTIC ESTIMATE is enough, all by itself, to pay for any single one of these three items: Defense, Social Security, Medicare+Medicaid, all by itself.

But we shouldn't compare to federal SPENDING, because the question is can we use LVT to offset existing taxes. Let's look at federal TAX RECEIPTS and compare that to what LVT could raise.

On the high end LVT is in striking range of replacing all other taxes.

This becomes more modest if you factor in state and local spending. But this is still a huge amount of taxes you could offset, with an LVT that has no deadweight loss.

Also this estimate doesn't account for local property taxes already in effect; figures would be higher if I did

And that's further without factoring in the ATCOR theory (if you untax labor and capital taxes, land values rise) and the Henry George Theorem (public spending under various conditions raises land values)

If you want an actual policy paper for putting this stuff all together, check out Nicolaus Tideman's Post-Corona Balanced-Budget Super-Stimulus: The Case for Shifting Taxes Onto Land

papers.ssrn.com/sol3/papers.cf…

Point 3 - Land represents a significant % of all major bank loans

This is the fun part. Banks nowadays are just ploughing all their money into real estate

It's almost twice as bad as it was in Henry George's day!

Thomas Piketty famously said in "Capital in the 21st century" that returns to capital are outpacing growth. He was wrong. Rognlie pointed out once you factor in appreciation, all the observed returns to "capital" are coming from housing

Point 4 - Land represents a significant % of all gross personal assets

Land represents about 40% of asset values in Spain, 50-60% of asset values in France and the UK

And about 40% in the USA, and 39-43% globally. (Using the Georgist definition of "Land" to mean all non-produced assets, which includes conventional land, natural resources, some even include forms of IP).

Point 5 - Land ownership is highly concentrated among the wealthy

Bill Gates is the # owner of private farmland in the US.
For all land, he's #49. Jeff Bezos is #25. Ted Turner is #4.

The rich own most of the land value and on this basis charge everybody else rent.

Correction: the OLD and rich own most of the land value. The young own far less, and they're not going to catch up.

By George, Land is a Really Big Deal.

Nobody can create land, but everybody needs it, and if you own land you get to enact what amounts to a private tax on the entire economy.

This is not a system that rewards hard work and free enterprise, but instead discourages them.

So what do we do about it? This Land Value Tax thing -- will it just be passed on to tenants? Can land value actually be accurately assessed?

For the answer to those questions and more stay tuned for tomorrow and the next day, when my posts on those subjects goes up.

Here's a link to the article itself, by the way. It's entirely possible I got some stuff wrong, so do feel free to leave some comments and engage with the discussion.

astralcodexten.substack.com/p/does-georgis…