Rob,

I do think that a basic income would be a big improvement, but only
because it would abolish the power of individual persons to cut off
the income of other individual persons.

However, I still consider the moral theory underlying Georgism
to be severely flawed, in much the same way as that underlying
libertarianism. (They are, of course, very similar.) My earlier
post only hinted at this, but I can explain it more further.

I also believe that the economic theory of Georgism suffers from a
severe flaw, which is very much connected to the flaw in its moral
theory.

The foundational principle of Georgism is the idea that “the fruits
of the earth belong to us all, and the earth itself to nobody.” So
far so good. But from here, through a set of libertarian-style
assumptions, a conclusion is reached that mere economic compensation
to the public can satisfy the full public interest in the use of a
resource. This is mistaken.

The underlying problem, I believe, is that Henry George was unable
to conceive of the economy as a network structure. The truth is,
he almost had it, and his almost having it is just what led to his
insights — but he still did not quite get it. Otherwise, he would
have had to generalize his theory, and get off his obsession about
land.

So, in George’s mind, each plot of land has a certain value, which
is not fixed or inherent in the nature of the land, but is primarily relative
to the value of what surrounds the land. If the local community
invests in streets, a railroad terminal, police, various public
services, and so on, this increases the value of the land; but of
course the owner of the land, who has the power to rent out this
value, is not the person who created the value. (This is a dubious
assertion if those services are funded with property taxes, though;
this hints at the problem.)

This paints a picture of land value that is a simple sum of the
pre-existing bounty of nature, which has its own pre-existing value
– plus the value added by labor. The problem, in George’s model,
is the accumulation by the land-holder of these labor-generated
externalities. That is, the problem is that the laborer who adds
the value cannot capture the value he adds.

The reality though is that land value is not a function of labor-added
value. Land value is a product of its position within the social
network. There is no way to add up labor inputs to get to the
value.* An example can demonstrate this.

[*] Or anyway: if you can, the accounts won’t balance; more value
will exist than labor and resources, because there are always more
ways to seek rent on the same fixed value. You end up having to
count the same labor and resources multiple times — once for each
use of land that could potentially seek a rent from it.

Georgism, in theory, would allow a single monopolist to buy up the
entire waterfront of the Mississippi River, and to pay for this a
fair rent to the state. What would that rent be? Assuming we are
pre-airplane, the owner can build bridges which effectively monopolize
the connection between east and west. How much can he charge? The
market price of crossing the bridge is proportional, not to the
cost of erecting and maintaining the bridge, but rather (in the
direction going East) to the value of the entire East of the USA
– to all the benefits offerred by that entire region, whether as
a market, a tourist destination, a staging point on the way to
Europe, or an opportunity to communicate with any of its population.
And going West, similarly, the fee which the bridge operator can
charge is proportional to the value of the entire Western USA.

Here you may think: “Aha! This is just what George is talking
about. Only here, the entire country is the ‘community’
which is entitled to extract the land-value from the bridge-monopolist.”

But you would be wrong. I explain by two directions:

(1) Consider, instead of that river, an equivalently sized and
shaped piece of land just one mile to west of the Mississippi.
Another monopolist could choose to buy up this thin sliver of land,
and there to erect a wall, a border, and to exercise the very same
monopoly privilege, becoming a “market-maker” between East and West.
Erecting a wall promises just as much profit as a erecting a bridge.

Does this theoretical possibility imply that the land one mile West
of the Mississippi ought to
command the same land-value ground-rent charged to a monopolist bridge-builder?

And what if the river is not owned by a single monopolist, but
divided into 10,000 parcels — do each of the 10,000 owners have
to pay the same rent (per acre) as the bridge-monopolist would?
Clearly, the monopoly value is not in the individual parcels of
land, but rather in the fact that a certain set of parcels are
controlled by a single agent, effectively constituting a single “node” on the
network grid of roads (economically if not physically). More on what this implies, below.

(2) The land-value of the river-front might either, (a) be considered
to include the value of the monopolist’s “market-maker” power; or
else (b) we might consider this power to be part of the value-added
by construction of the bridges. Neither possibility can rescue
Georgism:

(a) If the choke-point power is considered value-added by
the bridges, then the situation is morally absurd. The
profit returned from the land is proportional to the entire value
of the continents, not the value of the bridge as artifact.
Thus, in this case, Georgism’s power to curtail rent-seeking
is shown to be extremely lacking.

(b) If the choke-point power is considered part of the
land-value, then we have the situation that finally reveals
the economic flaw of Georgism — at which I hinted earlier.
Because in this case, the owner of that land is charged a
ground-rent which requires him to charge monopoly
prices for the crossing of the bridge. He is bound, as
if by law to extract the maximum value from the
community, only in order to surrender this same value back
to the community.

But this is no benefit to the community at all: the community
has set up an artificial scarcity in order to create a
monopoly power, which it then exercises against itself.
The sane solution is that the bridges charge a fee, if any,
proportional to the cost of bridge maintenance. But Georgism
fails to see the social need for this kind of arrangement.

Of course, a similar bridge situation does not require such a drastic
monopoly as control over the Mississippi. Any bridge at all is
some kind of local monopoly. It can charge a price proportional
to the cost of seeking the next-best route — not a price
proportional to the cost of bridge maintenance.

Bridges (and railroads, etc.) are only the most obvious, physical manifestation of the
network grid of society. The copper wires over which telephone communications
are sent are laid out much like roads. But the greatest monopoly
power in that network is held by the people who control the
telephone number namespace. The IP namespace, as well as
the internet domain namespace, are equivalent. These are completely
virtual “bridges”: one can have a physical copper line, a
physical connection to the physical global network, and yet still
be effectively disconnected from the internet, merely be the refusal
of some remote person to allocate you an IP address. (Unlike most
of these monopolies, ICANN, which allocates these numbers, is a
non-profit — but it still collects a whole lot of cash. And back
when it had a different name, it made a few people into billionaires
by contracting out its monopoly powers.)

Similarly, the owner of an operating system controls its ABI — a
choke-point sitting between the application developers and the
users. Thus it can charge to its users a price proportional to the
value of all applications developed on its platform rather
than a price proportional to the value added in OS development.
The application developers, in turn, are the choke-point between
users and user data in application-specific formats — whoever
controls the format of your office suite effectively gets to sell
access to the value you create with it. And again, whoever controls
the web browser sits in the position of a choke-point between the
users of the web, and all of the value created by all of the people
who run web sites. (In the 90s, the web browser was “the new OS,”
the next big monopoly, and investment money flowed accordingly.
But open web standards mostly de-monooplized the “browser as
platform.” An exception: Flash.) And this is also true of whichever
web site is the “home page” of the web browser: in a certain respect,
it sits between the user and all other web sites. At any rate, a
search engine can monetize (for itself) the value created by millions
of web content authors, because of its network position, sitting
between them and their audiences.

(Also: In the network graph of corporate cash flows, the CEO is a
choke-point connecting all cash flowing between investors and
employees, in either direction. Department heads immediately below
the CEO similarly connect entire departments’ labor-product to the
CEO in the same fashion. The manufacturing firm as a whole is the
node connecting laborers to the accumulated machinery and, effectively,
the (physically-manifested) technological knowledge of the past
tens of thousands of years of cultural accumulation.)

So, “the bridge situation,” in its basic structure, is not at all
limited to land, and would rarely be addressed by a land-value tax.
But even in the cases where it would be addressed, it would not be
adequately resolved.

The reason Georgism does not allow for a sane resolution to the
bridge situation is that it fails to see the possibility for property
owners (or, alternatively, the public through democracy) to choose
for themselves the shape the graph will take. Since it fails to
truly “see” the graph, it defaults to an assumption that the graph
somehow pre-exists, or exists outside, human agency.

Georgism assumes that a resource has, within its very nature (or
the nature of its situation), a certain rent-seeking potential –
rather than recognizing that humans can choose to use resources to
implement networks with different structures — choosing between structures featuring choke-points which permit rent-seeking, or
structures with redundant connections,
allowing alternative routes to any node, thus preventing monopoly. We don’t merely occupy the structure — we create it.

By demanding, in principle, that the most profitable possible
use be made of any resource, Georgism encourages rent-seeking.
And by assuming that the damage that rent-seeking imposes on the
community is necessarily off-set by the return of the rent “to the
community,” Georgism makes a severe economic mistake.

Libertarianism’s moral mistake is to think that rightful ownership
carries no social obligations whatsoever. Georgism’s moral mistake
is to assume that rightful ownership carries no social obligations
that cannot be settled by a check.

Alternatively, real economic democracy would limit property rights by a
principle that the people are owed a say in how resources are used
– not just a share in the profits.

What you’re saying, though, is that the state under a libertarian system has no right to go around granting land, money, or anything else to anyone, for any reason. Your criticism is very much levelled at the “libertarian” part of the deal, and does not seem to me to be effective against the “geo” part, that is the notion of land taxes.

I don’t really feel qualified to judge whether a geolibertarian world would be better than the one we have (or others that we might plausibly have), but if the basic income is high enough (and is sustainable at that level), it feels to me as though it certainly would be better, and any downside would be outweighed. But that’s probably because we differ on the basic question of whether the problem with market exchange is the intrinsically corrupting nature of the beast, or the fact that it presently occurs inside a framework of institutionalised inequality. I suppose you lean toward the former, and I lean toward the latter.

The “geo-libertarian” position is not just that “the Single Tax is the best tax.” It’s that the Single Tax removes the need to have the government do any spending. I.e., with the citizen’s dividend granting everyone equal financial power over land, the market is now supposed to decide whether there will be universities, and what they will be like, based on whether people will pay for them, and which ones they pay for. The ability for the people to vote with the dollars of their guaranteed income relieves them of the need to decide how to allocate resources with the ballot.

What I’m saying is that the universities that this system produces will not be the safe-havens from capitalist profitability constraints that they can be in a system where democratic processes allocate resources for the public interest. And they will suffer for this. Of course, universities are only one example; the other immediately obvious example is public parks. But what I meant to imply was that more of public space, and more of the world’s resources, ought to be allocated according to institutional models that were more “public service” and less “for-profit” — more under democratic control, and less under investor control.

On the other hand, Libertarianism (Georgist or otherwise) wants everything to be a for-profit corporation, whose social value we should measure by how much cash it can rake in.

Actually, there seem to be three sorts of people on that site: (1) standard-issue Cato types with optional faux-weepy mood music (Brennan being the most right-wing); (2) a bunch of anarcho-hippies with a soft spot for markets (Chartier, Vallier etc); and (3) Jacob Levy. Obviously, I simplify.

I’m not sure about the logic here. Let’s generalise slightly and consider any situation in which a benefactor (the state, in this case) gives a grant of land to some other institution or person. Under our current system, this is a pretty generous thing to do – it’s a straight transfer of wealth, comparable to giving gold bars or piles of cash or valuable copyrights and other such things that people commonly donate to universities. Under Georgism, it simply wouldn’t be all that generous – the donor would be giving away land, but the recipient would ultimately end up paying for it via land taxes. You’re really comparing a situation in which someone donated a kilo of gold to a university with one in which someone donated a kilo of, well, something a lot less valuable than gold.

The solution to your problem is pretty simple: the grant to the university should take some form other than land. Giving land worth $100m in our world would be equivalent to giving $100m worth of [other stuff] in Georgeworld, and the university would be able to use the $100m worth of stuff to acquire the land (for a relative pittance, since the value of land should be low due to the tax it attracts) and pay the requisite taxes. There would undoubtedly be some wrinkles to this, but it’s not self-evidently obvious to me that the Georgeworld scenario is worse than the ourworld scenario.

Now, my argument works pretty well for considering how we might establish future grant-based universities – I simply propose to give them something other than land. How we deal with existing land-grant universities is trickier, because they’re already dependent on free land for their continued existence, and wouldn’t be able to raise the funds to pay the taxes if instituted (or we wouldn’t want to live in the world where they did what’s necessary to raise the funds). Your view about this should probably be determined by the probability you attach to the state doing the right thing by the university; the state could recognise that the university is taking a massive loss due to the collapse in land values, and compensate it, either by offering cash or by offering a tax exemption (which comes to the same thing). You might say this is unlikely, but it’s no more so than the original land grants themselves. I suppose it’s possible to argue that the state was just much more enlightened about this kind of thing in 1862 than it is now, but by that point you’re making an argument that doesn’t have a lot to do with Georgism.

I just want to add for the record that even Georgist libertarianism is actually pretty terrible. It might plausibly eliminate a lot of economic rents due to resource ownership (although not rents having to do with privileged spots in organizations or markets), but it abolishes all democratic influence over resource allocation, and imposes on every resource-consuming endeavor the same requirement of short-term competitive profitability that makes capitalism so soul-destroying. Concretely, Georgism abolishes the land-grant university. Personally, I want to see more of Earth’s territory resemble that institution, rather than less.

In fact, I keep asking conservatives – what happens in monopoly if you cut down or raise the money for passing go. How long will the game last without that inflow of money? Does nobody play monopoly anymore? (I’m a citizen’s dividend – ok basic income if you like – guy.) They never seem to get it.

The thing (one thing) about real left-libertarianism is that it rapidly becomes something like welfare-state capitalism, since limitation of ‘entitlements’ can only be done by reclaiming fungible goods (money) and money can’t just be returned to some natural unowned state to be homesteaded by pioneers. And in fact the welfare state involved would probably have to be very extensive, depending on what baselines one arbitrarily sets, etc etc.

This is all the more so since Nozick’s theory falls to objections like those that he thinks ‘fell’ value-added schemes: all the ridiculous compoications involved in trying to base redistribution on calculating entitlements and their other-regarding limitations would make such a scheme unfeasible. (I would suggest that if one were to base design of a real society by allusion to some notional unfeasible model of entitlements, one should use the most defensible such model which would set appropriative entitlements at min(value-expended,value-added), but whatever.)

To avoid the consequence of ending up with a welfare state, Nozick seems to conclude that since a strict calculation of just entitlements is unfeasible, the best thiong to do is forget about it and revert to telling stories about how there’s nothing obviously evil about Wilt Chamberlain.

BTW the characters on that website – from a very cursory look- don’t seem to be any kind of left-libertrian in the philsoophical sense: they appear to be just right-libertarians with a bit of spin based on emphasising the standard Panglossian fictions. not that this is surprise, particluarly.

Related: http://rortybomb.wordpress.com/2012/04/16/how-can-herbert-spencers-1892-revisions-to-his-social-statics-help-us-understand-conservative-opposition-to-the-individual-mandate/

Also, linked from the above, here is Henry George himself, weighing in on the issue: http://www.wealthandwant.com/HG/APP/PIV_Conclusion.htm

“Given a wrong which affects the distribution of wealth and differentiates society into the rich and the poor, and the recognized organs of opinion and education, since they are dominated by the wealthy class, must necessarily represent the views and wishes of those who profit or imagine they profit by the wrong.”

…However, under frontier conditions, assuming an abundance of free land of every quality, I must admit that it is possible… if you assume the frontier will never close…

The opportunity cost is simply unaccounted for.

Right, so I’m pretty sympathetic to this. What Nozick wants to say is that there can be compensatory mechanisms that can and often will outweigh the opportunity and other hence, overall, will not leave anyone worse off.

You can do this in terms of rational preference—this is how G.A. Cohen interprets Nozick for example. In Cohen’s example, I might appropriate a section of a beach that was originally free to use and start charging people a $1 for access; if though I also clean up the beach, etc., others might consider the new arrangement preferable, or at least no worse than what was existed before. Nozick, as far as I can tell, doesn’t seem to appeal to rational preference, and wants to rely on something, um, more “objective”? And then, towards the end of the section dealing with the proviso, there’s some hand wavy stuff about how almost all value is added by labor anyway, and something etc., so too also.

Again, I’m not defending any of this, but that’s the view.