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Ethical Economics

Anthony Werner

Anthony Werner
Ethical Technology

Posted: Sep 21, 2011

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“It can be reduced to a simple slogan: ‘Let’s abolish taxes and collect rent’. This would be both an equitable and efficient solution to our economic woes.”

Sounds like feudalism to me.

As with Edward Miller’s recent article regarding LVT and single tax philosophy, this all sounds fair and reasonable, yet I still don’t get how it will solve our present socio-economic “world” crisis founded upon speculative capital and creation of debt/liability that now must be greater than any value potential of nation land rents and revenues?

Economics is not my bag, but social ethics is, and yet LVT and rent collection appears still reliant upon capital creation, and the ability for tenants to pay at least basic rent? This ideal would seem to encourage capital, wealth and social migration and creation of mega cities and outlying ghettos, merely supporting the divide between rich and poor?

And how would this idea help a country like Greece, their peoples, (as tenants in need), and its unmanageable debt for example?

No humans should be permitted to own land and transfer this as freehold, and only non-transferable leaseholding should be permitted, I agree at least on this.

Collecting rent on land is one element in the right direction. But due to automation and a broken banking system, this alone will not fix our problems unless we correspondingly create a monetary system that is tied directly to resources and issued as a basic income.

Then some might argue that renters improve their rented land, say by building nice houses, which would drive the rent costs up (via public auction or whatever other method you use to determine the rent value). So the system should allow for some, albeit limited, amount of private property.

And the system must be capable of coexisting with the current economy, and host other complimentary and local economies (enabling a diversity of economic design).

What you end up with is Panoply

Summarized in this article.

iPan, you must be mistaking that for our current system. When a republic is collecting the rent of land, then it is the people that own the rent, not landlords or kings.

Another tangent, yet a fascinating piece on expanding Chinese agriculture from my favorite rightwing pighead magazine:

http://spectator.org/archives/2011/09/21/a-corny-tale

PS: why read Rightist literature?: as the Godfather said,
“keep your friends close, and your enemies closer.”

So, obviously, you know what they are up to.

the problem with most rightist, is that you can’t sum up, it’s too obviously void of any thoughts, whereas leftist, you can sum up, sometimes there one or two ideas even if it’s usually completely full of ****

be cosmist !

“be cosmist!”

Yes, however the rightists themselves need to be told of cosmism- not most of those at IEET. Once in a while a rightist—thank god Communists don’t blog at IEET—blogger tries to probe for ‘converts’ (victims) here yet the number of those who can have the wool pulled over their eyes at a site such as this is virtually zero. Frankly, IMO, on the outside it never ends, if rightists and all power-freaks can’t use violence they try to use every other form of threat/intimidation they can. Etienne, unfortunately, violence is merely in the process of being transformed to that which is more more insidious. Dictatorship = warfare; democracy = economic warfare. (so genuine peace of mind doesn’t technically exist, which is why I write religion/spiritually is “escapism”; if genuine peace of mind hypothetically did exist religion/spirituality wouldn’t be necessary as we would already be in a ‘spiritual’ state- it would be our natural state rather than being the more or less altered state it is).

CygnusX1: “....yet I still don’t get how it will solve our present socio-economic “world” crisis founded upon speculative capital and creation of debt/liability that now must be greater than any value potential of nation land rents and revenues?”

The economic rent arises from public goods yet is collected privately. This has effectively resulted in excess money, basically in the hands of the rent collectors. This has become an additional controlling factor that tends to impoverish the have-nots.

Much of the debt has resulted from land value speculation and the attempt to get hold of the rent. The debts are balanced by credits somewhere else outside the banking system, probably to a large extent pension and insurance funds, and other financial institutions.

This is a start on why LVT is relevant to the present situation.

There is also the fact that governments have difficulty in raising tax to balance the books. LVT raises revenue in a completely different way to virtually all other taxes and so will fall on a different section of the economy. It is this section that is most likely to be able to pay most.

A point worth emphasising here, I think, regarding ‘benefits enjoyed’ is that the community pays twice for the benefit of infrastructure improvements. We pay taxes for community services and transport links that increase the value of land. A recent example is the A3 Hindhead tunnel that cost the taxpayer £371m. The road is certainly a necessary improvement and a benefit to the community. But one result is that the average uplift in property values in surrounding towns and villages south of the tunnel is expected to be 15% - 30%, making it even more difficult for people, especially first time buyers, to establish a home and pay the mortgage. So a benefit for some turns out to be a barrier for others.

I think what Anthony Werner is saying is that if we collected the economic rent from the value of land then infrastructure would be self financing and there would be no need to levy taxes on wages and production. This is certainly an idea worth considering.

It is becoming more and more evident to us that fundamental change in our thinking is urgently needed in order to begin to remedy the economic situation as we find it today. Needless to say, the present system is certainly not working!

As suggested in the above article, there is, indeed, a general lack of understanding in regard to natural law, and this may be the root of the problem. The idea that land (inclusive of the radio spectrum and other such natural phenomena), labour and capital are three basic requirements for the creation of wealth, seems a clear and obvious fact, and where there is a monopoly of either of these, imbalance must arise in one form or another. This we see happening on a grand, global scale before our very eyes.

The right handling of land tenure in relation to labour and capital may be the very key to the challenges we face; but perhaps it comes across as too simple an idea to seriously entertain, particularly among those who play a big part in maintaining the complicated living conditions in which we find ourselves. The present system, as we know it, is sustained and motivated by competition and greed: the rich get richer and the poor, poorer, but it is not sustainable in the long run. The above article touches on key and fundamental issues, I think, and warrants deeper reflection.

Well, in the meantime (quite a long time) I want a defense tax; but all of you draw your own confusions.

It would never work with a Government, as soon as it is put on a politicians desk it will be twisted tweaked and trashed until there is nothing in commen with the original idea.
In the old days a few prays and sacrifices might have got you throught but today I don’t think you would like the answer, any “Dayity with intelligence” would only have one answer: Get rid of the “infestation”!!
Rant and rave all you want but life as we know it is ending!
My only answer is “Don’t Worry, be Happy” you can’t take it with you.
Cheers Rod.

“By land they meant not just the earth’s surface, but all the powers of nature available to man which today would include the radio spectrum.”

I’m not sure I really see the point. Why does it matter whether something is “natural” (whatever that means exactly: are the Dutch polders “natural”?) or man-made.

No, the problem with economics is that it still hasn’t decided whether it’s a social science or a type of political philosophy. I once had a conversation with an economist colleague who was trying to convince me that people really do behave more or less as rational economic operators. When I cited evidence to the contrary, he basically said, “Well, they should.” He hadn’t decided whether he was trying to understand (the scientist’s job) or advocate a political philosophy.

Sadly, all this is having real-world effects. Law and order is breaking down in Athens: my mother-in-law is afraid to go to the bank in case she gets mugged. Analysts are reporting the effect of austerity (a deepening recession and consequent worsening of the debt crisis) as if it wasn’t obvious from the start that that’s what would happen.

In Aquila, Italy some seismologists have (incredibly) been charged with manslaughter for failing to predict an earthquake. Yet economists are arguably getting away with murder on a much bigger scale. The problem is not that they promote theories -science can only progress by testing competing theories - but that they state them as fact. More recent, evidence-based insights from behavioural economics and systems theory are not being taken up by policy-makers because the latter are advised by old-school economists ignorant of the latest developments. Perhaps the threat of litigation would introduce more care and circumspection into their pronouncements?

Peter:

The problem is attempts to privately benefit from public goods. If BT managed to buy absolute ownership of the radio spectrum in the UK, they would have no problems with pension funds ever again. BT would be able to charge users the most they are able to afford as there is no substitute. Whilst the radio spectrum stays in the realm of the commons, users could pay rent to the community. Service providers have to build their own infrastructure, transmitters etc, and could charge for the use of them quite legitimately. However, by the community retaining rights to the irreplaceable, there is protection against monopoly.

The issue with land is that access to the dry surface of the planet is absolutely essential for human beings to even exist, just as the air we breath is. Hence control of such access should be subject to rent paid to the community, whilst provision of improvements such as housing, polders could be justifiably charged for by the provider.

Your economist colleague seems to be so typical of mainstream economics. If the crises we are in do not wake us up, then maybe your suggested litigation is a good idea.

Abolishing taxes and collecting rent would also make it easier to protect the environment: economic activity that might profit a corporation but damage the environment would reduce rent in the affected area and alert government to its detrimental effect.

Adam Smith writes in the Theory of Moral Sentiments,

“The man who acts according to the rules of perfect prudence, of strict justice, and of proper benevolence, may be said to be perfectly virtuous. But the most perfect knowledge of those rules will not alone enable him to act in this manner: his own passions are very apt to mislead him; sometimes to drive him and sometimes to seduce him to violate all the rules which he himself, in all his sober and cool hours, approves of. The most perfect knowledge, if it is not supported by the most perfect self-command, will not always enable him to do his duty.”

What is at issue in this debate is the role of self-command in both the individual and the society. However, as Smith notes, our own passions mislead us into acting against our long-term “self-interest” for the near-term profiteering upon which the markets judge our performance.

We are similar to a colony of yeast cells bathed in a sugary bath.  We individually consume our own sugar without concern for those adjacent to us because we are rapacious in our appetites.  The byproduct of this over-consumption is alcohol which spoils our own living environment and places our survival at great risk. The result?  We all perish in the same sugar-to-alcohol solution because we ignore our perfect knowledge with a complete lack of self-command.

The question I ask is: are we smarter than yeast?

In Social Statics or Chapter 1X Herbert Spencer, I think, answers Adam Smith and Nils Langenborg in this way:

“Given a race of beings having like claims to pursue the objects of their desires – given a world adapted to the gratification of those desires – a world into which such beings are similarly born, and it unavoidably follows that they have equal rights to the use of this world. For if each of them ‘has freedom to do all that he wills providing he infringes not the equal freedom of any other,’ then each of then is free to use the earth for the satisfaction of his wants, provided he allows all others the same liberty.

And conversely, it is manifest that no one, or part of them, may use the earth in such a way as to prevent the rest from similarly using it; seeing that to do this is to assume greater freedom than the rest, and consequently to break the law.

Equity, therefore, does not permit property in land. For if one portion of the earth’s surface may justly become the possession of an individual, and may be held by him for his sole use and benefit, as a thing to which he has an exclusive right, then other portions of the earth’s surface may be so held; and our planet may thus lapse altogether into private hands.”

It is often forgotten that the full title of Spencer’s work is: Social Statics or The Conditions Essential to Human Happiness. Where there is sufficient for all, who would want to put self-interest above the good of society as a whole? And were they to do so they would, I suspect, be very quickly ostracised.

Thanks to Nils and Mike, some wonderful quotations. Smarter than yeast? A good question.

Not knowing too much about what it is like to be a yeast cell, we may just have to be content with what ise known about being human. Here we can see that rapacious appetites are often moderated by at least a measure of self-command, and there are at least sometimes concerns felt and actions undertaken for the benefit of others. A possible exception of course is when someone steps onto MY land!

So how can we as a society cultivate more of this self-command?

@ Richard.. How?

Well, this is no small question you ask, yet I believe to promote “Ethical economics” and aim towards egalitarianism, we need to discourage Self-ishness. How? A philosophy, (regardless of diverse spiritual and religious beliefs), founded upon Self-understanding, existentialism and personal responsibility. And by building a global social order founded upon an understanding of causality, (sanskrit - Karma), and that our actions and Self-ishness affects others.

To encourage social harmony we need to be non-exclusive and encourage social participation and provide basic human needs for all. Yet this attitude must be supported from the top down, leaders, politicians, bankers and the rich elite must be held as responsible and to lead by example?

How can our society cultivate more self command?
It would help if society rewarded what is good and natural - like the willingness to contribute through work.
How will 1m under 21 unemployed develop self respect, basic self discipline and self reliance, preconditions to self command?
The best argument for redirecting the unearned increment of land to public purposes (either by the market mechanism of LVT or by traditional systems) is the undesirable effects of the alternatives.
Taxing employment (PAYE/NIC/ENIC) and consumption (VAT) artificially raises the cost of labour rendering otherwise viable labour-intensive enterprise ‘uneconomic’.
It is wholly possible that if labour were not taxed in these ways we might still have a coal industry, a ship-building industry and the majority of start-up SME’s that fail in the first two years.
We could have a less industrial agricultural sector that requires labour-intensive rather than capital and energy intensive processes.
All of these are ready and willing to operate on low value marginal land and would prosper if the burden of public revenue were transferred off labour and capital and onto land in proportion to its value. Land values in the City of London are 1 million x the value of agricultural land!
The baby boomers made less from a life of devoted professional service than from the the uplift in the value of their houses. They rejoiced as they sold them to other people’s children while lamenting their own children’s inability to afford a flat.
Beveridge’s 1946 Welfare State was a pretty civilised idea. The version we now have rewards teenage girls with the flat her peers cannot afford if she will get herself pregnant, then threatens to take it away if she marries a young man with an income. Tax and redistribution and tapering means-tested benefits make it near impossible for him to support her to raise the children but will pay 70% of childcare if she goes to work instead.
At every step the most natural things taken for granted by our grandparents are hindered. The inevitable reaction is a tide of disenchantment punctuated by bouts of hedonism.

Self command would develop naturally enough if economic conditions supported natural self development.

@ Peter..

What you say is true, however remember that we are heading towards a technological future of automation and robotics that will and should provide for basic human needs, “if” we aspire to change our politics and ideas of capitalism to accommodate? Our technology is well placed to provide for social needs, our current ideas of Capitalism and politics stands in the way?

~ “It is wholly possible that if labour were not taxed in these ways we might still have a coal industry, a ship-building industry and the majority of start-up SME’s that fail in the first two years.”

Seems we cannot return to mass employment in factories, or for providing the peoples with even more dangerous occupations such as coal mining. And do we want to encourage use of Carbon based fuels in our technological future? How many ships do we need people to build in our modern world? SME’s are important and key to aide the success of the free market.

~ “The baby boomers made less from a life of devoted professional service than from the the uplift in the value of their houses. They rejoiced as they sold them to other people’s children while lamenting their own children’s inability to afford a flat.”

Ah.. but as is overlooked in David Brin’s recent articles also, it is the baby boomers who are now the greedy elite, who aspired to promote “Reaganomics” that encouraged selfish “Thatcherism”, and who are in fact, now running our broken socioeconomic banking systems and corporations?

~ “The version we now have rewards teenage girls with the flat her peers cannot afford if she will get herself pregnant, then threatens to take it away if she marries a young man with an income.”

Good point, yet you overlook that the “real issue” is lack of provision of social housing and its construction, leading to reliance upon the housing private sector to fill the holes. This also feeds the greedy Capitalist notion of leaseholder landlords making money whilst sitting on their lazy butts. Seems that, as Edward Miller pointed out in his earlier article regarding LVT, that a legislative policy and law would be the only way to prevent the abuse of needy tenants and unethical rent hikes on these needy tenants, especially in inner cities, where the jobs are abundant?

The answer must be.. more people = requirement for building and investing in more social housing, (hopefully this will also provide for some jobs and employment also)?

~ ” At every step the most natural things taken for granted by our grandparents are hindered. The inevitable reaction is a tide of disenchantment punctuated by bouts of hedonism.”

Again, our world society is changing, looking back to our grandparents is not the answer, (although a little moral reflection would be of benefit for all?) Social upheaval from technological innovation, automation, healthcare, longevity, together with the expectations of the future, recreation and hedonism you highlight are inevitable.

We need to make social and philosophical changes to accommodate this. Our industrial society and age will no longer provide jobs for the masses as it once did, (and they will not want these factory jobs in our evolving technological future anyhow), we need to find new ways for peoples including youths to participate in society and gain this self respect. We need to change our economic philosophy to ensure that modern society is non-exclusive and encourages participation.

I recently posted this link to an article by Jaron Lanier in Mike Treder’s article How We Think About Money” http://ieet.org/index.php/IEET/more/4875

This also explores the need to find answers to future mass unemployment and how the free market can help? However, it would seem that if we humans still rely too heavily on competition and “survival of the fittest”, even in a post scarcity society, there will still be those who will suffer? (as commentator “Wingnut” points out excellently in David Brin’s article on “Class War”).

The Local-Global Flip, or, “The Lanier Effect”

“There’s this question of why is there so much economic pain at once all over the world, what happened? There are a number of different explanations that can be helpful. Hitting some hard limits to growth in the world is part of it, the rise of new powers of India, and China, and Brazil, so that suddenly there are more people with means. That’s part of the story. But there’s something else going on here, too, which is that the mechanisms of finance just completely failed and screwed everybody. If we look at exactly what happened with the mortgage meltdowns and the utter failure of complex financial instruments in which securities were bundled in ways that were beyond human understanding, essentially, if you look at the extraordinary ways in which the whole world seemed to go into debt at once, what happened there?”

>> http://edge.org/conversation/the-local-global-flip

Ignores the importance of intelligence and the creation of new value thereby even though this is the chief differentiation of human beings over say, yeast.  Focuses only on land and undeveloped land at that even after saying that land refers to much more than mere acreage on the earth’s surface. 

I don’t see that this article was written with any real understanding of economics even at a lay level.

I think it’s important to understand that George’s single tax proposal followed from a novel premise: That wages are drawn from the value added by labor, and not from capital. When the economy is seen in this light, it becomes obvious that a large portion of the wealth of a society is extracted by those who contribute neither labor nor capital. These are the rentiers, who hold exclusive rights, often granted by fiat, to natural resources and who charge for access to those resources. George argued that natural resources are the common property of mankind, and that wealth gained by blocking access to them should be recovered by society.

The problem that George pointed out is that as the economy grows, rents increase out of all proportion to the gains made by capital and labor. People are starstruck by the notion that they too can become rentiers, and start driving up the price of land until the inevitable bursting of the speculative bubble. It’s like a game of musical chairs in which the chairs are an illusion, and the true rentiers always win.

George proposed a single LVT as a _first step_ to recovering society’s due from the rentiers. In my view, that means that if we get the ball rolling toward a more just society, it will gain momentum as more people enjoy the benefits of society’s wealth. These days, I think it would be enough to start diminishing taxes on income and capital gains, and start increasing property taxes with a view to converting them to LVTs. Certainly start aggressively phasing out sales taxes, which are a blight on everybody, except maybe those with exclusive government contracts.

Anyway, “Progress and Poverty” is worth reading, and it’s available online at many sites. There is also a modernized, abridged version online.

Rentier Economy is an interesting phrase coined, I think, by John Stuart Mill in Principles of Political Economy, published in 1848 - a few years ahead of Henry George’s Progress & Poverty (1857). Mill says that in a Rentier Economy, “the landlords get a free lunch! Landlords grow richer in their sleep without working, risking or economising. The increase in the value of land, arising as it does from the efforts of an entire community, should belong to the community and not to the individual who might hold the title.”

Rentier income is economic rent and interest and it is important to realise that this unearned income is not used to expand the means of production or raise living standards, it is primarily used for property speculation and the purchase of shares in order to acquire even more unearned income. The poor get poorer and the rich get a free breakfast, lunch and dinner!

Lest we forget Thomas Paine: “Taking it then for granted that no person ought to be in a worse condition when born under what is called a state of civilization, than he would have been had he been born in a state of nature, and that civilization ought to have made, and ought still to make, provision for that purpose, it can only be done by subtracting from property a portion equal in value to the natural inheritance it has absorbed.”

George’s ideas were by no means wholly original, but his synthesis followed a careful line of reasoning that resonated with millions of people, and would still do today, were it not supressed by crackpot theories like marxism and neo-classicism.

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