All posts by Bryan Kavanagh

I'm a real estate valuer who worked in the Australian Taxation Office (ATO) and Commonwealth Bank of Australia (CBA) before co-founding a private valuation practice, Westlink Consulting. I discovered that we leave too much publicly-generated land rent to be privately capitalised by banks and individuals into land price bubbles. This generates repetitive recessions and depressions. These need to be avoided by capturing more revenue from land values to free up wages and household debt.

FIXING INEQUALITY

by James Webster

If you want to address inequality, income is a major factor.

Apart from state subsidies, the main sources of income are wages, business profits and location – and location often takes quite a big part of business profits (just speak to a tenant in a shopping centre).

Anyone theoretically can make an effort to increase their wages and, with endeavour, business profits – however, land and location are rather different – income from location goes to the owners. Those that own land, especially in good locations, have rather an advantage, they get income (either through capital gain or actual rent) that does not go to wage earners and business owners; often a significant part of what would be a business’s profit actually goes to the owners of location, and as we have heard housing rents can sometimes exceed 90% of a person’s income (for people on Newstart).

Inequality of opportunity can therefore be starkly traced back to inequality of ownership of land, or more specifically to the benefits of land. Unless that is addressed, efforts to reduce inequality of opportunity will go nowhere.

Added to that, there is a theory that is summed up as ‘Land takes the gains’ – meaning that any real improvements in general wage incomes, productivity, infrastructure, viz, any societal good will always inflate land values. What this means is that all the best endeavours to fix anything else (including increasing Newstart) without addressing land income distribution will simply result in land values or rents going up, soaking up the best endeavours to progress.

THE UNANSWERED QUESTION

Why are people working harder than ever before, but having insufficient time to devote to their family?

Why is the state of their financial affairs declining?

Why do they spend less time enjoying nature and the classical pursuits.

Why has middle class poverty increased as the uber-wealthy have become far wealthier?

It’s the elephant in the room for every one of your questions, QandA! We could deal better with the many issues with which we’re confronted if the economy was working for people, instead of just feeding the extractively wealthy.

I vented frustration at world economies in terminal decline today in these tweets (amongst others!):-

Bryan Kavanagh@bryankav123 Replying to @scientificecon and @CallumRN Bank competition? Maybe. I find central bank nodding to property bubbles & extractive share buy-backs chillingly similar to Bruno Heilig’s insightful 1941 account of pre-WWII Germany. http://thedepression.org.au/hitler-explained/ Looking to saviors, instead of simply calling out speculative madness?

Bryan Kavanagh@bryankav123·1h Replying to @AnnaEarl11 @DrCameronMurrayand 2 others Yes, Michael Hudson’s onto something when he says there are many extractive hangers-on in the ‘FIRE’ sector (i.e. finance, insurance and real estate) but insufficient real productivity? https://youtu.be/CnrEHFwZ9hk So, “FIRE is a good servant but a bad master” may have a 2nd meaning?

Bryan Kavanagh@bryankav123·9h Replying to @Renegade_Inc Yes, billionaires get there because we tax productivity, instead of unearned income/economic rent. We pay an enormous price for defying Adam Smith, David Ricardo, JS Mill, Henry George, Mason Gaffney, Joseph Stiglitz, et al, on the point that unearned rents must be taxed away.

WHERE ARE THE QUANTS?

Why don’t quants assess unearned incomes in the economy? You know, extractive economic rents – ‘super profits’?

Here’s a start in the chart below. These are land rents and capital gains – in blue and green – only. Viz, they don’t include electromagnetic spectra rents.

And, of course, taxes on productivity are extractive, too. Not only that, but they inject deadweight losses of something like twice the amount levied.

Disappearing aggregate demand/wages and earned profits (blue) is the main reason world economies are in a mess.

C’mon, quants: make a name for yourselves!