The Institute for Public Affairs (IPA) and Prosper Australia’s research body the Land Values Research Group (LVRG) both turned 70 this year.
Whilst each organisation purports to be the true voice of freedom, in reality only one is: the LVRG.
Amongst others, the IPA receives funding from Gina Rinehart, whilst the LVRG continues to struggle to find funding which might enable it to digitise the studies it has conducted over its seventy years.
It was nice for Gina Rinehart, Rupert Murdoch, Tony Abbott and Cardinal George Pell to be able to attend the IPA’s recent celebratory dinner. These luminaries are not to be found at Prosper Australia’s annual dinners. Power and privilege are not known to be close friends of Truth.
There’s a strong raison d’être for conservatism. If you want social change, you need to be certain you’re headed in the right direction. The thoughts of history’s great conservatives are often as valid as those of its notable liberal progressives.
Over the years, however, the IPA has drifted from holding socially conservative views to throwing its hat in with the big rent-seekers, the one percent.
On the occasion of its 70th birthday, I thought I’d give the IPA the opportunity to deny the charge, so on 1st April I put the following question via its website:-
“Does the IPA see anything wrong with the privatisation of publicly-generated economic rents? Your stance that miners ought to be able to retain them suggests you do not.
I’m giving someone at the IPA the opportunity to respond to my blog today.
BTW, I see the taxation of labour and capital as a form of theft.”
I consider the failure of the IPA to respond to my question speaks volumes about where it stands.
You say we need more funds to tackle poverty, homelessness, health, the environment, education and infrastructure? I say instituting the Henry Tax Review is a BIG step towards solving those problems.
If that was really the case, Chris, if Rip Van Winkle fell asleep on his vacant block on Sydney Harbour in 1788 and woke up now, he’d be entitled to realise its $20m value entirely for himself now? You’re saying the increase in value has everything to do with what Rip did–i.e. sleep–and nothing at all to do with what the community had done around him? Really? If so, you clearly miss the point made by Locke, Ricardo, George, Jefferson, et al. You don’t understand that economic rent is a community-created value.
If that is the case, then simply no increase in natural asset value due to private action – in this case exploration and development – can be considered rent.
The rent is only due on the unexplored, unproven value.
It’s not much at that point.
Wrong again. Economic rent–or government-granted privilege–is purely owed to the public, Chris. By now, we ought to be learning that things go wrong when we allow individuals to privatise it. Economic rent is indeed the NATURAL source of government revenues, and as John Locke observed all taxes ultimately come out of rent anyway. Unfortunately, by going “via the cape” (of taxation), unlike rents, taxes increase prices and deadweight, destroying economies and lives.
Rent cannot be purely public, nor purely public.
Rent is simply the value of possessing a monopoly right on a natural resource. It is either extracted as an ongoing series of payments that fluctuate with the current value, or it accumulates as the capital value of the monopoly right.
It is very much the payment made to all others to allow you the sole right to the use of that resource. At its core, it isn’t even technically something due to the government, but rather to each individual who is foregoing opportunity by allowing that monopoly. The collection of this money by government for government use is a useful simplification, but government is not necessary for rent to exist.
If I understand your point correctly, you are indicating that the return a company receives from improving the value of a resource is properly considered profit, and not rent. If I understand that correctly, I could cede that, largely because it doesn’t change the overall point I made. On that case, the value of the rent then remains purely associated with its undiscovered potential value, not its discovered, developed value because that is classed as profit.
However, one of the points made by Uncle Henry is that land is primary, and value that is contributed to the land becomes land. In that case, the rent expands to incorporate the value contributed to it through the processes of exploration and development, and that contribution is private, not public, leading to the concept of private rents.
No, not at all, Chris. You’re confusing profits and rent. The first is clearly private the second is public. That’s why the term “super-profits” is misleading, it also confounds profits and resource rent. The English language is unique. Properly used, each word has its own special meaning. That’s especially the case with profit and what economists call rent.
I’ll let the IPA defend themselves if they choose to.
But that said, I’m in a couple of minds over ‘resource rents’. For a start, most of the resource value is actually private, stemming from the conversion process of mineral prospects (of low value) to mineral reserves and resources (of high value).
So while I’d be happy to accept a public claim on mineral prospects, unless the government funds the (chancy) process of conversion to mine ready, I don’t see they have a particular claim to what is quite clearly a case of rent derived from private investment.
So there is a rent due, yes, but realistically it is due to those who have put the effort and risk on the table in the way of exploration and resource development.