Few bother to try to understand the point. That’s where neoliberal economics has come to overtake our thinking and to fail us.
Think about it. What did it cost to produce the earth – the land, sea and air. Nothing. Why does land cost so much then? Because everybody wants it? Nup. Everybody wants a little air, too, but it’s available for free. So land, having no cost of production ought also be free.
With the proviso, however, that we need to pay its annual rent. This could be done in installments, instead of income tax and charges on sales.
Were we to capture the rent of land publicly, a block of land would have no selling price. That’s because the price of land reflects the private capitalization of its uncollected rent – not its inadequate supply as we’re constantly told.
It doesn’t have to be like this. With the price of land now being the greater part of the purchase cost of a home, the implications are enormous for housing affordability if the rent of land were to be taken into the public coffers, instead of taxing productivity.
We’d have genuine ‘free enterprise’, together with very little private debt. (This may not suit the banking industry which now seems to have become the economy.) A genuinely free economy of abundance would emerge.
The switch from taxes to a land rent system would certainly need to be introduced incrementally, in order to avoid economic shocks, but its great advantages would become apparent as the land rent came gradually to replace taxes.
Unlike taxes on productivity which inject deadweight losses of something like twice the amount of tax levied, public capture of the land rent carries no deadweight loss at all. That deals with issues which currently condemn the practicality of both modern monetary theory (MMT) and a universal basic income (UBI), namely, that they would tend to be capitalised into higher and higher land prices.
Capture of land rent kills inflation stone dead. That’s the job of a land rent – and the failed job of taxes on productivity – to remove surplus money from the economic system. Where people have understood taxes to be a pot of money from which public expenditures are made, the view is fortunately now being challenged.
The benefits and abundance flowing from the public capture of land rent instead of taxation remains a great secret undiscovered by people in general, but more pointedly by the experts: the modern economist, scientist, lawyer, politician and educationalist.
By any definition, this is an incredible scandal which locks world economies into real estate cycles of boom and bust. Neoliberal economists are nakedly exposed as high priests for the status quo when they explain these socio-economic catastrophes as “the natural business cycle”.
In current world economic circumstances, it’s an understatement to suggest the secret needs a little daylight and exposure.