Henry George
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Newsletter of the Lincoln Institute of Land Policy May 1997 LL ANDANDL INESINES Volume 9 • Number 3 Scholars Explore the Insights of Henry George H. JAMES BROWN rewarding producers for meeting consum- an today’s researchers and policy- ers’ needs at the lowest possible cost. He makers effectively draw on the also recognized that land was a very pecu- C ideas of nineteenth-century philo- liar commodity. No matter how high its sopher Henry George to help solve twenty- price rose, its supply could not increase. first century problems? A forthcoming Yet the demand for land inevitably rose as Lincoln Institute book, Land Use and the human population grew, and the wealth Taxation: Applying the Insights of Henry of landowners tended to grow regardless George, presents eight essays by scholars of how well or badly they used the land. from varied disciplines who demonstrate George proposed a simple but radical that many of George’s ideas about land solution to this dilemma. Although some use and taxation are still valuable today. reformers proposed the outright public When George published his most ownership of land, George suggested in- famous book, Progress and Poverty, in stead taxing away the value of land produced 1879, the United States had no zoning by anything other than private efforts. laws, no income taxes, and only two Such a land value tax would keep private national parks. As Nobel laureate Robert landowners from unfairly capturing the Solow points out in his chapter, “How benefits of natural resources, urban to Treat Intellectual Ancestors,” George locations and public services. George could not have anticipated all the changes Henry George in real estate development, public finance continued on next page and property rights in the 120 years since he published his own analysis of these subjects. Yet policymakers at all levels still face Henry George’s fundamental Effects of Land and Housing Policies challenge—to balance private property rights and public interests in land. on Market Performance George was writing as the era of near- ly free land on the American frontier was STEPHEN K. MAYO set out a stylized set of “do’s and don’ts” drawing to a close. He was concerned rowing recognition of the econ- for housing policymakers to use in mak- that decreasing access to land would un- omic and social importance of ing choices about policies, regulations and dermine the relative equality of economic G land, housing and real property institutions that influence the performance opportunity and therefore of political markets is focusing attention on the need of the housing sector. Each of these docu- rights that had distinguished the United for good policies and good data to moni- ments makes it clear that the stakes of get- States from the “old” countries. tor the performance of these markets and ting housing policies right are consider- Like all the classical economists, George their effects on the international economy. able, especially those policies having to believed that competitive markets and Much of the impetus for addressing do with urban land. private property encouraged efficiency these issues came with the United Nations and productivity by systematically General Assembly’s unanimous endorse- The Importance of the Housing Sector ment in 1988 of the document, Global Housing, together with the land under it, INSIDE THIS ISSUE Strategy for Shelter to the Year 2000. This is the single most important asset of house- report described the social and economic holds in most of the world’s cities. Hous- 4 Land and Housing Markets role of housing and called on governments ing investment and the flow of housing 6 Community Planners to undertake enabling policies to create services account for a total contribution to well-functioning land and housing markets. GNP of between 7 and 18 percent in most 7 News and Notes Within a few years, the World Bank countries. However, these figures fail to published its own housing policy paper, 7 Order Form Market Performance Housing: Enabling Markets to Work, which continued on page 3 Lincoln Institute of Land Policy LandLines • May 1997 that Henry George observed in [nine- Henry George Land Use and Taxation: Applying the continued from page 1 teenth-century] San Francisco can readily Insights of Henry George is dedicated to be seen in the major cities of [developing] also believed that this tax would force David C. Lincoln, president of the Lin- countries today: rapidly rising land values landowners either to put their land to its coln Foundation, who also served as and attendant land speculation.” “highest and best” use themselves, or chairman of the Lincoln Institute from C. Lowell Harriss demonstrates that make it accessible to someone who would. 1974 to 1996. Henry George’s “intellectual and moral The book is edited by H. James appeal” extends to environmentalists and Chapter Summaries Brown, president of the Lincoln Insti- urban advocates. Environmental and Martim Smolka and I investigate recent tute. Contributors are Robert Solow, growth management regulations recog- efforts to capture the portion of land Institute Professor, Department of Eco- nize that land is unique, and that deci- values created by public actions through nomics, Massachusetts Institute of 2 sions about its use have long-lasting and a range of new land taxation policies, Technology; Martim Smolka, fellow far-reaching effects. Harriss argues that including impact fees and benefit assess- for Latin American and Caribbean pro- drawing a precise line between privately ments. While the implementation of any grams, Lincoln Institute; Karl Case, and socially created value in land is much new tax faces serious resistance, new land professor of economics, Wellesley Col- complicated by zoning, permitting and taxes face strong opposition from politi- lege; Dick Netzer, professor of eco- planning, and that attempts to capture cally powerful landowners. Still, in our nomics and public administration, New increases due to public actions may, in view these new efforts to capture value York University; William Doebele, pro- some cases, provoke counterclaims on provide many opportunities. New taxes fessor of urban planning and design, government for decreases in value. on land, particularly in developing and emeritus, Harvard University; C. Lowell Daniel Bromley re-examines Henry transitional countries, can be both an Harriss, professor of economics, emeri- George’s fundamental challenge—balanc- important source of revenue and a tus, Columbia University; Daniel ing private property and public interest in stimulus to economic development. Bromley, editor, Land Economics, Uni- land. Bromley argues that public and pri- Karl Case explores the efficiency of in- versity of Wisconsin; and Joan Young- vate rights and values are interdependent. tervention in land markets and concludes man, senior fellow, Lincoln Institute. The rights of landowners are essentially that government intervention is more The paperbound book will be created by social rules, which must evolve justified in the case of land than in other available in late June at $12.00 plus as society gains new knowledge and adopts kinds of markets for several reasons. It $3.50 shipping and handling. Call new standards in both land use and poli- is widely recognized that intervention is 800/LAND-USE (526-3873) or use tics. From that standpoint, regulations 2 necessary because of extensive externalities the order form in this newsletter to restricting what private owners may do in the land market. Many economists also order a copy. with “their” property are simply the logi- argue in favor of intervention because of cal flip side of “the social gift of private possible distortions of the income and land ownership.” Bromley agrees with values. She questions the use of a special wealth distribution. In addition, Case George that, as an incentive system, the tax on wealth in land when other socially advocates intervention based on specula- private ownership of land provides broad created forms of wealth that depend as tive inefficiencies caused by the tendency economic benefits, but he questions how much or even more on public actions, of land prices to increase rapidly but to land “can . assure liberty when not such as broadcast licenses, are not subject adjust downwards only slowly. everyone has or can obtain” access to it. to the same degree of taxation. Yet, Young- Dick Netzer describes how the prop- Joan Youngman describes the basis for man suggests, the recent trends toward erty tax, which funded almost all public the unpopularity of property tax and the simply taxing consumption or income and services in Henry George’s time, has dim- many thorny problems of implementing a reducing taxes on wealth or property raise inished in importance and now provides fair property tax system. She examines the the very issues of public fairness and pri- only a quarter of government revenues in difficulties of separating and measuring vate productivity raised more than a the U.S. However, he explains how cur- the public and private components of land century ago by Henry George. rent attempts to reduce the federal deficit and promote political devolution are mak- ing the property tax more rather than less More on Urban Commons important, and should encourage local The March 1997 Land Lines articles on “Urban Land as Common Property” omitted a key governments—especially in cities that have reference to geographer Rutherford H. Platt’s co-edited book, The Ecological City: Preserving recently experienced real estate booms— and Restoring Urban Biodiversity (University of Massachusetts Press, 1994; also see July 1994 to take another look at land value taxation. Land Lines). Platt pioneered the idea of seeing abandoned or neglected urban open spaces William Doebele investigates the grow- as ”incidental commons.“ His presentation at the Lincoln Institute-sponsored session at the ing interest of both developing and transi- ”Voices from the Commons“ conference in June 1996 traced how open space in U.S.