Thursday, December 25, 2008

Merry Christmas

Merry Christmas, everyone! Celebrate as you please! Newton's birthday (by the old Julian calendar)! Hanukkah (or however you spell it)! It's the Winter Solstice, a time when celebration is needed to ease the gloom of winter.

There are two classes of people I do not tolerate very well, sorry.

One is the anti-religion nerd-grinch who refuses to celebrate Christmas because it's the mythical birthday of an imaginary man-god that no sane and rational person could ever believe in.

The other is the religion spastic who bleats, "Put Christ back into Christmas," which is really double-speak code for, "Shove everything else out of Christmas."

Our winter solstice holiday season, complete with the make-believe man-god's mythical birthday, is believed to have dated to the 23-rd century BC if not indeed earlier, if certain ancient Sumerian and Elamite writings eventually prove to be genuine. With a tradition like that, no person in their right mind would refuse to celebrate.

Wednesday, December 10, 2008

Bailing Out the Auto Industry

Cars, the most hopelessly inefficient form of transportation ever invented, have done wonderful things for us.

Car ownership has enabled people to live in the outer suburbs, far from their jobs, stores, schools, and places of social life. This makes outer suburban land more potentially useful and therefore more expensive, thus feeding the forces of land speculation.

As a byproduct, this car dependence has required large parking lots in inner cities, thus requiring stores, industries, schools, etc. to acquire more land for these parking lots. This feeds the forces of speculation in inner city land.

So now that we've become so totally dependent on cars for all our transportation needs, our dependence appears to justify propping up the car industry when they begin falling victim to the very same land speculation that they, themselves, encouraged.

Perhaps we might change our perspective a bit. Maybe we could go ahead and let the car companies fail. Then many people will become unemployed and many dwellers of outer suburbia will be stranded in their remote luxury mansions without cars.

That would be horrible! But look! There's an obvious solution! Modify our tax structure to increase the location component of property taxes and decrease taxes on buildings, incomes, sales, and everything else.

This would cause land usage patterns to become more dynamic, enabling people to move closer to their work, stores, schools, etc. so that walking and bicycling would become practical for more of their transportation, thus decreasing their need for cars. The more dynamic land usage patterns would also permit the establishment of business forms that are more relevant to people's actual needs, thus re-employing the workers displaced by the failure of the car companies.

This tax shift, described in the nineteenth-century book Progress and Poverty by Henry George, looks like it would be very easily implementable within almost any reasonable governmental form. When I receive my property tax bill every September, the location value and building value are already separated out and re-added back together again, so implementing the tax shift looks like it would involve leaving a step out rather than adding a step. And if the income tax could be eliminated, yet another burdensome administration could be eliminated.

Hey, don't tell me it can't be done!

Sunday, December 7, 2008

Seeds of Destruction

Back when world communism was alive and well, the communists taunted us and warned us that capitalism sows the seeds of its own destruction. Their observation is true, of course, but they failed to notice that communism also sows the seeds of its own destruction, the very same seeds, in fact, and by pure chance their seeds germinated first.

So what are these seeds of destruction?

Every elementary economics textbook begins by explaining that all wealth is made from land, labor, and capital. When an entrepreneur first establishes a business, he spends his initial investment on land and capital, then hires employees to perform the labor.

This initial investment lumps land and capital together and refers to the composite as the Means of Production. Capitalism places the Means of Production under corporate control and communism places the Means of Production under government control. Is one inherently better than the other? Should we care?

The need for the entrepreneur to lump land and capital together for investment purposes leads to the error of failing to see the fundamental difference between land and capital. Land is part of the universe. No human being, alive or dead, made it. It's a Gift of God (if you're a believer) or a Fact of Nature (if you're a non-believer). Capital is made by living people, and the quantity of it is a product of human decisions, thus capital bears a much closer kinship to labor than to land.

And therein lies the Seeds of Destruction. Whenever land and capital are treated identically for taxation and administrative purposes, land becomes subject to uncontrollable price inflation that eventually renders land such a large percentage of the corporate assets that it becomes more profitable to cut back production instead of increasing production. Downsizing happens. People lose their jobs. Newly unemployed homeowners default on their mortgages and banks are left holding the bag with properties that can't be sold for the amount of the outstanding balance.

In short, we have a depression.

Is the current economic downturn a mere recession that will soon turn back up again? Are we headed for a depression that will take years to pull back out of? Is this the depression that will cause total collapse of the entire world order as we know it? I'm not going to make a prediction, and I'm not going to believe any prediction anybody else makes, either.

Whatever the next presidential administration tries to do to fix our economy, it's doomed to fail unless something is done to rein in land speculation. The land value tax suggested in the nineteenth-century book Progress and Poverty by Henry George would be a very good place to start.

Now, if we do finally get wise and find a way to stop uncontrollable land-price bubbles, should the government own and administer major capital investments, as recommended by communists and socialists? In some cases, perhaps yes, but in other cases it won't make any difference.