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Post-Modern Fiscal Theory Again

by ChrisCook Sun Jul 21st, 2013 at 05:41:59 AM EST

There was an interesting facebook post in a group I frequent by a thinker on Economics - Kimball Corson.

Thinking Is About as I Expected on the Problem of Monopoly Rents

My post on several economic related websites challenging the sufficiency of of a single tax on land, in addition to getting me kicked off the LVT (Land Value Tax) website, has brought to the fore a very serious point: there is little coherency and agreement on how to attack the monopoly rents problem in the American economic system. There is even disagreement on what and where they are. If such groups members were to the given equal power correct matters tomorrow, they very clearly would not know how to proceed. That is how diffuse, confused and dispersed their thinking is on these matters which we all agree are serious. Why this result?

My view is that economic literacy among members is not what it could be. There are myriad disparate views on too much. Economic misunderstandings abound. While that is not surprising given the level of economic training and thinking among most members, it is nonetheless distressing. The pinnacle of irony is for one well trained in economics to be told by one who is not that he doesn't understand much economics. That is bizarre, but so it goes. The economics of too many is simply "home brew" with too little reading and study to back it up. This deficiency does not however, mitigate the strong economic views held or how erstwhiledly they are vocalized.

The reason I posted the article contending that a single tax on land is not sufficient to attack the monopoly rent problem was to flush out the disparate views in the area. I knew everyone would run to the fore with their own thoughts and we would see how disparate and confused many are. I was proved correct and, of course, attacked along the way. I expected as much, although not to be booted off the LTV site. I think that is more than a bit extreme, but so is some of the thinking there. I have no interest in remaining an LTV member for multiple reasons, so nothing is lost to me.

It has been an interesting exercise but it shows what the chances are Americans will rise up united and force a solution to the problem. They are approaching zero. This has to delight the oligarchs because the economic thinking, poor as it is on these FB sites, is clearly much better on average than among the American populace at large.

My response follows.


As I see it what is coming out of this is the underlying axioms as to the basis of 'Value' - whatever that is.

Georgists make an ideological assumption that the basis of all Value is one single 'factor of production' - Land.

They define Land quite widely, to include not just Location (3D Space) but everything in it or passing through it.

Technocrats make a similar assumption in respect of Energy.

Marxists assume that 'Labour' - again ideologically defined - is the basis of all Value.

This assumption is convenient to mainstream Economics, which lumps together everything but Labour as 'Capital' (conveniently and cunningly conflating Land as Gaffney described) but does not assume (as does Kelso's Binary Economics) that Capital is productive in use independently of Labour. It is convenient to rentier owners of Capital because if you assume that only Labour is 'productive' then that's all you tax.

In my view, what is changing everything is that Intellectual value in the form of Knowledge (data patterns and representations) and Knowhow (which qualifies Labour) are becoming hugely valuable in a world of direct instantaneous global connections.

There are three key points.

Firstly, the rents extracted by the holders of Knowhow and Knowledge reduce those available to Land-owners. eg we see on-line businesses destroying commercial rents

Secondly, these holders of exponentially growing Intellectual value are not bound to any particular location in the way that industrial workers and managers are bound.

Thirdly, Intellectual value is not 'rivalrous', and this essentially means that the steering wheel is coming away in the hands of the elites who have long been able to control rivalrous land and capital.

My post a while ago in the FT Alphaville blog (and here) covered this, but could do with a bit of updating.

Post Modern Fiscal Theory

As I've been saying for some time, we need a Modern - or even a post-Modern  - Fiscal Theory to accompany a Modern Monetary Theory which is indirectly based (via a system of direct and indirect taxation of labour) upon a money supply loaded almost entirely upon the value of Labour.

So MMT's policy solution of a Job Guarantee will serve - unless accompanied by a shift in the fiscal base - mainly to enrich rent-seeking owners of Land and IP.

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So MMT's policy solution of a Job Guarantee will serve - unless accompanied by a shift in the fiscal base - mainly to enrich rent-seeking owners of Land and IP.

That seems an odd conclusion. Could you walk me through how you reached it?

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by A swedish kind of death on Sun Jul 21st, 2013 at 12:02:05 PM EST
I can see that JG labor at the community level could easily be directed to projects that benefit existing economic incumbents as it would be them or their representatives who decide what projects are worthy of that labor. But were such labor be directed to improving the lives of the elderly, providing quality child care including feeding, education and health care, and providing public sponsored transportation to those without access to vehicles through public transit, providing recreational opportunities, as was done by the US CCC in the '30s it would be a net benefit. But the challenge would be getting a JG enacted and the price would likely be that it primarily serve the interests of existing economic incumbents.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Sun Jul 21st, 2013 at 01:34:46 PM EST
[ Parent ]
If people get paid more, then they can afford more rent, essentially.

"The future is already here -- it's just not very evenly distributed" William Gibson
by ChrisCook (cojockathotmaildotcom) on Sun Jul 21st, 2013 at 02:04:13 PM EST
[ Parent ]
I can relate to this.

Buying properties is heavily state supported in some places (think .NL and .PT - though .PT this has been dismantled). When there is more demand than supply (which, BTW, has happened in both places above), the state subsidy has the pernicious effect of raising property prices even more. It is actually the worse kind of state intervention that I can think off: Apparently supporting working families, effectively transferring capital to banks and property developers (highly regressive), inflating market prices into bubble territory. The working families get no benefit from this has all the subsidy is destroyed through higher prices...

by cagatacos on Mon Jul 22nd, 2013 at 04:28:56 AM EST
[ Parent ]
Steve Keen might suggest you add Australia to your list and, of course, the USA, where home ownership was highly touted by Bush 43 in addition to verbal encouragement, prolonged low interest rates and regulatory forbearance courtesy of Greenspan and the Fed. I suppose a Job Guarantee might be a substitute when the former efforts have blown up spectacularly, as in the USA but at the cost of doing great violence to the simplistic moral economic tale that has so thoroughly been sold to the public.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Mon Jul 22nd, 2013 at 10:50:30 AM EST
[ Parent ]
"[Australian] government policy is to have expensive affordable housing. Which is rather difficult to achieve."

- Keen

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Mon Jul 22nd, 2013 at 12:51:24 PM EST
[ Parent ]
However in the JG policy, the provider of employment insurance does not bid against private employers for labor, but rather sets a price floor and gives way to anyone willing to outbid in wage or conditions.

It seems as if part of the premise is that if the political terrain in a country with employment insurance was the same as the neoliberal "do what we say or starve" countries, then any additional income will be scooped up by rentier and all that the employment insurance will do is to redistribute income among the relatively powerles middle income classes and working poor.

However, getting a Job Guarantee put into place seems like it first requires changing that political terrain, and having a Job Guarantee in place would seem to undermine much of the neoliberal disciplinary stick.

So I'm not clear on how the argument by which the income is soaked up by rentier is consistent with the premise that a Job Guarantee has been successfully put into place.


I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.

by BruceMcF (agila61 at netscape dot net) on Tue Jul 23rd, 2013 at 02:29:29 AM EST
[ Parent ]
MMT's policy solution of a Job Guarantee will serve - unless accompanied by a shift in the fiscal base - mainly to enrich rent-seeking owners
It seems to me that argument is conflating the job guarantee with the broader guaranteed living income.

The job guarantee by increases the amount of goods and services on offer, whereas a generic living income is not guaranteed to do so.

Finance is the brain [tumour] of the economy

by Migeru (migeru at eurotrib dot com) on Mon Jul 22nd, 2013 at 04:34:49 AM EST
[ Parent ]
Has a living income been tried anywhere? The usual arguments - that it's inflationary and destabilises market signals (i.e. rich people can't exploit it) - may not apply in practice.

The more I think about these arguments, the more it seems the bottom line is whether collective wealth and intelligence are hoarded by a tiny minority or distributed more evenly.

There's plenty of evidence that distribution increases general wealth and prosperity, and also creates more innovation.

The hoarders are only interested in relative wealth- which is something else entirely.

It's astonishing - not at all - that most economics is about pin-level fairy stories of the 'If you do this, something else happens' type.

But there's been almost no interest in causal relationships between inequality, political instability, and the destruction of social intelligence - which in practice means limited ability to invent and innovate.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Tue Jul 23rd, 2013 at 05:55:17 AM EST
[ Parent ]
Ahmadinejad has just implemented transfers that seem to be on the level of the minimum wage, called "economic jihad" by The Economist.
The government cleverly doled out two months' worth of family cash transfers, amounting to some $90 per person, before unleashing its shock. When the first tranche of price rises hit, quadrupling the cost of some kinds of bread and shooting diesel prices up by 2,000%, among other things, there was barely a peep from the public. Iranians have rapidly got used both to paying a lot more for some things and to having more money to spend as they wish. A family of five now pockets monthly sums close to Iran's minimum wage, enough to pull a big proportion of the 10% of Iranians who live on less than $2 a day above that bar. Yet tight controls on the money supply have kept inflationary pressure lower than feared. By some counts it has already fallen from an annualised 20% in March to 14% in May. With government finances now in better shape, that may drop still further, and quickly.
by gk (gk (gk quattro due due sette @gmail.com)) on Tue Jul 23rd, 2013 at 06:11:54 AM EST
[ Parent ]
The usual arguments - that it's inflationary and destabilises market signals

Mild inflation and controlled prices are financially stabilising...

Finance is the brain [tumour] of the economy

by Migeru (migeru at eurotrib dot com) on Tue Jul 23rd, 2013 at 06:20:17 AM EST
[ Parent ]
But in neolib world, inflation is always world-ending ZOMGWTFBBQ hyper-inflation.
by ThatBritGuy (thatbritguy (at) googlemail.com) on Tue Jul 23rd, 2013 at 07:28:42 AM EST
[ Parent ]
What about Alaska? The oil-dividend thing is quite substantial, isn't it?

And the social ethos seems quite socialist, whatever party badges they choose to put on it.

It is rightly acknowledged that people of faith have no monopoly of virtue - Queen Elizabeth II

by eurogreen on Tue Jul 23rd, 2013 at 07:48:59 AM EST
[ Parent ]
$878 last year, according to Wikipedia. Hardly a living wage.
by gk (gk (gk quattro due due sette @gmail.com)) on Tue Jul 23rd, 2013 at 08:00:55 AM EST
[ Parent ]
Has a living income been tried anywhere?

2008-2010, in Otjivero in Namibia there was a pilot project where every adult gets 100 namibian dollars a month (50 for kids, payed to the mother) for two years. Resulting in more economic activity, less poverty, crime and malnourishment. The pilot project came about as a result of the claims that the 2002 Namtax proposal of universal living income faced.

Similar project in Ghodhakurd in Madhya Pradesh in India in 2012. They got 300 rupees a month, half for kids.

Both were intended primarily as poverty relief (hence the low sums) and as such appears more efficient then other projects. Neither has been continued or led to national projects. According to Guy Standing at University of London this is primarily because of pressure from IMF and the World Bank.

This info is courtesy of Grus&Guld, JAK Sweden's dead tree paper. JAK is a bank for interest-free saving and loans.

Sweden's finest (and perhaps only) collaborative, leftist e-newspaper Synapze.se

by A swedish kind of death on Tue Jul 23rd, 2013 at 11:40:55 AM EST
[ Parent ]
Let's do some numbers.

According to recent estimates, in Spain there are 1.4m households where nobody is working, and half a million households with no income.

The relative poverty level (60% of median household income) is about €15k a year.

So, if you decided to pay €15k per household to the 500,000 households with no income, it would cost €7,5bn per year. Since Spain's GDP is roughly one trillion per year, it would cost less than 1% of GDP to "artificially" bring all the households with no income above poverty level.

€15k per year for 2m households would come to €30bn per year, or 3% of GDP.

If you believe in the quantity theory of money, this could accelerate inflation by 3%. But it you make this into a job guarantee programme there would be additional goods (but mostly services) provided by the programme participants and inflation would be reduced.

What, we can end poverty and unemployment for 3% of GDP? Why are we not doing it?

Finance is the brain [tumour] of the economy

by Migeru (migeru at eurotrib dot com) on Tue Jul 23rd, 2013 at 11:53:22 AM EST
[ Parent ]
Because banksters would rather sit on their little piles of shit than be forced to share it with peasants.

No, really. That is the reason.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Tue Jul 23rd, 2013 at 12:08:28 PM EST
[ Parent ]
You can become the richest person in the country by accumulating the most wealth and claims on wealth and by destroying the wealth of others. That is why the very rich are fond of depressions. All they have to do is lock up their wealth until they can use it to buy up on the cheap the assets of the newly bankrupt.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Tue Jul 23rd, 2013 at 12:58:19 PM EST
[ Parent ]
You've just described the game of 'Monopoly'.

"The future is already here -- it's just not very evenly distributed" William Gibson
by ChrisCook (cojockathotmaildotcom) on Wed Jul 24th, 2013 at 05:53:45 AM EST
[ Parent ]
Yes, but the game of Monopoly comes to an end when that happens. I'm not sure that's what the real life winners want.....
by gk (gk (gk quattro due due sette @gmail.com)) on Wed Jul 24th, 2013 at 05:56:56 AM EST
[ Parent ]
No, no, then land value tax is introduced :)

History of the board game Monopoly

The history of the board game Monopoly can be traced back to the early 20th century. The earliest known design was by an American, Elizabeth Magie, patented in 1904 but existing as early as 1902.[1] Magie's original intent was to publish a board game to illustrate an economic principle, namely the Georgist concept of a single land value tax.[2]


Sweden's finest (and perhaps only) collaborative, leftist e-newspaper Synapze.se
by A swedish kind of death on Wed Jul 24th, 2013 at 07:02:26 AM EST
[ Parent ]
Fascinating! Too bad it would be such a legal hassle to sell an updated version that included Magie's second stage land tax and, possibly, other alternative rules. That would be subversive. Perhaps call it Monopoly Satire, as satire has some status as protected speech in the USA.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Wed Jul 24th, 2013 at 10:16:17 AM EST
[ Parent ]
was a Georgist teaching tool about the land tax...

Finance is the brain [tumour] of the economy
by Migeru (migeru at eurotrib dot com) on Thu Jul 25th, 2013 at 04:52:24 AM EST
[ Parent ]
Though it would be less than €30b/yr given multiplier effects.

Indeed, whether or not it is a job guarantee program, the Spanish economy is sufficiently depressed that there will be no appreciable inflation from a 3% boost to national income.

I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.

by BruceMcF (agila61 at netscape dot net) on Tue Jul 23rd, 2013 at 01:17:34 PM EST
[ Parent ]
An interesting conclusion in the Namibian pilot project was that employment went up, not down.

Sweden's finest (and perhaps only) collaborative, leftist e-newspaper Synapze.se
by A swedish kind of death on Tue Jul 23rd, 2013 at 02:01:13 PM EST
[ Parent ]
Also, the empirical evidence appears to be that minimum wage legislation does not increase unemployment.

Finance is the brain [tumour] of the economy
by Migeru (migeru at eurotrib dot com) on Tue Jul 23rd, 2013 at 02:17:09 PM EST
[ Parent ]
A Town Without Poverty?: Canada's only experiment in guaranteed income finally gets reckoning | The Dominion
But this experiment happened much closer to home. For a four-year period in the '70s, the poorest families in Dauphin, Manitoba, were granted a guaranteed minimum income by the federal and provincial governments. Thirty-five years later all that remains of the experiment are 2,000 boxes of documents that have gathered dust in the Canadian archives building in Winnipeg.
by generic on Fri Aug 16th, 2013 at 06:33:20 AM EST
[ Parent ]
Chris, your link to Post Modern Fiscal Theory at FT doesn't work for me. Perhaps you could append it as a comment, unless FT now owns that IP.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Sun Jul 21st, 2013 at 01:26:19 PM EST
Here it is at ET

I think Alphaville is a walled garden, albeit free (and recommended)to join.

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Sun Jul 21st, 2013 at 02:03:15 PM EST
[ Parent ]
The pinnacle of irony is for one well trained in economics to be told by one who is not that he doesn't understand much economics. That is bizarre, but so it goes.
What is bizarre is that how little academic economics has to do with the real world, which opens "trained economists" to this kind of attack.

Finance is the brain [tumour] of the economy
by Migeru (migeru at eurotrib dot com) on Sun Jul 21st, 2013 at 04:19:12 PM EST
Yes, for most of my mainstream colleagues, the correct phrasing would not be "you don't understand much economics", but rather, "you don't understand much about the economy".


I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.
by BruceMcF (agila61 at netscape dot net) on Tue Jul 23rd, 2013 at 02:30:39 AM EST
[ Parent ]
The most direct way to address the benefit that incumbents would enjoy from a JG program is to institute an asset tax on all individuals with a threshold somewhere between the equivalent of US$2 million and $10 million. To be effective it would have to be highly progressive above that threshold. In the US almost all of the potential beneficiaries of such a tax would think it was unfair to those on whom it is levied. Sadly.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Mon Jul 22nd, 2013 at 12:49:56 AM EST
Well, I think the whole State/Tax thing and representative democracy are soooo Last Century, anyway ;-)

In the emerging reality-based and participative networked future the Party won't create the Policy, according to some misbegotten ideology - the Policy will create the Party.

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Mon Jul 22nd, 2013 at 08:36:38 AM EST
[ Parent ]
We can hope.

I like your new sig line.

"It is not necessary to have hope in order to persevere."

by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Mon Jul 22nd, 2013 at 10:53:24 AM EST
[ Parent ]


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