Lars Doucet - Progress, Poverty, Georgism, & Why Rent is Too Damn High

Speaker 1 Over the last century, we've had this huge conflict. All the oxygen's been sucked up by capitalism and socialism, duking it out.

Speaker 1 We have this assumption that you either have to be pro-worker or pro-business, that you can't be both.

Speaker 1 I have noticed a lot of crypto people get into Georgism, not the least of which is Vitalik Buterin, who endorsed my book.

Speaker 1 If you earn $100,000 in San Francisco as a family of poor, you are below the poverty line. Let's start with just taxing the things nobody has made and that people are gatekeeping access to.

Speaker 1 Let's tax essentially monopolies and rent-seeking. The income tax needs needs to do this full anal probe on everyone in the country and then audits the poor at a higher rate than the rich.

Speaker 1 And it's just this horrible burden we have.

Speaker 2 Okay, today I have the pleasure of speaking with Lars Douce,

Speaker 2 who developed the highly acclaimed Defender's Quest game and part two is coming out next year, but now he's working on a new startup.

Speaker 2 But the reason we're talking is that he wrote a review of Henry George's Progress in Poverty that won Scott Alexander's book review contest.

Speaker 2 And now it has been turned into and expanded into this book, Land is a Big Deal. So, Lars, welcome to the podcast.

Speaker 1 Great to be here, Duark Ash.

Speaker 2 Okay, so let's just get into it. What is Georgism?

Speaker 1 Okay, so the book is based off of the philosophy of a 19th-century American economist by the name of Henry George from Whence We Get Georgism.

Speaker 1 And basically, George's thesis is kind of the title of my book, That Land is a Big Deal.

Speaker 1 Georgism is often reduced to its main policy prescription that we should have a land value tax, which is a tax on the unimproved value of land, but not a tax on any buildings or infrastructure on top of the land, anything humans add.

Speaker 1 But the basic insight of it is that

Speaker 1 it's kind of reflected in the aphorisms you hear from real estate agents when they say things like the three laws of real estate are location, location, location, and buy land, it's the one thing they're not making any more of.

Speaker 1 It's basically this insight that

Speaker 1 land has this hidden role in the economy that is really underrated. But if you look at history through the right lens, control over land is the oldest struggle of human history.

Speaker 1 It goes beyond human history. Animals have been fighting over land forever.
That's what they're fighting over in Ukraine and Russia right now, right?

Speaker 1 And

Speaker 1 basically, the fundamental insight of Georgism is that over the last century, we've had this huge conflict. All the oxygen has been sucked up by capitalism and socialism, duking it out.

Speaker 1 We have this assumption that you either have to be pro-worker or pro-business, that you can't be both. And Georgism is genuinely pro-worker and pro-business.
But what it's against is land speculation.

Speaker 1 And if we can find a way to share the earth, then we can solve the paradox that is the title of George's book, Progress and Poverty. Why does poverty advance even when progress advances?

Speaker 1 Why do we have all this industrialized technology and new methods? And, you know, in George's time, it was industrial technology. In our time, it's computers and everything else.

Speaker 1 We have all this good stuff. We can make more than we've ever made before.
There's enough wealth for everybody, and yet we still have inequality. Where does it come from?

Speaker 1 And George answers that question in his book, and I expand on it in mine. Yep, yep.

Speaker 2 Okay. So, yeah, I'm excited to get into the theory of all of it in a second.
But first, I'm curious:

Speaker 2 how much of your interest in the subject has been inspired by the fact that as a game developer, you're constantly dealing with decentralized rent seekers like Steam or iOS,

Speaker 2 App Store. Is that part of the inspiration behind your interest in Georgism or is that separate?

Speaker 1 It's interesting. I wouldn't say that's what clued me into it in the first place, but I have become very interested in all forms of rent seeking, right?

Speaker 1 In this general category of things we call land-like assets that come to first mover advantages in these in these large platform economies. I've started to think a lot about it, basically.

Speaker 1 But the essence of land speculation is you have this entire class of people who are able to basically gatekeep access to a scarce resource that everybody needs, which is land, right?

Speaker 1 That you can't opt out of needing. And because of that, everyone basically has to pay them rent.
And those people don't necessarily do anything, you know?

Speaker 1 They just got there first and tell everyone else. It's like, well, if you want to participate in the world, you need to pay me.
And

Speaker 1 so

Speaker 1 where I actually, where the actual connection with game development actually clued me into Georgism is I'd heard about Georgism before. I'd read about it.
I thought it was interesting.

Speaker 1 But then I started noticing this weird phenomenon in online multiplayer games going back 30 years repeatedly of virtual housing crises, which is the most bizarre concept in the world to me. Like

Speaker 1 basically a housing crises in the metaverse and predecessors to the metaverse.

Speaker 1 As early as Ultima Online when I was 19, you know, this is this online game that you could play and

Speaker 1 you could build houses in the game and put them down somewhere and so um what i found was that houses were actually like fairly cheap like you could work you know long enough in the game to be afforded to like buy blueprints for a house which will you put it somewhere but there was no land to put it on and i at the time i thought oh well i guess the server filled up you know i didn't really think much about it i was like this stinks i didn't join the game early enough you know i'm kind of screwed out of housing And then I kind of forgot about it.

Speaker 1 And then like 20 years later, I checked back in and that housing crisis is still ongoing in that game. That game is still running, you know, a good 25 years later.

Speaker 1 and that housing crisis remains unsolved. And you have this entire black market for housing, you know, and then I noticed that that trend was repeated in other online games like Final Fantasy 14.

Speaker 1 And then recently in 2022, with all this huge wave of crypto games like Axie Infinity and Decentraland and the Sandbox.

Speaker 1 And then Yuga Labs's Board Ape Yacht Club, the other side, had all these big land sales. And at the time, I was working as an analyst for a video game consulting consulting firm called Novic.

Speaker 1 And

Speaker 1 I told my employers, it's like, we are going to see all the same problems happen. We are going to see virtual land speculation.

Speaker 1 They're going to hit a virtual, they're going to reproduce the conditions of housing crises in the real world.

Speaker 1 And it's going to be a disaster. And I called it, and it turns out I was right.
And we've now seen that whole cycle kind of work itself out.

Speaker 1 And it's just, it just kind of blew my mind that we could reproduce the problems of the real world

Speaker 1 so articulately in the virtual world without anyone trying to do it. It just happened.

Speaker 1 And that is kind of the actual connection between my background in game design and kind of getting George-pilled, as the internet kids call it these days.

Speaker 2 There's a hilarious clip.

Speaker 2 Some comedian was on Joe Rogan's podcast. I think it was like Tim Dylan.

Speaker 2 And they're talking about, I think, DeSantraland, where if you want to be Snoop Dogg's neighbor in the metaverse, it costs like a couple million dollars or something.

Speaker 2 And

Speaker 2 Joe Rogan was like, so you think you can afford to live there? And then Tim Dylan's like, no, but I'm going to start another metaverse and I'm going to work hard.

Speaker 2 But okay, so let's go into Georgism itself. So Tyler Cowen had a blog post a long time ago where he was comparing taxing land to taxing unimproved labor or unimproved capital.

Speaker 2 And, you know, it's an interesting concept, right? Like, should I, so I have a CS degree, right?

Speaker 2 Should I be taxed at the same level as an entry-level software engineer instead of a podcaster because I'm not using my time as efficiently as possible?

Speaker 2 And so leisure in another way is the labor equivalent of having an unimproved parking lot

Speaker 2 in the middle of San Francisco.

Speaker 2 Or capital, if I'm just keeping my capital out of the economy and therefore making it not useful, maybe I should have that capital taxed at the rate of like the capital gains on T-bill.

Speaker 2 And this way, you're not punishing people for having profitable investments, but you're kind of doing with the capital gains.

Speaker 1 Right.

Speaker 2 What would you think of that comparison?

Speaker 1 Yeah, so really, before you can even answer that question, you got to go back to ground moral principles you're operating on.

Speaker 1 Like, is your moral operating principle like we just want to increase efficiency, so we're going to tax everyone in a way to like basically account for the wasted opportunity cost?

Speaker 1 Which brings up a lot of other questions of like, well, who decides what that is?

Speaker 1 But

Speaker 1 I think the Georgist argument is a little different.

Speaker 1 We're not necessarily like, it is efficient, the tax we propose, but it actually stems kind of from a more, from, from a different place, a more kind of fundamental aspect of justice, you know?

Speaker 1 And from our perspective, if you work and you produce value, your work produced that value, right?

Speaker 1 And if you save money and accumulate capital in order to put that capital to work to receive a return,

Speaker 1 you've also provided something valuable to society. You know, you saved money so a factory could exist, right? You saved money so that a shipping company could get off the ground.

Speaker 1 You know, those are valuable contributive things, but nobody made the earth. The earth pre-exists all of us.
And so, someone who provides land actually does the opposite of providing land.

Speaker 1 They unprovide land and then they charge you for opening the gate. And so, the argument for charging people on the unimproved value of land is that that we want to tax unproductive rent seeking.

Speaker 1 We want to tax non-produced assets because we think we want to encourage people to produce assets. We want to encourage people to produce labor, to produce capital.
We want more of those things.

Speaker 1 And there's that aphorism that if you want less of something, you should tax it.

Speaker 1 So, I mean, maybe there is a case for some kind of galaxy brain take of, you know, taxing unrealized opportunity costs or whatever, but I'm less interested in that.

Speaker 1 And my moral principles are more about let's start with just taxing the things nobody has made and that people are gatekeeping access to. Let's tax essentially monopolies and rent-seeking.
And then

Speaker 1 if we still need to raise more taxes, we can talk about that later. But let's start with

Speaker 1 let's start with just taxing the worst things in society and then stop taxing things we actually want more of.

Speaker 1 Because we have this mentality right now where everything's a trade-off and we have to accept the downsides of income taxes, of sales taxes, of capital taxes,

Speaker 1 because we just need the revenue, and it has to come from somewhere. And my argument is it's like it can come from a much better somewhere.
So let's start with that.

Speaker 2 Yeah, yeah. So I guess

Speaker 2 if it was the case that we've implemented a land value tax and we're still having a revenue shortfall and we need another kind of tax and we're going to have to keep income taxes or capital gains taxes, would you, in that situation, prefer a sort of tax where you're basically taxed on the opportunity cost of your time rather than the actual income you've generated or the returns you've interest you've generated on your capital?

Speaker 1 No,

Speaker 1 I think probably not. I think you would probably want to go with some other just like simpler tax for the sake of it because there's too many degrees of freedom in there.

Speaker 1 And it's like, we can talk about why I will defend the Georgist case for property tax assessments, you know, for land value tax.

Speaker 1 But I think it gets different when you start like judging what is the most valuable use of your time because that's a much more subjective question.

Speaker 1 Like you're a pod, like, okay, are you providing more value to society as being a podcaster or being a CS, you know, a computer science person or creating a startup?

Speaker 1 It's like, that may not be evident for some time. You know what I mean? Like,

Speaker 1 I can't think of an example, but like, think of people who were never successful during their lifetimes. Like the guy who invented,

Speaker 1 what was it?

Speaker 1 FM radio, right? He threw himself out a window because he never got it really adopted during his lifetime, but it went on to change everything, you know?

Speaker 1 So if we were taxing him during his lifetime based off of what he was doing of being a failure, like if Van Gogh was taxed of his like wasting his life as an artist as he thought he was, which ultimately led to his suicide, you know, a lot of these things are not necessarily realized at the time.

Speaker 1 And so I think that's,

Speaker 1 and, you know, it would need a much bigger kind of bureaucracy to like figure that all out. So I think you should go with a more modest.

Speaker 1 I mean, I think after land value tax, you should do things like severance tax on natural resources and other taxes on other monopolies and rents.

Speaker 1 And so I think the next move after land value tax is not immediately to capital and income taxes and sales taxes, but to other taxes on other rent-seeking and other land-like assets that aren't literally physically land.

Speaker 1 And then only after you've done all of those, if you still,

Speaker 1 you know, absolutely then, then move on to, you know, the bad taxes.

Speaker 2 What is a severance tax?

Speaker 1 Severance tax is a tax on the extraction of natural resources. This is what Norway does with

Speaker 1 their oil industry that has been massively successful. And a key reason that Norway has avoided the resource curse.

Speaker 1 Basically,

Speaker 1 Georgius Purist will say it's essentially a land value tax, but of a different kind.

Speaker 1 A land value tax, like you can't normally extract just land, like on this, in this house you're living on.

Speaker 1 You're not using up this land, but non-renewable resources you can use up.

Speaker 1 And so a severance tax is basically Nestle should be charged a severance tax for the water they're using, for instance, you know, because all they're doing is enclosing a pre-existing natural resource that used to belong to the people that they've essentially enclosed, and now they're just putting it in bottles and selling it to people.

Speaker 1 You know, they should be able to realize the value of the value add they give to that water, but not to just taking that resource away.

Speaker 2 No, that makes sense. Um, okay, so let's let's go deep into the actual theory and logic of Georgism.
Okay.

Speaker 2 One thing I was confused by is why property owners who have land in places that are really desirable are not already incentivized to make the most productive use of that land.

Speaker 2 So even without a property, or sorry, a land tax, if you have some property in San Francisco, why are you not incentivized to construct it to the fullest extent possible by the law?

Speaker 2 to collect rents anyways.

Speaker 2 You know what I mean? Like, why are you keeping it that as a parking lot?

Speaker 1 Right, right, right. So

Speaker 1 there's a lot of reasons. Um, and one of them has to do with, um, there's a, there's an image in the book that, um, this guy, um, put together for me.
I'll, I'll show it to you later.

Speaker 1 Um, but what it does is that it shows uh, the rate of return. What a land speculator is actually optimizing for is their rate of return, right? And so, if land appreciates by 10% a year,

Speaker 1 you know, you're actually incentivized to invest in vacant land or a teardown property because the building of a teardown property is like worth negative value.

Speaker 1 So the land's cheaper because there's garbage on it, you know,

Speaker 1 than you are to necessarily invest in a property. And you're basically your marginal dollar is better spent on more land than it is on building up.

Speaker 2 But eventually, shouldn't this be priced into

Speaker 2 the price of land so that the returns are no longer 10% or they're just like basically what you could get for any other asset? And at that point, then

Speaker 2 the rate of return is similar for building things on top of your existing land than buying new land.

Speaker 2 Because, like, the new land has like the, you know, the, that, that, that return has been priced into other land.

Speaker 1 Well, I mean, arguably, empirically, we just don't see that. You know, we see rising land prices as long as productivity and population increases.

Speaker 1 Those productivity and population gains get soaked into the price of the land. It's because of this phenomenon called Ricardo's Law of Rent.
And it's been pretty empirically demonstrated

Speaker 1 that

Speaker 1 basically, and it has to do with the negotiation power, but like why, I'm some people do, of course, build and invest. You know, there's a lot of local laws that restrict people's ability to build.

Speaker 1 But another reason is just like, it also has to do with the existing

Speaker 1 part of it. It pars part of the effect is partially the existing property tax regime actively incentivizes empty lots because you have a higher tax burden if you build, right?

Speaker 1 So, what actually happens is a phenomenon that's similar to oil wells, right?

Speaker 1 You have, it's not just because of property taxes, those do encourage you to keep it empty, but there's this like, there's this phenomenon called land banking and waiting for the land to ripen, right?

Speaker 1 Sure, I could build it now, but I might have a lot of land parcels I've got, and I don't need to build it now because I think the prices might go up later and it would be better to build on it later than it is now.

Speaker 1 And it's not costing me anything. to keep it vacant now.
If I build now, I'm going to have to pay a little bit more property taxes. And I know in three years that the price is going to be even better.

Speaker 1 So maybe I'll wait to incur those construction costs then. And right now, I'm going to focus more on building over here.

Speaker 1 And like, I've got a lot of things to do, you know, so I'm just going to squat on it here.

Speaker 1 It's the same way like I have, I'm squatting like, you know, I, to my shame, like about 30 domain names, you know, most of them bought before I kind of got onto Georgism.

Speaker 1 And it's like, yeah, I'll pay 15 bucks a year to just hold it. Why not? You know what I mean? I might use that someday.
Right.

Speaker 1 And it's like, I should probably release all the ones I have no intent of using because because I was looking for a domain for my startup the other day and every single two word.com is taken

Speaker 1 and has been for like 10 years, you know, and it's a similar phenomenon. It's just, it's like some of it is economic, rational following of incentives.

Speaker 1 And some of it is just, it's like, well, this is a good asset. I'm just going to hold on to it because why not? And

Speaker 1 no one is, and I don't have any pressure to build right now. And this happens on the upswing and on the downswing of cities.

Speaker 1 So while the population is growing and while the population is declining, people will just buy a lot of land and hold it out of use because it's also just a great place to park money

Speaker 1 because it's an asset that you know, if the population ever starts growing, it's going to keep its value better than almost any other hard asset you have. Yeah, yep.

Speaker 2 I guess another like broader criticism of this way of thinking is: listen, this is all, and sorry for using these like uh podcast lingo of scarcity mindset, but this is all like scarcity mindset of um, you know, land is limited.

Speaker 2 Why don't we just focus on the possibility of expanding the amount of usable land? I mean, there's like not really a shortage of land in the US. Maybe there's a shortage of land in urban areas.

Speaker 2 But, you know, why don't we like expand into the seas and why don't we expand in the air and space? Why are we thinking in this sort of scarce mindset?

Speaker 1 Right. Okay.
So I love this question because actually our current status quo mindset is the scarcity mindset. And Georgism is the abundance mindset, right?

Speaker 1 And we can have that abundance if we learn to share the land. Because right now,

Speaker 1 you know, why don't we expand? And the answer is: we've tried that, we've done it twice. And it's the story of America's frontier, right?

Speaker 1 And so, like, right now, there's plenty of empty land in Nevada, but nobody wants it. And you have to ask why, right?

Speaker 1 You also have to ask the question of how did we have virtual housing crises in the metaverse where they could infinitely expand all they want? Like, how is that even possible?

Speaker 1 You know, and the answer has to do with what we call the urban agglomeration effect.

Speaker 1 What's really valuable is human relationships, proximity to other human beings, those dense networks of human beings. And so

Speaker 1 the idea is not necessarily that, like, in a certain sense,

Speaker 1 the issue is that land is not an indistinguishable, fungible commodity. Location really matters.

Speaker 1 America has a finite amount of land, but it might as well be an infinite plane.

Speaker 1 We are not going to fill up every square inch of America for probably thousands of years if we ever do.

Speaker 1 Right.

Speaker 1 But what is scarce is specific locations.

Speaker 1 They're non-fungible, you know, and to a certain extent, it's like, okay, if you don't want to live in New York, you can live in San Francisco or any other like big city.

Speaker 1 But what makes New York New York is non-fungible. What makes San Francisco San Francisco is non-fungible.

Speaker 1 That particular cluster of VCs in San Francisco, until or unless that city completely explodes and that moves somewhere else to Austin or whatever, you know, at which point Austin will be non-fungible.

Speaker 1 I mean, Austin is non-fungible right right now. And so the point is that the way Georgism unlocks the abundance mindset, let me talk about the frontier.
We have done frontier expansion.

Speaker 1 That is why immigrants came over from Europe, you know, and then eventually the rest of the world to America to, you know, settle the frontier.

Speaker 1 And the losers of that equation were, of course, the Indians who were already here and got kicked out.

Speaker 1 But that was the original. idea of America.

Speaker 1 And I like to say that America's tragedy, America's problem is that America is a country that has the mindset of being a frontier state, but is, in fact, a state which has lost its frontier.

Speaker 1 And that is why you have these conversations with people like Boomers who are like, why can't the next generation just pull itself up by its bootstraps?

Speaker 1 Because America has had at least, I would say, two major periods of frontier expansion. The first was the actual frontier, the West, the Oregon Trail, the covered wagons.

Speaker 1 you know, the displacement of the Indians. And so that was a massive time.
That was the time in which Henry George was writing was right when that frontier was closing, right?

Speaker 1 When all that land, that free land was being taken and the advantages of that land was now being fully priced in. That is what it means for a frontier to close is that now the good productive land,

Speaker 1 the value of it is fully priced in.

Speaker 1 When the frontier is open, you can just go out there and take it and you can get productive land and realize the gains of that.

Speaker 1 And the second frontier expansion was after Henry George's death was the invention of the automobile, the ability to have a job in the city, but not have to live in the city.

Speaker 1 The fact that you could quickly travel in, like I commuted in to visit you here, right?

Speaker 1 That is because of the automobile frontier opening that has allowed me to live in some other city, but be able to do productive work like this podcast by driving in.

Speaker 1 But the problem is, sprawl can only take you so far before that frontier as well closes. And by closes, I don't mean suburban expansion stops.

Speaker 1 What I mean is that now, suburban homes, you fully price in the value of the benefits you're able to accrue by having that proximity to a city, but still being able to live over here through, of course, Ricardo's law for rent.

Speaker 2 Yeah, but I feel like this is still compatible with the story of we should just focus on increasing technology and abundance rather than trying to estimate how much rent is available now given current status quo technologies.

Speaker 2 I mean,

Speaker 2 the car is a great example of this, but imagine if there were like flying cars, right? Like there's a, you know, the where's my flying car?

Speaker 2 There's like a whole analysis in that book about, you know, if you could, if if people are still commuting like 20 minutes a day you know a lot more land is actually in the same travel distance as was before and then not now all this land would be worth as much even in terms of relationships that you could um you could like accommodate right so uh why not just build like flying cars instead of uh focusing on um uh land rent well because these things have a cost right the cost of frontier expansion was murdering all the indians and the cost of automobile expansion was climate change you know

Speaker 1 there there has to be a price for that.

Speaker 1 And then eventually the problem is you eventually, when you get to the end of that frontier expansion, you wind up with the same problem you had in the first place.

Speaker 1 Eventually, the problem is the first generation will make out like gangbusters if we ever invent flying cars, even better, like Star Trek matter teleporters. You know, that'll really do it.

Speaker 1 Then you can really live in Nevada and have a job in New York.

Speaker 1 There are some people who claim that Zoom is this, but it's not. You know, we've seen the empirical effects of that.

Speaker 1 And it's like, it's the weakest like semi-frontier we've had and it's already closed. because

Speaker 1 because of zoom houses like this over in austin have gone up in value because there is demand for them

Speaker 1 um there's demand for people to telecommute and so anyone who has so so the ability so the increased demand for living out in the suburbs is now basically priced in because of the zoom economy and so the thing is the first people who did that who got there really quick the first people to log into the ultimate online server were able to claim that pace of the frontier and capture that value.

Speaker 1 But the next generation has to pay more in rent and more in home prices to get that.

Speaker 2 Actually, that raises another interesting criticism of Georgism. This is actually a paper from Zachary Gautenar and Brian Koplin, where it was titled The Search Theoretic Critique of Georgism.

Speaker 2 And the point they made was

Speaker 2 one of these, like one way of thinking about the improvement to land is actually identifying that this land is valuable. Maybe because you realize it has like an oil well in it.

Speaker 2 Maybe you realize that it's like the perfect proximity to these like Chinese restaurants and this mall and whatever.

Speaker 2 And then just finding which land is valuable is actually something that takes capital and also takes, you know, like you deciding to offend your life and go somewhere, you know, like all kinds of effort.

Speaker 2 And that is not factored into the way you would conventionally think of the improvements to land that would not be taxed, right?

Speaker 2 So in some sense, you getting that land is like a subsidy for you identifying that the land is valuable and can be used to productive ends.

Speaker 1 Right. Yeah.
No, so I've read that paper. So, first of all,

Speaker 1 the first author of that, Zachary Gelchiner. Yeah.

Speaker 1 I've not been able to pin him down on what he exactly meant on this, but he's made some public statements where he's revised his opinion since writing that paper, and that he's much more friendly to

Speaker 1 the arguments of Georgism now than when he first wrote that paper. So I'd like to pin him down and see exactly what he meant by that because it was just a passing comment.

Speaker 1 But as regards Kaplan's critique, Kaplan's critique only applies to a 100% LVT, where you fully capture capture all of the land value tax.

Speaker 1 And the most extreme Georgists I know are only advocating for like an 85% land value tax. That would still leave, and Kaplan doesn't account at all for the negative effects of speculation.

Speaker 1 He's making a speculation is good actually argument. And even if we grant his argument, he still needs to grapple with all the absolutely empirically observed problems of land speculation.

Speaker 1 And if we want to make some kind of compromise between maybe speculation could have this good discovery effect, there's two really good answers to that.

Speaker 1 First, just don't do 100% LVT, which we probably can't practically do anyway because of natural limitations, just empirically, you know, in the signal. It's like

Speaker 1 you don't want to do 115% land value tax. That drives people off the land.
So we want to make sure that we like

Speaker 1 have a high land value tax, but make sure not to go over. And so that would leave a sliver of land rent that would still presumably incentivize this sort of thing.
There's no argument for why.

Speaker 1 you know, 100% of the land rent is necessary to incentivize the good things that capitalist is talking about. The second argument is when he talks about oil,

Speaker 1 well, we have the empirical evidence from the Norwegian massively successful petroleum model that shows,

Speaker 1 in the case of natural resources, how you should deal with this. And what Norway does is that they have a massive, massively huge severance tax on oil extraction.

Speaker 1 And according to Kaplan's argument, this should massively destroy. the incentive for companies to go out there and discover the oil.
And empirically, it doesn't.

Speaker 1 Now, what Norway does is that they figured out, okay, so the oil companies, their argument is that we need the oil rents, right?

Speaker 1 We need these oil rents or we will not be incentivized for the massive capital costs of offshore oil drilling.

Speaker 1 Well, Norway's like, well, if you just need to cover the cost of offshore oil drilling, we'll subsidize that. We'll just pay you.
We'll just pay you to discover the oil.

Speaker 1 But when you find the oil, that oil belongs to the Norwegian people. Now, you may keep some of the rents, but most of it goes to the Norwegian people.
But hey, all your R D is free.

Speaker 1 All your discovery is free. If the problem is discovery, we just subsidize discovery.
And then the oil companies are like, okay, that sounds like a great deal. We don't have to,

Speaker 1 because without that, what the oil companies do is that they're like, okay, we're taking all these risks.

Speaker 1 So I'm going to sit on all these oil wells like people sitting on domain names because I might use them later and the price might go up later.

Speaker 1 But now because there's a huge severance tax, you're forced to drill now.

Speaker 1 And you're actually, your actual costs of discovery and R D and all those capital costs are just taken care of.

Speaker 2 But isn't there a flip side to that where, I mean, one of the economic benefits of speculation um uh obviously there's drawbacks but one of the benefits is that it um it gets rid of the volatility in prices where a speculator will buy when it's cheap and sell when the price is high and in doing so they're kind of uh making the asset less volatile over time and if if you're basically going to tell people who have oil on their land, like, we're going to keep taxing you.

Speaker 2 If you don't take it out, you're going to get keep you're going to keep getting taxed, you're encouraging this massive glut of a finite resource to be produced immediately, which is bad if you think we might need that reserve in the ground 20 years from now or 30 years from now,

Speaker 2 you know, when oil reserves are running low.

Speaker 1 Not necessarily, you know, and so

Speaker 1 the problem is that speculation in the sense you're talking about of like encouraging people to do arbitrage is good for capital because we can make more capital, but we can't make more land and we can't make more non-renewable natural resources.

Speaker 1 And the issue empirically, and I just think the evidence just doesn't support that empirically, because if anything, land speculation has has causes land values to just constantly increase, not to find some natural part, especially with how easy it is to finance.

Speaker 1 Two-thirds of bank loans just chase real estate up. And that's just like, if you just look at the history of the prices of, you know, of residential real estate in America,

Speaker 1 it's like, it's not the cyclical graph where it like keeps going back down. It keeps going back down, but it keeps going up and up and up.
just on a straight line along with productivity.

Speaker 1 And it underlines and undergirds major issue, everything that's driving our housing crisis, which then undergirds so much of inequality and pollution and climate change issues.

Speaker 1 And so, with regards to speculations, like even if I just bite that bullet and it's like, okay, speculation is good, actually, I don't think anyone's made the case that speculators need to capture 100% of the rents to be properly incentivized to do anything good that comes out of speculation.

Speaker 1 I think it's some small, reasonable percentage, you know, five to 10% of the rents, maybe 15 if I'm feeling generous.

Speaker 1 But I don't think anyone's empirically made the case that it should be 100%, which is more or less the status quo.

Speaker 2 I mean, with regards to that pattern of the fact that the values tend to keep going up implies that there's nothing cyclical that the speculators are dampening.

Speaker 1 Well, there are cycles to be sure, but it's not like it's something that resets to zero.

Speaker 2 Yeah, but that's also true of like the stock market, right? Over time, that goes up, but speculators still have like an economic role to play in the stock market of making sure prices are.

Speaker 1 I mean, the difference is that people are now paying an ever-increasing portion of their incomes to the land sector. And that didn't used to be the case.

Speaker 1 And if it keeps going, it's going to be, I mean, you have people who are now paying 50% of their income just for rent. And that's not sustainable in the long term.

Speaker 1 You're going to have the cycle you have there is revolution. You know, you,

Speaker 1 no, I'm serious. Like, what happens is, like, you look through history, you either have land reform or you have revolution.

Speaker 1 And, you know, it's, it's either like either you have a never-ending cycle of

Speaker 1 transfers of income from the unlanded to the landed, and eventually the unlanded will not put up with that.

Speaker 1 You know, there was a real chance in the 19th century, at the end of the 19th century of America going full-on socialist or communist.

Speaker 1 And the only thing that saved us, and George's argument was like, it's either Georgism or communism. And if you want to save capitalism and not go totalitarian, we need...
Georgism.

Speaker 1 And then what George failed to anticipate was, of course, the automobile.

Speaker 1 And the automobile kicked the can down another generation, another couple of generations right and it came at the cost of sprawl and um that made everyone feel like we had solved the issue but basically we just and the costs of sprawl are enormous in terms of pollution and poor land use um just look at houston right now right but um now we've come at the end of that frontier and now we're at the same question and it's like you see this resurge in interest in leftism in america and that's not a coincidence right because the rent is too damn high and poor people and poor people and young people feel really really shoved out of the promise and social contract that was given to their parents, and they're jealous of it, and they're wondering where it went.

Speaker 2 Yeah, yeah. Actually, you just mentioned that a lot of bank loans are given basically so you can like get a mortgage and get a house.

Speaker 1 It's like towards land.

Speaker 2 Um, there was an interesting question on Twitter

Speaker 2 that I thought was actually pretty interesting about this.

Speaker 2 Uh, I can't find the name of the person who asked it, um, so sorry I can't give you credit, but they basically asked if that's the case, and if most bank loans are going towards, you know, helping you buy land that's like artificially more expensive, but now you implement a land value tax and all these property values crash.

Speaker 2 Oh, yeah. Won't we see just a and then all then all these mortgages are, you know, obviously they can't pay them back.

Speaker 1 Right, right. Are we going to destroy the banking sector? Exactly.

Speaker 2 We'll have like a great Great Depression.

Speaker 1 Well, I mean, if you, okay, so like this is this is kind of like, I mean, I'm not, I'm not trying to compare landlords to slave owners or something, but it's like, it's like the South had an entire economy based off of slavery, this thing that like we now agree was bad, right?

Speaker 1 And it's like we shouldn't have kept slavery because the South,

Speaker 1 like it really disrupted the Southern economy when we got rid of slavery, but it was still the right thing to do.

Speaker 1 And so, I mean, there is no magic button I could push as much as I might like to do so that will give us 100% land value tax everywhere in America tomorrow.

Speaker 1 So I think in the actual path towards a Georgia's future is going to have to be incremental. There'll be enough time to unwind all those investments and get to a more sane banking sector.

Speaker 1 So, I mean,

Speaker 1 like, if we were to go overnight, yeah, I think there would be some shocks in the banking sector, and I can't predict what those would be, but I also don't think that's a risk that's actually going to happen because, like, we just, we just cannot make a radical change like that on all levels overnight.

Speaker 1 Yep, yep, yep.

Speaker 2 Um, okay, so let's get back to some of these um theoretical questions. Uh, one I had was,

Speaker 2 I guess I don't fully understand the theoretical reason for thinking that you can collect arbitrarily large rents. Um,

Speaker 2 Why doesn't the same economic principle of competition, I get that there's not infinite landowners, but there are multiple landowners in any region, right? So if

Speaker 2 for the same reason that profit is competed away in any other enterprise, you know, if one landowner is extracting like $50 of profit a month and another landowner is extracting, you know, like

Speaker 2 whatever, right? Like a similar amount, $50, one of them, and they're both competing for the same tenant.

Speaker 2 One of them will decrease their rent so that the tenant will come to them and the other one will do the same and the bidding process continues until all the profits are you know bidded away right so this is ricardo's law of rent right and it's and there's there's a there's a section on in the book with a bunch of illustrations you can show and so the issue is that um

Speaker 1 we can't make more land right and so you might be like well there's plenty of land in nevada but the point is there's only so much land in Manhattan but but the people who have land in Manhattan why aren't they competing against themselves or each other right well what they do is because the nature of the scarcity of there's only so many locations in Manhattan and there's so many people who want to live there, right?

Speaker 1 And so, all the people who want to live there have to outbid each other.

Speaker 1 And so, basically, so like, let me give a simple agricultural example model, and then I will explain how the agricultural model translates to a residential model.

Speaker 1 Basically, when you are paying to live in an urban area or any, even a suburban area like here in Austin, what you're actually paying for is the right to have proximity to realize the productive capacity of that location, i.e.,

Speaker 1 like, I want to live in Austin because I can have access to a good job. You know what I mean? Or whatever is cool about Austin, a good school, those amenities.

Speaker 1 And the problem is you have to pay for those and you have to outbid other people who are willing to pay for those.

Speaker 1 And Ricardo's Raw Rent says that the value of the amenities and the productivity of an area, as it goes up, that gets soaked into the land prices. And the mechanism by that.

Speaker 1 is that it's like, okay, say I want to buy a watermelon, right? There's only one watermelon. Well, I have to outbid that guy.

Speaker 1 But the watermelon grower is going to be like, oh, a lot of people want watermelons. So next season, there's going to be more watermelons because he's going to produce more watermelons.

Speaker 1 But because there's only so many locations in Austin, you know, within the natural limits of our transportation network, basically it forces the competition on the side of the people who are

Speaker 1 essentially the tenants, right?

Speaker 1 It forces us into one-sided competition with each other.

Speaker 1 And that,

Speaker 1 and and so there's an example of like a simple agricultural example is like, okay, say there is a common field that anyone can work on, and you can make a hundred units of wealth if you work on it, right?

Speaker 1 So, and there's another field that you can also earn 100 units of wealth in, but it's owned by a landowner.

Speaker 1 Why would you go and work on the landowners when you're going to have to pay him rent? You wouldn't pay him any rent at all. You would work on the field that's free.

Speaker 1 But if the landowner buys that field and now your best opportunity is a field that's only worth 10 units, a free field that will produce 10 units of wealth.

Speaker 1 Now he can charge you 90 units of wealth because you have no opportunity to go anywhere else.

Speaker 1 And so basically, as more land gets bought and subject to private ownership in an area, landowners over time get to increase the rent, not to a maximum level. There are limits to it.

Speaker 1 And the limits is what's called the margin of production, which is

Speaker 1 basically you can charge up to, and this is where the competition comes in, the best basic like free alternative, you know, and that's usually, you can realize that geographically.

Speaker 1 Like out on the margins of Austin, there's marginal land that basically is available for quite cheap, you know, and it might be quite far away.

Speaker 1 And it used to be not till quite far away 20, 30 years ago, you know? And so as that margin slowly gets privatized,

Speaker 1 landowners can charge up to that margin. The other limit is subsistence.
They can't charge more than you're actually able to pay. But the basic example is that.

Speaker 1 So this is why, this is how frontier expansion works. When the entire continent's free, the first settler comes in, strikes a pick in the ground, keeps all of their wealth.

Speaker 1 But as more and more of it gets consolidated,

Speaker 1 then landowners are able to charge proportionately more until they're charging essentially up to subsistence.

Speaker 2 Yeah.

Speaker 2 Does that explain? property values in San Francisco.

Speaker 2 I mean, they are obviously very high, but I don't feel like they're that high where the software engineers who are working at Google are living as subsistence levels.

Speaker 2 Neither are they at like the margin of production where it's like, this is what it would cost to live out in the middle of California and then commute like three hours to work or something.

Speaker 1 Right. Well, so it has to do with two things.
So first of all, it's over the long run. And so it's like when you've, you've had a lot of productivity booms in San Francisco, right?

Speaker 1 And so it takes some time for that to be priced in. you know, and it can be over a while, but given a long enough time period, it'll eventually get there.

Speaker 1 And then when we're talking about stuff, it's also based off of the average productivity.

Speaker 1 The average resident of San Francisco is maybe not as productive as a high, like basically doesn't earn as high an income necessarily as a high income productive worker.

Speaker 1 And so this means that if you are a higher than productive, higher than average productivity person, it's worth it to live in the expensive town because you're being paid more.

Speaker 1 than the average productivity that's captured in rent, right? But if you're a low, if you're lower than average productivity, you flee high productive areas.

Speaker 1 You go to more marginal areas because those are the only places you can basically afford to make a living.

Speaker 2 Okay, that's very interesting. That's actually one of the questions I was really curious about.
So I'm glad to hear an answer on that. Another one is: so, yeah, the idea is: you know,

Speaker 2 land is soaking up the profits that capitalists and laborers are entitled to in the form of rent. But when I look at the wealthiest people in America,

Speaker 2 there's people who own a lot of land, but they bought that land after they became wealthy from doing things that were capital or labor, depending on how you define starting a company.

Speaker 2 Like, sure, Bill Gates owns a lot of land in Montana or whatever, but like the reason he has all that wealth to begin with is because he started a company, you know, that's like basically labor or capital, however you define it.

Speaker 2 Right.

Speaker 2 So how do you explain the fact that all the wealthy people are capitalists or laborers?

Speaker 1 Well, so the thing is,

Speaker 1 one of the big misapprehensions people have is that when they think of billionaires, they think of people like Bill Gates and

Speaker 1 Elon Musk and Jeff Bezos. Those are actually the minority billionaires.
Most billionaires are hedge funds, are people involved in hedge funds. You know, bankers.
And what are bankers?

Speaker 1 Most, what are two-thirds of banks? It's real estate.

Speaker 1 And so,

Speaker 1 but more to your point, like, if I if I just like point that directly into it, it's like, I don't necessarily have a problem with a billionaire existing. You know what I mean?

Speaker 1 If someone like genuinely like brings something new into the world and like, you know, I don't necessarily buy the narrative that like billionaires are solely responsible for everything that good that comes out of their company.

Speaker 1 You know, I think they like to present that image. But I don't necessarily have a problem with a billionaire existing.
I have a problem with

Speaker 1 working class people not being able to feed their families.

Speaker 1 And so, the greater issue is the fact that the rent is too high rather than that Jeff Bezos is obscenely rich.

Speaker 2 No, no, I guess my point wasn't that

Speaker 2 like I'm not complaining that your solution would not fix the fact that billionaires exist. I also like that there's billionaires.
What I'm pointing out is it's weird that if your theory of

Speaker 1 like where all the surplus in our society is getting you know given away is that it's going to landowners and yet the most wealthy people in our society are not landowners doesn't that kind of contradict your theory a lot of the wealthy people in our society are landowners right and it's just like it's not the so the so the thing is is that basically making wealth off land is a way to make wealth without being productive right and so my point is is that so like you said in your interview with glazer that it's like okay the google plex like the value of that real estate is probably not, you know, compare that to like the market cap of Google.

Speaker 1 But now compare the value of all the real estate in San Francisco to the market caps of some of those companies in there. You know,

Speaker 1 look at the people who are charging rent to people who work for Google. That's where the money's actually going.

Speaker 1 And, you know, investors talk about this: it's like, I have to, like, if you earn $100,000 in San Francisco as a family of four, you are below the poverty line, right?

Speaker 1 You know, the money is going to basically upper middle class Americans and upper class Americans who own

Speaker 1 tons of residential land and are basically

Speaker 1 and also the old and the wealthy especially are essentially this entire class of kind of hidden landed gentry that are extracting wealth from the most productive people in America and young people especially.

Speaker 1 And it creates really weird patterns,

Speaker 1 especially with like service workers who can't afford to live in the cities where their work is demanded.

Speaker 2 Yeah. Okay.
So what do you think of this take? This might be economically efficient. In fact, I think it probably is economically efficient.
But the effect of a land value tax would be to shift,

Speaker 2 to basically shift our sort of societal subsidy away from upper middle class people who own, happen to own land in urban areas and shift that to the super wealthy and also super productive people who like control the half an acre that Google owns in like Mountain View.

Speaker 2 So it's kind of like a a subsidy, not subsidy, but it's easing the burden on super productive companies like Google and so that they can make even cooler products in the future.

Speaker 2 But it is in some, in some sense, a little regressive. You're going from upper middle class to like, you know, tech billionaire.
Right.

Speaker 2 But it still be economically efficient to do that.

Speaker 1 Well, no, I don't quite agree with that because it's like, although there are a lot of upper middle class Americans who own a lot of the land wealth, it's not the case that they own where the majority of the land wealth is.

Speaker 1 The majority of the land wealth in urban areas is actually in commercial real estate. Is the central business district, if you, and I work in mass appraisal, so

Speaker 1 I've seen this myself in the models we build, is that if you look at the transactions in cities and then you plot where the land value is in like a graph, it looks like this.

Speaker 1 And this is the city center, and that's not a residential district. So the residential districts are sucking up a lot of land value and the rent is too damn high.

Speaker 1 But the central business district, and this even holds even in the age of Zoom, it's taken a tumble, but it's starting from a very high level.

Speaker 1 That central residential, I'm not residential, but commercial real estate is super valuable, like orders, like an order of magnitude more valuable than a lot of the other stuff.

Speaker 1 And a lot of it is very poorly used.

Speaker 1 In Houston, especially, it's incredibly poorly used. We have all these central parking lots downtown.
That is incredibly valuable real estate.

Speaker 1 And just a couple of speculators are just sitting on it, doing nothing with it. And that could be housing, that could be offices, that could be amenities, that could be a million sorts of things.

Speaker 1 And so when you're talking about a a land value tax, those are the people who are going to get hit first. And those are people who are neither, you know,

Speaker 1 nice, you know, nice, friendly upper middle class Americans, nor are they hardworking industrialists, you know, making cool stuff. They're people who are doing literally nothing.
Now,

Speaker 1 if you do a full land value tax, yeah, it's going to shift, you know, the burden in society somewhat.

Speaker 1 But I feel that most analyses of property taxes and land value taxes that conclude that they are regressive, I think that's mostly done on the basis of our current assessments.

Speaker 1 And I feel like our assessments could be massively

Speaker 1 improved and that if we improve the assessments, we can show where most of our land values actually concentrated.

Speaker 1 And then we can make decisions about exactly, you know, are we comfortable with these tax shifts? Yep. Yep.

Speaker 2 Hey guys, I hope you're enjoying the conversation so far. If you are, I would really, really appreciate it if you could share the episode with other people who you think might like it.

Speaker 2 You know, put the episode in the group chat you have with your friends, post it on Twitter, send it to somebody who you think might like it.

Speaker 1 All of those things helps out a ton.

Speaker 2 Anyways, back to the conversation.

Speaker 2 So, a while back, I read this book, How Asia Works.

Speaker 1 You must be familiar with it.

Speaker 1 I'm a fan.

Speaker 2 Yeah, and one of the things, I think Joseph Studwell was the author, one of the things he talks about is, so he's trying to explain why some Asian economies grew gangbusters in the last half of the 20th century.

Speaker 2 And one of the things he points to is that these economies implemented land reform, where basically, I guess they were distributed land away from, I guess, the existing aristocracy and gentry towards, you know, the people who are like working the land.

Speaker 2 And while I was reading the book at the time, I was kind of confused because, you know, we've like, there's something called the Kosian,

Speaker 2 the Kosian way to like,

Speaker 2 I forget the name of the argument, but basically, the idea is regardless of who initially starts off with a resource, the incentive of that person will be to

Speaker 2 suffer for him to like give that resource or lend out that resource to be worked by the person who can make most productive use of it.

Speaker 2 And Sedwell was pointing out that these like small far, you know, like these peasant farmers basically, they will pay attention to detail of crop rotation and making the maximum use of this land to get like the maximum produce.

Speaker 2 Whereas if you're like a big landowner, you will just like try to do something mechanized that's not nearly as effective. And in a poor country, what you have is a shit ton of labor.

Speaker 2 So you want something that's like labor-intensive. Anyways,

Speaker 2 backing up a bit, I was confused while I was reading the book because I was like, well,

Speaker 2 wouldn't what you would expect to happen in a market that basically the peasants get a loan from the bank to work, to buy, I guess, rent out that land, and then they are able to make that land work more productively than the original landowner.

Speaker 2 Therefore, they are able to make a profit and everybody benefits, basically. Why isn't there a coasting solution to that?

Speaker 1 Because any improvement that the peasants make to the land will be a signal to the landowner to increase the rent because of Ricardo's law of rent. Yep, okay.

Speaker 1 And that's exactly what happened in Ireland when,

Speaker 1 and George talks about this in Progress and Poverty, is that a lot of people were like, why was there famine in Ireland? It's because the Irish are, you know, bad people.

Speaker 1 You know, why didn't they, they're lazy? Why didn't they improve?

Speaker 1 And it's like, because if you improve the land, all that happens is you still are forced into one-sided competition and the rent goes up.

Speaker 2 Yep. Okay.
That makes sense.

Speaker 2 Is the goal that the taxes you would collect at the land value tax, are they meant to replace existing taxes or are they meant to give us more services like UBI?

Speaker 2 Because they probably can't do both, right? Like you either had to choose getting rid of existing taxes or it depends how much UBI you want.

Speaker 1 You know what I mean? It's like you can, you know, it's a sliding scale. It's like how many taxes do you want to replace versus how much like, I mean, you can have a budget there.

Speaker 1 It's like if you can raise, you know, I show in the book the exact figures of how much I think a land value tax could raise.

Speaker 1 And I forget the exact figures, but like you can pull up a graph and overlay it here of, you know, whether you're talking about the federal level or federal, local, and state, you know, there's $44 trillion of land value in America, and I believe we can raise about $4 trillion in land rents annually with 100% land value tax, and we would probably do less than that in practice.

Speaker 1 But even on the low end, and I forget what figure I quote for the low end, like you could fully pay for any one of Social Security, Medicare plus Medicaid together.

Speaker 1 So the second one is healthcare or defense entirely with the lowest estimate of what I think land rents could raise. And then I think you can actually raise more than that

Speaker 1 because I think, and I give an argument in the book for why I think it's closer to like 4 trillion. And that could pay for all three and have room over for a little bit of extra.

Speaker 1 And so, I mean, it's up to you.

Speaker 1 Like, like that's a policy decision of whether you want to spend it on spending, whether you want to spend it on offsetting taxes, or whether you want to spend it on UBI.

Speaker 1 I think the best political solution, because like if I bite the bullet that there might be some regressivity issues left over, you want to do what's called.

Speaker 1 a UBI or what, you know, in George's time was called a citizen's dividend, right? You know, this will smooth over any remaining regressivity issues.

Speaker 1 And then, but I very much am in favor of getting rid of some of these worst taxes, you know,

Speaker 1 not just because they have deadweight loss and land value tax doesn't, but also because there's this tantalizing theory called At Core, all taxes come out of rent, which suggests that if you reduce other taxes, it increases land values, which means that if it's true in the strongest sense, it means the single tax, right?

Speaker 1 Land value tax replace all taxes would always work.

Speaker 1 And I'm not sure if I buy that.

Speaker 1 I want to see some empirical evidence, but I think at least some weak form of it holds so that when you offset other worse taxes, not only do you get rid of the deadweight loss from those, but you also wind up raising at least a little bit more in land value tax revenue.

Speaker 2 Yes. Yeah.

Speaker 2 I mean, as a libertarian or I guess somebody who has like libertarian tendencies, My concern would basically be like, this obviously seems better than our current regime of taxing things that are good, basically, capital and income.

Speaker 2 But my concern is the way I'm guessing something like this would be implemented is it would be added on top of rather than repealing those taxes. And then

Speaker 2 so, yeah, I guess like we would want to- I get this one a lot.

Speaker 1 Yeah, no. And so I have, you know, I've been a libertarian in my past and I have a soft spot for libertarianism.
I used to be a Ron Paul guy back in the day. for a hot minute.

Speaker 1 And so I think the thing to assuage your concerns there is what is land value tax? It's property tax without a tax on buildings.

Speaker 1 So the natural path to actually getting land value tax comes from reforming existing property tax regimes by reducing an entire category of taxation,

Speaker 1 which is the tax on buildings. And so that's what I think is the most plausible way to get a land value tax, like in Houston, like in Texas here.

Speaker 1 If we were to start by just capture the same, like what I actually propose for a first step is not 100% land value tax federally. I don't even know how you get to there.

Speaker 1 I think what you actually actually do is you start in places like Texas and like, here, legalize split rate property tax. That's where you tax buildings and land at separate rates.

Speaker 1 Set the rate on buildings to zero. Collect the same dollar amount of taxes.
Let's start there. There's proposals to do this in various cities around the nation right now.

Speaker 1 I think there's one in Virginia. There's a proposal to do it in Detroit.

Speaker 1 I think there's some talk of it in Pennsylvania and some places. And I'd like to see those experiments run and observe what happens there.
I think we should do it in Texas.

Speaker 1 And that would be something that I think would be very friendly to the libertarian mindset because, very clearly, we're no new revenue, right? And we're exempting an entire category of taxation.

Speaker 1 Most people are going to see a savings on their tax bill. And the people who own those parking lots downtown in Houston are going to be paying most of the bill.

Speaker 1 Yeah.

Speaker 2 By the way, what do you make of, is there like a Georgist critique of government itself in the sense that government is basically the original

Speaker 2 land squatter and it's basically charging the rest of us rents for staying on rent rent that it's neither productively improving as much as at least it's like getting rents from us more.

Speaker 2 Like, if you think about,

Speaker 2 you know, even your landlord usually is not charging you 40%, which is like what the income tax rate is in America, right?

Speaker 2 And it's like almost, you can like view the America as like the landlord of America.

Speaker 1 Well, I mean, it's like, I mean, I mean, if you want to take the full,

Speaker 1 if you're asking, is Georgism, you know, compatible with full anarcho-capitalist libertarianism? Probably not 100%.

Speaker 1 I think, you know, we can have a a little government as a treat.

Speaker 1 But I think, you know, I think it's not a coincidence that if you look throughout America's founding, I don't think it's a coincidence that originally, like people talk about it's like, oh, it used to be only white men who could vote.

Speaker 1 White landowning men could vote. Like a government by the landowners for the landowners of the landowners, right? And that's very much kind of the traditional English system of government.

Speaker 1 um you know just neo-feudalism right and so i think georgism certainly has a critique of that that it's like like government is often instituted to protect the interests of landowners.

Speaker 1 But what's interesting is that if you look throughout history, you know, I'm very much a fan of democracy, you know, rule of the people. And it's like, I think we, you know, I kind of sympathize with

Speaker 1 Milton Friedman here, where he's like, you know, he might want to have less government than we have now, but he doesn't believe we can have no government.

Speaker 1 And then he goes on to endorse, you know, the land value tax as the least worst tax because income tax, especially, I feel like is a gateway drug to the surveillance state.

Speaker 1 You know, one of the advantages of land value tax is you don't even care necessarily who owns the land. You're just like, hey, 4732 Apple Street, make sure the check shows up in the mail.

Speaker 1 I don't care how many shell companies in the Bahamas you've like obscured your identity with. Just put the check in the mail, Mr.
Address, you know?

Speaker 1 Whereas the income tax needs to do this full anal probe on everyone in the country and then audits the poor at a higher rate than the rich. And

Speaker 1 it's just this horrible burden we have. And then

Speaker 1 it gives the government this kind of presumed right to know what you're doing about everything you're doing. This massive invasion of privacy.

Speaker 2 Yeah, no, that's fascinating. Speaking of shell companies in the Bahamas, by the way,

Speaker 2 there's interesting speculation about what would happen if crypto really managed to divorce and private, I guess, make private your log of transactions or whatever.

Speaker 2 And then I guess the idea is the only legible thing left to the government is land, right?

Speaker 2 So it would like force the government to institute a land value tax because you can't tax income or capital gains anymore. That's all on the blockchain and obscured in some way.
And yeah, yeah. So

Speaker 2 I mean, is like crypto the gateway drug to Georgism? Because it'll just move income and capital to the other realm.

Speaker 1 Yeah, it's just so weird. You know, I've gone on record as being a pretty big crypto skeptic, you know what I mean? But I have noticed a lot of crypto people get into Georgism.

Speaker 1 I mean, not the least of which is Vitalik Buterin, who endorsed my book,

Speaker 1 you know, who's a huge fan of Georgism. It's like, I mean, I'll take fans from anywhere, even from people I've had sparring contests with.

Speaker 1 You know, I'm generally pretty skeptical that crypto can fulfill all its promises. I am excited by those promises.
And if they can prove me wrong, that would be great.

Speaker 1 And I think there's some logic to what you're saying is that if we literally couldn't track transactions, then I mean, I guess we don't have much to track except land.

Speaker 1 I don't think that'll actually come to pass just based off of recent events.

Speaker 1 You know,

Speaker 1 and that's basically my position on it. But I have noticed a lot of crypto people just,

Speaker 1 they're some of the easiest people to convince about Georgism, which was completely surprising to me.

Speaker 1 But I've learned a lot by talking to them. It's very interesting and weird.

Speaker 2 So there are some other interesting questions from Twitter.

Speaker 2 Ramon Dario Iglesias asks, How do you transition from a world today where many Americans have homes, or at least are aspiring to have homes, to a world where,

Speaker 2 I mean, obviously it would would be like a different regime. They might still have homes, but who knows? Like

Speaker 2 their property will be just be like thought of in a completely different way. How do you transition to that world? Like what would that transition look like for most Americans?

Speaker 1 So there's this issue called that I have to grapple with, which is called Gordon Tulloch's transitional gains trap, right? So if you think about taxi medallions in like New York City, right?

Speaker 1 You know, it's like, it's this artificially scarce asset that allows you to operate a taxi, right?

Speaker 1 And

Speaker 1 the first generation that got their taxi medallions basically got in cheap and then afterwards like made out like gangbusters.

Speaker 1 But the second generation had to buy those taxi medallions at the fully priced in value.

Speaker 1 And now when you come in and you're like, okay, we're going to abolish taxi medallions, if like, say you were going to do that, you would screw over that entire second generation who bought in in good faith after the value of the asset had been fully priced in.

Speaker 1 Even if you admit that the system is now unfair, removing that unfairness screws over the people who played by the quote-unquote unfair rules. You know, so how do you grapple with that?

Speaker 1 And I think it's something that Georgists need to grapple with because we can't just imagine a future utopia without accounting for being fair to people who play by the rules, including people like myself.

Speaker 1 Like I'm a homeowner, right?

Speaker 1 Am I intending to screw over myself and everyone like me?

Speaker 1 And so I think this is where it's really important to do the math of knowing exactly who's going to be a winner, who's going to be a loser, who's going to pay more, who's going to pay less.

Speaker 1 I think it's really salient that a lot of the value of land is commercial downtown real estate.

Speaker 1 And I think that a revenue-neutral property tax shift to land where we exempt the taxation of all buildings, but collect the same amount in property taxes as we're doing now, but just from the land, and then a modest citizen's dividend is a really good first step.

Speaker 1 And then over the years, you can raise the land value rate as you also decrease things like income tax and sales tax.

Speaker 1 I think that's a transition that gets us there without really screwing anyone over.

Speaker 1 And for any edge case, like a poor, sympathetic widow who has no income and, but has a high-value home, you just make it so she doesn't have to pay the land value tax until she dies or sells the estate.

Speaker 1 Yeah. Yeah.
Yeah.

Speaker 2 Um, and like, I guess, even in there, the worst case scenario is a status quo where they don't have to play, pay uh land value taxes, which is already the case now, right? Right.

Speaker 1 I mean, nobody cares about the people who are being evicted and displaced by the status quo.

Speaker 2 One, like, I guess, snafu in terms of like figuring out how to price the land is By the time that a land value tax is passed, it'll have been like years after there's political talk of having a land value value tax.

Speaker 2 And that talk will in turn affect the prices of homes that are sold in that time.

Speaker 1 Absolutely.

Speaker 2 And so then you'll look at the land selling value and be like, oh, wow, this house on like the outskirts of San Francisco only sold for $200,000.

Speaker 2 And does that mean that like the unimproved land there is only worth $100,000?

Speaker 2 And so won't that just

Speaker 2 won't that really conflate the data when you actually go about implementing this of like what the actual unimproved land is worth?

Speaker 1 Right. Well, so it's important to remember that land selling value is derived from land rental value, not the other way around.

Speaker 1 So land selling value is the net present value of the future flow of income that can be generated from the property. So the property's inherent productivity is kind of inherent to it.

Speaker 1 And the selling price of it is based off of, you know, the capitalization of that value minus the expectation of any taxes, right? Right.

Speaker 1 And so a lay 100% land value tax will theoretically reduce the selling price to zero, but the land will still be as productive as it always was.

Speaker 1 It's just that the flow of those rents are being redirected.

Speaker 1 Right. And so that's the thing is that, and also in mass appraisal, one of the things you do is you decapitalize the effect of

Speaker 1 the tax.

Speaker 2 But I'm saying, how do you even figure out?

Speaker 2 You don't know in the mind of the property owner or the property seller, like what is a what do what do they think the probability is of a tax. And that,

Speaker 2 since you don't know that, it's like hard to estimate what is the actual like capitalization value, you know, the reality.

Speaker 1 So are you concerned about like this, the societal effects of the depreciation of land prices? Or are you more concerned about just the calculation issue?

Speaker 2 The calculation issue. So

Speaker 1 here's the thing. Empirically,

Speaker 1 if the land value, if the land value,

Speaker 1 basically, if the land selling price has dropped to zero, then you are fully capturing all of the land rents. And if it's above zero, you have not captured all of the land rents.

Speaker 2 Oh, okay.

Speaker 2 So, like, maybe in the first year you implement this, it's like not, you know, maybe you only implemented like a you're like basically in the first few years you implement this, you would like be trying to mess with the rate.

Speaker 1 If it's like it's like, I mean, it's more complicated than this, but if there's any vacant lots in the area and they're selling for anything,

Speaker 1 there's still land rent in that in that property.

Speaker 2 Gotcha. But so this is not something you'd be able to figure out day one.
You would have to, like, over a course of years of fudging the numbers.

Speaker 1 We're doing property tax assessments right now. You know, we're doing mass appraisal all the time right now.

Speaker 1 And if you just keep it updated every year, I mean, you could do it every six months if you had the right technology, which is something I'm pushing for.

Speaker 1 And so you can see the prices change in real time as transactions come in.

Speaker 1 And you can use multiple regression and geographic weighted regression to work out the difference between the improvements and the land prices. And

Speaker 1 if you had a rental registry and knew what everyone was paying in rents, you'd be able to keep even better track on what's going on with that.

Speaker 2 Yeah, this might be actually a good point to talk about your new startup. This is actually something I don't know a lot about either.
So yeah,

Speaker 2 what is the idea? What are you up to?

Speaker 1 Right. So my new startup is, you know, so I'm transitioning out of video games and into mass appraisal, municipal property tax assessment, mass appraisal.

Speaker 1 And so my new startup, it's called Geoland Solutions for now. We'll probably have a new name for it by the time that this podcast airs.

Speaker 1 But the idea is that, you know, I think the best criticism to Georgism is, you know, well, how are you actually going to separate land value from improvement, from building value, right?

Speaker 1 You know, how like

Speaker 1 we can't do a land value tax till we put a price on every parcel of land, right? So how are you going to do that? And I thought that was the best, most good faith, you know, criticism remained.

Speaker 1 And it seemed like it's like, well, we got to get good at that, right?

Speaker 1 And so I looked into it and I realized that there's a lot of research papers that have been posted in the last 15 years about how to practically do this.

Speaker 1 And then I went and I started interviewing a bunch of assessors and I realized that the state of the practice is pretty far behind. Only 15% of

Speaker 1 most property tax assessment offices even use,

Speaker 1 even use multiple regression.

Speaker 1 A lot of them are using the cost approach, which is basically where you, it's what Ed Glazer talked about in your interview with him, where you estimate the cost of building and you apply depreciation and you subtract it from the observed selling price to get the assumed land price.

Speaker 1 And that works okay. But a lot of assessment is not only using essentially only that method, but also

Speaker 1 another issue is that just a lot of those cost tables are very out of date.

Speaker 1 Assessments themselves are not always done every year.

Speaker 1 It's not unheard of to find places that haven't done reassessments in, you know, more than 10 years.

Speaker 1 Most places, it's like, you know, one to five. But even that, I think we should be doing everything we can to get all the latest mass appraisal technology and research.

Speaker 1 And so we've hired some people who have, like, I basically, one of our first hires was one of the guys who was just first author on all these papers we were reading.

Speaker 1 And we're just here to update municipal property tax assessors on the latest methods so that we can accurately know what all the land in America is worth.

Speaker 1 You know, and then this will solve a lot of regressivity issues too, because we know that a lot of

Speaker 1 landlords are actually under-assessed relative to homeowners, believe it or not, because

Speaker 1 they're more likely to protest their property taxes.

Speaker 1 And uh minorities tend to be over assessed um and um poor people tend to be over assessed that's why property taxes are sometimes called regressive is the assessments um need to be fixed i see um

Speaker 2 i i guess because if you have more property getting your rate changed from like one percent to one point uh point eight percent is like a worth thousands of dollars rather than like a hundreds of dollars right and there's there's there's a lot of other issues too is this is like there's more there's more value in the like the more

Speaker 2 there's all sorts of reasons that you can have these things you know often from no malintent whatsoever right you know but just like just out of date assessments can can also cause all sorts of issues yeah yeah i guess one worry that people might have is listen income taxing is like you know obviously very inefficient what is the i think you in the book you're talking about the the percentage of income uh that uh of taxed income that is literally just spent on figuring out how much income tax to collect and how whether people have paid or whatever.

Speaker 2 So I get that, but at least it has this nice property of there is like, it feels like there's this hard figure that ought to exist.

Speaker 2 So like, I made this much income this year, whereas figuring out how much land is worth, you know, just like, I get that it's basically like, yeah, if you, you know, figure out like the rent value, that's like the value of the land, but it just feels much more murky.

Speaker 2 And therefore, it might potentially enable corruption in the level of like,

Speaker 2 you know, like whoever's doing the assessment or however that method of assessment is happening, um, they'll just like use these fancy algorithms to nudge it one way or another that benefits big corporations or, you know, whoever they want.

Speaker 1 So that's a really, that's a good argument. But the reply to that is that we do need to move towards more transparency, right?

Speaker 1 Because land value follows certain rules that should logically make sense, right? We know some things that drive locational value. First of all, we should move towards open source models, right?

Speaker 1 Which is something that we want to do and open data whenever possible. A lot of these cities will post open data portals.

Speaker 1 Like my mission in life is to be able to like advance the state of the art of this technology and make it so anyone can kind of check on stuff.

Speaker 1 You should be able to, in any city in America, some cities have this, but not enough, you should be able to look up your property tax assessment on a map and compare it to your neighbor.

Speaker 1 And what you shouldn't see is a Christmas tree effect where your neighborhood looks like Christmas tree lights of like green and red of people whose property tax assessments like massively differ.

Speaker 1 That's the case in a lot of cities. Like if the value, like if the land values have been correctly assessed in this neighborhood, most of these parcels should be about the same.

Speaker 1 Like probably the cul-de-sac's worth a little bit more, you know, but like your prop, your neighbor's land shouldn't be worth 20% more than yours.

Speaker 1 And if it is, it'll stick out on a map like a sore thumb. And if the data and the algorithms are all open source and open data, you should be able to check anyone's math.

Speaker 1 And you should be able to use that to then protest. your taxes if they seem off.

Speaker 1 And that's kind of the argument for land value taxes is that, I mean, you can hide all kinds of stuff in income taxes and capital taxes. I mean, that's what the Caymans and the Bahamas are for.

Speaker 1 But if you want to, I mean, it's very easy to find people who are getting a break on their property taxes.

Speaker 1 Like all this corruption, I'm not saying it won't happen, but it'll be very easy to see because you'll be able to see just this mansion that suddenly has this discontinuity on the land value map.

Speaker 1 It's like, well, someone gave this person a break and

Speaker 1 maybe we should write an article in the the local newspaper about this.

Speaker 2 Yeah, it'll be way better than how income taxes work where none of it's like open to potentially even the government itself. Right.

Speaker 2 But okay, so another concern is

Speaker 2 that's fine for things that are like above ground and legible, but what about

Speaker 2 you find out through like,

Speaker 2 I don't know, like some sort of surveying or whatever that this land has a lot of oil under it. And then you buy it.

Speaker 2 But obviously you're not going to tell the government, hey, I just found like however many.

Speaker 1 Oh, so this is just theoretic critique.

Speaker 2 Or no, no, no, not even that. It's literally like you won't declare it.

Speaker 2 So in a sense, you're still being a speculator, but in fact, you're incentivized even more to be a speculator in the sense that as soon as you declare that there's oil underneath this ground, then the government is going to start taxing you for it.

Speaker 2 So you just want to like hang on to that

Speaker 2 forever as long as you can keep it private.

Speaker 1 So we need to talk about mineral policy in America because especially in the state of Texas, mineral rights and land rights are totally different.

Speaker 1 Usually when you buy land in Texas, in America, you actually don't have the mineral rights. Oh, really?

Speaker 1 Like,

Speaker 1 those are very several. Like, a lot of people are very interested in getting those mineral rights.

Speaker 1 And so, usually, like, if you're not paying attention, generally speaking, you're not getting the mineral rights when you're buying land. And if you are, you're paying more for them.
And

Speaker 1 so, I mean, I think a good example of this is probably like,

Speaker 1 you know, you want to create some, I think, with the case of minerals, you can't just have a full um

Speaker 1 i think as kind of an acknowledgement of kaplan's like search theoretic thing like you have something more like like the Norregian model, where you need to basically give some incentive to someone to produce or to not withhold that resource, right?

Speaker 1 A good example would be the treasure,

Speaker 1 the treasure law in England, because England has all this ancient Anglo-Saxon treasure and Roman treasure.

Speaker 1 And so, before what they would have is someone would find it and like go like hide it or melt it down because they didn't want the government to

Speaker 1 tax them. And so they passed this treasure law, which is not perfect, but it's okay.
But they're like, this is our heritage, right? We want that in a museum. So here's the deal.

Speaker 1 If you find treasure, you're going to get paid and the landowner is going to get paid.

Speaker 1 So there's an incentive for people to go out with metal detectors and there's an incentive for a landowner to let people do that.

Speaker 1 And then the government's going to put it in a museum.

Speaker 1 You know, you're going to, you're going to be rewarded for the discovery of that thing, but that thing is itself, its value is going to be captured because it's the heritage of the British people.

Speaker 1 The opposite of this is the Spanish government, whenever someone finds a ship full of gallon, a galleon full of gold doubloons on the bottom of the ocean, if you go and you invest the capital to bring that up to the surface, you know, and you're in Spanish waters or the Spanish government finds you or you like take it not to Spain, a Spanish admiralty court is going to try to get its claws on that gold.

Speaker 1 In the view of the Spanish government, like basically the incentives they're producing is to make sure that nobody ever, ever recovers a ship. Yeah.

Speaker 2 Or if they they do, it just ends up in some sort of like, you know,

Speaker 2 foundry in

Speaker 1 another country. Right, right, right, right.
The Spanish government's approach to sunken treasure basically incentivizes people never to go after.

Speaker 2 Yeah. Yeah, yeah.

Speaker 2 I guess a general critique of Georgiaism in general or implementing it would be, listen, the reason America is wealthy and other developed countries are wealthy is because they are very strong in terms of honoring contracts, especially honoring people as property rights.

Speaker 2 And, you know, if we get to a scenario where the government is saying, okay, but in this case, we're going to,

Speaker 2 I mean, I guess it depends on how you think about the contract of property. But in some sense, it's a contract where I have the government that, like, hey, I have this property.

Speaker 2 And once you don't honor that, like,

Speaker 2 the people will get too concerned to want to invest in America or in American assets.

Speaker 2 And that will just have like all kinds of economic repercussions where people are like, oh, I guess my property is not mine.

Speaker 2 Maybe like other things I thought I was investing in, like my stocks are not mine. So why should I buy these stocks in America?

Speaker 1 This is a, this is a fully general argument against change. And it also is like,

Speaker 1 I don't agree with all the assumptions. Like, you know, if America doesn't honor its agreements, what are they worth? Well, we've violated all kinds of treaties,

Speaker 1 not like with the Indians especially, but also like all sorts of international treaties.

Speaker 1 And, you know, I mean,

Speaker 1 like,

Speaker 1 we've made all kinds of times where we've like changed rules on things and changed asset classes. You know, we had an entire period where we just banned all sales of alcohol.

Speaker 1 And then we had a time where we completely undid that and brought it all back. You know, there's been times where we've like made major, major changes to the rules

Speaker 1 of what kind of asset classes we have. I mean, this, this is kind of like brought up with like, you know, any kind of like labor protections and things is,

Speaker 1 you know, is it's like, well, we have these rules and therefore we can never change them. And I think

Speaker 1 I think the best answer to this is that you need to acknowledge Gordon Tullik's transitional gainstrap.

Speaker 1 And if there's someone who's going to be, you know, put out, then you make sure that there's some compensation in the system to smooth over the transition.

Speaker 1 But the rule of law doesn't imply that any change to the status quo is going to undermine trust in it. And I don't think that...

Speaker 1 And I think it's important to remember that George is not interested in seizing land.

Speaker 1 That's a very big distinction from the Maoist position, which is murder the landlords, or the more like modest Asian reforms, Asian reforms, which are just going to.

Speaker 1 So, first of all, when you're talking about how Asia works, they took the land away from the big landowners, gave it to the peasants, and it made those countries way more productive, right? And like,

Speaker 1 I don't think anyone would like to look at those Asian countries now and compare them to where they were and be like, well, the rule of law is weaker now than it used to be.

Speaker 1 But George isn't even advocating for that. He's just advocating for raising taxes on land and exempting all of the building taxes.
So I don't think it amounts to seizure of land.

Speaker 1 And I think for those reasons, but even if it did amount to that, I think, you know, sometimes it's worth biting some bullets.

Speaker 2 Yeah, yeah.

Speaker 2 Okay, let's move on to the dessert. Let's move on to some more fun interpretations and applications of Georgism.
Sure. So

Speaker 2 one, I think Bern Hobart had this blog post on the diff. I don't know if you follow, anyways, but he's like a great finance writer.

Speaker 2 And he was talking about how if you have a Facebook account or a YouTube channel with like millions of subscribers you're in some sense like you were like very early to YouTube or Facebook and now you have this land

Speaker 2 and Facebook punishes you if you're have a big account but are not posting frequently or not getting enough engagement it'll like in the future you'll have a harder time reaching people And you know, Bernhobart had this like

Speaker 2 Georgist interpretation of that, where it's like, you have this productive asset of people's attention, like this, this initial sort of profile that you're able to build in the early days of Facebook.

Speaker 2 I figure you're not like posting on it, we're not going to give you the advantage of having millions of eyes.

Speaker 2 But anyway, so there's all kinds of like ways you can apply Georgism to, you can think of like the app store as this sort of like rent-seeking from Apple where they charge you with 30% tithe.

Speaker 2 And yeah, there's all kinds of other places in the digital world where you can think of this. Like, what is your sort of like,

Speaker 2 how do you think about Georgism in the context of those kinds of things?

Speaker 1 Right. So, I've actually written a policy paper on how to apply the theories of land value tax to virtual worlds.

Speaker 1 Um, and and so the question is: virtual real estate is when does something actually operate like a land-like asset, and then to what extent does

Speaker 1 Georgist principles apply, right? And that doesn't necessarily mean just do LVT, it means that you know, so first of all, let me define what I mean by a land-like asset.

Speaker 1 A land-like asset has three properties: it is scarce in supply, it is necessary for production, and it obtains locational value by virtue of its position in some kind of graph. Right.

Speaker 1 And so as an example, I create like a fictional MMO and I give the example of a unicorn, a permit, and a plot of land. The unicorn is scarce, but it's not necessary for production.

Speaker 1 Any value you could get from the unicorn, you could get some other way. It's just really nice to have.
And there's only like 10,000 on the server. A permit is like a permit to brew potions.

Speaker 1 You're a part of the witch's guild. You can brew potions.
So like my apprentice witch, she has to pay rent to me to gain access to my permit to be allowed to brew potions.

Speaker 1 But all permits are fungible. So there's no locational value.
And then a plot of land, right? Like we've talked about, where you can also, and so this becomes a real speculative asset.

Speaker 1 Domain names are probably the closest thing to this. And Vitalik Buterin has actually written a post about how to apply George's theory to domain names and also all the wrinkles that are involved.

Speaker 2 I know you did this on your blog, right? As a guest post?

Speaker 1 Well, progressandpoverty.substock.com is not technically my blog. It's a group blog where a lot of us Georgists post.

Speaker 1 But so, yeah, so my blog in the sense of our blog. Sure.

Speaker 1 And he cross-posted it. He posted it also on his own blog.
And so, but there's other considerations to remember when we go away from literal land.

Speaker 1 So, for instance, in domain names, especially with the Ethereum name system, you have issues of identity, right? That don't apply. Like, if someone buys this house from you,

Speaker 1 probably people aren't going to be like, maybe the next person who lives here is going to get some of your mail for like a week or two, but like no one's going to think that they're you necessarily.

Speaker 1 But if I buy vitalic.eth,

Speaker 1 like there might be some confusion, like I might be able to get some transactions that were meant for him. And so there's these other considerations to like kind of, and he deals with all of that.

Speaker 1 And so I wrote a policy paper about how to apply LVT in virtual worlds and stuff.

Speaker 1 That was more in these more kind of literal simulacra of the real world in these like virtual worlds than kind of of the things you're talking about of like YouTube accounts and and charts um in in like um

Speaker 1 in basically uh app stores and stuff, which are user-generated content platforms.

Speaker 1 But I haven't fully analyzed user-generated content platforms, but I do think chart positions are a sort of virtual land, you know, and you do essentially, they do essentially charge rent for that,

Speaker 1 not just to the platform in their flat 30% fee across everything, but also

Speaker 1 in the kind of advertising Red Queen's race you have to do to stay on those charts. You essentially have to buy that position and then keep it.

Speaker 1 You know, and so basically, like the first, there's this huge first mover advantage that turns into rent-seeking.

Speaker 1 And I haven't fully analyzed exactly how you apply George's theory there, but I do think there's something to it. I also think there's something to extremely long-lived copyrights and patents.

Speaker 1 It's a little undercooked at the moment. I don't have a fully fledged theory of it.
But certainly, cases like other monopoly assets like orbital real estate,

Speaker 1 radio spectrum, any kind of

Speaker 1 like being able to capture the right to the possibility space.

Speaker 1 Like especially like, you know how like John Carmack had a lot of algorithms, like some of which were patented and he wasn't even allowed to use them in his own games because someone else had speculatively patented like...

Speaker 2 Oh, really? That sucks. Yeah.

Speaker 1 You know, it was like the, um, like Carmack's reverse was like this particular algorithm that they weren't allowed to use in like Quake 3 or something because someone had speculatively patented it.

Speaker 1 And there's like no other way to do that thing. So Quake 3, this one particular subroutine had to be like 25% slower because

Speaker 1 someone had patented like essentially like, imagine you could patent the Pythagorean theorem, you know? Yeah, yeah.

Speaker 1 So like that kind of nonsense. And you can just rent seek off that for 20 years.
Jesus.

Speaker 2 Oh, that's funny. Anyway, I guess we're going to move on to another juicy implication that you were just talking about, which is space.

Speaker 2 There is like this idea, I mean, eventually, hopefully, humanity will conquer space and like the rest of the galaxy.

Speaker 2 So, and this is where like Georgism will be really interesting and applicable because we obviously want to

Speaker 2 encourage and incentivize people to like go to new worlds and make use of like stars and planets.

Speaker 2 But we obviously don't want it to be the case that if you got to Mars a year earlier, like if Musk gets to Mars a year before Bezos, he has

Speaker 2 forever rights to everything on Mars and all the resources. Right.
So, yeah, Georgism in space would be, I think, I think is actually a place that makes a lot of sense.

Speaker 2 But I mean, have you put much thought into like,

Speaker 2 you know, interstellar Georgism?

Speaker 1 Interstellar Georgism is actually current international law.

Speaker 1 Through the Outer Space Treaty.

Speaker 1 The Outer Space Treaty currently says, and I think the Outer Space Treaty will last for about five minutes once the interplanetary space race gets gets going in earnest.

Speaker 1 But the current law, the law of the international order of the outer space treaty, basically says that nobody's allowed to claim interstellar bodies like the moon or Mars for China or the US.

Speaker 1 Like we have a flag there, but it's not American territory.

Speaker 1 It's basically international waters, so to speak, right?

Speaker 1 And

Speaker 1 once the actual possibility of having permanent bases shows up, then we will have to hash that out.

Speaker 1 But so basically, I think we should take that and run with it and basically be: if you are going to, you know, know take possession of interstellar bodies you know it will become a question of who exactly becomes the government in that scenario is it like some international coalition is it the un i'm not a huge fan of the un you know um or is it just like it turns out to be like whatever sovereign government gets there first just gets to claim it but can you have georgism within those confines i think we certainly should you know because otherwise what you're going to get is that the first you're going to get underinvestment you know you're going to get so much underinvestment because the first people to get there are going to basically charge rent to all the people who come next yeah yeah um and then i just remembered the other question i wanted to ask about copyright which is that's a really interesting and complicated area because it's hard to think of

Speaker 2 what is the intrinsic sort of value of the land of the idea and what is the improvement you've made right and so like

Speaker 2 what are you going to call like the improvement on like the song you discovered maybe like the melody is like the melody would have existed anyways but like the specific lyrics you came up with.

Speaker 2 I don't know.

Speaker 1 Well, it's like copyright, it's not clear to me exactly what the implication of Georgism is. It's like Georgism, if you zoom out, it's not exactly just about land, right?

Speaker 1 That's where people, a lot of people like kind of like, why are you so obsessed about land? It's mostly about

Speaker 1 enclosure of natural monopolies, right? And

Speaker 1 economies just based entirely around rent-seeking. And it's clear we have this with like eternal copyright.
If we had eternal, if we we had the copyright laws we had today

Speaker 1 when disney was first getting started like the brothers grim would still be under copyright and they would not have been able to get off the ground with a lot of their early properties and then they pulled the ladder up right behind them it's clear they're rent-seeking in a lot of ways and refusing to give back to the commons from which they first enriched themselves and the question then becomes like you know can you easily parse copyright as land.

Speaker 1 I mean, it's a very undercooked theory, but there's something there of like, probably what it cashes out to is just copyright terms should be shorter.

Speaker 1 You know, like at some point when an idea has become part of the cultural consciousness for like so long, it should become part of just the background collective commons, you know, because all ideas are essentially remixed and built on top of other ideas, but we want to incentivize people to create new ideas in the first place.

Speaker 1 It's not a perfect analogy to land, but there is something there about rent-seeking that needs to be addressed. And it probably just cashes out to just reducing copyright terms.
Yep, yep.

Speaker 2 Let's talk about the political feasibility of this idea. So

Speaker 2 I mean, I just mean land value tax in general. Do you think it'll be something that will get passed in a democracy?

Speaker 2 There's like, you know, a lot of people have homes or want to have homes, but on the other hand, if you like, just redistribute.

Speaker 2 If you don't have like, I don't know, many acres in the middle of San Francisco, you would probably still come out net ahead. But would you, could you be able to explain that to people?

Speaker 2 And obviously there's like tenants who would definitely benefit from this. Anyways, in general,

Speaker 2 what is your thought on like how politically feasible this is now or would be in the future?

Speaker 1 I think it's more politically feasible than we think. I think it just right now has low salience.

Speaker 1 And if more people start talking about it, I think it's going to make a lot of sense, especially if it's pitched as property tax reform.

Speaker 1 Like right now in Texas, you know, you have people like Huffins who are trying to abolish property tax, which will turn the state into California like that. Why? Huh? Why?

Speaker 1 How come?

Speaker 1 Why does he want to abolish property tax?

Speaker 2 Why would it turn it into California?

Speaker 1 Because California has some of the lowest property taxes in the nation. Yeah.
And Proposition 13, and it creates

Speaker 1 an entire layer of landed gentry and really, really, really expensive housing. Like housing's already getting expensive in Austin, and property taxes have an effect of lowering property prices.

Speaker 1 Property taxes are an imperfect land value tax. And so basically,

Speaker 1 it'll just reproduce the economic conditions that empirically exist in California. Yep.

Speaker 2 Yeah, you know, there's like, there's this funny saying that the Texas Constitution is not a government document, but rather an anti-government document.

Speaker 2 But one of the, I guess, the positive byproducts, if you're a Georgianist, is since it makes taxing income so hard, governments are forced to tax property and hopefully eventually land.

Speaker 1 I'm holding to pick with the Texas Constitution because Houston had a single tax mayor in 1911 and had an active Georgia land value tax.

Speaker 1 And it would have still had it today if it wasn't for the state constant,

Speaker 1 for a state judge who basically shut them down.

Speaker 2 Why? What is the reason?

Speaker 1 Because there's a clause in the state constitution of Texas that says all property taxation has to be uniform. And that's interpreted as uniform across both the buildings and the land.

Speaker 1 You can't tax them at separate rates.

Speaker 2 Yeah. Wait, so does that mean that constitutionally you could just couldn't do it in a Texas sign?

Speaker 1 It's up to interpretation. There's some people who interpret it that it's like

Speaker 1 that that clause was written to mean you can't tax this guy at a higher rate than that guy. You have to tax them based on the value of their property.

Speaker 1 And then you could claim that it's still being uniform. We're just taxing land.
And we have all these exemptions and categorizations already. This is just another one of those.

Speaker 1 Why, you know, we could, we tax agricultural land at a different rate. You know what I mean? Like if you put a bunch of cows on a property, suddenly it's like it's magically less valuable.
Yeah.

Speaker 1 You know,

Speaker 1 so why can't we, you know, like target just the land? And so if you had the right judge, maybe you could get away with that.

Speaker 1 But anyway, to go towards political feasibility, I think it could be more feasible than we think, especially pitched as property tax reform, because people are like, property taxes are too high.

Speaker 1 Hey, everyone, let's exempt all your buildings.

Speaker 1 I think you could build a coalition that's excited about that and especially if you do the math and show who like like what the change in your taxable rate is going to be i think you know you know just a revenue neutral property tax shift to land can be quite popular there's a lot of cities around the us right now where this is being floated you know organizations like strong towns and the center for property tax reform are working on a lot and lincoln land institute are like talking to places about it.

Speaker 1 Detroit is talking about it right now, and they could desperately use it.

Speaker 1 And I think it could pass, you know, and then in terms of I think Henry George's salience is coming back, like, and especially in Norway, like the ruling center party coalition just passed a,

Speaker 1 you know, their very successful resource management policy with oil. They also have one from the early 1900s in hydropower, which was set up by Norwegian Georgists.

Speaker 1 And so the ruling center party coalition just put one in for salmon farming aquaculture locations, a new severance tax on that.

Speaker 1 And they name-checked Henry George when they implemented it in the speech.

Speaker 1 And so I think if they are willing to, you know, stand up to the landowners in Oslo and pass a land value tax, that would be the next step. I'm not sure if they're brave enough to do that.

Speaker 1 But we're starting to see this kind of bubble up. And so I think a revenue-neutral property tax shift to land is the politically popular way to do it

Speaker 1 because it can be done on the local level without having to change a whole bunch of laws. You know, it's a little complicated in Texas because that's stupid state constitutional provision.

Speaker 1 But in other states, they don't have those.

Speaker 1 There's other states that any municipality could do it right now if they wanted.

Speaker 2 And I guess another part of this question, then, or that answer is, well,

Speaker 2 one of the things you talked about in the book is, you know, in some sense, the value of your land is caused by the other people around you, of other properties, of like other amenities and companies or whatever that are in.

Speaker 1 So it's kind of like publicly contributed.

Speaker 2 But if you think about it that way, doesn't it make sense that your land taxes should go to that community, which is the one that's creating all this value, rather than being, say, distributed federally.

Speaker 2 So maybe we should have land value taxes on local levels, but then it goes to pay towards local amenities.

Speaker 2 So it's like if you live right next to the subway and the reason your property is so valuable is because like you're right next to the subway, then that goes towards making the New York subway better, but it doesn't go towards like, you know, I don't know, like some sort of the city's hall in Kentucky or something.

Speaker 1 Right. I mean, it's like if you wanted to create a model for a, you know, bottom-up decentralized America, like I would take that bargain.

Speaker 1 We still got to like fund the federal government somehow, you know? And so like,

Speaker 1 I would like to repeal, you know, the federal income tax and have that funded by land value tax.

Speaker 1 But it's like, I mean, if that's like as far as I could ever get, I'd shake your hand and take that deal right now. You know, sounds good.

Speaker 2 Yeah, fair enough. One more question.
This was an actually from Twitter from Craig Bratrick.

Speaker 2 The question is basically, if,

Speaker 2 I mean, one of the reasons why we think of land as being sort of like a public thing is because your land value is contributed by people around you. But what if you own so much land that

Speaker 2 really you are the one that's contributing to the value of all your land, right? If you're thinking of like something like Disney World,

Speaker 2 they basically own like half of Orlando or something, and they're the ones that are creating nearby amenities, which are making the rest of Disney World valuable.

Speaker 2 So in that case, aren't they entitled to all the proceeds?

Speaker 1 And what's funny is like, in a way, yes. And so what's interesting is like, this is often like poses a gotcha question for Georgists.

Speaker 1 But we actually like internally, this is called the Disneyland or the Disney World question, you know?

Speaker 1 And it's actually a really interesting case. And the thing you have to realize now is who is Disney World in this situation? Disney World is the government in that case in point.

Speaker 1 Disney World is the community. Disney World is the city.
It's a private city.

Speaker 1 And then there's all these questions of who is a citizen of Disney World and is it an equable democracy or whatever, which we'll leave aside for the moment.

Speaker 1 But the point is, is that Disney World has fully internalized the positive externalities of their own building, right? And so the incentive structure has changed. We fully acknowledge that.

Speaker 1 We just bite that bullet. So the question then becomes, you know,

Speaker 1 what do you do about it? It's a really interesting situation.

Speaker 1 It's essentially a private city, you know, and so there can be certainly issues with company towns, especially when they, you know, enforce local monopolies, essentially like bad local laws where it's like you have to buy from the company store or whatever, you know, which is mostly an issue of governance.

Speaker 1 But in terms of like land use, actually,

Speaker 1 if an entire landowner owns an entirely large enough area

Speaker 1 to internalize all of their positive building things, that actually, you know, they are actually, you know, that that does change the situation.

Speaker 1 And then you need to see them less as the private owner of a parcel and more as a private operator of a city. Right.

Speaker 1 And that changes the governance question and it becomes a completely different category of problem.

Speaker 1 And so then there's questions of it's like, you know, what, what, what is the right mix of taxes and subsidies? And do you even want to have these sort of entities in the first place?

Speaker 1 And what does the governance question look like? But the important thing to realize is that you are no longer dealing with a private landowner. You are dealing with a private city.

Speaker 2 Wait, okay. So is maybe one way to think about Georgism that somebody has to be collecting the rents.

Speaker 2 And what Georgias are saying is we want the rents collected by the government and not by the person who is like a private landowner.

Speaker 2 presumably because the government will do more public racing things with it. But like rents have to be collected.

Speaker 2 We're just trying to decide who will collect them.

Speaker 1 Right. Rents will be collected one way or another.
And if we leave it to the status quo, private actors free-riding off their neighbors will collect them and make everything worse.

Speaker 1 They will cause less investment and they will hold the best land out of use. And there will be less building than there should be.
And the rent will be too damn high.

Speaker 1 And the rent has to be collected one way or another. So it might as well be collected on behalf of the community.
Yeah. Right.

Speaker 1 Because not only will this fix the incentives, but then it also shares the wealth with the people actually produce the wealth.

Speaker 1 And if the community community is itself this giant private city then that kind of changes the equation a bit and i have not like fully delved into the disney world issue and the disney world question and that's a little separate academically from actually existing disney world and how anyone feels about that institution in particular um but the important thing to realize is that we're now dealing with a different domain you know because then the question is it's like you know who is a citizen of disneyland who is a tenant of disneyland who what is the governance of disneyland it's like you're realizing that now disneyland essentially is the government and i think that's actually like kind of literally true in actually existing Disney World because they have their own like special district that operates essentially as a private government.

Speaker 1 And that's just,

Speaker 1 it's just its own, its own kind of question. But the point is very much, yes, the rents have to be collected one way or the other.
So they might as well be collected on behalf of the community.

Speaker 1 One way to implement that is through a government, right? You know, because we have this nice little democracy we can use.

Speaker 1 But you can all, there's also this movement, you know, there's this whole charter cities movement, and then a movement I like even better called starter cities, which is less like, let's find some, you know, third world country to like hope our sovereignty doesn't get revoked in five years, like, but let's like build cities somewhere in America where zoning is pretty loose.

Speaker 1 You know,

Speaker 1 you could have everyone who lives there basically be a shareholder of a private entity and share out the land rents that way.

Speaker 1 Another way to implement it would just be ground leases rather than land value tax within a private city. And then everyone who lives there is de facto a shareholder of the city.

Speaker 1 And there's some people who are trying to build stuff like that, which which I'm very much interested in.

Speaker 2 Awesome. Awesome.
Okay, final question. What is next for you?

Speaker 1 So what is next for me? So I'm still a game developer.

Speaker 1 And, you know, so nights and weekends, I'm overseeing a project that'll release next year, Defenders Quest II, after a good decade of development. I'm happy for that to be finished.

Speaker 1 But then additionally, you know, I am working on a startup, which is called Geoland Solutions for now. The name will almost certainly have changed by the time of

Speaker 1 time this podcast airs, but if you go to geolandsolutions.com, it'll redirect to whatever our new website is. And that is a municipal mass appraisal company.

Speaker 1 We're going to partner with local municipalities. We've already got a couple of customers who are interested in what we're doing.

Speaker 1 And we're going to massively update the state of the practice of municipal mass appraisal in America to be more accurate, more efficient, and

Speaker 1 more up to date with the latest models and more transparent. you know, leaning into open source and open data solutions wherever possible.

Speaker 1 And I think that can be the practical step towards Georgism, not just to implement Georgism, but even to advocate for it.

Speaker 1 Because, you know, in the Edward Glazer interview, you know, one of the critique, I'm super happy to have Glazer's endorsement, even if he thinks Georgism isn't a panacea.

Speaker 1 One of the things about his critique of it not being a panacea, and I think, you know, it's a polysea, even if it's not a panacea.

Speaker 1 You know, I'll settle for curing multiple diseases, even if I'm not curing literally all of them,

Speaker 1 is that I think he's under the impression that land isn't a big deal. And how important you think Georgism is depends on how much the land is worth.
And to do that, we have to measure it.

Speaker 1 And we're not super good at measuring it right now.

Speaker 1 And I think we need to get super good at measuring it. And I've decided, you know, when I was talking about this originally, you know, basically someone, you know, challenged me.

Speaker 1 It's like, if you really think you can do this, then

Speaker 1 the reason I don't think you can do this is because if you really could, then people would give you millions of dollars to go do it. And well, we just closed around

Speaker 1 led by Sam Altman, you know, and that's exactly what happened. And now we're going to do it.

Speaker 1 So I'm really grateful to that commenter for challenging me in that way because I'm like, okay, well, I really see my life's work as like making Georgism possible and practical.

Speaker 1 And I think the way to do that is to measure the value of the land and to put those tools out there for anybody to be able to pick up.

Speaker 2 Yep. Yep.
Awesome. Okay.
So the book is Land is a Big Deal.

Speaker 2 And where else can people find you?

Speaker 1 Yeah, so you can find me at a couple of places. One, the website, landisabigdeal.com.
You can find me on Twitter at Lar C S Prime, L-A-R-S-I-U-S-P-R-I-M-E.

Speaker 1 And

Speaker 1 the book is based on a series of articles that you can find at gameofrent.com. And

Speaker 1 what else? We have another website. Yeah, well, geolandsolutions.com, which will redirect you to

Speaker 1 whatever the new name is. And

Speaker 1 that's everything I do.

Speaker 2 Yeah, and this is one of those books.

Speaker 2 I mean, it's like there's books you read where you're like, oh, that's interesting. You know, like, I guess I shifted my prior slightly.

Speaker 2 And there's books like, oh, fuck, why did I not think about it that way? That's like, wow, that's like changes everything about like how I think about in this case, you know, economics. And

Speaker 2 it really is one of those things where I'm looking, I think you hear the metaphor in the book about like observing the cat in a picture. Yeah, seeing the cat.
Yeah. Exactly.

Speaker 2 So yeah, anyways, I do highly recommend the book. It's one of those books you'll read where you'll just have a completely new perspective on an entire field.

Speaker 1 Awesome.

Speaker 2 Okay. Thanks, Lars.
Thanks for coming on today.

Speaker 1 Thanks for making your way all the way over here to do this interview live. Yeah, well, thanks for grilling me.
Thanks for all the hard questions.

Speaker 1 You know, it's like, I really, I really, I really like to be challenged in that way and like really engage with the best faith, you know, hard-hitting critiques, you know, to like make sure we really understand what we're talking about here.

Speaker 1 Because it, none of this matters unless it works. Yep.
Right.

Speaker 1 And so it's like, I'm not here to like defend Henry George's honor. I'm here to like really explore whether this can actually be a solution or a problem.
Yes. Yep.
Yep.

Speaker 2 Awesome.

Speaker 2 Hey, thanks for listening. If you enjoyed that episode, I would really, really, really appreciate it if you could share it.

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Speaker 2 Many thanks to my amazing editor, Graham Besselu, for producing this podcast and to Mia Ayana for creating the amazing transcripts that accompany each episode, which have helpful links, and you can find them at the link in the description below.

Speaker 2 Remember to subscribe on YouTube and your favorite podcast platforms. Cheers.
See you next time.