Educating the Next Generation
GroundSwell, May 2012]
I recently met with long-time Georgist and expert on government
finance, taxation and transportation policy, and Common Ground member,
(http://centralresearchgroup.org/georgist-economic/bill-batt) and his
wife, Karen, at the lovely country home of Common Ground-NYCs
treasurer and past president, Rita Rowan, just outside Albany. Also in
attendance were some international friends of mine, who have recently
moved back to New York City, including their precocious tri-lingual
12-year old son, Timothy, and his French mother Emmanuelle (not their
real names). We enjoyed lunch outside, on a beautiful Spring day on
Following a summary of our recent Common Ground-NYC meeting, to which
some of our less local members, like Bill, were unable to attend, the
conversation turned, as it often does when Georgists gather, to what
to do about the rent seekers, economic rent, and the general concepts
of Georgist thinking. Perhaps others will find this inter-generational
dialogue as interesting and guiding as I did. Herewith is a slightly
edited version of that conversation. Followup comments are in
There was a recent article on one of the alternate
news sites that said bring back the concept of economic rent. There
was an interview of (Joseph) Stiglitz for a German Press where he
talked about looking at rent-seekers as being the parasites in our
Scott: Of course
and its nice that he used those words.
Emmanuelle: What do you mean by rent-seekers?
Bill: Well, the word rent has a different meaning in popular
language than it does in economics. And Rent
it may be the same
as the French word Rente
(http://www.thefreedictionary.com/rente). Im not sure. In
English, economic rent comes from any gain in wealth from a natural
resource not made by human beings. For example, suppose you buy a
piece of land for $100 and 5 years later its $1,000. Well, the
reason it got to be more valuable is due to the rent and the same with
any other natural resource
. oil (for example), after you
subtract the labor and the capital investment in oil rigs and all
that, the value of the oil is rent and so with any other natural
resource like the radio frequency and whatever. And Joe Stiglitz
argues, along with the way we (Scott, Rita and me) argue that we
shouldnt tax peoples work the labor we
should tax the rent, and this is what contemporary economics has
eviscerated in their formulas and definitions. But, if we go back to
classical economics, to people like John Stewart Mill and all those
19th century figures
Scott: even Adam Smith
Bill: Yeah! Then you can see the value of the use of the word
rent there. And all of those people believe the right tax was a tax on
the rent of natural resources and not peoples work. So that now
that people are beginning to use that word again, maybe we can use it.
(Joe Stiglitzs newest book, just out, talks about people who
capture titles to resources and collect the rent the rent-seekers
on almost every page! See The Price of Inequality.
Also, an adaptation here:
Scott: (Michael) Hudson made that point (in his recent
appearance at the Left Forum) that with the junk economics as he calls
it today, the concept of rent has just gone completely away. And of
course, (Mason) Gaffney wrote that book, The Corruption of
Economics where he describes the systematic expungement of Land
and rent from economic terms.
Emmanuelle: Especially when natural resources are by
Scott: And the location
Timothy: So youre saying what theyre doing is
making property cost more because people need to pay for the land they
Scott: Its the private collection of the value of the
Bill: Well, Ill give you a good example. You know the
game of tic-tac-toe. Now suppose we have 9 squares in an open field
and the lines of the tic-tac-toe are roads. And then, all of those
plots of land are sold, and then people develop every plot except the
center plot. So, one guy builds a gas station and someone else might
build a pharmacy. Someone else might build a grocery store
the way around except the center square
Timothy: And theyll be worth the most
Bill: Exactly. And what happens to all of the land value now
that there is economic activity in what was earlier just an open
Timothy: It becomes more because
Bill: Right! And which piece, which square has the highest
Timothy: The middle one.
Timothy: Because theres all things which
Scott: The demand.
Timothy: Yeah, theres all the demand.
Bill: Right. All the access to the other squares comes from the
center square, so that center square is really the most valuable. And
that value did not come from what the owner of that central parcel
did. It comes from all the effort of all the other people in the
community who have market exchanges
the rent is
community-generated. So, thats true in any city, for example.
The value of the land in the city is due to everyones activity,
not one persons. So even the guy who owns a parking lot, his
value increases because all the other lots around it are doing
something. So, that the highest value land is where the people are,
and where the people are meeting and making exchanges. Were out
here (in the country) for example where there are very few market
Timothy: So the land here
just doesnt have the
Bill: Well, if we collected the economic rent back the
community which generated it then the carrying costs to the people who
own those parcels would go up, and those people would be induced to
build on them so that they could get a return on their investment. But
if society just leaves economic rent in the hands of the owners, then
they can just go live in Florida or just go to sleep
and they get
rich without doing anything. (Philosopher John Stuart Mill said that the
landlord gets money in his sleep.)
Timothy: Because everyone builds around him!
Bill: Right! Exactly. So you got it!
Bill: And were (Scott, Rita and me) arguing that all
that economic rent is the thing that people should tax and we shouldnt
tax peoples labor. Because people own their bodies and they work
hard, and then you tax peoples labor away from them? Its
and other people who do nothing or sleep, they get
money without doing anything. They didnt do anything to earn it.
Rita: They didnt labor to create that stuff. Emmanuelle:
Yeah, but at the same time the owner of the middle square is not
developing his land. He is not getting anything out of it
Scott: Hes getting what economists call imputed income
Bill: Uh huh.
Emmanuelle: So you would tax on something that he hasnt
Scott: Yes, but nobody else is getting anything either. Its
sitting there in the center unused and because the owner has exclusive
title, theres no opportunity for anyone and theyre
excluded. You know, if you have a big property in New York, like I do
near my place a nine-acre property then that means that
nobody else can take the opportunity to use that land.
Rita: That takes that useful land out of production.
Scott: Yeah. So theyre hoarding and speculating
Emmanuelle: But in a city you dont necessarily want to
have all the land used.
Scott: Thats true, but you see what happens in practice
is that is that as you tax the land the market price comes down
commensurately, because the total capitalization amount is less. More
of the value is collected in taxes instead. The market forces wont
allow the sale price and the tax to go up at the same time. So that as
you increase one, the other comes down. So, now youve made the
land cheaper, so that means it is not so important to develop every
square inch and it doesnt take the much revenue out of the
Bill: If we really wanted it to be a park or other open space,
we should take it off the tax roles and make it public property.
Scott: You know 30% of the land in New York is untaxed anyway.
Its excluded. Its a church or a hospital or a school, etc.
Universities are big real estate owners now and they dont pay
any property taxes. Or, firms like Goldman Sachs, who has a get
special deal that they extorted from (Mayor) Bloomberg in which they
said Were going to leave the city if we have to pay
Emmanuelle: Yeah, I saw that in one of your papers.
Rita: You know, and we mentioned that to one of those
developers at on Earth Days (a recent event for vendors/activists near
Grand Central in New York that Common Ground-NYC members participated
in) and what was his reaction? Theyre not supposed to pay taxes!
Scott: I know. This is the problem we get. You know, they
think its a God-given right that if they sit on Land that they
should not pay taxes.
Rita: They said they would move to New Jersey!
Scott: Yeah, well they threatened that. They dont pay
tax in New Jersey either, by the way.
Emmanuelle: Its just for them?
Scott: Yeah. Its a special deal just for them. Morgan
Stanley doesnt have this deal.
Rita: Nobody (else) has this deal.
Emmanuelle: Theyre (Goldman Sachs) a cause of the whole
Scott: A big part of it, yeah.
Bill: Let me give another example of economic rent. At all the
big airports. The planes come in and out all day. But the most
congested time is about 5 oclock in the afternoon. Thats
when everybody is taking off for Paris or wherever theyre going.
So lots of planes are landing and leaving about that time of day. But
the airport is much less crowded at 2:00 oclock in the morning.
Now, the airlines own the timeslots around the airport so that every 3
minutes theres a landing slot and they own that time as their
property. Now, one of the reasons why the airport is very crowded is
because sometimes the airline does not even use its property
they just keep it! Now, if we auctioned off those time slots to the
highest bidder so then if they didnt use it, theyd still
be paying for it, then there would be a liquid market in time slots
and the airport efficiency would go way up. And many economists have
argued that thats how we should solve the problem of congestion
at airports. We should auction those timeslots. But no, if you look at
the annual report of American Airlines, you can see they list their
property assets, and part of that is their timeslots at the airport.
Scott: Same with driving, if we had congestion pricing
Bill: Now, see they didnt create that time. The value of that
time was created by all the airlines together in that community who
make the market. The value of the time in that particular slot is the
result of everybody. Thats economic rent. And that goes for
radio waves, cell phone frequencies, satellite orbits
Scott: Boat docks
Emmanuelle: Why a satellite orbit?
Bill: Well, there are only so many places in the sky
Emmanuelle: Yes, I agree with you but who is the recipient of the
money that is being given by the satellite company
Bill: Oh, the government that gives
Emmanuelle: But which government
now its up in Space
Bill: Well, I guess its the
American government that gave it to them.
Scott: Its an international body
Institute of Space Law http://iislweb.org/index.html)
Bill: But they voted
Scott: Its like shipping lanes
.there are space lanes.
There are certain orbits that are staked out by certain satellites. So
you cant put another satellite in the path of an America
satellite. So, they own that geo- synchronous orbit. So those are
valuable spaces. And its becoming an even bigger problem because
whats happening now is that debris is starting to fill up those
lanes. You know the satellites are starting to break apart or
malfunction. You know, China blew one up a few years ago, which meant
there were actually more satellites because they blew it
Timothy: Why did they blow it up?
Scott: To test
.well, thats another controversial thing
were testing an anti-ballistic missile system, which of course got
America all excited because we want to be the only ones to have that.
Timothy: Oh, so they were testing an anti-satellite weapon?
Scott: Well, it was an anti-ballistic missile, but they blew up a
satellite they didnt need anymore. So now these pieces of space
junk are flying up there and theyre very hard to keep track of.
And at the speed they move up there a little fragment can destroy a
Bill: or destroy a spaceship
Scott: Yeah, or even a space station
. The danger is there is so
much floating around up there that theres no space left. So we
should be charging for the congestion up there. Somebody should be
paying for taking that space to the community
which I guess in
this case is all of Earth.
Timothy: Nobody should own Space.
Scott: Nobody should own Space. Exactly.
Bill: Well, were also now talking about owning the air.
Timothy: What? You cant own the air!
Scott: Its part of the commons.
you didnt create the air!
Bill & Scott: Thats right!
Scott: But people are using it as if they did.
Bill: Well, let me give you an example of how its being
privatized. Right now, more in Europe than in this country, but its
about to happen in this country too if the utilities get their way.
The power companies, say, they burn coal and then the emissions from
the coal-burning goes up in the smokestack and up in the sky. Now if
the utilities burn coal, the carbon dioxide and other emissions carbon
.I cant remember the names of all of them
but all of these go up in the air. Now, if we really want to limit the
amount of pollution in the air what we should do is stop certain
utilities from sending their emissions up.
Emmanuelle: Can you replace them by nuclear power plants, or
Bill: Well right now, the idea that most of the public is talking
about is something called cap and trade. That is, the
scientists will decide how much air, how much pollution the air is
capable of absorbing. Then when they know what the limit is, theyll
say, OK, every utility shall be given a certain number of
pollution permits and then, the air
where its more
polluted in one place they will trade with somewhere theres less
pollution, and they will trade back and forth until theres a
balance. But that still gives the utilities the ownership of the air.
Rita: And of polluting! It gives them a permit to pollute.
Bill: Now, we Georgists say: OK, its probably true that the air
is capable of absorbing a certain amount of pollution. So what we
should do is auction off those permits for a price. And the utilities
that are willing to pay the most let them rent permits for that air to
use as the dump. And then the public would get the money for those
permits. It would be the revenue to support the government instead of
taxes on our labor.
Scott: Because its all of our air.
Timothy: Yeah, but who would be the public?
Bill: Good question. Since the air circulates throughout the whole
world, maybe the payment should be to a world government?
Timothy: But there is no world government.
Emmanuelle: The U.N. (laughs).
Scott: That would be a radical move
Bill: Well, look we already are having the Congress in the United
States look again at a treaty, the Law of the Seas Treaty. The Law of
the Seas treaty was originally drafted and signed by most of the worlds
nations 30 years ago, but the United States never signed it.
Scott: Yeah, because were exceptional.
Bill: So, finally, the Congress has decided maybe now is the time for
us to sign the Law of the Seas treaty. But, whats interesting
about the Law of the Seas treaty is that the rights to mine the
minerals at the bottom of the sea and the rights to fish in certain
oceans will have a payment and the payment will be made to a central
authority and the money will be used for developing nations. (It will
be a payment for the privilege of using the Commons!)
Emmanuelle: Well, the money may not make it to those nations
give any money to the U.N. because, well, you know
Scott: Because of the bureaucracy
Emmanuelle: Bureaucracy is a (polite) way of putting it
Bill: Well, there are so many agencies in the U.N. that it would be
hard to generalize.
Emmanuelle: Some are better than the others
its true. Its
Bill: So I guess the real question is if this new agency were to
collect rent from this new Law of the Seas treaty, how well
administered would the agency be that distributed all that money?
Timothy: Im pretty sure someone would have a bit of influence
over that thing and would take out some of the money for themselves.
Bill: Youre right. Its very possible
Timothy: Because I dont think they could equally share
everything, or for somebody who is really in need
Bill: I dont know enough how it would work and I suspect that
most of the designers dont know how it would work.
Karen: Who in Congress wants us to sign it now?
Bill: Well, theyve decided that the United States will
big mining companies will now be able to have an advantage if the
treaty is signed.
Scott: This (treaty) would extend our continental shelf 200 miles.
Timothy: I dont think America would give out money to
Bill: Well, it wouldnt be American money.
Timothy: I dont think America would ever do that
Bill: Thats the real question.
Timothy: You just
They (America) dont do that. They have
to find some way to get something out of this treaty. They wont
just sign it (in order to) give out money to poor countries. Theyll
sign it because maybe they know how they could take advantage of the
situation in some way.
Bill: Well, you know, many people have argued that
been some new books on this
that the United States is becoming
Timothy: Then China
Bill: Well, not just China. Then many other countries. And relatively
speaking the distribution of economic power and political power on the
world stage is changing. The BRIC countries
ever hear that
acronym? It stands for Brazil, Russia, India
Timothy: Oh, I see.
and China. Yes, these are countries that are growing in
power. And in political power as well as economic power.
Emmanuelle: In fact, until very recently, they were considered like
developing countries, but then they are developing so fast
Scott: China is a major power now.
Timothy: China owns half of America, you could almost say.
Bill: Well, in some ways, Yes. But people are also arguing that
sometimes the United Nations should take into account population size
and not just the political power. And remember China and India have
Emmanuelle: But I think they are going to change their position on
their composition of the Security Council.
Bill: People have been talking about that for a long time.
Scott: There are only 5 countries in that now.
Timothy: Yeah, but the Security Council cannot work because there are
like five people who have veto power and if one of these 5 countries
find that they will not profit from (an agreement) they could say no.
Emmanuelle: Look what happened with Syria.
Timothy: Yeah, thats what happened with Syria. Thats what
happened with Tibet.
Scott: Theyre in danger of slipping into irrelevancy because
theyre not the five major powers anymore.
Bill: So then other world bodies will assume some of the
responsibilities. For example, NATO, which was originally a military
organization, is now carrying other functions. For example, its
still a military power in Afghanistan even though its still
largely an American force, but theyre other countries who are
also sending forces. And the interesting thing is that because the
leadership is still largely American some of the other countries who
are uncomfortable with the way decisions are made have decided to
withdraw their forces. Which means that America is contemplating or
compromising some of its decisions.
Emmanuelle: The French, now with their new president, Hollande, has
announced that by the end of the year they will be out.
Timothy: Well, the only reason they are in Afghanistan is for oil.
And the oil will largely go to America.
Scott: They have other minerals too.
Timothy: But, its not a major threat. Theyre not fighting
for survival of America. They are fighting for oil. Theyre not
fighting for survival. Theyre fighting so some of the other
countries could get a little more powerful.
Bill: Or, some of the commercial corporations will be able to move
Scott: Its at the crossroads of so many other countries.
Bill: Well, my understanding is that it they are talking about
building a pipeline from Iran across to China and since it would cross
Afghanistan, it is strategically located even if it does not have much
Rita: Because of the access to that corridor.
Scott: Well, historically, going back to Alexander the Great
Rita: Absolutely. They all wanted it. The mountains always kept them
Bill: Theres a good book by a scholar that lives very close to
here. His name is Michael Klare, The Race for whats left.
And its about the struggle for whats left. For example,
now that the ice cap is melting north of Alaska.
Scott: Thats 20% of the worlds undiscovered oil according
to the U.S. Geological survey.
Bill: Yes. And Russia also wants that. So, its a big struggle
over whos going to get that oil.
Scott: Canada, Denmark because of Greenland.
Timothy: Soon theres not going to be anything left and everyones
going to die.
Bill: Well, some people have argued that
Scott: Its possible.
that this big struggle over the worlds resources
(will result in) global warming because of the methane coming into the
air. And that the air will warm so much that many places will not be
livable, and that many people will die and that the human species
itself might be endangered.
Timothy: Its also because capitalism
the basic system of
capitalism is to produce and to consume.
Bill: Well, we argue that there are many kinds of capitalism. And the
kind of capitalism that we Scott and I believe in, which
is the Georgist variety, is very different from the kind of capitalism
which is in practice today which is based on consumption youre
Timothy: So if we dont change the system soon, we might run
into lots of trouble when all the resources start failing and that
there will be a new war.
Bill: But if we taxed some of those resources, what would happen?
Timothy: Less people would be able to mass up (consumption).
Bill: Yes. We would discourage the consumption, because normally, the
more you tax something
Timothy: the less its used.
Bill: Yes. Then people would be trying to find other resources, or
Timothy: That is a good idea. That is a way where we could (live
better). Its fairly obvious that in the end when theres no
more left which might be very soon, like the next hundred years, or
even less, that there will be another war, because there might be a
little oil somewhere.
Scott: Its already happening.
Timothy: At the end where theres no more anywhere else, America
might attack Canada for
Scott: Well, Canada is attacking itself. Theyre drilling
everywhere. Theyve got the shale oil. Theyre cutting down
whole forests because of that, so even though its a low
population country, theyre denuding huge amounts of the country.
Bill: Yes, parts of Canada are opposed to other parts. The parts of
Canada that are in the West, particularly like the province of
Alberta, Manitoba, Saskatchewan, all those parts have resources that
are being exploited and other parts of this country of Canada are
opposed to that, like Ontario, Quebec and the provinces in the east.
So Canada is having a difficult time. So right now, the conservatives
the ones that are in power now; they are prevailing.
Timothy: I thought the conservatives wanted stuff to be always the
Bill: Well, different countries have different notions of what the
word conservative means. For example, in North America,
the word conservative has a different meaning.
Conservative in the U.S. and Canada usually means very little
government control and lot of free market liberty for corporations. Its
not the same as in France (where Timothy spent most of his young
Timothy: Im not so sure. In France conservatives are radicals
who want to go away from the EU, get all the foreigners out.
Bill: Thats part of it.
Timothy: Im not sure, but I dont really like them.
Scott: Its a misnomer, because they dont conserve
We veered into discussions of race and nationalism, thorium energy,
State Banking and other things, at this point, proving that even
Georgism is not the end of the story.
Did we make a convert? Well, I asked Timothy later on when he was
apart from Bill and the others this question, and he said Yeah,
So, Georgism is so simple even a child can understand it. Its
the adults that have the problems with it. (Scott Baker may be emailed