How to Make a Perfect World
in one simple step:
Make governments earn their money like everyone else. (I.e. replace all taxes with ground rent.)
Since ancient times, the strong (those who rule) have preyed on the weak (e.g. everyone else). They tell the weak "this is good for you" and "there is no other way". Today it is called "taxation" or "land monopoly". This rewards freeloading and punishes wealth creation. A simple way to fix the problem is to collect no tax, but only collect ground rent. Compound growth means even rulers and landowners will make more money. But the main result is better government, which will solve all our problems.
About ground rent
Ground rent is the rental value of bare land. That enormous value is created by society: more people, more roads, more parks, etc. makes more valuable land. Landowners then add value, by building, planting, working in offices, etc. If society (represented by government) can only take the value it creates, then it will create more value. If landowners can only take the value they create, then they will add more value. Adam Smith put it this way:
"Ground-rents, so far as they exceed the ordinary rent of land, are altogether owing to the
good government of the sovereign, which, by protecting the industry
either of the whole people, or of the inhabitants of some particular
place, enables them to pay so much more than its real value for the
ground which they build their houses upon... Nothing can be more
reasonable than that a fund, which owes its existence to the good
government of the state should be taxed peculiarly, or should
contribute something more than the greater part of other funds,
towards the support of that government." (Adam Smith, The
Wealth of Nations, Book 5, Chapter 2)
Main advantages of ground rent over tax
- Honest government
Ground rent belongs to society.
When society collects ground rent it merely collects its own money. This is more honest that tax, which is taking someone else's money.
- More efficient use of land
If land must be paid for then
people will only use what they need and sell the rest. It will be
bought by people who can use the land more efficiently.
Rent will never be too high, because if it is then people will just use less land.
This reduces governent income, forcing them to lower the rent.
- Most efficient use of all resources
These arguments apply to all natural resources, not just land. To
economists, "land" includes resources like the air, the
water, the electromagnetic spectrum, etc.
- More production, lower prices
Ground rent fixes your tax
costs. So additional work is tax free. This creates lower costs,
bringing more sales, hence more production. For
example, if ground rent was set at exactly the same rate as
businesses now pay in tax. After producing the same as before they
could produce a more, free of all taxes, and therefore at a much
lower cost, and so attract more buyers. Of course, fixed
costs are expensive if you can't sell as much one year.
But that is already true for all other fixed costs and the
solution is well known. Have a core of permanent land plus an option
on extra land that can be added or released as needed.
Ground rent is based on the market value of
land, which can be tracked by anybody. So anybody can measure the
value added by a government's actions.
- Less market failure
Ground rent measures the overall value
of society. So it does not allow costs to be hidden. That is, it
does not allow market failure. Market
failure is where a government or business can make money by doing
harm. For example, taking money by restricting choice, or hiding
information, or causing pollution. But ground rent captures the
total value of any region, so no costs can be hidden.
- More recycling, more renewables
When land is taxed but work is
not, raw materials will cost more but everything else will cost
less. Leading to more recycling, use of renewable energy, etc.
- More beautiful land
A government's income will
depend on how much money people will pay to live and work in an
area. So beauty will become the top priority. Beauty
means attractiveness. Hence beauty attracts people. Easy ways to
make an area attractive are to remove litter, plant beautiful lawns
and trees, etc.
- More forests
See above: if your job is to look after the environment, you will be paid according to how many people you attract to live in the area. So forests will be more beautiful, parks more frequent, etc.
Better economy as a whole
- Fair rents
If ground rent is too high, people simple won't
use the land. That reduces the market rental value until it is low
enough for people to choose to pay.
- More jobs
See the earlier point about increased production: somebody has to do the extra work. See below for more ways that jobs will increase in number and quality.
- Longer term thinking
Land values are strongly affected by
beauty, good neighbours, infrastructure, etc. Those things measure
long term value, well beyond the next election cycle.
- Better information
Ground rent measures everything that
makes a location desirable. So through regression analysis, the
value of every political choice can be objectively
measured. Regression analysis is s set of statistical tools for working out the
relationship between data. For example, if we have many examples of
house prices, we can work out how much value is added by location
and how much is from other things. The more data we have,
the more precisely we can measure everything. For example, building
a road adds value to houses. Litter in the street reduces value.
Good neighbours add value. A bad neighbour reduces value. The more
carefully we measure land value, the more we can calculate the true
value of everything.
- No tax avoidance
Land cannot be hidden. So ground rent
ends tax avoidance.
- Increased supply of skilled people
Ground rent is much
simpler than other taxes. This frees up armies of tax accountants to
do useful work instead.
- More time for top managers
A single ground rent is simple
and cannot be avoided (land cannot be hidden). So managers will
spend much less time on tax matters.
- Unlimited supply of land (for any efficient use)
more efficient use of land makes it more valuable. This raises
ground rent. This increases the supply of less efficiently used land
- A more stable economy
With full ground rent, merely owning
land (or similar natural resources) brings no profit. So land
speculation will end. So the economy will be more stable. For
example, we will not have spiralling house prices one year and then
house prices crash the next year.
- Lower land prices (to balance rent)
The total price of land (initial
price plus annual ground rent) is limited by what buyers are willing
to pay. So if rent goes up the price must come down.
- Lower overall land prices
Ground rent means underused land
will be sold. This increases the supply, enabling buyers to offer
- Lower rents for land
Ground rent is based on land prices. As land prices come down (see above) ground rent must come down. If people decide to live on far less land, the remaining unused land drops in price, so will be used again. (Note that there may be a transition period while the aconomy adjusts: see the section on windfalls for landowners and how to make the change.)
- Lower interest rates
Interest exists so that lenders
profit from lending. A more stable economy means lenders can charge
less and still be sure to make a profit.
- Cheaper apartments
Ground rent is based on location, not building height. And ground rent allows tax free work. So it will be very cheap to add extra floors (and hence extra apartments).
- Cheaper home rents
If landlords charge more, people will simply move to cheap apartments instead. So landlords will have to charge less. Of course, for low rise houses they cannot afford to charge less, so the rental sector will move toward taller buildings. This frees up land for other purposes such as parkland (as parks increase the value of houses nearby).
Windfalls for landowners
- Homeowners will profit
Homeowners currently pay more tax than they should, based on the small amount of land they own. So
their tax bill will go down. How do we know that most homeowners own relatively little land? We could measure it, but when governments do not charge ground rent, most land will always be owned by fewer and fewer people. To see why, play the game "Monopoly". It was originally called "the
landlord's game" and invented to show how inequality
(ultimately a monopoly) naturally arises. Ground rent
corrects this by making land monopolies too expensive to survive.
- Retired homeowners will profit
Currently retired people have sufficient numbers to veto ground rent if they wish. So they
must also receive generous compensation. For
example: compensation equal to the ground rent they would pay until
- All landowners can profit
If needed, landowners can be given a huge bribe to support ground rent. It can be much greater than the total value of their land, allowing them plenty of time to adjust. As long as the bribe is fixed whereas growth is exponential, we can pay for it right now. (See "larger economy" and "instant wealth" below.) The bribe of course must be be paid back if they ever oppose ground rent in any way (because the bribe is simply the value they create by supporting ground rent).
Jobs and wealth
- Consumer confidence
More jobs, lower prices, more stability etc., lead to greater consumer confidence (in spending money and trying new ideas).
- More investment
Ground rent measures everything we value,
and does so efficiently. So it is easier to see the value of
investments, so more will be invested. For
example, a new road might cost a billion dollars. But ground rent
might show it adds 1.5 billion in value. So the 1.5 billion can be
added to ground rent, and the 0.5 billion profit is net profit to
society. Note that a later result of ground rent is
competition bringing ever improving information. So eventually,
every investment that has value automatically pays for itself.
- A job you love
Lower prices and cheaper
rent means jobs that were previously uneconomic now become
possible. For example, a person could live very cheaply in an apartment in order
to live as an artist, or set up a not-for-profit business that can
survive on just modest donations.
- Full employment
More productivity and investment, a more
stable economy and more jobs in enjoyable areas mean anyone who
wants to work can do so.
- A many times larger economy
Many of these changes create
extra growth every year. This compound growth means the economy will
become many times larger. For
example, if ground rent provides an extra 2 percent growth, in 35
years the economy will be twice the size it would have been under a
tax system. That is, twice as big as the growth we expect anyway, so
perhaps four times its present size. Then it would double again and
- Society's income will also expand exponentially
At first a large amount of unused land will be sold, but land prices will then find their natural level.
Then demand will rise as the economy grows.
So ground rents (society's income) will increase at a similar rate to the economy as a whole.
- Instant wealth
As soon as future growth is known, we can
use it right now by issuing bonds. For
example, if we expect a billion dollars of income in ten years, we
can issue bonds that promise to pay that money to someone. Those
bonds can be sold for cash today,
- Competition to attract workers
Full employment means businesses must keep workers happy, or lose them to another employer.
- Competition between regions
Each region will need people to pay the rent. So they will compete to attract you. And full
employment (and low rent) means you can move easily.
- Make deals with government
Ground rent simplifies what we pay to government, while increasing the demand for workers. So it is
easier to make deals. For example, "if ten of my friends move to your region you will
make a million dollars a year. Change one little rule for us and we
will do it." For added incentives, make a larger group,
offer to pay a little more, take fewer services (e.g. handle some
things yourself), etc.
- Choose your ideal government
As more groups make deals,
regions will specialise in providing exactly what different groups
want. Or lose to regions that do. For example, chose a more libertarian government, or a more socialist
one, or a more Christian one, or a more environmentally friendly
one, or a more crime free one, etc.
- Create your ideal government
Some people's idea of ideal government is libertarian. That is, each person can create
their own rules. That is, create your own government with
friends. This freedom cannot be abused. Because if your new government makes your neighbours' land
less attractive in any way then the parent government must pass on those
charges to you. If it does not then it
loses income. So only good neighbours can survive.
- More efficient government
As governments specialise, we
can see which ideas attract the most people. Governments that use
that information will gain more rent.
- No global poverty
Faster growth from ground rent means other nations must copy or decline (relatively). Free movement of
workers accelerates the process.
- Government you can trust
If a government loses trust it will become less attractive, and hence less wealthy. So
governments will become more trustworthy to survive.
- Better decisions at every level
As people trust governments, and value added is analysed, it will become possible to create a database based on how much value each business (eventually each person) adds to society. Any government that gives access to this will create better decisions at every level. Note that any information will be acceptable to the
everyone, or they will simply leave to find a government that suits them better.
- Better science
As governments compete they must invest more in science, to find new ways to make a society attractive.
- Free movement of ideas
Rewards for doing good and better science mean we can set more ideas free, and simply reward creators for the results. For example, a new idea might cost a million dollars to develop, but produces a dollar's worth of benefit to two million people. By charging them 60 cents on ground rent, everyone profits.
No "very bad" things
- Good laws
With your ideal government you get the laws you want. And the enforcement you want.
Anything good is encouraged. Anything very bad is a crime. Next we'll see how ground rent ends crime.
- Rewards just for doing good
As people trust their governments, governments can better identify and reward citizens who
make a location more attractive. For example, running youth club that makes kids into better citizens,
or helping the homeless learn skills.
- Less crime
More jobs, and rewards for doing good, mean less crime.
- Even less crime
As people trust their governments they will be more comfortable with sharing information and allowing cameras. So criminals have nowhere to hide.
- Towards zero crime
How do we stop the hard to predict crimes? We live in a physical universe. So everything either has a physical cause or is entirely random. Beter science and better decisions mean we can detect the signals of bad crimes (e.g. what leads to abuse?) so the bad crimes never happen.
- Toward zero natural disasters
The same principles that end crime also end natural disasters. Better science means they can be predicted, and a much stronger economy means we can pay for whatever preparation we need.
A perfect world
- Work just one hour a day (if you want)
With cheap rents and cheap food, a person could choose to live in a tiny high rise apaertment and then only need to work an hour a day. And that "work" might be just "doing good".
- Solving "the immigration problem"
Businesses and regions will compete for workers. This reduces any danger of others "taking your job", leading to freer movement of workers, more efficient allocation of labour, and a reduction in world poverty.
We live in a physical universe. So anything that makes one person more productive than another is physical. So it can be copied, leading to more equality. By allowing people to choose their ideal government, with more sharing of information, ground rent allows more copying of the best ideas. Governments that encourage fair copying will out perform those that don't.
- No danger from robots
Equality solves the robot problem: whatever advantages robots have, we can copy them. For example, mobile phones give us computer level memory, robot tools give us robot level efficiency, etc. Freedom to copy means if one group or individual gains extra benefits, so can other groups or individuals.
- No dictators
Dictators, by definition, reduce choice. This implies slower economic growth. For
example: A dictator may siphon wealth into his own pockets, put
incompetent friends in key positions, divert money into building a
police state, etc. Over time the difference between the dictator's
state and the same state under ground rent may be a trillion dollars
per year. So dictators make their countries poor.
So they can be bribed to step aside. For example, the dictator can be quietly offered a hundred billion dollars to live as a merely symbolic monarch in a palace. If he refuses, a similar offer can be made to any generals who are in a position to remove him. Is this a reward for evil? No, because all dictators do is tax work and own land without paying rent. If we support those principles then we are doing the same, though on a smaller scale. Hence it is only fair that we pay. We created the problem.
- No war
People generally do not like to die, so wars rely
on showing people even worse choices. Ground rent removes the worse
choices, thus ending war. For example, a religious terrorist will tend to be either poor, reliant
on the poor, or sympathetic to the poor. By removing poverty we
remove his motivation and support. Note that economics has
already ended war for many of us. Rich, comfortable nations no
longer fight each other. Ground rent just brings everybody into the
rich club. By ending crime, rewarding the good and supporting science, ground rent
ensures that any rogue madmen are quickly identified before they can
deceive many others.
Love and happiness
- Reduced stress
Full employment, enjoyable jobs, ideal government, no crime etc., will reduce stress. For
example, some people may decide to live extremely cheaply in order
to work just a few hours a week, and spend the rest of the time
doing whatever they want.
- Full funding for the sick
Equality means we have a roughly
equal chance of getting sick, and ground wealth provides the wealth
and science to solve it. So we will, in order to survive.
- Animal welfare
Better science means better fake meat. Once
it is better (and cheaper) than real meat, animals will only have
value for their natural animal behaviour. Note
that ground rent produces a more beautiful world, so we will tend to
increase their natural habitat.
- Kindness to people and animals
Any region with a reputation for unkindness will attract fewer people. So ground rent
will lead to pressure to demonstrate kindness. That is, helping the
weak. For example, being kind to animals or to humans in trouble.
- A world based on love
"Love" means choosing to make someone
else happy. Ground rent makes a world where governments compete to
attract people: that is, to make them happy.
- Anything you can imagine
Ground rent brings exponential
economic growth in a world devoted to making you happy. So anything
you can imagine becomes possible.
How to make the change
The need for ground rent is easy to prove. It's simple economics: stealing is economically inefficient.
But persuading people is much harder: all our history and social structures and how we think is alll based on theft. So here are seven methods for changing from tax to ground rent:
Talk about economics. Help people understand why ground rent is the property of society.
Do the research. Talk to Georgist groups. Become an expert on previous attempts to institute ground rent. Take an economics degree. Join a political think tank. Be provocative. Change the conversation among experts.
Next time something horrible happens in the news, point out (gently) that we could just choose a perfect world instead. It's realistic and simple.
Think of a way to compensate landowners, that does not let them just keep the money then go back to their old ways. Then you have a strategy where everybody wins! Then join a political party and get them excited aboutit.
Talk about Moses. If we had folowed the message of the Bible we could have had three thousand years of compound growth. Even the poorest person today would be rich enough to own his own star system by now.
Find a multimillionaire. He can buy land, and make a model ground rent community. Then let it expand., Then use his experience to become a consultant to the world's governments: he can double their national wealth for the small price of ten billion dollars a year. Thus he becomes the world's first trillionnaire.
Use your brain to find a new strategy that nobody else has thought of. Use your drive to change the world: find a way to make it happen!
I wish I could do one of these myself. But persuasion requires different mental tools: you need to be able to out-think a competitor in real time, and enjoy the battle. I can't do that. Can you do that? Then you can save the world.
More about ground rent
Ground rent is the rental value of a location.
Not the house, not the crops and fences that a farmer might have added.
Not anything that the owner did.
Just the value that bare land would have at that location.
Who creates location value?
A location has a certain value even if its owner does nothing at all.
So location value cannot be created by the landowner.
All of that value depends on the actions of society as a whole.
If society did not exist, or if it did nothing, nothing could have any price.
So it is the actions of society in general that creates a price.
Yes, the owner is part of society, but so are a thousand or a million other people.
Location value is the value of society's work
Location value measures how much a person will pay to live there
That is, it is the value of everything good a society does:
building roads and schools, providing safety, adding beauty, being good neighbours, etc..
So ground rent is the value of society's work.
The landowners goes to work and improves the land, and society does the same: it goes to work and improves the land.
If we pay each for their work then we will get more work like that.
What is the true value of ground rent?
What we currently call "rent" is only a small part of the rent we currently pay. We also pay taxes in order to live in a particular country. So the true rental value of your location is at least equal to all your rent and taxes combined. Is your location worh the money? You are free to move your home and business to some third world desert. There taxes and rent might be much lower. There you can attempt to do the exact same work, and see see what your work is worth on its own.
Tax is theft. Ground rent is society merely collecting it property
It follows from what went before that tax is, in effect, theft. But ground rent is society merely collecting its own property. Let's move away from theft and toward creating wealth instead. Then see what happens.