Views of Economists
Almost all economists, across the political spectrum, support the use of site rental as a means to derive public monies rather than taxes on capital and labour. The following is but a small collection of some of the greatest economists in modern history who have advocated such an idea.
It must added at this point that classical economists (e.g., Adam Smith, David Ricardo, John Stuart Mill) all also recognised that ground rent was an efficient means to raise public revenue. Some (especially Ricardo and Mill) were quite hostile to landlords and considered their interests contrary to contrary to the interests of others.
John Kenneth Galbraith, Presidential Medal of Freedom, 1946 and 2000
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If a tax were imposed equal to the annual use value of real property ex its improvement, so that it would now have no net earnings and hence no capital value of its own -- progress would be orderly and its fruits would be equitably shared. |
Galbraith is perhaps the most known of twentieth century economists. As a Keynesian and an institutionalist, and as a progressive liberal, his books on economic topics (e.g., American Capitalism, The Affluent Society, The New Industrial State) were bestsellers.
Galbriath taught at Harvard University and served in the administrations of Franklin D. Roosevelt, Harry S. Truman, John F. Kennedy and Lyndon B. Johnson; and among other roles served as U.S. ambassador to India under Kennedy.
Paul Samuelson - Winner, Nobel Memorial Prize in Economics, 1970
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"Our ideal society finds it essential to put a rent on land as a way of maximizing the total consumption available to the society. ...Pure land rent is in the nature of a 'surplus' which can be taxed heavily without distorting production incentives or efficiency. A land value tax can be called 'the useful tax on measured land surplus'." |
Paul Samuelson, professor of economics at the Massachusetts Institute of Technology, has worked in the following fields:
- Welfare economics, in which he co-developed the Lindahl-Bowen-Samuelson conditions as criteria for deciding whether an action will improve welfare;
- Public finance theory, in particular the optimal allocation of resources in the presence of both public goods and private goods.
- International economics, in which he co-developed two international trade models: the Balassa-Samuelson effect, and the Heckscher-Ohlin model (with the Stolper-Samuelson theorem).
- Monetary economics, where he devised the overlapping generations model as a way to analyze economic behavior
Milton Friedman - Winner, Nobel Memorial Prize in Economics, 1976.
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"There's a sense in which all taxes are antagonistic to free enterprise -- and yet we need taxes. ...So the question is, which are the least bad taxes? In my opinion the least bad tax is the property tax on the unimproved value of land, the Henry George argument of many, many years ago." |
Friedman is the leading proponent of the monetarist school of economic thought. He maintains that there is a close and stable link between inflation and the money supply, rejects the use of fiscal policy as a tool of demand management; and he holds that the government's role in the guidance of the economy should be severely restricted. Friedman has written extensively on the Great Depression, which he called the "Great Contraction," arguing that it had been caused by an ordinary financial shock whose duration and seriousness were greatly increased by the subsequent contraction of the money supply caused by the misguided policies of the directors of the Federal Reserve. Friedman also argued for the cessation of government intervention in currency markets, thereby spawning an enormous literature on the subject, as well as promoting the practice of freely floating exchange rates. In welfare economics, Friedman advocated a minimum income through a "Negative Income Tax".
Friedman is also known for his refinement of the consumption function, the permanent income hypothesis. Other important contributions include his critique of the Phillips curve and the concept of the natural rate of unemployment (1968).
Friedman advocated a strong union between capitalism and liberal government. His television series Free to Choose aired on PBS in early 1980 and became a book, co-authored with his wife, Rose Friedman.
In statistics, he devised the Friedman test, a non-parametric analogue to the two-way analysis of variance.
Herbert Simon, Winner, Nobel Memorial Prize in Economics, 1978
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"Assuming that a tax increase is necessary, it is clearly preferable to impose the additional cost on land by increasing the land tax, rather than to increase the wage tax." |
It is not unreasonable to descibe Herbert Simon as a genius whose abilities spanned several fields. Simon made outstanding contributions to to cognitive psychology, computer science, public administration, economics, sociology and philosophy.
He was awarded the ACM's A.M. Turing Award along with Allen Newell in 1975 for making "basic contributions to artificial intelligence, the psychology of human cognition, and list processing." In 1978 he was awarded the Nobel Memorial Prize in Economics "for his pioneering research into the decision-making process within economic organizations". He coined the terms "bounded rationality" and "satisficing" in this context.
Herbert Simon has been credited for revolutionary changes in microeconomics. He is responsible for the concept of organizational decision-making as it is known today. He was also the first to discuss this concept in terms of uncertainty; i.e. it is impossible to have perfect and complete information at any given time to make a decision. While this notion was not entirely new, Simon is best known for its origination. It was in this area that he was awarded the Nobel Prize in 1978.
James Tobin - Winner, Nobel Memorial Prize in Economics, 1981
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"I think in principle it's a good idea to tax unimproved land, and particularly capital gains (windfalls) on it. Theory says we should try to tax items with zero or low elasticity, and those include sites." |
James Tobin served as an economic advisor for John F. Kennedy and taught at Yale University for many years. In 1955 he won the John Bates Clark medal and in 1981 the Nobel Memorial Prize in Economics.
Tobin advocated and developed the ideas of Keynesian economics. He argued that governments should intervene in the economy in order to stabilise output and avoid recessions. His academic work included pioneering contributions to the study of investment, monetary and fiscal policy and financial markets. Furthermore, he proposed an econometric model for censored endogenous variables, the well known "Tobit model".
He also suggested a tax on foreign exchange transactions, now commonly known as the "Tobin tax", designed to reduce speculation. He suggested that the proceeds of the tax could be used to fund projects for the benefit of developing countries, or to support the United Nations.Franco Modigliani, Winner, Nobel Memorial Prize in Economics, 1985
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"It is important that rent of land be retained as a source of government revenue. Some persons who could make excellent use of land would be unable to raise money for the purchase price. Collecting rent annually provides access to land for persons with limited access to credit." |
Italian-born Franco Modigliani left Italy for the US in 1939 because of his Jewish background and strong antifascist views. As Professor at the Graduate School of Industrial Administration of Carnegie Mellon University in the 1950s and early 1960s, Modigliani made two extremely important contributions to economics:
- With Merton Miller, he formulated the important Modigliani-Miller theorem in corporate finance. This demonstrated that under certain assumptions, the value of a firm is not affected by whether it is financed by equity (selling shares) or debt (borrowing money).
- He was also the originator of the life-cycle hypothesis, which attempts to explain the level of saving in the economy. Modigliani proposed that consumers would aim for a stable level of income throughout their lifetime, for example by saving during their working years and spending during their retirement.
An activist until the end of his life, Modigliani enlisted fellow Nobel laureates Paul Samuelson and Robert Solow in 2003 to write a letter published in the New York Times chiding the Anti-Defamation League for honoring Italy's prime minister, Silvio Berlusconi. Berlusconi had recently defended Mussolini's conduct toward Jews during World War II.
James Buchanan Jnr., Winner, Nobel Memorial Prize in Economics, 1986
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"The landowner who withdraws land from productive use to a purely private use should be required to pay higher, not lower, taxes." |
James McGill Buchanan Jr. is most renowned for his work on public choice theory, for which he won the 1986 Nobel Memorial Prize in Economics. He has long been professor at George Mason University, and is a central figure in the Virginia school of political economy. His work in economics included a rigorous analysis of the theory of "logrolling" (the phrase used to describe trading of votes by legislative members to obtain passage of actions of interest to each legislative member).
Buchanan's most famous book, The Calculus of Consent (1962), co-authored with Gordon Tullock, combines economics and political science. Specifically, the book is about the political organization of a free society. But its method, conceptual apparatus, and analytics "are derived, essentially, from the discipline that has as its subject the economic organization of such a society."
Robert Solow - Winner, Nobel Memorial Prize in Economics, 1987
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"The user of land should not be allowed to acquire rights of indefinite duration for single payments. For efficiency, for adequate revenue and for justice, every user of land should be required to make an annual payment to the local government equal to the current rental value of the land that he or she prevents others from using." |
Robert Solow is known for his work on the theory of economic growth. He was awarded the John Bates Clark Medal in 1961,the Nobel Memorial Prize in Economics in 1987 and in 1999, he received National Medal of Science.
As the research assistant to Wassily Leontief he produced the first set of capital-coefficients for the input-output model. During his Ph.D. thesis, he attempted model changes in the size distribution of wage income using interacting Markoff processes for employment-unemployment and wage rates.
Just before going to Columbia University he was offered and accepted an Assistant Professorship in the Economics Department at the Massachusetts Institute of Technology. For almost 40 years, Solow and Paul Samuelson worked together on many landmark theories: von Neumann growth theory (1953), capital theory(1956), linear programming (1958) and the Phillips Curve (1960).
Solow also held several senior U.S. government positions, including senior economist for the Council of Economic Advisers (1961–62) and member of the President’s Commission on Income Maintenance (1968–70). His studies focused mainly in the fields of employment and growth policies, and the theory of capital.
Solow's model of economic growth allows the determinants of economic growth to be separated out into increases in inputs (labour and capital) and technical progress. Using his model, Solow calculated that about four-fifths of the growth in US output per worker was attributable to technical progress. In the 1980s efforts on economic growth models focused on the role of technological progress in the economy, leading to the development of endogenous growth theory (or new growth theory).
"If it is very easy to substitute other factors for natural resources, then there is, in principle, no problem. The world can, in effect, get along without natural resources."
William Vickrey - Winner, Nobel Memorial Prize in Economics, 1996
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"Economists are almost unanimous in conceding that the land tax has no adverse side effects. ...Landowners ought to look at both sides of the coin. Applying a tax to land values also means removing other taxes. This would so improve the efficiency of a city that land values would go up more than the increase in taxes on land." |
William Vickrey was a Columbia University professor, who was awarded the Nobel Memorial Prize in Economics. He died three days after the announcement, and was awarded the prize posthumously.
Vickrey was awarded the prize jointly with James Mirrlees for research into the economic theory of incentives under asymmetric information. An example of this is the situation where, for instance, the insured know more about their health than their insurer.
He also did important work in congestion pricing, the idea that roads and other services should be priced so that users see the costs that arise from the service being fully used when there is still demand. Congestion pricing gives a signal to users to adjust their behaviour or to investors to expand the service in order to remove the constraint. His theory was later partially put into action in London and in Melbourne, Australia.
The Vickrey auction is named after him. It is a type of sealed-bid auction, where bidders submit written bids without knowing the bid of the other people in the auction. The highest bidder wins, but the price paid is the second highest bid. This type of auction gives bidders an incentive to bid their true value. Vickrey Auctions are also used in computer network routing.
