Comment by ipnon
1 year ago
In “Radical Markets” by Posner and Weyl they show that for any plot of land, if you run a continuous auction on it, meaning whoever pays the most tax on it gets to own it immediately, including all assets contained within, then you get both maximum tax revenue and maximum utility.
Is this accounting for path-dependent utility? The utility of getting enough land to build a house to live in, and then losing it as soon as the house is built is severely negative.
Does it also account for actors who aren't perfect economic calculators with infinite information processing capacity?
In other words, does that system work for grandma?
A realistic system would definitely need to tack on an extra fee say 10% to account for real world friction.
So the selling price would be 110% the highest bid.
It also gives rich people way too much power over anyone they hate. Suppose I have a billion dollars, you don't, and I hate you - I can buy your house, your next house, your next next house, and your next next next house, and you can't say no.
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I think that model will fall apart when you include transactional costs
Not just transaction cost, but also the whole point of Georgist theory which is that it's supposed to stimulate development. Putting a skyscraper on a piece of land costs a lot of money, paid for by the returns to development. If someone who hasn't paid the capital costs of building that skyscraper (and the admin costs of letting it out) then has the right to buy the land under the developers and charge them the highest possible ground rent, the thin profit making opportunity disappears, and it becomes less costly to relinquish landholdings than to develop them only to lose them to the first entity that wants to capture the value of your investment in the skyscraper in ground rent.
Probably the only stable state for that sort of market is for the government (which not only usually has the lowest costs of capital, but also sets the ratio of LVT to property prices) to end up owning all the land. That model can work (see Singapore) but it very much depends on the quality of the government and doesn't replace tax revenue...