Interdisciplinary Perspectives on Economics and Land Value

Paper Session

Saturday, Jan. 7, 2017 8:00 AM – 10:00 AM

Sheraton Grand Chicago, Millennium Park
Hosted By: International Network for Economic Method
  • Chair: Matthias Klaes, Scottish Centre for Economic Methodology and University of Dundee

Fee Simple Obsolete

Lee Anne Fennell
,
University of Chicago

Abstract

Urbanization has dramatically altered the way in which land generates and forfeits value. The dominant economic significance of patterns of land use and the opportunity costs of foregone complementarities have made the capacity to reconfigure urban property essential. Yet the architecture of our workhorse tenure form — the fee simple — is ill-suited to meet these challenges. The fee simple grants a perpetual monopoly on a piece of physical space — an ideal strategy when temporal spillovers loom large, interdependence among parcels is low, most value is produced within the four corners of the property and cross-boundary externalities come in forms that governance strategies can readily reach. But times have changed. Categories of externalities that were once properly ignored by the fee simple have become too important to continue neglecting. This paper argues for alternative tenure forms that would move away from the endless duration and physical rootedness of the fee simple.

Efficient and Just Implementation of Equal Rights to Land

Nicolaus Tideman
,
Virginia Tech

Abstract

Suppose it is accepted that people have equal rights to land and other natural opportunities, and that they agree that this moral understanding should be implemented in an economically efficient way. What follows? First, if land is initially abundant and will later become scarce, people should be free to appropriate as much as they choose while land is abundant, with the understanding that they will need to share when it is scarce. Second, people have land rights during their lifetimes and not beyond. Third, the flow of scarcity value (rent) should be shared equally among those alive at each time. The possession of land does not need to be equalized; it is sufficient to equalize shares of rent. Fourth, rent should be equalized on a global basis. Fifth, what applies to land applies equally to minerals, water, the frequency spectrum, the capacity of the earth to absorb waste products, and all other natural opportunities. Thus taxes on activities causing climate change are required. Sixth and finally, it is unjust for countries to oppose efforts to secede.

Ownership of the Means of Production

E. Glen Weyl
,
Microsoft Research and Yale University
Anthony Lee Zhang
,
Stanford University

Abstract


Private ownership creates monopoly power, harming the dynamic efficiency of asset allocation. Common ownership can improve allocative efficiency, but eliminates incentives to invest in the common use value of assets. For a class of assets such as publicly owned natural resources, both allocative and investment efficiency are important, thus licenses should be intermediate between public and private ownership to trade off these goals. In this paper, we propose using a system of self-assessed property taxes with a universal right to force a sale at the self-assessed price, as first proposed by Harberger (1965) as a simple implementation of partial property rights. Within a dynamic overlapping-generations model of trade, these Harberger taxes decrease monopoly markups, increasing trade frequency and the efficiency of asset allocation in the stationary trading equilibrium of the model. We propose a simple rule-of-thumb policy for license design: tax rates should be set to about half the observed rate of trade in existing asset markets. In calibrations, a 2.5% annual tax rate is near optimal, increasing the steady state value created by assets by approximately 4%.

Toward an Economic Phenomenology of Land Value

Matthias Klaes
,
Scottish Centre for Economic Methodology and University of Dundee
Todd Mei
,
University of Kent

Abstract

Classical and neoclassical conceptions of land as a factor of production have led to its conceptual assimilation in modern economics within a more general framework of capital and economic rent. Advances in ecological economics have pointed to the limits of this assimilation. In a complementary yet distinctive sense, we will approach these limits with respect to discreet philosophical and practical analyses. The former involves recovering an understanding of land as the grounding subject of economics via phenomenological and ontological methods. The latter reveals how rural communities in Scotland are realising communal land ownership as a result of recent changes in legislation that have allowed a number of community buy-out projects to proceed. The experiences of those communities reflect both the challenges involved in financially sustainable community self-governance, and how their sense of land value is mediated in tension between economic demands and their lived experience of caring for the land in order to hand it on as a resource to future generations.
JEL Classifications
  • B4 - Economic Methodology
  • K1 - Basic Areas of Law