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Geo-Rent: A Plea to Public Economists

  • Fred E. Foldvary

This paper presents an analysis of what is termed “geo-rent,†what the plot-devoid-of-improvements would rent for in an auction. Most of the public finance literature and current thought has disvalued and misunderstood the actual and potential role of land and its rent for public revenue. The qualities of land value that make it a superior source of revenue—having little or no deadweight loss, and capitalizing civic infrastructure and services—are recognized but compartmentalized, ignored in the broader policy discussions. That the “producer surplus†is in reality mostly land rent is little recognized. The “Henry George Theorem†that rent can optimally equal the cost of public goods is not applied to policy issues. Public finance theorists and economists generally presume that land rent is an insignificant portion of national income, whereas studies have estimated that a substantial portion of government revenue could be obtained from geo-rent. The shunting aside and disparagement of public revenue from geo-rent has distorted economic analysis and contributes to iatrogenic economy-hampering fiscal policy. The paper proposes a broader and more integrated public economics which recognizes the fundamental role of land in economies and fully incorporates the analysis of public revenue from land rent.

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Article provided by Econ Journal Watch in its journal Econ Journal Watch.

Volume (Year): 2 (2005)
Issue (Month): 1 (April)
Pages: 106-132

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Handle: RePEc:ejw:journl:v:2:y:2005:i:1:p:106-132
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  1. Bruce W. Hamilton, 1975. "Zoning and Property Taxation in a System of Local Governments," Urban Studies, Urban Studies Journal Limited, vol. 12(2), pages 205-211, June.
  2. Nicolaus Tideman & Ebere Akobundu & Andrew Johns & Prapaiporn Wutthicharoen, 2002. "The Avoidable Excess Burden of Broad-Based U.S. Taxes," Public Finance Review, SAGE Publishing, vol. 30(5), pages 416-441, September.
  3. Oates, Wallace E, 1969. "The Effects of Property Taxes and Local Public Spending on Property Values: An Empirical Study of Tax Capitalization and the Tiebout Hypothesis," Journal of Political Economy, University of Chicago Press, vol. 77(6), pages 957-71, Nov./Dec..
  4. Oates, Wallace E. & Schwab, Robert M., 1997. "The Impact of Urban Land Taxation: The Pittsburgh Experience," National Tax Journal, National Tax Association, vol. 50(1), pages 1-21, March.
  5. Buchanan, James M. & Goetz, Charles J., 1972. "Efficiency limits of fiscal mobility: An assessment of the tiebout model," Journal of Public Economics, Elsevier, vol. 1(1), pages 25-43, April.
  6. Fred E. Foldvary, 1994. "Public Goods And Private Communities," Books, Edward Elgar Publishing, number 167.
  7. David Altig, 2001. "Simulating Fundamental Tax Reform in the United States," American Economic Review, American Economic Association, vol. 91(3), pages 574-595, June.
  8. Ellickson, Bryan, 1971. "Jurisdictional Fragmentation and Residential Choice," American Economic Review, American Economic Association, vol. 61(2), pages 334-39, May.
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