helmuth_hubener
Banned
- Joined
- Nov 28, 2007
- Messages
- 9,484
Let the peasants rejoice, for the time has come to at last talk about Hong Kong! Yey! Party Time!
In the social sciences, we must deal with a limitation which researchers do not encounter in the physical sciences. Namely: in the social sciences, we cannot use a purely empirical methodology. In the social sciences there is no way to design and run controlled double-blind experiments to test out our theories. For one thing, no large populations are going to submit to having their lives wrecked for decades in order to prove that XYZ does wreck lives. Even if one could get such submission, there are insurmountable obstacles to correct experimental design, due to no two populations being identical, no two homelands of said populations being identical, etc., etc., etc. Thus I have no way to isolate a single variable. I also have no way to establish any kind of control group, since researchers will disagree as to what the "default" human society should be. I also have no way to double-blind the experiment, since obviously the people cannot be kept from awareness of what policies they are living under. And finally, I have reason to believe that empiricism is not even the correct methodology to use in the social sciences, due to the nature of human beings as volitional creatures -- as subjects that act, rather than objects that are acted upon.
Despite all these caveats and disclaimers, I shall nevertheless dive into addressing Hong Kong as an alleged empirical proof of the benefits of a Land Value Tax. Hong Kong is claimed to be a shining example of the success of the theories of Henry George and his LVT disciples. The empirical evidence has been suggested roughly as follows:
1) Hong Kong has a high LVT and no land-owning.
2) Haiti (or Bangladesh, Pakistan, Burma...) has no LVT and does have land-owning.
3) Just look at the results. LVT and lack of land ownership are vindicated as leading to wealthiness.
Are there any problems with this methodology? Yes. Are there any problems with this data? Yes. Are there any problems with this conclusion? Yes.
Method: The core problems with empirical methodology in the social sciences have been touched upon above. But even setting those aside, the specific methodology of this experiment cries out for examination. Could pairing up Hong Kong vs. Haiti even conceivably give us a slam dunk case as to the efficacy of LVT? Is LVT/lack-of-LVT really going to be named by anyone as the defining difference between these two countries? Is that going to come to anyone's mind other than Mr. L.'s as the answer to "what's the difference between Hong Kong and Haiti"? Will it even be in anyone's top ten of differences? Highly doubtful, outside of those poor souls obsessed with this particular hobbyhorse.
Data: Furthermore, in what meaningful way can Haiti be said to have more land-ownership than Hong Kong? In Hong Kong, if I have a lease with few if any restrictions, as is the case with most leases issued many years ago (the more recent the lease, the more restrictions tend to be written into it), and if it will not expire for another 935 years, is that not pretty close to ownership? The Hong Kong government will leave me alone and not seize my land. My effective property rights to the land will be respected. I can sell it, trade it, rent it, or gift it, and I am the one in charge of deciding what to do with that land -- the government, for the most part, will not interfere. For all practical purposes, I am the owner of the land, at least as much so as a typical owner in the USA, and more than many owners, say, in New London, Connecticut. In Haiti, on the other hand, can we say that land-owners are secure in the knowledge that they will be left unmolested by the state to use the land however they choose? That they have effective property rights to the land which will be respected? I would say no.
[P]easant land transactions reflect skepticism of notaries, land surveyors, and
virtually all agents of the state including the judiciary.
Arrangements among peasant farmers tend to be self-regulatory. Peasants
rarely update title to inherited land. Ownership rights are regulated by
community ties rather than by the law. Owners of informally divided inheritance
plots often have deeds to refer to that are many generations old. Farmers avoid
registering their lands because of the costs involved from notary fees, survey
costs, taxes, and other charges. For peasants, avoiding surveys also diminishes
the risk of land loss due to the high cost of surveying and revising current plot
lines to conform to old master deeds. Formal title is not necessarily more secure
than informal arrangements. Formal title is more expensive and less flexible than
the informal system.
Peasant farmers in Haiti do not enjoy land tenure security. Insecurity stems from
confusing land laws and weak institutions of enforcement. Most peasant land
holdings are not covered by updated title because of the high transaction costs.
Those with updated title cannot adequately defend their rights in a court of law
due to political instability. (Smucker 2000)
According to a Habitat for Humanity official, only 5 percent of Haiti's land has documentation of proprietorship, and land is often forcibly redistributed. (source)
So, in practical reality, Hong Kong effectively does offer secure land ownership to potential buyers, whereas Haiti, while it may have land ownership on paper, effectively does not. The political situations in the Philippines, Bangladesh, etc. are likewise not exactly paragons of respect for private property rights, not in land nor anything else. I would say that on a continuum between no land ownership and absolutely secure land ownership, Hong Kong one of the closest in the world to the latter, whereas Haiti is within spitting distance of the former. If I "owned" land in Haiti, I would have no comfort whatsoever that my land might not be seized at any moment by any number of statist groups claiming to be in charge there. If I owned land in Hong Kong, I could sleep peacefully knowing that chances were good that no one is going to seize my land for at least 935 years (or however long my lease) and that even at the end of that time, 99.9% odds I can simply renew the lease with no hassle. Which ownership is the more ownery? Hong Kong's situation offers a lot more of those qualities of owneryness which vile land parasites look for in a jurisdiction, even if it's not officially called "owning".
So much for land ownership. The second data set is LVT rate. Point of information: Hong Kong has no LVT. This would seem to be an important fact for those claiming that Hong Kong proves and vindicates all they've ever said about LVT, but it is nevertheless one which seems to have escaped their attention or in any case which they pass over. Hong Kong has no LVT; it does have a property tax. Hong Kong's property tax is 16%, or 17% profit tax for land-owning corporations (yes, I'm simplifying). What portion of that tax is on the value of the pure land? Not much -- Hong Kong is highly urban and the value of improvements and buildings far outweighs the value of the land. So I don't know what the haul of Hong Kong's "virtual LVT" would be if we were to separate it out, but it is not all that much, relatively. So does Hong Kong even have a high virtual LVT? Higher than average? That remains to be proven. I myself have skepticism, as the pro-LVT side has shown to be warranted.
Does Haiti have a low or non-existent LVT? Haiti's property tax rate is 15%. Now I'm sure there's a tax code a mile long in both places complicating the situation, but on the face of it, 15% is not dramatically lower than 16-17%. In fact, another site, doingbusiness.org, says that Haiti's property tax rate is 15%, while Hong Kong's is 5%. So maybe, in fact, Hong Kong's virtual LVT is much lower than Haiti's, for a typical
http://www.doingbusiness.org/data/exploreeconomies/hong-kong,-china/paying-taxes/
http://www.doingbusiness.org/data/exploreeconomies/haiti/paying-taxes/
So as far as the data goes, reality is almost backwards from the claims we've heard: Hong Kong has a stronger land ownership regime than Haiti in every meaningful sense, and the tax rates on land in both are either similar, or Hong Kong's is much lower.
Conclusion: Because comparing Hong Kong to Haiti is not an acceptable method for proving LVT's benefits, and because the data presented is very, very wrong, the conclusion that was based on this method and this data cannot be supported by this experiment. If the "researchers" such as Mr. L. wish to substantiate their claims as to LVT's beneficial effects, an entirely new experiment will be needed.
~~~A New Comparison~~~
Knowing the, umm, level of academic rigor to which the researchers have held themselves thus far in their careers, I have taken it upon myself to ponder such an experiment. My hypothesis is that Hong Kong has some of the lowest tax rates and freest economies in the world, and that any tax on land or lack thereof is but one minor factor in the whole kaleidoscope of economic policies. They would be even more wealthy were there no property tax -- including no tax on land, which is a component of property as presently taxed.
To test this hypothesis, let's look at two nations with very high degrees of economic freedom, respect for property rights, low taxes, etc., but one which taxes land and one which does not. This way, we come closer to somewhat sort of isolating that single variable -- land value taxation -- that we want to look at. Even though the quality of isolation is inevitably still low, it at least is better than when we compare Hong Kong and Haiti, a comparison where obviously the one minor factor of Hong Kong having similar or lower property tax rates than Haiti is making a much smaller difference than the cumulative effect of the million other ways in which Haiti's economy is horribly unfree and Hong Kong's outstandingly free.
So, I take Hong Kong vs. Dubai. Both very free, economically speaking, according to the libertarian standard, UAE being ≈ the 14th freest country, and Hong Kong being the 1st. (source) Hong Kong has a property tax; Dubai does not. If my hypothesis is correct, Dubai is that much better off by having no property tax, though that benefit can be offset by additional other taxes or state interventions. If the pro-LVTers are correct, Dubai is dramatically worse off by not having a property tax and their economy should be doing much more poorly than that of Hong Kong which at least has some property tax.
In examining the facts and figures, I find that Dubai has a much higher rate of GDP growth than Hong Kong -- a much, much higher rate. From 2000-2010, GDP of Hong Kong increased 133%, while GDP of Dubai increased 503-542% (I found varying figures for 2010 Dubai GDP). It's not even close. No mitigating factors can begin to mitigate this difference.
Pro-LVTers may claim that Dubai's prosperity is still due to LVT principles, for though there is no tax on land, the government does control oil reserves, another form of economic "land". However, the share of Dubai's economy coming from oil and natural gas extraction has plunged to vitually zip at the same time that the rest of its economy has soared. So that argument will fall as flat as Dubai's oil revenues.
Again, looking purely at empirical data, would it be too extreme to claim that humanity is better off today than at that time thousands of years ago when, you claim (based on no data) that humanity had not yet started homesteading nature? I venture that it would not be. Thus, the period of human history with land ownership clearly has a better economic track record than the period which you claim (based on no data) was without. It's not even close. I mean, Dubai being quintuple as good at Hong Kong at generating wealth was not even close. This, where land-owning humanity has generated millions upon millions of times the wealth as (supposedly) non-land-owning humanity, this is at a level where all blowing-out-of-water wiping-the-floor-with idioms fail.
In conclusion, empirical data supports land-owning as an economically successful practice.
