Central Planning Privatized

When we think of the phrase central planning, it brings to mind a soviet system of bureaucratic committees and an absence of pricing. Decision-making in this state of affairs is made uniform as there is only one plan which is permitted. In a market economy planning is decentralized. As Hayek says, the choice is not between planning and no planning, but between many plans or just one plan. There is a set of circumstances under which private economies can be centrally planned by a finance cartel (assuming a finance cartel exists).

In order for a private economy to be centrally planned by a finance cartel, credit must be the leg on which all production leans. If businesses are able to finance their operations past the initial start-up loan purely out of their own profits, then they operate in autonomy and cannot be subjected to a hierarchy of finance. That is, in an economy where savings is encouraged over borrowing, businesses will be comparatively autonomous in their decision-making as they will be discouraged from borrowing and encouraged to save and operate therefrom. As many of you know, the change in money supply does not change the stock of non-money goods, but it does change the behavior of market participants. We can visualize a slider-bar representing change in money supply, at the left end is deflation and at the other is inflation. If our imaginary indicator is at the far left end of this slider, market participants will behave in a certain way. Most relevantly to this topic, they will be comparitively reluctant to take on debt. At the other end of the imaginary slider-bar, market participants will be very willing to take on debt, as it is cheapened. As a general rule, where inflation is the norm, borrowing is the standard practice of the firm and where deflation is the norm, savings is the standard practice of the firm.

In the other thread I made on state and banking, I referred to the right of the creditor to his funds as analogous of the right of the landlord to his land. When a tenant agrees to live in an owner’s apartment building, he agrees to certain conditions of contract and if he violates them, he is contractually vulnerable to eviction. This is not a value judgment. The rentier’s power over the tenant isn’t the power to induce certain actions but to prevent certain actions. This difference is ultimately one of degree, because, if a rentier has few enough competitors and tenants have few enough options, contracts could be so prohibitive of certain actions that they could carve out a handful of actions, essentially compelling the tenant to act a certain way. This usually isn’t the case however, and the restrictions rentiers place on tenants are usually so superficial that a tenant’s permitted actions are not reduced to a series of the rentier’s actions. But it does stand, that the difference between prohibition of action and command of action is only a difference of degree. If I have unlimited power to prohibit you from acting a certain way, I have unlimited power to compel you to act a certain way. When a person goes into debt, he agrees to live in a figurative apartment. The creditor may exercise a certain contractual authority over the debtor by telling him what the funds may or may not be used for. In the case of a debtor who is constantly seeking more credit, as is the status quo of corporate practice, creditors can get him to surrender much of his operational autonomy in return for credit. So what? Go onto Yahoo! Finance or Google Finance and check out the balance sheets of all your favorite big corporations. They’re all living in someone else’s house. Well that doesn’t mean anything either, because there is competition among banks, right? That’s an assumption that is an entirely different topic and deserves its own analysis. It’s safe to say, however, that if the central bank imbued with discretionary power is privately owned between a consortium of banks since 1913 which are now represented in 4 banks today, then there might well be a finance cartel. If there is, then the cartel has the power to make decision-making utterly conformed either by contractual formalities or informally. Whether the demands of the creditors are laid out contractually or not isn’t important as the principle remains unchanged: the debtors are living in their house and, at the end of the day, must either do their bidding or get out.

Political-enthusiasts of an easy-money persuasion will often say that inflation thwarts banks because they receive less interest payments. Although there is a debate to be had there (whether the increase in the number of debtors brought on by the lowering of interest is high enough to offset the lowering of the interest rate so that total money in interest payments have increased), they miss a more subtle point: maybe bankers earn less money directly, but they increase their control over the economy. They are then able to plan privately and coordinate the business plans of their debtors. For example: do you think that a creditor would allow his debtor automobile manufacturer produce a car that runs on alcohol if it threatens the stream of interest payments that his debtor petroleum company makes? Whether inflation is a direct cash negative or positive misses the larger point. Moneymaking is for the lower class, even if it is the billionaire lower class. Money is vulgar and untidy. Power and control is much nicer. Power is for the new aristocracy. Inflation spreads the pervasiveness of credit and thus extends the ability of creditors to make all of their debtors conform and coordinate toward their interests.


Let’s assume a king. He runs his domain alright, except there was a bad harvest recently. He took out a loan to import some grain so the domain wouldn’t starve. He also decided that he liked the perks he could use the loan money on. The state’s expenditures rose so that, if one recalls the original state of budget neutrality, the king’s new preferences are budget negative. He has to seek the help of financiers to keep his country going. If he doesn’t obtain the cooperation of financiers he either defaults on debt and loses his kingly legitimacy or, if he tries to tax the extra money out of the people, he risks political instability. He will do what has to be done in order to obtain the cooperation of the financiers. It follows then, that the king will do nothing that the financiers don’t want him to do. That’s not to say, necessarily, that he will do everything for them, but he won’t do anything so much against them that they would not finance his debts. The king is now 2nd in the social pecking order to the financiers.

Let’s now introduce democracy, that institution by which the people’s will is actualized via representative government. Does the conclusion from earlier still apply? After all, the government has to listen to the people or they will vote in someone else. Positively so. An executive politician could not let his legacy be either a debt default or a delegitimization of the state. The pages of his history would be entirely marred. In fact, the effects of financier governance may be intensified: a politician may agree to further indebtedness in the future, so long as default doesn’t occur under his own office, letting a later politician take the fall for him.

Wherever and whenever state’s are indebted and their economies point toward further indebtedness, state executives are lower in the social pecking order than financiers. At first it seems that the King or President is highest in all society; he alone may punish and reward. This power is illusory insofar as his means of punishment and rewarding are in the hands of another. What reason is there ever to think that the state executive is “in control” when, if he should act against the wishes of the financiers, they will deny him credit and his state will collapse?

Having considered this, perhaps a different default sequence of hierarchy is in order. Instead of putting king, wielder of power, at the top, it is those with the means with the means to provide power who sit at the top. They’ll inevitably form conduits to power-wielders in order ensure a minimum of miscommunication. This is well-documented for us.

Why is any other worldview legitimate. This seems so basic. If you’re a tenant, you can’t smoke in my building. If you’re my employee, you have to wear this bright red visor. If you require my funds to keep running, you’ll ensure future indebtedness and provide a contract to my brother’s company, etc. We generally accept this basic principle in all spheres accept when it comes to the relationship between state and bank. I tried explaining this to my parents who continually tried to shift the subject to Obama. People think Obama is this or that. Whatever. He’s a tenant. He’s living in someone elses house. No smoking. No cats.

I think that this story, which takes about 200 seconds to read, when understood and divorced of cognitive dissonance should dissolve all belief in the democratic pillars of accountability, civic virtue, etc. I think people understood this back in the day (19th C. America) before people were put through public schooling. Which probably explained why greenbacking was (and still is, to a certain extent) so popular among liberationists.


Under assumptions of a stable money supply, speculation in commodities is a helpful function which allocates resources to their most needed uses along the temporal axis. What would, in its absence, be abundant today and scarce tomorrow becomes, in its presence, available both today and tomorrow. When people complain of speculators driving up prices too high, they are often mistaken in that it is the central bank printing money which is responsible for the rise in prices. After all, the central bank cannot tell lenders what to do with the money once it is created, and often they will use it to buy and hold commodities. Either an increase in the money supply is at fault, or there is an inordinate degree of speculation occurring, in which case the complainers are right and many speculators will fail.

When, as it is under our present banking system, money is not pushed into the economy by the central bank but pulled out of the central bank and into the economy by private bankers, the nature of speculation is somewhat altered. The pulling-in aspect of money creation is true as long as the central bank assumes its role as custodian of big banks’ liquidity needs, which it has, in the name of macroeconomic stability. Private banks may easily lend without having the reserves, and the central bank, fearing for economic stability, will provide them through OMOs or the discount window.

Speculation under a system of essentially private money creation is changed in that it may be somewhat self-affirming. The money used to buy commodities will essentially be the newest money created and so speculative activity in commodity X may be synonymous with raising the price level in commodity X; it may be somewhat self-affirming. This doesn’t mean that the general price level will raise solely due to steep price rises in commodity X. After the seller of commodity X gets paid, he will undoubtedly buy something else, something non-commodity X. So it’s not as though the price rises due to increased money supply will be solely represented in whatever commodity the first recipient of the new money chooses to speculate. There will of course be the subsequent recipients, whose buying actions will determine the rest of the price rises in the general price level.

This is important recognize because, in a stable money supply, the speculator’s actions will not influence whether they are correct or not. If he guesses that Corn will raise $X, he buys and holds, and he may be right or wrong. But under the Federal Reserve System, a speculator’s actions do have an influential effect on their own correctness. A speculator is lent money by a private bank, buys Corn guessing it will rise to $X, and his own purchasing decision, due to the fact that he is the recipient and user of the first new dollars, will influence the price movement in favor of his own prediction. Speculative action under private money creation can be self-affirming.

 I would describe this state of affairs, wherein money is created by private banks essentially pulling money out of the monopoly issuer and then used to speculate on commodities, as a negative for the later recipients of the new money and a positive for the speculators. I think that a system which benefits some at the expense of others must be called negative. What it means is that lenders and speculators can set the pace of inflation, instead of federal reserve chairmen, and it stands to reason that they will set the pace of inflation higher than the latter would have. The reason being that lending and speculating is very nice when the Fed covers you on all that you do and you know that you’re speculating with new money which has inflationary pressure on what you’re speculating in. A general conclusion from this is that our system of private banks pulling money out of the Fed is more inflationary than in a hypothetical system in which the Fed, without any discretionary power, targets a certain growth of CPI or GDP or something.

I think this is actually a very bad consequence of our banking system because it means that the growth of our money supply is determined by the rapacity of bankers and that much of that inflation will go into basic necessities like pork, corn, gas, oil, coffee, etc.



Positive Theory of Land Cycle

What is Land? –

The economic conception of land differs somewhat from the ordinary conception of land. In the latter, land means something like: the ground we stand on, or soil. In the former, land means all the space on earth, from the core to the reaches of the atmosphere. Land, as a concept, is a spatial one, meaning that one can not take soil from Oklahoma and dump it into the Gulf of Mexico to make an island and then say that one has ‘created land’. One has not done so. One has merely taken soil and improved a section of land in the Gulf of Mexico, the improvement being that humans can now stand there. Land includes things such as oil, coal, trees, etc. Land, in the economic sense, is all earthly space and things not made by man.

Land is Unique – 

Land has a combination of qualities which make it unique from other goods. Those are: non-producability, absolute immobility, infungibility and unavoidable necessity. It is non-producable in that no man can combine his labor and capital to produce more of it. It is immobile in that no man can transport one site to another site. It is infungible in that each plot of land is unique because of its unique array distances from other plots of land. It is unavoidably necessary in that no man can combine labor and capital to produce something without also having land. There must be a location for every productive endeavor. As we will see, the difference between land and all other goods has important implications for how the price of land will respond to certain actions in the market.

Land is Unique from other Fixed-Supply Resources – 

Land, as an economic good, is distinct from other natural resources, resources which can’t be created by man, for a few important reasons. This is an important point, as geo-critics will invariably point to oil or natural gas and ask why the same cyclical phenomena do not occur therein. Firstly, oil and natural gases are types of energy, which is substitutable. If the prices of oil or natural gas rise too much, producers will be compelled to switch to different forms of energy. When the prices o land rise, producers must make the decision to either produce or not produce, seeing as land, as an unavoidably necessary factor production, can’t be substituted. Secondly, as land cannot be moved, geographical arbitrage is impossible. If there is an oil shortage in Greece and a glut in Norway, brokers can resolve this issue by buying in the latter and selling in the former. If there is a land shortage in Germany and a land glut in China, brokers can not resolve this by buying in the latter and selling in the former.

Behavior of Land Prices –

Owing to the characteristics explained above, particularly to land’s immobility, the price of land has a peculiar reaction to ordinary market phenomena. If a plot of land is located next to an excellent public school or hospital, it will have a higher site value than a plot of land located far from said services. This is because one cannot bring the plot which is far closer to said services. There is a cost implied: the cost of transporting oneself to local services. If, for example, a railroad is constructed and runs through a town, the land values of the town will rise. Those plots of land closest to the train station will have the strongest rises in value and those further from the train station will have weaker rises in value. The value of land is determined by the things which surround it, which can also simply be highly valuable land. Boost the value of a plot of land, the value of nearby plots will also rise due to their proximity.

Impetuses for Land Cycles – 

Land Cycles are initiated by events in the marketplace which serve to boost land values in the way that Austrian Malinvestment Cycles are initiated by events which create a lengthy expansion of credit. The boost in land values will invite an episode of land speculation which will result in a lowered rate of investment, banking instability and consequent bust. Such events can be public works projects, like dams or railroads, or inflationary episodes, like a long series of weighty sessions of Open Market Operations by the Federal Reserve Bank. In the former, the cycle will be local, as the land values will only rise in the area around those public works. In the latter, the land cycle can be in just one place, if all speculators miraculously and telepathically agree on one locality. It is more likely, however, that the land cycle will occur in real estate hot-spots throughout the country being effected by the inflationary episode. The relationship between these two cycles brings us to a necessary but short aside.

Effects of Credit Expansion on Land Values – 

When Central Bankers expand credit in the hopes that this new abundance of credit will go into investment, they are often deluding themselves. Expanding credit means a higher price level generally, and speculators operate on the anticipation that a certain commodity will rise in price in the future. Since credit expansion necessitates higher prices in general, much of the credit following such an expansion will go into speculation in general. In this regard, speculation on printed money is something of a self-fulfilling prophecy: speculators use the new money, which they anticipate will push up commodity prices, to push up commodity prices themselves. Indeed, inflationary episodes will likely invite speculation even from those who are inexperienced and, sending commodity prices higher than the new inflation warrants, necessitate a snap-back therein. Ludwig von Mises noted the effects of inflation on speculative activity in his Theory on Money and Credit (1953):

Yet it must be noticed that speculation has a peculiar effect in the case of a currency whose progressive depreciation is to be expected while it is impossible to foresee when the depreciation will stop, if at all. While, in general, speculation reduces the gap between the highest and lowest prices without altering the average price-level, here, where the movement will presumably continue in the same direction, this naturally can not be the case. The effect of speculation here is to permit the fluctuation, which would otherwise proceed more uniformly, to proceed by fits and starts with the interposition of pauses. If foreign-exchange rates begin to rise, then, to those speculators who buy in accordance with their own view of the circumstances, are added large numbers of outsiders. These camp-followers strengthen the movement started by the few that trust to an independent opinion and send it farther than it would have gone under the influence of the expert professional speculators alone. For the reaction cannot set in so quickly and effectively as usual. Of course, it is the general assumption that the depreciation of money will go still farther.
There are two types of speculators: those who speculate professionally and those who are merely seeking to ride the upward curve of a stock chart. Those belonging to the former group are experienced with the commodity they deal in. They understand the fundamentals and history of the market and so they are relatively good at what they do. Those belonging to the latter group are inexperienced, by nature, with the commodity they are speculating in. They merely see a steep price movement and wish to buy while the price is still rising and sell before it tapers off. The former envision the world in real terms, the latter envision the world in graphical terms. Mises is saying that more of the latter will follow the former in their endeavors during times of inflation and will carry the price to an incorrectly high measure. The ‘camp-followers’ will have to take losses in that event.

Secondly, and perhaps more significantly, speculators following an inflationary episode will inordinately be attracted to commodities which are nearly or totally invaluable to the new projects which are spurred on by cheapened credit. Oil and land for example, are basically unavoidable as factors of production for companies which seek to take advantage of the new credit cheapness. Speculators then, will anticipate that the new projects’ expenditures will go into land and oil, thus boosting the price, and will buy land and oil themselves. Although this credit-induced speculation in oil is obnoxious to entrepreneurs and doesn’t perform its normal social function under the non-inflationary conditions where the market rate is the natural rate (seeing as the price mechanism is distorted by purchasing power from-thin-air), the harms can be mitigated. Oil companies can increase their own rates of extraction or release reserves, seeing as oil companies neither ordinarily operate at max capacity nor operate at zero inventory.

As we have established that inordinate land speculation attends inflationary episodes, that stimulus which causes an Austrian Malinvestment Cycle, we will develop the theory of the Land Cycle independent of inflationary episodes, so as not to confuse Geoist and Austrian-described phenomena with each other. After doing so, economists and Austrians specifically would do well to devote some attention to the Land Cycle issue if they are concerned with the effects of central banking on national economic stability. Because widespread unsuccessful land speculation is attendant to the same causal factor which capital malinvestment is attendant to, Austrians must either refute the notion of a Land Cycle or incorporate it into their own theory; a theory of the business cycle which points to episodes of credit expansion as the causal factor yet neglects to explain its relationship to land speculation is incomplete. Such a theory which combines Geoist and Austrian perspectives on cycles cannot explain where and how exactly simultaneous land speculation and capital malinvestment cycles will interact, though it is predictable that the strongest episodes of land speculation will attend those areas which appear to be ‘booming’ the strongest. In other words, it is likely that the Geoist and Austrian cycles operate more or less on top of each other, making it difficult to tell them apart. The Land Cycle is not, however, relevant only to those who indict central banking as the culprit. Those who propose public spending projects must also make themselves aware of the unintended consequences which attend such a value-boosting action. This includes proponents of large-scale infrastructure spending. 

The Local Theory of the Land Cycle – 

Let us say that there is a railroad under construction which will run through a town called Barney. The future prices of the plots of land in Barney have risen. Land speculators will buy up plots of land closest to the point of access to the railroad, as those plots of land closest to the point of access will rise the most when construction is complete. The initial sellers of land, those selling to the initial speculators, will likely not sell for pre-railroad prices. It is likely that they will sell the land for its pre-railroad price plus whatever value they believe the finalized railroad will give to the plot. This action of the initial speculators pushes up the values of the adjacent plots, so that the present prices of the plots of land in Barney have risen too. Land values in Barney have, as of now (T=1), risen both due to the railroad and to the speculative activity.

This initial activity encourages additional speculators. As noted before, amateurish speculators follow professional speculators when sharp spikes in price occur. Secondary speculators buy up plots of land further from the value-boosting phenomenon. Would-be buyers at this point will become priced out of the market (the asking price of land will be higher than their maximum buying price) despite the fact that land prices are still rising. How is this possible? This is possible because speculators are still coming into the market. In this case we distinguish between buyers and speculators, despite the fact that both of them buy. The difference between them here being the fact that buyers intend to buy and employ, whereas speculators intend to buy, hold, and sell. If we consider a sale of a good, the transaction is finalized when the buyer has paid the seller the asking price. If a speculator is intermediating in this transaction, acting as the effective time discount, then the transaction is opened when the speculator buys from the transaction is closed when the speculator sells to the buyer. That is, assuming that there will remain a buyer with a high enough maximum buying price to effectively close the transaction.

Why does the author then say, that land speculation is a special case, wherein there is likely to be far more failure among speculators than there usually is in other speculative episodes in other commodities?

Problems in Land, Failure, and Speculation – 

Speculation plays a social function in market economies to which its critics rarely give credit. Though the speculator may nakedly only care for the monetary gains of arbitrage, his self-interest will guide resources along the temporal axis (through time) to their most strongly expressed requests. The essence of the speculative function is to balance out shocks of demand and supply. When a speculator successfully buys pork today and sells next year, anticipating that it will be much pricier in a year, he takes pork from a place where its scarcity is not so harshly felt (that is today) and sells it to a place where its scarcity is much more harshly felt (that is next year). He makes markets normal and predictable. If he is unsuccessful, he has not played any more of a social function than an entrepreneur whose enterprise has failed. Just as bad entrepreneurs are kept to a minimum in markets because they are outcompeted by good entrepreneurs, bad speculators are kept to a minimum in markets because they are outcompeted by good speculators. There are a few assumptions necessary for this to be true, such as a banking system which doesn’t tolerate unilateral expansions of credit and a strong deterrent to land speculation, such as communal collection of land values.

Land is a difficult exception to the general functionality of speculation. Successful land speculation does indeed allocate resources to their most valued uses throughout time, but there are other effects which are detrimental. The only effect relevant for our immediate purposes is that land lacks a proper mechanism for warning speculators not to enter the market.

To understand why, we will look at the normal warning mechanism intrinsic to all other speculative incidences. Let’s take the example of corn. At the current going price, there are 10 willing sellers and 5 sellers whose minimum selling price is higher than the current going price. There is a sudden burst of demand for corn, as a new type of machinery makes its employment more gainful. The new demand pushes the price higher than the minimum selling prices of the first 2 would-be sellers. In addition, the new demand invites competition into the corn market and a new seller joins the market. There are then 13 sellers and 3 would-be sellers. The new competition in the corn market means that the upward price movement is not so drastic as it would have been had there not been any new competition. As demand pushes the price of a good up, would-be sellers are induced to sell and entrepreneurs are induced to start their own enterprises in these newly pricey goods. The last 3 would-be sellers do not manage to sell. In industries where increased demand breeds increased production, withholding a product in the hopes that consumers will pay an even higher price is counter-productive because new competitors who are willing to sell for less will enter the market and satisfy consumer needs before they are willing to pay the price of the withholder. If the price moves up again, the market will become more competitive as more market agents try to outdo each other in satisfying consumer demand. See fig. 1

Now let’s take the example of land. At the current going price, there are 10 willing sellers and 5 would-be sellers with a minimum selling price lower than the current going price. There is a sudden local burst of demand for land, as a railroad project is underway and speculators anticipate higher land prices. The new demand pushes the prices higher than the minimum selling prices of the first 2 would-be sellers. There are now 12 sellers and 3 would-be sellers. New competitors, however, do not enter because land cannot be produced. The amount of land for sale is exactly the same as before and will be exactly the same as before the new heightened demand. Should the demand continue to rise, remaining sellers of land can withhold from selling and asking prices will follow the shape of an exponential curve. There will be no one to undercut the last sellers of land, so they can charge kingly prices as long as there is a willing buyer. See fig. 2

In the example of corn, those last 3 would-be sellers were not able to sell their stocks of corn because there was no one in the pool of would-be buyers who had a maximum buying price as high as their minimum selling prices. The the reason that another would-be buyer was able buy, was because a new person with a lower minimum selling price introduced himself to the market. Would-be buyers do not have to alter their preference scales and change their maximum buying prices, because new competitors, to a certain extent, will enter into the market. In a mechanistic sense, whenever goods can be produced, a heightened demand will be met with a heightened supply after a period of time and a new equilibrium will be reached at a higher price.

In the example of land, however, there is not any mechanism which will serve to flatten out the price movement. There are no new competitors who can slow down the upward price movement. This is important because a graph of local price movements will look very bullish. It will look as though it can only go up. Speculators will be enticed by this, thinking that the bull market is not over, because, after all, in all other industries, there is the mechanism of new firms being introduced to increase the supply and slow the upward price movement. The slowing of the upward price movement is an essential signal to would-be speculators that market for said commodity is rapidly approaching a state of affairs in which the maximum currently possible amount of buyers are buying from the maximum currently possible amount of sellers. Equilibrium in another word. When this signal is absent, as it will be in land speculation incidences, there is no effective red light for speculators. They will only stop entering into the game once the first speculators begin to finalize the transactions between seller and buyer and the upward pressure on prices is relieved. By this time, it will be too late to decide to not buy and hold, as many speculators will have already decided to do so.

The primary speculators will be the only people who manage to successfully buy, hold and sell. By the time they choose to sell their plots, the amount of willing buyers remaining in the pool is only a fraction of what it was before the speculative flurry. The only ones remaining are those willing to pay for the highest quality plots which are necessarily those closest to the railroad station, the first ones bought up. After the primary speculators sell off their plots to the few willing buyers remaining, there exists a situation in the land market, where there are many sellers with a minimum selling price far above all of the maximum buying prices of would-be buyers. These failed speculators, those were never given a signal not to buy and hold, will have to sell for a loss on their speculations and, in many cases, default on their loans. This mass incidence of loan default may lead to local bank panics or bank failures.

Fig 1. Market Response to Heightened Demand in Corn 

Fig 2. Market Response to Heightened Demand in Land

Problems in Successful Land Speculation – 

Although the author would not declare outright that land speculation is a social ill, there are certain detriments that follow. Whether the disadvantages outweigh the advantages, we won’t say. That said, when the disadvantages of successful land speculation are considered in combination with the disadvantages of unsuccessful speculation, successful speculation is a fuel to the fire of instability caused by the latter. The problems of successful land speculation are as follows:

Expanded Margin of Production – When speculators decide to buy and hold land, local producers, must go further from the value-boosting phenomenon, which is in many cases in the center of town. Producers often have to seek plots further away from the center of town, which is where they would have ideally situated themselves. The consequences of an expansion of the margin of production is that less of the total product of labor, capital and land goes to wages and capital and more of it goes to rent.

Barrier to Entry on Producers – Should a producer decide to buy at the asking price of the speculators in order to have a plot of land near the railroad station or center of town, he has spent that much more on land and that much less on labor and capital. Then he can’t afford to employ as much labor and capital as he would have. Instead he spent a lot of money for a piece of land, which helps only the speculator, who does not contrive to engage in productive activity proper, only buying and reselling.

Tenancy Rent Heightens – Due to the inordinate speculation, expanded margin of production and the public work which was the causal factor in this series of phenomena (not speculation), tenancy costs will become higher as land values become higher and land lords can ask for more monthly rent without suffering a narrower customer base. This means less consumable income for local tenants.

These factors which hamper investment and decrease aggregate demand are already bad enough to cause a local business slowdown in the form of higher unemployment. When they are combined with the string of defaults originating in land speculation they converge to cause a local bust. The plots of failed speculation must be resold at much lower prices and land values in general must be allowed to come down. After this has been allowed to happen, then a recovery can start to take place. Businesses can then begin construction affordably, private debt has been cleared and tenants have more consumable income to thicken consumption goods markets. If land values are not allowed to clear, then the town will recover but painfully as business expansion and tenancy remain artificially costly.

Geo-Austrian Synthesis – 

The Geo-Austrian Business Cycle Theory, which basically predicts that capital malinvestment and land speculation necessarily follow prolonged episodes of unilateral credit expansion and necessarily result in the classic and famed boom-and-bust of capitalism, has a greater explanatory power of economic cycles. Rothbard’s famed critique of George ought not to necessitate the banishment of Geoclassical concepts within the libertarian community.

There’s more to be written here on the construction industry as a link between Austrian and Geoclassical concepts, but I haven’t gotten around to it.


It is true that there is a difference between the policy prescriptions of a gold standard and of free banking. In a gold standard, the government defines currency as gold or as notes redeemable therefor. A gold standard government would not accept a tax payment of any note not representing a claim to gold (be that corn, silver, cows or land). Any note not accepted for taxes would have a crippling disadvantage and would likely not circulate, seeing as individuals would not likely want to hold it for any significant length of time. The implication of this point is that a gold standard subsidizes the value of gold as money to the expense of any other commodity which might back circulating notes. The godfather of the developed version of mutual banking, William Batchelder Greene, acknowledged fully that mutual bank notes (credit backed by land, buildings, or labor) would depend on a unit of account, whose role could only be fulfilled by money. He acknowledged mutual bank credit as a non-money item, as a facilitator of credit and complement to money. Here is the passage

The reasons for this are clear, labor, buildings and land do not suit any of the attributes of money; they are not money-ish. They are not (for the most part) transportable, standardized, and most importantly they are not as marketable as money. W.B. Greene did not aspire to convince men that houses were money or that land was transportable. His position laid in advocating breaking the state’s money monopoly so that people could form associations in which they pledged their land, houses, and labor to a mutually owned and beneficial lending institution. This would increase their access to credit and the interest rate of the mutual bank would only be as much as was necessary to cover the costs of running it. It seems to us a panacea! An abolition of usury! The ultimate instrument of liberation!

Almost. It’s a nice idea and a useful one too, but there remain flaws. P.J. Proudhon’s platform, as cited by Greene, was that the Bank of France be converted to a Mutual Bank. Seeing as this is utterly unrealistic and statist in conception (highly uncharacteristic coming from Proudhon) Greene proposed differently. He supported private individuals coming together out from underneath legislation and forming their own Mutual Banks. If Proudhon’s idea could be pulled through and all were required to accept Mutual Bank notes on par with real money, then of course the money would circulate well. It would also, in all likelihood, become prone to attracting bad debtors and creditors and accepting them without caution, as there would legally be no consequence. That is, until Mutual Bank notes would start to be replaced by more reliable money by more wary economic actors.

When Mutual Bank notes are not enforced at par, as with W.B. Greene, there is much more incentive for bank managers to be more discriminating in who they accept. But there is then the problem of getting everyone to join the Mutual Bank. Some might oppose it, those who already have ample capital at hand and don’t which to spur competition. Conceivably, the addition of their capital to the mutual banking pool and access to zero-interest credit might well be less beneficial, from said individual’s point of view, than abstaining from association and thus nipping-at-the-bud whatever competition in industry would have been spurred by cheap credit. Whatever established capital interests there would be in society during the time of the Mutual Bank’s founding would not likely want to take part in it, as it would enable a growth in competition. There is also the point that Mutual Bank notes would not likely circulate at par with gold or silver, seeing as they’re not money and the redemption of the note would leave one with a highly illiquid asset. Even if many people did not accept Mutual Bank notes at par with actual money, there’s no reason to suppose that it couldn’t circulate. The difference would be that purveyors of capital might add a markup on the price of their wares should the buyer be paying in non-money notes. Mutual Banking, as envisioned by Greene, is an institution complementary to gold and silver money. As Greene believed, and rightly so, that the non-scarce assets to be pledged at a Mutual Bank are not nearly moneyish to be money, that Mutual Banks ought only to issue large bills, so as to interfere as little as possible with actual money’s role as a unit of account and medium of exchange. Simply put, Mutual Banking can exist alongside money as a credit institution; metals are money and other stuff is credit.

And lastly, is Mutual Banking inflationary? It’s kind of a strange topic and the answer not immediately obvious. The source of inflation is too much paper pushing around too many goods – fiduciary media, a money substitute that is nonconvertible for whatever lies in the warehouse despite the claim on the note. Is a Mutual Bank note fiduciary media? No it is not, it is backed up by the house and land which was used to join into the association. So it cannot be a source of inflation as Austrians would think it to be, but this is qualified. If a Mutual Bank sprung up tomorrow and thousands of landed persons pledged into the association and the bank was then able to issue credit, there certainly would be an upward push on the price level. Why? Because there would be notes circulating for something that was never considered as appropriate collateral for credit. It would not be money pushing up prices, but new credit. As the economy would not be accustomed to the new source of credit there would be inflation. But once this initial adjustment period has passed, in which the price level is able to ‘acknowledge’ new forms of credit, Mutual Banking will not be a source of inflation. This is because every new addition to the capital pool at the bank must be backed by new goods. It would be a net zero effect on the price level, as every new note could be redeemable for that which has just been produced to warrant it’s production (be it a well constructed house, barn, or a potato garden).


If you disagree or can poke holes, please comment, as I believe this is rather strange territory for political economy.


In the previous posts on land ownership we surveyed the three most popular, to my mind, solutions to ‘the land problem’. The Tucker Standard (ownership of land based on possession and use) was deemed more satisfactory insofar as it is less prohibitive of individual liberty and does address the land question. The Land Tax is in all probability a better facilitator of the socialization of ground-rent, which we see to be a positive as property in land is a zero-sum game. What one owns another can not; land can never be produced; capitalism does not alleviate this scarcity, does not enlarge the social wealth-pie as it does in all other cases. But if the Land Tax does socialize ground-rent totally, then why should it seem to be a less desirable policy than a Tucker Standard?

The Land Tax is one of those taxes which is inescapable. Any person living in a society of Land Taxation can find no relief from the door-knocking of bureaucrats. Such taxes, inescapable taxes, are the most vulgar, as there is absolutely no element of voluntarism in their payment. Whether it is the land under your feet, the product you obtain, or the labor and capital which you employ, taxation is a vulgar and base molestation of the individual. Though taxation is everywhere a molestation, there are those kinds which seem less offensive. Those types would be sales taxes, luxury taxes, tariffs, user-fees and the like. Under a tax system based solely off of tariffs, a citizen may well head off to the woods to live a life of autarky and asceticism. Under a tax system based on the former totalizing and intrusive measures, a state would, theoretically, send a tax-collector out after our brave pioneer to make sure that the land under his feet or the shovel in his hand had not escaped its own rapacity. Even if there are economic reasons to prefer, say, a progressive consumption tax, such a measure would require the establishment of an IRS like institution to collect, inspect, stratify, and, in all probability, invite loopholes. Though a progressive consumption tax may encourage positive growth in investment, and though a sales tax may well be passed onto the consumer much more easily, one is more respectful of individual sovereignty. The former charters a human being onto a ledger so he can be measured and inspected. The latter only requires that he be molested for the duration of the exchange, and should he choose not to buy such taxed goods he would not be molested at all. The Tucker Standard does not molest because it is not a tax, it merely says what is and what isn’t property.

If something is not property, then it follows that it cannot be traded. If something isn’t owned it is impossible to trade a claim thereto. The Tucker Standard then seems to be a sufficiently potent remedy to the ills of land speculation, whose social harms are enthusiastically pointed out by Georgists. The Georgist position on land speculation is that: any unused land under the possession of a taxpayer would be a liability. The rent of the land would be taken in taxation and the taxpayer would be wasting his time and everyone else’s simply holding onto it idly. It follows that none will trade land as a commodity under Land Taxation because it would only yield fruits when mixed with labor and/or capital. Everything born of rent would be taken. The Tuckerite position follows in a similar yet simpler fashion: what is not owned simply is not traded. Would there be scenarios in which a land owner would want to sell his land? Of course. But speculation would be effectively abolished as plots of land would not be used as so many slips of paper passed around. A title to land would mean nothing unless it were actively being used, and a motion to sell in that case is not speculation at all but merely one man selling his own land.

Let the above bits of reasoning direct us toward the Tucker Standard. It makes land available, as does the Land Tax, but it does not punish one for owning land. It abolishes land speculation, as does the Land Tax, but rather than punish the speculator it preempts him. It is compatible with the free choices of free men, which cannot be said as easily for Land Taxation. George’s remedy was clear, direct, doable and potent. Despite all of those virtues as an admirable answer to a grave social ill, it is nonetheless a totalizing system barely any worse than an income tax. It’s institution necessitates a bureaucracy of tax-sniffers and the paranoia which free men must feel standing upon rented land. Tucker’s proposition is also clear, direct, doable and potent. It is also a beautiful preservation of individual liberty, fully compatible with stateless governance. Perhaps it may not socialize ground-rents totally and perhaps it does not make labor and capital, the only man-made producer’s goods, the sole recipients of productivity rewards. These are all afterthoughts, however, when we consider that liberty is the mother, not the daughter, of order. To take socialization of ground-rents as the highest achievement of political dreamers would be to miss the forest for the trees. It would simultaneously necessitate a tax bureaucracy and a powerfully funded state. It would necessitate the intrusion into the lives of free men. There are other alternatives and no matter their imperfections (and what is perfection besides a central planners highest ambition) they take almost as much of the good without taking any of the bad.


Inflation decreases the real return on savings for people. Deposit accounts are less fruitful and even stock portfolios do little better than keep pace with inflation, which is hardly fair considering the risk difference. We saw in the last post that the effect of inflation which impels people to switch their savings out of bank accounts and into stock portfolios is an indirect subsidy to Blue Chip companies. We now observe another indirect and undesirable effect of steady inflation: a heightening of societal time preference, that is, the desire to consume more of one’s income. We see that this is bad because of what we understand about the capital structure, that a higher rate of consumption today will mean a lesser stock of goods in the future in comparison with a scenario in which the rate of consumption was lower. Said another way, lower consumption means economic growth and an increase in general wealth, and inflation grinds against this healthy process.

As inflation decreases the real return on savings, because it makes deposit accounts a negative return and stock portfolios a shaky positive return, people will be less inclined to save their money. Some might see a way out of this situation and put their money in metals or land, but most are inclined to follow the beaten path and, if they are not going to save the money, they might as well spend it. This means that for that money which is pushed into the supply of loanable funds unilaterally via the Federal Reserve System, one should expect some money to come out of that supply via the decisions of independently acting people. If those individual retractions outweigh the money ‘pushed in’ by the FRS into the supply of loanable funds, then one ought to expect a shortening of the capital structure. A boom-bust cycle would exacerbate this effect, as much capital is both consumed and misallocated during the boom phase. Some capital is consumed because nominal incomes rise with the onset of a boom, and many increase their spending with the rising income, despite those incomes being unsustainable and destined for alteration during/after the bust. That capital which is misallocated is that which was directed to ventures for which the demand did not exist when savings equaled investment, when prices were indicative of real scarcity and not, ostensibly, washed away by an artificial credit flood.

This seems to us very dangerous, that constant inflation may lead to periods of time in which the capital structure is actually shortening, and the future supply of goods will actually be lesser. To think otherwise, we would have to be leaning on the millions of individuals to act against their own economic interests. Some may say that this is not unreasonable. Perhaps that is true with complicated contracts or insurance agreements, but I doubt that most people cannot simply do the math on the returns of their savings to find out that it’s not paying off anymore. Inflation, in this sense, can cause the masses to ‘go Galt’, however ridiculous that might sound, by neglecting to feed their own economy the credit it needs to grow. That Keynesian notion of bringing bread out of a stone, boosting investment above savings, consistently applied, brings about an opposite consequence.



Economic interventionism is a self-defeating policy. The individual measures that it applies do not achieve the results sought.

-Ludwig von Mises, Bureaucracy



Many leftists today will complain about the materialistic state of society, in which people get satisfaction from buying stuff, rather than doing things. The finger might be pointed at the megacorporations such as Viacom which spend more money on advertising than their actual product (citation needed). It might also be pointed at an institution, fortified to the point of invisibility, directing all human motives in society, which changes the value of future money. Changes in the value of money change all economic calculations. The decision to spend or not, regardless of which brand, is fundamentally altered by inflation-flows. The quantity of consumer spending is affected by inflation. In fact, pundits, propagandists and newspaper columnists alike agree that boosting aggregate demand would be a sure step to economic prosperity. This clip of Peter Schiff on a mainstream pop-econ program, I find, is a disturbing presentation of what common thought on the economy really is: http://www.youtube.com/watch?v=zZSdTPox5OE. The claim is that our economy requires consumer-credit is just sad. The ideology of aggregate demand has completely saturated our society, and we are left with the mushy apples of shortening capital structure (as all of this consumer credit is dissaving), consumers sunk into debt on things they don’t need, and people actually behaving as though consumption is the end-all of life. The last is not an economic point, but rather a sociological one.

Economic factors can have sociological effects, and telling people that spending their hard-earned on pleasantries, rather than preparing for the future, is good for the economy, removes some of the virtuous inhibitions they may have had towards buying satisfaction. There was a time in history, when the most respected thinkers of society held that abstention from the shallow pleasures of material was virtuous. That doing instead of laying and watching was conducive to character. Now it is imperative that we keep up the spending, borrow if you have to! Our economy will crash without your hedonistic contributions!

 Something occurred to me the other day: does the bagel store down the street show up in the S&P 500? Of course it doesn’t. But is it paying interest payments on the new oven it installed last week? Of course it is. Can people afford to put all of what they don’t consume of their income into a savings deposit, like they used to in the good old days? Of course they can’t. Inflation will outpace them, and they will have suffered an unsatisfactory return or maybe even real losses. Thus, the common avenue of savings is shifting from bank accounts into stock market portfolios, as inflation outpaces rates in savings accounts by miles. As the supply of loanable funds decreases in favor of stock market portfolios, the shape of the economy begins to change. Those resources that originally would have been employed in businesses taking loans from local bank branches now go towards ‘Blue Chip’ stocks. Said in another way, a tertiary effect of long-term inflation targeting is to subsidize large name-brand corporations by encouraging savings away from bank loans and onto the stock market, where the biggest boys are the ones who are visible. Businesses which would have benefited from an increase in the supply of loanable, those which might have been seeking to expand, are disadvantaged by this tendency. Instead capital is redirected onto the big businesses on the stock market, even though their intentions to make an expansionary move weren’t communicated through taking out a loan from the bank, seeing as a company can indeed expand its profits by shrinking its operations.

Financial Consolidation: Part 2


In the first part of this analysis, we looked at how the government’s counter-cyclical policies will disadvantage small banks to large ones, leaving them out of the liquidity-and-Cantillon party and vulnerable to buyouts or disadvantageous emergency-credit agreements with the bigger banks. The implications of this, are that, insofar as the government continues its policies, the more boom-bust cycles there are the less competition there will be in the banking sector.


It is not even necessary, however, that a boom-bust cycle precipitate in order that politically-connected banks should gain a strategic position in the market. This happens without such disorderly events. Though the express function of central banking the world over is to maintain macroeconomic stability, it does much more than that. In a different word, much other than that.


The largest ten financial institution’s in the US today control 54% of the market. The largest hundred financial institutions in the US control 82% of the market.1 Here is a handy chart of the mergers over the past few years: http://www.motherjones.com/files/images/big-bank-theory-chart.jpg. You will notice that many of the large mergers on this chart occurred between 2001 and 2002, when the Federal Reserve struck the discount rate down to 1% and held it there for a few years. And then you notice also that there are some other juicy mergers after the 2008 crisis and the subsequent liquidity provisions. Eh, what the hell. The financial sector ever since the 80’s has been positively ballooning and consolidation has come along with it.


How is this possible? What can explain it? The author has an explanation in mind: a constant campaign of bank-protectionism and debt-cheapening. The Fed follows the banks’ lead and expands to provide reserves underneath their lending activity. World debt has exploded over the last two decades, as this link will corroborate: http://tinylink.net/82692. That’s right, 1.2 Quadrillion. But none of it is for sure, as such activity is counted as off-balance-sheet assets/liabilities. How does this help banks? They can expand credit indefinitely and also take on massive debts themselves. With the massive debt they accumulate they can be dominant in markets and they needn’t worry about returning it, as debt is constantly cheapened. Their commoner-customers get no such luck, as many of them are signed onto adjustable-rate policies or their policies were adjusted for inflation from the beginning. “Isn’t cheapening debt good though?” asks the concerned. Only if one adheres to the typical narrative of debt – that the usurer is oppressing the borrower. That may have been an accurate description of affairs in earlier times, but the roles have been switched in the new paradigm of central banking. As Mises notes:



The devaluation, say its champions, reduces the burden of debts. This is certainly true. It favors debtors at the expense of creditors. In the eyes of those who still have not learned that under modern conditions the creditors must not be identified with the rich not the debtors with the poor, this is beneficial. The actual effect is that the indebted owners of real estate and farm land and the shareholders of indebted corporations reap gains at the expense of the majority of people whose savings are invested in bonds, debentures, savings-bank deposits, and insurance policies.”

-Ludwig von Mises, Human Action, page 792

In summary, it is the large and powerful forces of society, in disagreement with our intuitions, who are the primary beneficiaries of debt-cheapening and it is the fixed-income and frugal, risk-averse people who are most punished. Casino capitalism is mandatory for all: savings deposits are no longer satisfactory alleys for abstention from consumption. One must now go onto the stock market to keep pace with the flow of dollars, putting many risk averse people in uncomfortable situations.

The current state of affairs looks like welfare for the powerful and austerity for the small. Regular people suffer underneath oligopolistic banking institution’s while those banks enjoy a bountiful stream of liquidity / reserve provisions from the central bank, all in the name of macroeconomic stability. But of course there’s nothing unstable about massive private debt accumulation and publicly shared losses.

One last thing: The Boskin Commission. The Fed targets a certain inflation rate, right? Usually around 3% is enough to smooth out price-stickiness correct? The measure of inflation was altered in the 90’s under Alan Greenspan’s purview. The methods of recording CPI were altered so as dampen the visibility of real inflation.


See here: http://en.wikipedia.org/wiki/Boskin_Commission


The two pillars of the Boskin Commission are Hedonic Adjustments and Substitution Biases. The rationale of the former is that real prices need to be discounted for quality increases. So the Bureau of Labor Statistics will replace the actually recorded price with a price ‘discounted’ for quality increases. So because computers have increased in quality since 1990 but their price has risen also, the CPI must be discounted in order to account for the quality changes. The rationale of the latter is that consumers will choose different products based on their price fluctuations. If a person sees that steak has gotten more expensive, then he will switch over to hamburger for a while. But of course it’s not important to note that steak has gotten more expensive, for some reason! Oh, and Hedonic Adjustments do not account for such quality decreases.


Shadowstats blogger John Williams estimates that the Boskin Commission conceals 2-3% points on the CPI. He runs a popular blog which compiles government econometrics according to today’s methods, yesterday’s methods and yesteryear’s methods. The difference between the Boskin Commission and that method before that also seems to be about 2-3% points. If we are to believe John Williams’ figures, then it would seem that the financial system requires evermore everfaster.





1 http://www.federalreserve.gov/pubs/bulletin/2009/pdf/bankprofits09.pdf

Libertarian Land Rights: Rothbard v. Tucker v. George


Libertarians and Common Goods: Part 3

So in the last, we discussed homesteading v. surveying and selling, and ended on the multiple property ethics within the libertarian tent, that is the Rothbardian, Tuckerite, and Georgist ethics. Here are the basic tenets: The Rothbardian declares that when land is homesteaded it is absolutely property. The Tuckerite declares that when land is homesteaded it is property insofar as the homesteader continues to use the land. The Georgist declares that any type of land-property must offer the value of the land-rent to the community, seeing as land-rent is produced not by the one laboring the plot but all those around him improving the area.

It seemed that, had the Rothbardian ethic been instituted since the dawn of man, natural resources of fixed supply would probably not have been monopolized, and if they had been, the areas around them would probably not have become very populated. But now that such resources of fixed supply have been crystallized into private property, there is nothing in the Rothbardian ethic which could help to break up a water monopoly. What is meant is this: a wealthy man may, in total accordance with Rothbardian ethics, buy up a water utility (or buy up all the small properties which constitute the source of a water utility) and charge a kingly rate and extort the public. Only the painful and gradual emigration from the area would even things out. This applies to land as well. A wealthy man may buy all the land surrounding a growing city for speculative purposes and the rent of the city will rise and its tenant-citizens become poorer.* Some libertarians may not view this situation – normal people trapped under a kingly rate of a resource whose owner did nothing to produce it – as non-problematic. Or perhaps the folly of inter-subjective utility comparisons prevents us from declaring this an injustice.

The problem with the Rothbardian position on land is that it is most often developed via Locke’s theory of homesteading. That is, that land is just property when a man mixes his labor with it. But they all pass over Locke’s Proviso, which reads thusly:

Nor was this appropriation of any parcel of land, by improving it, any prejudice to any other man, since there was still enough and as good left, and more than the yet unprovided could use. So that, in effect, there was never the less left for others because of his enclosure for himself. For he that leaves as much as another can make use of does as good as take nothing at all. Nobody could think himself injured by the drinking of another man, though he took a good draught, who had a whole river of the same water left him to quench his thirst. And the case of land and water, where there is enough of both, is perfectly the same.

Second Treatise of Government, Chapter V, paragraph 33

Which implies that such a crystallization of land into property is just only when land and water of like quality to that being homesteaded abounds. This is a rather narrow condition to be met. It would be met on a planet of infinite arable land. On a planet of finite land, some arable some not, it remains to be seen what ‘enough’ actually is. Henry George pointed out that if a piece of land has rent, then there is not land of like quality available to others. Land ownership is indeed a zero-sum game. It does nothing to produce more of it and the improvement of production thereon actually hurts those who own none of it. If Locke did not himself believe (as many of his followers do) that land ownership was just until it met his condition, then what would he have preferred as a solution to the land question?

Many Georgists claim that they are the inheritors of the tradition of Classical Liberalism because they present as the centerpiece of their political philosophy a sophisticated response to the Land Question. That answer is this: the single tax, wherein all the state’s taxes are replaced by one tax which captures the entirety of the site value of each plot. Not the real estate value, but the value of the ground, the location of the plot. It is not a tax on improvement or residence, but on occupancy of land. It would effectively abolish land speculation. It’s also probably one of the best taxes: it can’t be passed on to consumers, it doesn’t penalize capital accumulation, investment, hard work, or consumption as many other taxes do. It is also the subject of much unfair criticism, much of which is unwarranted. To try to rebut each of the criticisms here in this article would be putting an article inside an article. And redundant. Mark Wadsworth of the UK’s Young People’s Party has already done so at his own blog.** Go read them and decide for yourself. It is an entire issue worthy of the reader’s attention.

(For those aren’t familiar with the Land Tax, here are some quick fixes: http://tinylink.net/23342 http://en.wikipedia.org/wiki/Progress_and_Poverty  http://www.progress.org/   http://cooperativeindividualism.org/)

Benjamin Tucker’s solution to the land problem went thusly: property in land is valid insofar as the owner actually uses the land. Land speculation would be effectively abolished by this measure. Many of the great estates and holdings would be broken up. The ease of acquiring land would greatly increase. Trying to homestead an entire lake under this scenario would be pointless, seeing as once the would-be monopolist settles down and builds his facility at one end of the lake, the other end would be open to homesteading again, since it is clear the would-be monopolist is not actually using that area but simply trying to prevent others from using it. Many libertarians object to this measure, saying that it would result in chaos and seizures based on arbitrary absences of owners. People homesteading other people’s houses while they’re at work. The author cannot say that these objections seriously weigh on his opinion of Tucker’s occupancy/use standard. For one, it only applies to land. Not capital or personal possessions. So there goes that story. Secondly, conventions arise. When there are problems, people usually try to solve them. I cannot help but be skeptical that no communities would ever develop generally consistent and applicable standards for the occupancy/use principle.

The author must conclude by stating his partiality towards one of these ethics above the other two. It seems that Tucker’s is the most attractive. It does not invite land and water monopolization and poverty of tenants as a Rothbardian ethic does. Admittedly, if everyone owned land, a Rothbardian ethic would be great. But that is not often the case, as one person’s land ownership can often impede the land acquisition of another. It does not invite the bureaucratic discretion and finagling or necessitate a state as Henry George’s does. It also allows one to live in absolute squalor, which Henry George’s does not (seeing as one must pay the land tax in order to live on the land, regardless of one’s work). The Tuckerite ethic seems to be the most consistent with the heart of libertarianism: the ability of a man to live freely, out from under masters, whether they be landlords, police, bureaucrats, or his voting neighbors. It smothers the economically undesirable effects of land speculation, makes land acquisition easier for all, thwarts the dreams of water and land monopolists (seeing as it decentralizes control over natural resources), taxes no one and necessitates no state. It would be conducive to the type of independent, self-reliant, and dignified common man who characterizes the American Mythos. As Benjamin Tucker said, referring to his own brand:

“Anarchists are simply unterrified Jeffersonians.”

*Some Rothbardians defend land speculation as merely an act of speculation in normal commodities. But a distinction must be drawn. When a speculator does what he does – buy commodities when their price is low and sell when their price is high – he flattens out price fluctuations. When a land speculator does what he does – buy land when the price is high and sell when the price is higher – he does nothing but prevent the land from being used and profit from the lowered productivity. As land is fixed in supply, the speculation does not relieve any price fluctuations – there’s never any more or less, and in the face of growing productivity and population, the price only goes up. Speculation is indeed a convenient outgrowth of the profit motive in capitalist societies, but only because it smooths out supply shocks. There are no supply shocks in land. Thus, we see that land speculation is rather pointless and detrimental for all who aren’t land speculators.