This reminds me of an episode of EconTalk, interviewing the author of the book Radical Markets, which includes new and radical ideas for how an economy could be run. One of the ideas is to allow anyone to buy a property at its set value at any time (giving a reasonable notice period, I presume). The property owner is the one who sets the value of the property. To stop property owners from gaming the system and pricing the property too high, all property owners would be required to pay a tax periodically on the value of their property. (Of course, the lower the price set, the more likely it is that the property will get bought, so the property owner can't set the price too low either.) The goal of this idea is to allow land to be used the most efficiently, the way the market is supposed to work for most goods. Of course, this idea has a lot of obvious drawbacks, but I thought it was an interesting thought to discuss.
- Podcast episode: http://www.econtalk.org/glen-weyl-on-radical-markets/
- Article from website of the book: http://radicalmarkets.com/chapters/property-is-monopoly/
Much like with third party job recruiters, there is just no possible way they won’t be subverted to disingenuously service the wishes of the wealthier party.
In addition to all this, just imagine all the horrible ways that wealthy people could inflict punitive damage on non-wealthy people. You pissed off the wrong person at work? You’re a journalist who wrote an unflattering piece about the politician? So you come home to find some consortium bought out the home you love, no traceable links back to the person who inflicted it on you, and the money involved was a pittance to them but a life-long nest egg for you that you desperately don’t want to have to convert into the purchase of a different home.
Every field or area of interest has this going on to some extent (e.g. techies wondering why others don't love configuring/tweaking tech as much as they do), I believe its called the false consensus effect: https://en.wikipedia.org/wiki/False_consensus_effect
Same with democracy.
This sounds like the latest in a long line of political theories and ideas cooked up by people who LOVE the game of voting about things and can't understand why others don't share that love. Basically, political wankery.
You have to do lots of things in society you don't like to have it run smoothly (for you and others) in what might be considered an egalitarian effort. Whenever you don't force it, pareto and bad actors end up capitalizing on the gaps. The western nations have relied on the populace's generous nature for long enough that information technology has given people a chance to see how sub-optimal it is. You now have competition between wants and don't cares, where the don't cares have been outmaneuvered into borderline poverty and below.
This similarity leads me to believe Glen Weyl is on to something.
It's a terrible system because a billionaire could come in and scoop up thousands of people's property for pennies (assuming they set their property price low because they can't afford tax when they set it higher).
It can work.
But, to your point: why shouldn’t people pay tax on the value of their property? If they can’t afford the tax, then obviously they can’t afford the house right? Prop 13 is already effectively a Ponzi scheme— actual tax cost is paid by future investors rather than the current investor. So if I buy a house today, my tax rate is x. Tomorrow, my tax rate is still x even if the actual cost of government and my home value has increased. So tomorrow’s buyer pays their tax plus the difference between my x and the actual tax required. Tomorrow’s buyer perpetually subsidizes yesterday’s buyer.
That isn’t fair at all.
I think there is a big difference between property owners who buy a house to live there, retire, hoping it appreciates in value, and people wealthy enough to buy a 2nd or 3rd house, or even a whole block. The later, would have no qualms selling them quickly if another opportunity arose. The first category of people will be a lot more risk averse. That's also one of the reason why the wealthy get wealthier, they don't have to worry about risk, and can easier jump from opportunity to opportunity.
Politicially, the optics of this for the elderly or others on fixed incomes would be terrible. Just imagine story after story showing sobbing old person removed from the area they lived in their whole life, “ripped away from family and neighbourhood ties” etc.
This would prevent both sniping in response to changing market conditions and exploitation of people who just failed to reevaluate value.
OTOH, it's still an annoying system and politically impossible: look at the national blowup a few years ago about one town exercising eminent domain for private development. Thid essentially is delegating the power of eminent domain to be exercised arbitrarily by every individual and business.
I must be misunderstanding something, this is how any free/mixed economy works, including in Canada and US. You may make the property owner an offer at anytime, and the owner sets the price by either accepting or rejecting an offer. The problem is the buyer can't just do anything with the property (like subdivide/build apartments) due to zoning laws.
Let's take a look at the rental market in Sacramento [1]. 2008 hits, and a single investment firm buys up 50,000 houses around the country, mostly in densely populated areas like Sacramento, and flips them into rental properties. In Sacramento county alone, they buy up 1500+ properties through a variety of subsidiary companies. (I'm suuuuure they price all their rentals competitively.)
And these guys aren't the only player in this game. Across California, as many as 25% of single family homes are being rented from institutional investors.
So now, let's give these guys the ability to buy any property they want, whenever they want, so long as they can come up with the cash for it. How will this play out?
a. They'll have far easier access to capital than you or I or any other unfortunate shmuck in this scenario, which means they'll be able to buy properties at much lower interest rates, lowering their overall cost to purchase.
b. They can then set the price to whatever they want for their market niche. They might rent the properties, set them up as vacation properties, or sell them back to upper-class buyers for a tidy profit. Or, heck, just let them lay vacant and wait for the market to creep upward, as is happening right now with foreign real estate investors all over the place. [2]
c. They'll have the ability to set higher prices because, for them, the increased tax costs will be covered by their increased profit margins, and they'll have the resources to find or purchase any tax code loopholes that will improve the situation even more for them. They'll also have an incentive to artificially inflate their property values because it'll make their portfolio look that much richer, which'll make it easier to secure even more investment, to buy even more property with.
d. Meanwhile, everyone who doesn't have a ton of money in the bank and a stellar line of credit gets kicked out of their house and forced into one of two situations: dense, expensive urban housing, or cheaper rural housing in economically depressed areas. In either case, these losers' purchasing power just evaporates.
e. The few people left deluded enough to believe they might not be poor someday have the lovely option of buying into this mess through companies like https://fundrise.com/. Of course, they're contributing to the problem by collectively giving lots of extra cash to the very people that are artificially inflating housing markets, but hey, at least you get 1 or 2% compounding out of it.
f. It at some point the peasants start getting noisy, they'll just contact their buddies at one of the three media conglomerates in the country and run some segments on how un-American it is to "redistribute" money (notably: it's only un-American if you're redistributing from the rich to the poor), and everyone getting screwed in this scenario will be convinced that they should feel proud to be screwed so hard.
This is one of the worst applications of "let the free market sort it all out" I've heard in a while.
[1]: http://www.kcra.com/article/this-is-the-largest-owner-of-ren...
[2]: https://calmatters.org/articles/data-dig-are-foreign-investo...
"The solution was simple. I offer to exchange everything I own for everything you own. If you refuse, you have admitted that you are richer than I am, and so you get to do the liturgy that was to be imposed on me."
Related is an the idea for eminent domain reform, where instead of compelling a sale, the government could usurp an arm's-length sale in progress, taking the property, paying the owner the agreed-upon sale price, and paying the disappointed buyer a percentage of the sale price, plus any actual costs incurred by failure to take possession of the property. That would likely feed the property-flipper industry, where an eminent domain seizure counts as an instant flip.
Their counter-argument is to start with markets where there is not so much personal emotion wrapped up in the price setting and valuation, such as broadcast spectrum rights. Then you could work out the logistical details of how it would work, people would get comfortable with it, and then years or decades later you expand it to housing.
Part of their proposal relies on a huge mental shift in how we think about housing and property rights, to treat it as a shared public good rather than something any individual owns. That's the kicker, which realistically would take a few generations as the mental model shift required probably exceeds the capacity for change in anyone over the age of 40.
That sounds horrible and very much impossible by definition. The “exact” value of my house where I spent my entire adulthood/childhood is “not for sale”
I keep hearing abouy this market efficiency but never came across a quantifiable measurement of this efficiency. Could you please point me to some literature where they say “oh this market is 70% efficient and that market is 90% because …”? How do you put “exact value” to this efficiency stuff?
Having to pack everything and look for new place to live just because some asshole decided he wants your living place now must be real pleasure.
See, when I am with small baby and kid has friends and I have deadlines in work, I don't want to have to move nor be suddenly force to pay much higher tax then flexible single dude who can leave easily.
We already have a system where you can offer any property owner any amount to sell, the idea that the government should come in and shape the market in such a way that people are charged for emotional attachments and compelled to sell at a specific price is ugly. It seems wrong to shape human behavior in that way (especially for a spurious benefit) and it seems like it mistakes efficiency towards a goal for the goal itself.
They are already rich by virtue of the property they own, so you would have to revise this to be "would become even more rich", which is more illuminating. These folks are already well above the "food, housing, basic needs" level of Maslow's hierarchy and are working towards self-fulfillment, part of which (to them) relies on preserving their current experience in their current home and neighborhood as it is (like living in a museum, as another commenter labeled it). They bought it for what it is, and that's what they want to preserve. It isn't about the money, it is about the experience they want to preserve. Or put in monetary terms, the market may value their home at $2m, but they put a personal value of maybe $3m or $5m on it in order to compensate for the cost of moving (people who have put down these kind of roots hate moving) AND finding an acceptable substitute or upgrade from what they currently have.