Gavonomics

Mainstream economics is built around the dogma that the private acquisition of an irreplaceable existing asset is equivalent to the creation of a new asset — not only for the acquirer, but also for the rest of us. That explains its lack of predictive and prescriptive power.

Contents you can use

The following items may be freely reproduced subject to the copyright statement at the end of each item.

2008/01/15:	Mark my words, Mr Rudd
2007/12/26:	Alternative Economic Review No. 3
2007/12/23:	TaxChoices for home buyers
2007/12/17:	Complete solution to vertical fiscal imbalance
2007/11/28:	Alternative Economic Review No. 2
2007/11/04:	Current account deficit demands tax shift
2007/10/29:	The Mother of All BBQ Stoppers
2007/10/24:	Alternative Economic Review No. 1
2007/10/19:	Australia, Hong Kong, Singapore & Taiwan: How property taxes affect economic growth
2007/10/16:	A tax-equity swap
2007/10/09:	Inquiry into a stupid question
2007/10/04:	Alternative Economic Review — Homepage
2007/10/03:	Cap-and-trade blog licensing
2007/08/14:	Land tax, rates, and housing affordability
2007/07/29:	Getting sustainably high returns on real estate
2007/06/27:	Emissions trading = private carbon tax
2007/06/10:	New report shows cost of property bubbles
2007/02/01:	USA: Huge discrepancy on consumption
2007/01/30:	USA: Q4 GDP growth probably negative
	USA: Freight tonnage declined in Q4
2007/01/29:	USA: Shipments of durables contract in Q4
	USA: Dead-cat bounce in new home sales
2007/01/26:	USA: Existing home sales retreat
2007/01/20:	Australia: Rent squeeze could trigger recession
2007/01/19:	USA: Dead-cat bounce in housing starts & permits
2007/01/06:	USA: No joy in employment stats
2007/01/05:	USA: No joy in manufacturing or construction
2006/12/31:	U.S. economy over the precipice
2006/12/24:	Distress sales in Victoria (Australia)
2006/12/09:	U.S. economy already contracting?
2006/10/19:	More on U.S. housing slump
2006/08/26:	Chinese property crash
2006/08/02:	Property recovery is illusory
2006/07/27:	Property crash phased; recession delayed
2005/12/04:	Global depression 2006—?
2005/11/16:	IR threat to rents
2003/09/29:	Taking homes for granted

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About the dates

This blog was started on Nov.30, 2006. The date of each item is the date on which the content was first written, not necessarily the date on which it was posted here.

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``.... Every tax ought to be so contrived as both to take out and to keep out of the pockets of the people as little as possible over and above what it brings into the public treasury of the state. A tax may either take out or keep out of the pockets of the people a great deal more than it brings into the public treasury... [T]he levying of it may require a great number of officers, whose salaries may eat up the greater part of the produce... [I]t may obstruct the industry of the people... [B]y subjecting the people to the frequent visits and the odious examination of the tax-gatherers, it may expose them to much unnecessary trouble....

A land-tax ... is levied by a much smaller number of officers than any other which affords nearly the same revenue... It does not obstruct the industry of the people. It subjects the landlord to no other inconveniency besides the unavoidable one of paying the tax....

The expense of levying a land-tax which varied with every variation of the rent ... might be very moderate, and much below what is incurred in the levying of many other taxes which afford a very inconsiderable revenue in comparison of what might easily be drawn from a tax of this kind....

Taxes upon the produce of land are in reality taxes upon the rent; and though they may be originally advanced by the farmer, are finally paid by the landlord....

A tax upon ground-rents would not raise the rents of houses. It would fall altogether upon the owner of the ground-rent, who acts always as a monopolist, and exacts the greatest rent which can be got for the use of his ground... Whether the tax was to be advanced by the inhabitant, or by the owner of the ground, would be of little importance. The more the inhabitant was obliged to pay for the tax, the less he would incline to pay for the ground....

[G]round-rents ... are a species of revenue which the owner ... enjoys without any care or attention of his own. Though a part of this revenue should be taken from him in order to defray the expenses of the state, no discouragement will thereby be given to any sort of industry. The annual produce of the land and labour of the society, the real wealth and revenue of the great body of the people, might be the same after such a tax as before....

[W]hen a tax is imposed upon the profits of stock employed in agriculture, it is not the interest of the farmers to withdraw any part of their stock... Each farmer occupies a certain quantity of land... For the proper cultivation of this land a certain quantity of stock is necessary, and by withdrawing any part..., the farmer is not likely to be more able to pay either the rent or the tax... The tax, therefore, will never enable him to raise the price of his produce so as to reimburse himself by throwing the final payment upon the consumer. The farmer, however, must have his reasonable profit, ... otherwise he must give up the trade. After the imposition of a tax of this kind, he can get this reasonable profit only by paying less rent to the landlord... A tax of this kind imposed during the currency of a lease may, no doubt, distress or ruin the farmer. Upon the renewal of the lease it must always fall upon the landlord....

A direct tax upon the wages of labour, ... though the labourer might perhaps pay it out of his hand, could not properly be said to be even advanced by him... The rise which such a tax might occasion in the wages of manufacturing labour would be advanced by the master manufacturer, who would both be entitled and obliged to charge it, with a profit, upon the price of his goods... The rise which such a tax might occasion in the wages of country labour would be advanced by the farmer... [I]t would be necessary that he should retain a larger portion, or ... the price of a larger portion, of the produce of the land, and consequently that he should pay less rent to the landlord. The final payment of this rise of wages, therefore, would in this case fall upon the landlord, together with the additional profit of the farmer who had advanced it. In all cases a direct tax upon the wages of labour must, in the long-run, occasion both a greater reduction in the rent of land, and a greater rise in the price of manufactured goods, than would have followed from the proper assessment of a sum equal to the produce of the tax partly upon the rent of land, and partly upon consumable commodities....

Capitation taxes, so far as they are levied upon the lower ranks of people, are direct taxes upon the wages of labour, and are attended with all the inconveniences of such taxes....

[A] tax upon the necessaries of life operates exactly in the same manner as a direct tax upon the wages of labour. The labourer, though he may pay it out of his hand, cannot, for any considerable time at least, be properly said even to advance it. It must always in the long-run be advanced to him by his immediate employer in the advanced rate of his wages....

Taxes upon necessaries ... are finally paid, partly by landlords in the diminished rent of their lands, and partly by rich consumers, whether landlords or others, in the advanced price of manufactured goods, and always with a considerable overcharge. The advanced price of such manufactures as are real necessaries of life ... must be compensated to the poor by a further advancement of their wages. The middling and superior ranks of people, if they understand their own interest, ought always to oppose all taxes upon the necessaries of life, as well as all direct taxes upon the wages of labour. The final payment of both the one and the other falls altogether upon themselves, and always with a considerable overcharge. They fall heaviest upon the landlords, who always pay in a double capacity: in that of landlords by the reduction of their rent, and in that of rich consumers by the increase of their expense....''

— Adam Smith,
The Wealth of Nations,
Book 5, Ch.II, Pt.2.