Econ 127, Foldvary

Wenzer, ed.: LVT

Chapter 14 - Foldvary - Ethics of Rent

Using rent for public finance is efficient.

But is is equitable?

Definition of rent: classical meaning: return on land.

Land: all natural resources

Wages originate in the marginal preference for goods over leisure, and the productivity of labor at the least productive land in use, and a return to human capital.

How does rent originate?

Rent originates from the difference in output between a plot of land and the output at the least productive land in use.

The law of rent.

Least productive land is the extensive margin.

The intensive margin of land used more intensely.

The marginal product of labor at the intensive margin equalizes with that at the extensive margin.

The law of wages.

Rent is a surplus, output above the costs of labor and capital goods.

It is what is called the "producer surplus".

Rent has three sources:

1) Nature.

2) human activity: population, commerce, technology

3) territorial public goods.

To determine what is equitable, we need an ethic to judge by.

This would enable us to judge any tax system.

To be an objective standard, needs to be a universal ethic.

Where would it come from?

Locke, p. 188. The state of nature has a law of nature to govern it.

Human nature generates a moral law of nature, natural moral law.

It is the basis for governance.

What do "equal and independent" mean?

Each person is self-directing; thinking and feeling is individual.

Equality of volition, self-awareness, reasoning

Values originate in individual interests.

Offenses depend on personal views.

Harm is an coercive invasion into another's domain.

A person who imposes his will on another puts himself in a superior position,

negating equality.

The universal ethic:

Acts are good if they are welcomed benefits.

Acts are evil if they coercively harm others.

All other acts are neutral.

A moral right to X means that the negation of X is morally evil.

A society has liberty when its law implements the universal ethic.

An implication: slavery is evil. Each person has self-ownership.

Self-ownership imlies ownership of one's labor and wages.

To the creator belongs the creation.

Self-ownership does not extend to natural resources.

The benefit of natural resources, land, are manifested in rent.

Equality premise implies an equal share of rent.

Activity rents belong to the relevant community.

Civic rentals are a return to capital goods and their provider.

Natural rents should belong to humanity in equal shares.

Ethics of government spending.

Wasted funds are resources unjustly taken from the people.

Funds are also unjustly spent when they benefit favored special interests.

The "disease of democracy": rent seeking.

A market for legislation.

Mass democracy induces demand for campaign funds.

Voting in small groups reduces rent seeking.

Can be a contractual community, like a homeowner association.

Harmony between economics and ethics.

What is efficient is also what is equitable.