Spencer Heath Archive

Item 1069

September 1935

Editor of Land and Freedom:

Your first page “Comment and Reflection” on the almost universal habit of thinking in terms of indicators instead of the things indicated occupies a curiously appropriate position facing the opening sentences on the opposite page. I quote: “Taking the full rent of land for public purposes insures the fullest and best use of all land. In cities this would mean more homes and more places to do business and therefore lower rents.”

At the present time are there not in both country and city any amount of lands upon which the taxes taken for public purposes are right now more than the full rental value of the land? Is it not also true that even highly improved real estate does not yield in rent enough to pay the taxes and the cost of maintenance of the improvements? Do we not right now have more houses than our present wealth production can maintain and more “places to do business” than we have business to be done in those places? Are not taxes on land now, in innumerable instances, higher than ground rents? Do you seriously propose doing anything that would still further reduce rents?

I anticipate you will say that speculation keeps land out of use and that this makes ground rents high. This is not true. Land kept out of use makes ground rents low because it makes wealth production low, for rent is not money and it is not price (these are mere indicators) but it is a part of the wealth that is produced. Specifically, it is that part which is paid for public services, including the use of public capital. What keeps land out of use is not speculation but the laying of penalties and restrictions on the production of wealth. This is also the cause of speculation, for speculation is the result of restrictions. It thrives on the prices that rise when production falls or wherever supply falls far short of need and demand. We think speculation makes us rich because it bids up prices (indicators again) without building up wealth and under increasing scarcity puts the command of wealth in hands that took no part in producing it.

Without restrictions on production there could be no speculation because no scarcity because production, supply, would keep up with the indicators of it and prices could not rise. Remember, what raises prices of any goods or services, private or public, is scarcity relative to demand, and artificial scarcity makes artificial prices. Without artificial restrictions, in every transaction more and more wealth or services would be given and more and more would be received in exchange, but prices would not rise. Only wealth and services would increase and there would be no harmful speculation because speculation looks to a rise in price and is prevented by a rise in production.

So with an increasing production there would be increasing need and demand for public services (public labor and capital to co-operate with private labor and capital) and out of this combined activity there would come vastly greater production and the amount of privately created wealth and services freely given in exchange for public services would be vastly increased. Thus with restrictions removed not only could there be no speculation but rent in terms of goods and services would rise.

When you, Mr. Editor, speak of rents being made lower your whole ensuing context strongly suggests that you are really thinking of more business being permitted to be done and not merely of “more places to do business.” In such case, out of the abundance of a liberated production aided by public services far more wealth would be produced. And far more would be given as rent in exchange for public services for then the public services would have no other possible support. To speak of lower rents under increased production is once more to confuse the prices (indicators) of goods and services with the goods and services themselves. The important need is not to take the “full rent of land for public purposes.” That is something it would be hard to escape doing. We are doing it very largely, perhaps completely, now and this does not insure the fullest and best use of land. What is necessary is to lift the restrictions now placed upon the fullest and best use of land, upon all the instruments and activities of exchange. Only by this freedom can we escape a declining production, rising prices and our intermittent riots of speculation followed by collapse.

In any case, we need not concern ourselves primarily with the laying of burdens; it should be our concern to lift them. If we continue to finance government out of the sources of rents and do not liberate production government becomes worth less than it costs and rents must continue to decline. But a government financed directly out of rents becomes worth more than it costs and the amount of wealth offered as rent will rise. In any case, directly or indirectly, all government costs must be supported out of rent or to the detriment of rent. Nature has provided for this and there is no way of escape; nor are there any evils to escape from, except those which come from our own folly in permitting unsupervised public servants to collect their wages and all the costs of their wanton profligacy and destructive waste by forcible and arbitrary invasion of all the processes of production and exchange. In this we have government destroying rent by blighting its source. We need only cease and desist from the present evil ways. Then we can depend upon nature to prompt by self interest, if need be, those who are in position to collect the rents to the spending of them in support of the kind of public services by which alone rents are created and maintained, keeping for themselves only the value of their own services of collection and supervision and the interest on the capital which they have invested or which has been invested for them in the public services.