Who deserves the additional economic value that results from higher labor productivity?
Let's consider some cases: how about when it results from agglomeration effects? How about instead when it results from technological capital improvements?
Agglomeration effects occur under conditions of agglomeration, like in cities, wherein more people live in closer proximity to greater numbers of other people than do people who live outside of cities, and increase the productivity of city dwellers.
A recent Noah Smith tweet putting forward the proposition that "agglomeration gives windfalls to landlords. Raise efficiency with a Land Value Tax."
Let's consider some cases: how about when it results from agglomeration effects? How about instead when it results from technological capital improvements?
Agglomeration effects occur under conditions of agglomeration, like in cities, wherein more people live in closer proximity to greater numbers of other people than do people who live outside of cities, and increase the productivity of city dwellers.
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A recent Noah Smith tweet putting forward the proposition that "agglomeration gives windfalls to landlords. Raise efficiency with a Land Value Tax."
So Noah's asserting (likely to enlighteningly start an argument and go through the dialectic) that the premiums to land/real estate values enjoyed by cities’ land-/real estate-owners is a windfall, undeserved by the landowner because they’re not results of the landowner* but of the agglomeration effect--the fact of the property's location in a higher-density area, which is dependent on the actions of many others and not due to just the choices/actions/work/responsibility/accomplishment of the property-owner himself--and therefore cities’ land-/real estate-values ought to be, or are justifiably, taxed more than those outside of cities.
Interesting enough, and seems to accord with my tentative general principle of trying to accord people's compensation with their work/effort/labor.
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Let’s apply this same logic now to wages. Some argue that the fact that wage growth has lagged behind labor productivity growth in recent decades means that wage-earners have received less than they deserve and that income that has been accruing to the owners of capital is undeserved by them and represents income that rightfully belongs to workers.
However, to the extent that the growth in labor productivity is the result of capital investment, and not, say, more education, training, and experience of the workforce, the workforce did nothing to earn the additional income the increased productivity enabled, and so does not deserve it.
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Therefore, it seems to me that one cannot simultaneously hold that the premium derived from agglomeration effects are not deserved by urban real estate-owners and that the additional income derived from labor’s increased productivity is deserved by labor.
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*Of course, this only holds perfectly/fully if the agglomeration effects happened entirely since the real estate was purchased by the landowner; otherwise, he paid for the agglomeration effect’s premium on the real estate’s value by paying a higher price for the real estate when he bought it. Rather than all or nothing either way, it’s most likely that some of the premium from the agglomeration effect was paid for by the real estate-owner and some was not, provided how much the agglomeration effect grew, i.e. how much the city (and therefore its residents’ productivity) grew since the time of purchase. The longer ago the real estate-owner’s purchase (assuming continuing agglomeration and productivity growth), the less the value premium was paid for; the more recent the real estate-owner’s purchase (similarly assuming continuing agglomeration and productivity growth), the more the value premium was paid for.
