Desert and Distribution of Income: Agglomeration Effects and Labor Productivity Growth

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.

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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.

"Kansas and Missouri fight for corporate investment and jobs"

2 states in a tug-of-war for workers that's costing millions

Perfect example of a collective action problem.  

(In this case) the dynamic forces them both/each to expend a lot of resources, which each only negate the other's; thus, both sides incur substantial cost(s) while providing basically no net gain.  This outcome is suboptimal for both as there are better possible outcomes for both sides, indeed a single alternate possible outcome that would be better for both sides.    

But if such a universal improvement, a pareto improvement in other words, is possible, then how both sides still experiencing this avoidable problem?

But both sides are also essentially forced into it; it's the rational thing to do.  After all, if they don't do it but the either side does, then they'll lose out even more.  Only if both sides stop doing it is the outcome better for both.  Thus, some agreement and coordination, presumably with mutually-acceptable/accepted enforcement provisions/measures in case of cheating/going back on,--in other words, law--is necessary for the best possible outcome in these kinds of cases.

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As a typical/paradigmatic case/example of a common collective action problem, this example is important because it may be able to illustrate to those not otherwise sympathetic to centralization and government action/intervention/activism the soundness of the deductive case for it's being optimal policy in some circumstances, namely when the conditions sufficient for a collective action problem are present and the benefits yielded justify the costs incurred (and also maybe necessary is that no other pathology of government is worse than freedom's/market's pathology in this case/area).  

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Hopefully states and localities can recognize this problem and band together resolved not to compete with other states and localities for economic activity by bidding with taxpayer money.  If federal legislation is not possible, then states should band together in the model of Common Core or National Popular Vote plan.  

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Similarly, but more controversially, the same collective action problem that applies to individual states in the whole country also applies to individual countries in the whole world.  For this reason (among many others), it seems necessary that some level of world government will be necessary.  

In the same way that individuals voluntarily surrender some rights and assume some responsibilities in order to live in society, and just also as states voluntarily surrender some rights (nuclear non-proliferation for instance, or use of land mines) and assume responsibilities (to defend other states) in order to enter treaties with other states, gaining alliances and allies, states will, at least will need to, establish a common world government.

Too many collective action problems otherwise: impossibility of universal currency devaluation, Piketty on a global wealth tax, financial regulation, etc.

The process of globalization is a one-time only phenomenon, though of course long and difficult and must be managed right.  But the costs are mostly related to the process (as in economic, distributive costs, as there are arguments for other social and cultural costs) and not the outcome, so the economic benefits of the hopefully-long-lived outcome likely outweigh the costs of the temporary process.  

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This phenomenon should also be taken into account when evaluating the economic and employment performance of different states, for the purpose of discovering/learning what policy should be undertaken at the federal level to boost employment or economic performance otherwise, or adjudicating between which candidates for federal office are better for the economy and employment than others' (which now sounds similar, even identical to the last question).

Abortion Regulation: From Illegal to Legal... to Universal?

I've just come to the conclusion that universal access to abortion is a legal political imperative. 

If we base our right to abortion on the right to bodily-autonomy, then abortion should be just as free and universally accessible as law enforcement and judicial services. 

Could this be right?  

Is the logic?  Should we reexamine the premise?

Constitutional Protection for For-Profit Activity

Check out this cool episode: https://itunes.apple.com/us/podcast/planet-money/id290783428?mt=2&i=371766299

The question of whether a commercial interest/incentive is to terminal two, or matters at all to whether or not a given use of intellectual property/A copyrighted property  constitutes fair use

Whether this single factor is determinant of fair use, even if this legal standard is a bit outdated, echoes/recalls my idea that A commercial interest in something raises the standard of justification for it/that must be met for it to be justified/4 justification. For example, if people want to claim an exemption from a regulation out of a religious/ethical/or artistic position/police, they should be permitted to do so but at the cost of a higher tax rate. In other words, this idea about fair use is similar to the thinking that underlies my, perhaps counterintuitive, idea that nonprofit charitable enterprises should be taxed at a higher rateVan for profit Enterprises, not a lower one.

Higher standard for things that you engage in with a profit incentive means lower/less protection on free-speech grounds, religious liberty grounds, artistic and academic freedom grounds, etc.

Conservatives' and Liberals' Moral Psychology

This is an old column but I came across when someone else things to it as part of a response to one of his current columns on ideological diversity.  It discusses how liberals give us to charity than conservatives and the implications of that, in the context of the public policy debate in which Liberals are widely agreed to be more generous public spending/public resources/public funds/the budget to the downtrodden.  

I've read/heard elsewhere that this finding disappears when you control for religion, so it's religion and not conservatism that makes people more charitable, and it's in religion and not liberalism that makes them less so. (check to see if this is in the column, and check to see if it's true)

More recently, it's been discussed some from the unearthing of a 1981 quote from Bernie Sanders that he does not believe in charity.

This might seem to accord with my analysis on liberals and conservatives and their differences on collective action problems: liberals favor coordinated solutions to collection action problems and conservatives don't, in general. 

Maybe this is because liberals overestimate/overprotect free-riding/action of unenlightened self interest, so they don't believe uncoordinated action can solve it, and maybe it's because liberals see themselves and those around them, who are also highly likely to be liberals, free-ride/act of unenlightened self-interest frequently/most of the time, i.e. that liberals free-ride/act on it unenlightened self-interest more than liberals do.

Maybe because they're less generous slash more vicious/less virtuous, or maybe it's because they have a different technical/positive view/belief, i.e. they believe and uncoordinated solution is less likely to happen, and are just taking the rational action rashly taking the action consistent with that belief.

Test both of those 

Maybe liberals just think that they don't have to do it, and it will even get done more efficiently by government.

The pros think they just should not have to do it.

Are they doing it out of defensive free-riding or initial free-riding?

Bleeding Heart Tightwads - NYTimes.com

Why Would a Conservative Support the State and Local Tax Deduction?

In this review of the tax proposal by Senators Marco Rubio (R-FL) and Mike Lee (R-UT), Amity Shlaes and Matthew Denhart criticize rolling back the deduction for state and local taxes without pointing to any reason at all.

Why exactly?

I know why liberals might support this deduction and oppose rolling it back. State and local taxes can be a lot more regressive than they might think best, so allowing them to be deducted from more progressive federal taxes (which implies that the difference in revenue to the federal government is made up for under the more progressive rates) alleviates that burden somewhat, among other more mundane reasons for it.

But what it also amounts to is low-tax states and localities subsidizing high-tax states and localities, so I don't know why conservatives would oppose scaling back this deduction or eliminating it.

Who's Not Paying Their Fair Share of Taxes, the Poor or the Rich?

Both many liberals and many conservatives believe that the tax code is unfair, with some not paying their fair share and others expropriated for too much. But of course, they disagree on who's who, with liberals viewing the tax code skewed toward the rich and conservatives viewing it as skewed toward the poor. Each camp has a sort of simple "just look out the window" common sense on its side: liberals can appeal to the fact that rich folks have all that money to enjoy a higher standard of living to argue that the system can't be tilted toward the poor and against the rich (or if it is, it's doing a terribly ineffective job), and conservatives can point to budget figures of the costs of different programs and tax payments.

Intuitively, I'm firmly in the liberal camp on this one; I mean, if the system is so biased in favor of the poor and against the rich, then why does everyone strive for wealth and to avoid poverty? But the conservative reasoning is so deceptively simple and persuasive that a lot of people believe it, so a more specific argument would be very helpful to cast doubt upon it and back up the liberal intuition. So let's examine this conservative view in depth and see where it takes us.

Progressive Taxation, Arbitrariness, and Justice

I'm glad that someone like Mike Konczal is analyzing the claim that our U.S. system of taxation is already very progressive by the standards of international developed economies.  (Thanks for the notice, Andrew.) In this post, he demonstrates the serious flaw in some (easily and commonly cited) measures of tax progressivity, specifically those that are based on the share of total tax revenue paid by certain economic segments of the population without also addressing their shares of national income and wealth. I wanted to highlight his post because he point can't be made enough, and because it reminded me of a normative line of thought I've been meaning to articulate for a while.