Lars Doucet — Progress, poverty, Georgism, & why rent is too damn high

One of my best episodes ever. Lars Doucet https://twitter.com/larsiusprime is the author of Land is a Big Deal https://www.landisabigdeal.com/, a book about Georgism which has been praised by Vitalik Buterin, Scott Alexander, and Noah Smith. Sam Altman is the lead investor in his new startup, ValueBase https://www.valuebase.co/. Talking with Lars completely changed how I think about who creates value in the world and who leeches off it. We go deep into the weeds on Georgism: * Why do even the wealthiest places in the world have poverty and homelessness, and why do rents increase as fast as wages? * Why are land-owners able to extract the profits that rightly belong to labor and capital? * How would taxing the value of land alleviate speculation, NIMBYism, and income and sales taxes? Watch on YouTube https://youtu.be/sL-qkv7Pzxo. Listen on Apple Podcasts https://podcasts.apple.com/us/podcast/lars-doucet-georgism-progress-poverty-why-rent-is-too/id1516093381?i=1000593198959, Spotify https://open.spotify.com/episode/7tcy2XXG2JmOdvHtyMuHqZ?si=nxdprv9JRTS2KIUqlQa4dg, or any other podcast platform. Read the full transcript here https://www.dwarkeshpatel.com/p/lars-doucet. Follow Lars on Twitter https://twitter.com/larsiusprime. Follow me on Twitter https://twitter.com/dwarkesh_sp. Timestamps (00:00:00) - Intro (00:01:11) - Georgism (00:03:16) - Metaverse Housing Crises (00:07:10) - Tax Leisure? (00:13:53) - Speculation & Frontiers (00:24:33) - Social Value of Search (00:33:13) - Will Georgism Destroy The Economy? (00:38:51) - The Economics of San Francisco (00:43:31) - Transfer from Landowners to Google? (00:46:47) - Asian Tigers and Land Reform (00:51:19) - Libertarian Georgism (00:55:42) - Crypto (00:57:16) - Transitioning to Georgism (01:02:56) - Lars's Startup & Land Assessment (01:15:12) - Big Tech (01:20:50) - Space (01:23:05) - Copyright (01:25:02) - Politics of Georgism (01:33:10) - Someone Is Always Collecting Rents This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit www.dwarkesh.com https://www.dwarkesh.com?utm_medium=podcast&utm_campaign=CTA_1

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Speaker 00

  Over the last century, we've had this huge conflict. All the oxygen's been sucked up by capitalism and socialism duking it out. We have this assumption that you either have to be pro-worker or pro-business, that you can't be both. I have noticed a lot of crypto people get into Georgism, not the least of which is Vitalik Buterin, who endorsed my book. If you earn $100,000 in San Francisco as a family of four, you are below the poverty line. Let's start with just taxing the things nobody has made and that people are gatekeeping access to. Let's tax essentially monopolies and rent-seeking. The income tax needs to do this full anal probe on everyone in the country and then audits the poor at a higher rate than the rich. And it's just this horrible burden we have.

• 0:39Dwarkesh Patel?

  Okay, today I have the pleasure of speaking with Lars Dussay, who developed the highly acclaimed Defender's Quest game, and part two is coming out next year, but now he's working on a new startup. But the reason we're talking is that he wrote a review of Henry George's Progress and Poverty that won Scott Alexander's book review contest. And now it has been turned into and expanded into this book, Land is a Big Deal. So Lars, welcome to the podcast.

• 1:09Speaker 00

  Great to be here, Dwarkesh.

• 1:10Dwarkesh Patel?

  Okay, so let's just get into it. What is Georgism?

• 1:12Speaker 00

  Okay, so the book is based off of the philosophy of a 19th century American economist by the name of Henry George, from Once We Get Georgism. And basically, George's thesis is kind of the title of my book, that land is a big deal. Georgism is often reduced to its main policy prescription, that we should have a land value tax, which is a tax on the unimproved value of land, but not a tax on any buildings or infrastructure on top of the land, anything humans add. But the basic insight of it is that it's kind of reflected in the aphorisms you hear from real estate agents, when they say things like, "The three laws of real estate are location, location, location, and by land, it's the one thing they're not making any more of."

• 1:54Speaker 00

  It's basically this insight that land has this hidden role in the economy that is really underrated. But if you look at history through the right lens, control over land is the oldest struggle of human history. It goes beyond human history. Animals have been fighting over land forever. That's what they're fighting over in Ukraine and Russia right now, right? And Basically, the fundamental insight of Georgism is that over the last century, we've had this huge conflict. All the oxygen's been sucked up by capitalism and socialism duking it out. We have this assumption that you either have to be pro-worker or pro-business, that you can't be both. And Georgism is genuinely pro-worker and pro-business.

• 2:38Speaker 00

  But what it's against is land speculation. And if we can find a way to share the earth, then we can solve the paradox that is the title of George's book, Progress and Poverty. Why does poverty advance even when progress advances? Why do we have all this industrialized technology and new methods? And, you know, in George's time, it was industrial technology. In our time, it's computers and everything else. We have all this good stuff. We can make more than we've ever made before. There's enough wealth for everybody. And yet, we still have inequality. Where does it come from? And George answers that question in his book, and I, you know, expand on it in mine.

• 3:15Dwarkesh Patel?

  Yep, yep. Okay, so yeah, I'm excited to get into the theory of all of it in a second. But first, I'm curious how much of your interest in the subject has been inspired by the fact that as a game developer, you're constantly dealing with decentralized rent seekers like Steam or iOS App Store. Is that part of the inspiration behind your interest in Georgism, or is that separate?

• 3:38Speaker 00

  It's interesting. I wouldn't say that's what clued me into it in the first place, but I have become very interested in all forms of rent-seeking, right? In this general category of things we call land-like assets that come to first-mover advantages in these large platform economies. I've started to think a lot about it, basically. But the essence of land speculation is you have this entire class of people who are able to basically gatekeep access to a scarce resource that everybody needs, which is land, right? That you can't opt out of needing. And because of that, everyone basically has to pay them rent. And those people don't necessarily do anything, you know? They just got there first and tell everyone else, it's like, "Well, if you want to participate in the world, you need to pay me."

• 4:22Speaker 00

  And so, where the actual connection with game development actually clued me into Georgism is I'd heard about Georgism before. I'd read about it. I thought it was interesting. But then I started noticing this weird phenomenon in online multiplayer games, going back 30 years repeatedly, of virtual housing crises, which is the most bizarre concept in the world to me, like... Basically, a housing crisis in the metaverse and predecessors to the metaverse. And as early as Ultima Online, when I was 19, you know, this is this online game that you could play and you could you could build houses in the game and put them down somewhere. And so what I found was that houses were actually like fairly cheap, like you could

• 5:05Speaker 00

  work, you know, long enough in the game to be afford to like buy blueprints for a house, which will you put it somewhere, but there was no land to put it on. And I, at the time, I thought, oh, well, I guess the server filled up, you know, I didn't really think much about it. I was like, this stinks. I didn't join the game early enough, you know, I'm kind of screwed out of housing. And then I kind of forgot about it. And then like 20 years later, I checked back in and that housing crisis is still ongoing in that game. That game is still running, you know, a good 25 years later, and that housing crisis remains unsolved. And you have this entire black market for housing, you know, and then I noticed that that trend was repeated in other online games like Final Fantasy XIV. And then recently in 2022, with all this huge wave of crypto games like Axie Infinity

• 5:48Speaker 00

  and Decentraland and the Sandbox, and then Yuga Labs' Board Ape Yacht Club, the other side, had all these big land sales. And at the time, I was working as an analyst for a video game consulting firm called Novic. And I told my employers, it's like, we're gonna see all the same problems happen. We're gonna see virtual land speculation, they're gonna hit, they're gonna reproduce the conditions of housing crises in the real world, and it's gonna be a disaster. And I called it, and it turns out I was right. And we've now seen that whole cycle kind of work itself out. And it's just, it just kind of blew my mind that we could reproduce the problems of the real world so articulately in the virtual world without anyone trying to do it. It

• 6:33Speaker 00

  just happened. And that that is kind of the actual connection between my background in game design and and kind of getting George-pilled, as the internet kids call it these days.

• 6:42Dwarkesh Patel?

  There's a hilarious clip. Some comedian was on Joe Rogan's podcast, I think it was like Tim Dillon, and they're talking about, I think, Decentraland, where if you want to be Snoop Dogg's neighbor in the metaverse, it costs like a couple million dollars or something. And Joe Rogan was like, so you think you can afford to live there? And then the Tim Dillon's like, no, but I'm gonna start another metaverse and I'm gonna work hard. But okay, so let's go into Georgism itself. So Tyler Cowen had a blog post a long time ago, he was comparing Taxing land to taxing unimproved labor or unimproved capital. And you know, it's an interesting concept, right? Like, should I, so I have a CS degree, right?

• 7:26Dwarkesh Patel?

  Should I be taxed at the same level as an entry level software engineer? Instead of a podcaster, because I'm not using my time as efficiently as possible. And so leisure, in another way, is the labor equivalent of having an unimproved parking lot in the middle of, in the middle of San Francisco. Or capital, if I'm just keeping my capital out of the economy and therefore making it not useful. Maybe I should have that capital taxed at the rate of like the capital gains on T bill. And this way, you're not punishing people for having profitable investments, which you're kind of doing with the capital gains.

• 8:05Speaker 00

  Right.

• 8:06Dwarkesh Patel?

  What would you think of that comparison?

• 8:07Speaker 00

  Yeah, so really, before you can even answer that question, you've got to go back to ground moral principles you're operating on. Like, is your moral operating principle like, we just want to increase efficiency. So we're going to tax everyone in a way to like, basically account for the wasted opportunity cost. Which brings up a lot of other questions of like, well, who decides what that is? But I think the Georgism argument is a little different. We're not necessarily like, it is efficient, the tax we propose. But it actually stems kind of from a more, from a different place, a more kind of fundamental aspect of justice, you know? And from our perspective, if you work and you produce value, your work produced that value. Right?

• 8:49Speaker 00

  And if you save money and accumulate capital in order to put that capital to work to receive a return, you've also produced, you've also provided something valuable to society, you know? You saved money so a factory could exist, right? You saved money so that a shipping company could, could get off, off the ground. You know, those are valuable contributive things. But nobody made the earth. The earth preexists all of us. And so someone who provides land actually does the opposite of providing land. They unprovide land and then they charge you for opening the gate. And so the argument for charging people on the unimproved value of land is that we want to tax unproductive rent seeking.

• 9:34Speaker 00

  We want to tax non-produced assets because we think we want to encourage people to produce assets. We want to encourage people to produce labor, to produce capital. We want more of those things. And there's that aphorism that if you want less of something, you should tax it. So, I mean, maybe there is a case for some kind of galaxy brain take of, you know, taxing unrealized opportunity costs or whatever. But I'm less interested in that and my moral principles are more about, let's start with just taxing the things nobody has made and that people are gatekeeping access to. Let's tax essentially monopolies and rent seeking. And then if we still need to raise more taxes, we can talk about that later.

• 10:15Speaker 00

  But let's start with, let's start with just taxing the worst things in society and then stop taxing things we actually want more of. Because we have this mentality right now where everything's a trade-off and we have to accept the downsides of income taxes, of sales taxes, of capital taxes. Because we just need the revenue and it has to come from somewhere. And my argument is it's like it can come from a much better somewhere. So let's start with that.

• 10:39Dwarkesh Patel?

  Yeah, yeah. So I guess if it was the case that we've implemented a land value tax and we're still having a revenue shortfall and we need another kind of tax and we're going to have to keep income taxes or capital gains taxes. Would you, in that situation, prefer a sort of tax where you're basically taxed on the opportunity cost of your time rather than the actual income you generated or the returns, interest you've generated on your capital?

• 11:04Speaker 00

  No, I think probably not. I think you would probably want to go with some other just like simpler tax for the sake of it because there's too many degrees of freedom in there. And it's like, we can talk about why I will defend the Georgism case for for property tax assessments, you know, for land value tax. But I think it gets different when you start like judging what is the most valuable use of your time, because that's a much more subjective question like you're a like, okay, are you providing more value to society as being a podcaster or being a CS, you know, a computer science person or creating a startup? It's like, that may not be evident for some time. You know what I mean? Like, I can't think of an example, but like,

• 11:45Speaker 00

  think of people who were never successful during their lifetimes. Like the guy who invented all, what was it? FM radio, right? He threw himself out a window because he never got it really adopted during his lifetime, but it went on to change everything, you know? So if we were taxing him during his lifetime based off of what he was doing of being a failure, like if Van Gogh was taxed of his like, wasting his life as an artist as he thought he was, which ultimately led to his suicide, you know, a lot of these things are not necessarily realized at the time. And so I think that's, and you know, it would need a much bigger kind of bureaucracy to like, figure that all out. So I think you should go with a more modest. I mean, I think

• 12:29Speaker 00

  after land value tax, you should do things like severance tax on natural resources and other taxes on other monopolies and rents. And so I think the next move after land value tax is not immediately to capital and income taxes and sales taxes, but to other taxes on other rent seeking and other land like assets that aren't literally physically land. And then, only after you've done all of those, if you still, you know, absolutely then, then move on to, you know, the bad taxes. What is the severance tax? Severance tax is a tax on the extraction of natural resources, is what Norway does with their oil, with their oil industry that has been massively successful, and a key reason that Norway has avoided the resource curse. Basically, it's, Georgism purists will say

• 13:12Speaker 00

  it's essentially a land value tax, but of a different kind. A land value tax, like you can't normally like, extract just like, land, like on this, in this house you're living on, you're like, you're not using up this land, but nonrenewable resources you can use up. You know, and so a severance tax is basically Nestle should be charged a severance tax for the water they're using, for instance, you know, because all they're doing is enclosing a pre-existing natural resource that used to belong to the people that they've essentially enclosed, and now they're just putting it in bottles and selling it to people, you know, they should be able to realize the value of the value add they give to that water, but not to just taking that resource away.

• 13:53Dwarkesh Patel?

  No, that makes sense. Okay, so let's let's go deep into the actual theory and logic of Georgism.

• 13:59Speaker 00

  Okay.

• 14:01Dwarkesh Patel?

  One thing I was confused by is why property owners who have land in places that are really desirable are not already incentivized to make the most productive use of that land. So even without a property, I'm sorry, a land tax, if you have some property in San Francisco, why are you not incentivized to construct it to the fullest extent possible by the law to, you know, get collect rents anyways? You know what I mean? Like, why are you keeping it that as a parking lot?

• 14:28Speaker 00

  Right, right, right. So there's, there's, there's a lot of reasons. And one of them has to do with, there's, there's an image in the book that this guy put together for me, I'll show it to you later. But what it does is that it shows the rate of return. What a land speculator is actually optimizing for is their rate of return, right? And so if land appreciates by 10% a year, you know, you're actually incentivized to invest in vacant land or a teardown property, because the building of a teardown property is like worth negative value. So the land's cheaper because there's garbage on it, you know, than you are to necessarily invest in a property in, you're basically, your marginal dollar

• 15:10Speaker 00

  is better spent on more land than it is on building up.

• 15:15Dwarkesh Patel?

  But eventually, shouldn't this be priced into the, the price of land so that the returns are no longer 10% or they're just like basically what you could get for any other asset? And at that point, then, then the rate of return is similar for building things on top of your existing land than buying new land because like the new land is like the, you know, the, that, that return has And priced into other land?

• 15:38Speaker 00

  Well, I mean, arguably empirically, we just don't see that, you know, we see rising land prices as long as productivity and population increases. Those productivity and population gains get soaked into the price of the land. It's it's because of this phenomenon called Ricardo's law of rent. And it's been pretty empirically demonstrated. That basically it has to do with the negotiation power, but like why? Some people do, of course, build and invest, you know, there's a lot of local laws that restrict people's ability to build. But another reason is just like, it also has to do with the existing. Part of it, it part, part of the effect is partially the existing property tax regime actively incentivizes empty lots. Because you have a higher tax burden if you build, right?

• 16:23Speaker 00

  So what actually happens is a phenomenon that's similar to oil wells, right? You have, it's not just because of property taxes, those do encourage you to keep it empty. But there's this like, there's this phenomenon called land banking and waiting for the land to ripen, right? Sure, I could build it now, but I might have a lot of land parcels I've got. And I don't need to build it now because I think the prices might go up later and it would be better to build on it later than it is now. And it's not costing me anything to keep it vacant now. If I build now, I'm gonna have to pay a little bit more property taxes. And I know in three years that the price is going to be even better. So maybe I'll wait to incur those construction costs then.

• 17:05Speaker 00

  And right now I'm gonna focus more on building over here and like, I've got a lot of things to do, you know? So I'm just gonna squat on it here. It's the same way like I have, I'm squatting like, you know, I, to my shame, like about 30 domain names. You know, most of them bought before I kind of got onto Georgism. And it's like, yeah, I'll pay 15 bucks a year to just hold it. Why not? You know what I mean? I might use that someday.

• 17:25Dwarkesh Patel?

  Right.

• 17:25Speaker 00

  And it's like, I should probably release all the ones I have no intent of using because I was looking for a domain for my startup the other day. And every single two word dot com is taken.

• 17:35Dwarkesh Patel?

  Right, right.

• 17:36Speaker 00

  And has been for like 10 years, you know, and it's a similar phenomenon. I was just, it's like, some of it is economic. Rational folgen von Incentiven. Und ein Teil davon ist, dass es so ist, als ob das ein guter Wert ist. Ich werde es nur halten, weil warum nicht? Und und niemand ist und ich habe keine Druckversorgung zu bauen. Und dies geschieht auf der Aufstieg und auf der Abstieg von Städten. Also während die Bevölkerung wächst und während die Bevölkerung sinkt, kaufen die Menschen viel Land und halten es aus Verlust, weil es auch ein großes Land zu parken ist. Weil es ein Wert ist, den du weißt, wenn die Bevölkerung immer wächst, wird es seine Wert besser halten als fast alle anderen hartes Geld.

• 18:15Dwarkesh Patel?

  Ja, ja. Ich ich glaube, eine andere breitere Kritik dieses Denkens ist, hören Sie, das ist alles, und sorry für die benutzung dieser Podcast-Lingua von Scharfheit, aber das ist alles Scharfheit von, du weißt, Land ist begrenzt. Warum sollten wir nicht auf die Möglichkeit fokussieren, die Menge landeswert zu expandieren? Ich meine, es gibt nicht wirklich eine Menge Land in USA. Vielleicht gibt es eine Menge Land in städtischen Bereichen. Aber du weißt, warum sollten wir nicht expandieren in die Seen? Warum sollten wir nicht expandieren in den Luft und Raum? Warum denken wir in diesem Skalenszenario?

• 18:48Speaker 00

  Okay, so ich liebe diese Frage, weil tatsächlich unsere aktuelle Status quo-Mindset ist die Scharfheit. Und Georgismus ist die Abundanz-Mindset, oder? Und wir können diese Abundanz haben, wenn wir lernen, die Land zu teilen. Weil jetzt, du weißt, warum sollten wir nicht expandieren? Und die Antwort ist, wir haben das versucht. Wir haben es zwei Mal getan. Und es ist die Geschichte des Frontiers von Amerika, oder? Und so, jetzt gibt es viel leeres Land in Nevada, aber niemand will es. Und du musst fragen, warum, oder? Du musst auch die Frage stellen, wie hatten wir virtuelle Wohnungen in der Metaverse, wo sie sich unendlich expandieren können? Wie war das vielleicht möglich? Du weißt, und die Antwort hat mit dem, was wir die städtische Agglomeration nennen. Was wirklich wertvoll ist, sind menschliche Beziehungen, die Nähe zu anderen Menschen, diese dünne Netzwerke von Menschen. Und so.

• 19:34Speaker 00

  The idea is not necessarily that like, in a certain sense, the issue is that land is not an indistinguishable fungible commodity. Location really matters. America has a finite amount of land, but it might as well be an infinite plane. We're not going to fill up every square inch of America for probably thousands of years, if we ever do, right? But what is scarce is specific locations. They're non-fungible, you know? And to a certain extent, it's like, okay, if you don't want to live in New York, you could live in San Francisco or any other like big city. But what makes New York, New York is non-fungible. What makes San Francisco, San Francisco is non-fungible.

• 20:17Speaker 00

  That particular cluster of VCs in San Francisco, until or unless that city completely explodes and that moves somewhere else to Austin or whatever, you know, at which point Austin will be non-fungible. I mean, Austin is non-fungible right now. And so the point is that the way Georgism unlocks the abundance mindset. Let me talk about the frontier. We have done frontier expansion. That is why immigrants came over from Europe, you know, and then eventually the rest of the world to America to, you know, settle the frontier. And the losers of that equation were, of course, the Indians who were already here and got kicked out.

• 20:52Speaker 00

  But that was the original idea of America. And I like to say that America's tragedy, America's problem is that America is a country that has the mindset of being a frontier state, but is in fact a state which has lost its frontier. And that is why you have these conversations with people like boomers who are like, why can't the next generation just pull itself up by its bootstraps? Because America has had at least, I would say, two major periods of frontier expansion. The first was the actual frontier, the West, the Oregon Trail, the covered wagons, you know, the displacement of the Indians. And so that was a massive, that was the time in which Henry George was writing, was right when that frontier was closing, right? When all that land, that free land was being taken

• 21:35Speaker 00

  and the advantages of that land was now being fully priced in. That is what it means for a frontier to close, is that now the good productive land.

• 21:45Speaker 00

  The value of it is fully priced in. But when the frontier is open, you can just go out there and take it and you can get productive land and realize the gains of that. And the second frontier expansion was after Henry George's death, was the invention of the automobile. The ability to have a job in the city, but not have to live in the city. The fact that you could quickly travel in, like I commuted in to visit you here, right? That is because of the automobile frontier opening that has allowed me to live in some other city, but be able to do productive work like this podcast by driving in. But the problem is sprawl can only take you so far before that frontier as well closes. And by closes, I don't mean suburban expansion stops. What I mean is that now suburban homes, you fully price in the value of the benefits

• 22:30Speaker 00

  you're able to accrue by having that proximity to a city, but still being able to live over here through, of course, Ricardo's law for rent.

• 22:37Dwarkesh Patel?

  Yeah, but I feel like this is so compatible with the story of we should just focus on increased ink technology and abundance rather than trying to estimate how much rent is available now, given current status quo technologies. I mean, the car is a great example of this, but imagine if there were like flying cars, right? Like there's a, you know, where's my flying car? There's like a whole analysis in that book about, you know, if you could, if, if people are still commuting like 20 minutes a day, you know, a lot more land is actually in the same travel distance as was before. And then now all this land would be worth as much, even in terms of relationships that you could, you could like accommodate, right? So why not just build like flying cars instead of focusing on land rent?

• 23:20Speaker 00

  Well, because these things have a cost, right? The cost of frontier expansion was murdering all the Indians and the cost of automobile expansion was climate change. You know, there, there has to be a price for that. And then eventually the problem is you eventually, when you get to the end of that frontier expansion, you wind up with the same problem you had in the first place. Eventually, the problem is the first generation will make out like gangbusters if we ever invent flying cars, even better like Star Trek matter teleporters.

• 23:46Dwarkesh Patel?

  Yeah.

• 23:47Speaker 00

  You know, that'll really do it. Then you can really live in Nevada and have a job in New York.

• 23:50Dwarkesh Patel?

  Yeah.

• 23:51Speaker 00

  There are some people who claim that Zoom is this, but it's not. You know, we, we've seen the, the empirical effects of that. And it's like, it's the weakest like semi frontier we've had, and it's already closed. Because, because of Zoom, houses like this over in Austin have gone up in value because there is demand for them. There's demand for people to telecommute. And so anyone who has, so the increased demand for living out in the suburbs is now basically priced in because of the Zoom economy. And so the thing is, the first people who did that, who got there really quick, the first people to log into the Ultima online server, were able to claim that pace of the frontier and capture that value. But the next generation has to pay more in rent and more in home prices to get that.

• 24:33Dwarkesh Patel?

  Actually, that raises another interesting criticism of Georgism. This was actually a paper from Zachary Goutchinar and Brian Kaplan, where it was titled "The Search Theoretic Critique of Georgism." And the point they made was, one of these, like, one way of thinking about the improvement to land is actually identifying that this land is valuable. Maybe because you do realize it has like an oil well in it, maybe you realize that it's like the perfect proximity to these like Chinese restaurants and this mall and whatever. And then just finding which land is valuable is actually something that takes capital and also takes, you know, like you deciding to upend your life and go somewhere, you know, like all kinds of effort.

• 25:14Dwarkesh Patel?

  And that is not factored into the way you would conventionally think of the improvements to land that would not be taxed, right? So in some sense, you getting that land is like a subsidy for you identifying that the land is valuable and can be used to productive ends.

• 25:30Speaker 00

  Right, yeah, no, so I've read that paper. So first of all, the first author of that, Zachary Goutchinar?

• 25:35Dwarkesh Patel?

  Yeah.

• 25:36Speaker 00

  I've not been able to pin him down on what exactly he meant on this, but he's made some public statements where he's revised his opinion since writing that paper and that he's much more friendly to the, to the arguments of Georgism now than when he first wrote that paper. So I'd like, I'd like to pin him down and see exactly what he meant by that because it was just a passing comment. But as regards Kaplan's critique, Kaplan's critique only applies to a 100% LVT, where you fully capture all of the land value tax. And the most extreme Georgists I know are only advocating for like an 85% land value tax.

• 26:06Dwarkesh Patel?

  Right.

• 26:07Speaker 00

  That would still leave, and Kaplan doesn't account at all for the negative effects of speculation. He's making a speculation is good actually argument. And even if we grant his argument, he still needs To grapple with all the absolutely empirically observed problems of land speculation. And if we want to make some kind of compromise between maybe speculation could have this good discovery effect. There's two really good answers to that. First, just don't do 100% LVT, which we probably can't practically do anyway. Because of natural limitations, just empirically, you know, in the signal, it's like you don't want to. You don't want to do 115% land value tax. That drives people off the land. So we want to make sure that we like. Have a high land value tax, but make sure not to go over. And so that would leave a sliver of land rent.

• 26:49Speaker 00

  That would still presumably incentivize this sort of thing. There's no argument for why. You know, 100% of the land rent is necessary to incentivize the good things that Kaplan was talking about. The second argument is when he talks about oil, um, well, we have the empirical evidence from the Norwegian massively successful petroleum model. That shows, um, in the case of natural resources, how you should, um, deal with this. And what Norway does is that they have a massive massively huge severance tax on oil extraction. And according to Kaplan's argument, this should massively destroy. The incentive for companies to go out there and discover the oil. And empirically, it doesn't. Now, what Norway does is that they figured out.

• 27:30Speaker 00

  Okay, so the oil companies, their argument is that we need the oil rents, right? We need these oil rents or we will not be incentivized for the massive capital costs of offshore oil drilling. Well, Norway's like, well, if you just need to cover the cost of offshore oil drilling. We'll subsidize that. We'll just pay you. We'll just pay you to go discover the oil. But when you find the oil, that oil belongs to the Norwegian people. Now, you may keep some of the rents. But most of it goes to the Norwegian people. But hey, it all your R and D is free. All your discovery is free. If the problem is discovery, we just subsidize discovery. And then the oil companies are like, okay, that sounds like a great deal. We don't have to. Because without that, what the oil companies do is that they're like, okay, we're taking all these risks. So I'm going to sit on all these oil wells like people sitting on domain names because I might use them later.

• 28:13Speaker 00

  And the price might go up later. But now, because there's a huge severance tax, you're forced to drill now. And you're actually, your actual costs of discovery and R and D and all those capital costs are just taken care of. But isn't there a

• 28:26Dwarkesh Patel?

  Flip side to that where, I mean, one of the economic benefits of speculation, um, obviously there's drawbacks, but one of the benefits is that it, um, it gets rid of the volatility in prices where a speculator will buy when it's cheap and sell when the price is high. And in doing so, they're kind of making the asset less volatile over time. And if, if you're basically going to tell people who have oil on their land, like, we're going to keep taxing you. If you don't take it out, you're going to get, you're going to keep getting taxed. You're encouraging this massive glut of a finite resource to be produced immediately, which is bad. If you think we might need that reserve in the ground 20 years from now or 30 years from now, uh, you know, when oil reserves were running low.

• 29:10Speaker 00

  Not necessarily, you know, and so the problem is that speculation in the sense you're talking about of like encouraging people to do arbitrage is good for capital because we can make more capital, but we can't make more land and we can't make more non renewable natural resources. And the issue empiric, and I just think the evidence just doesn't support that empirically because if anything, land speculation has causes land values to just constantly increase, not to find some natural part, especially with how easy it is to finance, two thirds of bank loans just chase real estate up. And that's just like, if you just look at the history of the prices of, you know, of residential real estate in America, it's, it's, it's, it's like, it's not this cyclical graph where it like keeps going back down.

• 29:51Speaker 00

  It keeps going back down, but it keeps going up and up and up just on a straight line along with productivity. And it underlines and undergirds major issue, um, everything that's driving our housing crisis, which then undergirds so much of inequality and pollution and climate change issues. And so with regards to speculations, like even if I just bite that bullet and it's like, okay, speculation is good. Actually, I don't think anyone's made the case that speculators need to capture a hundred percent of the rents to be properly incentivized to do anything good that comes out of speculation. I think it's some small reasonable percentage, you know, five to 10% of the rents, maybe 15 if I'm feeling generous. But I don't think anyone's empirically made the case that it should be a hundred percent, which is more or less the status quo.

• 30:31Dwarkesh Patel?

  I mean, with regards to that pattern of the fact that the values tend to keep going up. Lies that there's nothing cyclical that the speculators are dampening.

• 30:41Speaker 00

  Well, there are cycles to be sure, but it's not like it's something that resets to zero.

• 30:45Dwarkesh Patel?

  Yeah, but that's also true of like the stock market, right? Over, over time that goes up, but speculators are still have like an economic role to play in the stock market of making sure prices are.

• 30:55Speaker 00

  I mean, the difference is that people are now paying an ever increasing portion of their incomes to the land sector. And that didn't used to be the case. And if it keeps going, it's going to be, I mean, you have people who are now paying 50% of their income just for rent. And that's not sustainable in the long term. You're going to have, the, the cycle you have there is revolution. You know, you, no, I'm serious. Like what happens is like, you look through history, you either have land reform or you have revolution. And, you know, it's, it's either like, either you have a never ending cycle of, of, of transfers of income from the unlanded to the landed. And eventually the, the unlanded will not put up with that, you know?

• 31:37Speaker 00

  There was a real chance in the 19th century, at the end of the 19th century of America, going full on socialist or communist. And the only thing that saved us, well, and George's argument was like, it's either Georgism or communism. And if you want to save capitalism and not go totalitarian, we need Georgism. And then what George failed to anticipate was, of course, the automobile. And the automobile kicked the can down another generation, another couple of generations, right? And it came at the cost of sprawl. And that made everyone feel like we had solved the issue. But basically we just, and, and the costs of sprawl are enormous in terms of pollution and poor land use. Just look at Houston right now, right? But now we've come at the end of that frontier and now we're at the same question.

• 32:18Speaker 00

  It's like, you see this resurgence in interest in leftism in America and that's not a coincidence, right? Because the rent is too damn high and poor people, and, and poor people and young people feel really, really shoved out of the promise and social contract that was given to their parents. And they're jealous of it and they're wondering where it went.

• 32:36Dwarkesh Patel?

  Yeah, yeah. Actually, you just mentioned that a lot of bank loans are given basically so you can like get a mortgage and get a house. It's like towards land. There was an interesting question on Twitter.

• 32:48Dwarkesh Patel?

  That I thought was actually pretty interesting about this. I can't find the name of the person who asked it. So sorry, I can't give you credit, but they basically asked if that's the case. And if most bank loans are going towards, you know, helping you buy land that's like artificially more expensive, but now you implement a land value tax and all these property values crash.

• 33:08Speaker 00

  Oh, yeah.

• 33:09Dwarkesh Patel?

  When we see just a and then all then all these mortgages are, you know, obviously they can't pay them back.

• 33:13Speaker 00

  Right, right. Are we going to destroy the banking sector?

• 33:15Dwarkesh Patel?

  Exactly. We'll have like a great, great depression.

• 33:17Speaker 00

  Well, I mean, if you, okay, so like this is this is kind of like, I mean, I'm not, I'm not trying to compare landlords to slave owners or something, but it's like, it's like the South had an entire economy based off of slavery. This thing that like we now agree was bad, right? And it's like, we shouldn't have kept slavery because the South, like it really disrupted the Southern economy when we got rid of slavery, but it was still the right thing to do. And so, I mean, there is no magic button I could push as much as I might like to do so that will give us 100% land value tax everywhere in America tomorrow. So I think in the actual path towards a gorgeous future is going to have to be incremental. There'll be enough time to unwind all those investments and get to a more sane banking sector.

• 33:59Speaker 00

  So, I mean, like, if we were to go overnight, yeah, I think there would be some shocks in the banking sector, and I can't predict what those would be, but I also don't think that's a risk that's actually going to happen because like we just, we just cannot make a radical change like that on all levels overnight.

• 34:13Dwarkesh Patel?

  Yeah, yeah, yeah. Okay, so let's get back to some of these theoretical questions. One I had was, I guess I don't fully understand the theoretical reason for thinking that you can collect arbitrarily large rents. Why doesn't the same economic principle of competition, I get that there's not infinite landowners, but there are multiple landowners in any region, right? So if, for the same reason that profit is competed away in any other enterprise, you know, if one landowner is extracting like $50 a profit a month and another landowner is extracting, you know, like, whatever, right? Like a similar amount, $50, one of them, and they're both competing for the same tenant.

• 34:55Dwarkesh Patel?

  One of them will decrease their rent so that the tenant will come to them and the other one will do the same and the bidding process continues until all the profits are, you know, bid it away.

• 35:03Speaker 00

  Right, so this is Ricardo's law of rent, right? And it's, and there's, there's a, there's a section on it in the book with a bunch of illustrations you can show. And so the issue is that.

• 35:13Speaker 00

  We can't make more land, right? And so you might be like, well, there's plenty of land in Nevada. But the point is, there's only so much land in Manhattan. But the people who have land in Manhattan, why aren't they competing against themselves or each other? Right, well, what they do is because the nature of the scarcity of, there's only so many locations in Manhattan, and there's so many people who want to live there, right? And so all the people who want to live there have to outbid each other. And so basically, so like, let me give a simple agricultural example, model. And then I will explain how the agricultural model translates to a residential model. Basically, when you are paying to live in an urban area, or even a suburban area like here in Austin, what you're actually paying for is the right to have proximity to realize the productive capacity of that location.

• 35:58Speaker 00

  I.e., like, I want to live in Austin because I can have access to a good job. You know what I mean? Or whatever's cool about Austin, a good school, those amenities. And the problem is, you have to pay for those, and you have to outbid other people who are willing to pay for those. And Ricardo Zralv-Rent says that the value of the amenities and the productivity of an area, as it goes up, that gets soaked into the land prices. And the mechanism by that is that, it's like, okay, say I want to buy a watermelon, right? There's only one watermelon, we'll have to outbid that guy. But the watermelon grower's gonna be like, oh, a lot of people want watermelons. So next season, there's gonna be more watermelons because he's gonna produce more watermelons. But because there's only so many locations in Austin,

• 36:41Speaker 00

  you know, within the natural limits of our transportation network, basically, it forces the competition on the side of the people who are essentially the tenants, right? It forces us into one-sided competition with each other. And that, and so there's an example of like, a simple agricultural example is like, okay, say there is a common field that anyone can work on, and you can make 100 units of wealth if you work on it, right? So, and there's another field that you can also earn 100 units of wealth in, but it's owned by a landowner. Why would you, why would you go and work on the landowners when you're gonna have to pay them rent? You wouldn't pay them any rent at all. You would work on the field that's free.

• 37:22Speaker 00

  But if the landowner buys that field and now your best opportunity is a field that's only worth 10, a free field that will produce 10 units of wealth? Now he can charge you 90 units of wealth because you have no opportunity to go anywhere else. And so basically as more land gets bought and subject to private ownership in an area, landowners over time get to increase the rent, not to a maximum level. There are limits to it. And the limits is what's called the margin of production, which is basically you can charge up to, and this is where the competition comes in, the best, basic, like free alternative.

• 38:03Speaker 00

  You know, and that's usually, you can realize that geographically, like out on the margins of Austin, there's marginal land that basically is, is available for quite cheap, you know, and it might be quite far away. And it used to be not so quite far away 20, 30 years ago, you know? And so as that margin slowly gets privatized, landowners can charge up to that margin. The other limit is subsistence. They can't charge more than you're actually able to pay. But the basic example is that, so this is why, this is how frontier expansion works. When the entire continent's free, the first settler comes in, strikes a pick in the ground, keeps all of their wealth. But as more and more of it gets consolidated,

• 38:46Speaker 00

  then landowners are able to charge proportionately more until they're charging essentially up to subsistence.

• 38:51Dwarkesh Patel?

  Yeah. Does that explain property values in San Francisco? I mean, they're obviously very high, but I don't feel like they're that high where the software engineers who are working at Google are living at subsistence levels. Neither are they at like the margin of production where it's like, this is what it would cost to live out in the middle of California and then commute like three hours to work or something.

• 39:12Speaker 00

  Right. Well, so it, it has to do with two things. So first of all, it's over the long run. And so it's like, when you've, you've had a lot of. Productivity booms in San Francisco, right? And so it takes some time for that to be priced in. You know, and it can be over a while, but given a long enough time period, it'll eventually get there. And then when we're talking about stuff, it's also based off of the average productivity. The average resident of San Francisco is maybe not as productive as a high. And like basically doesn't earn as high an income necessarily as a high income productive worker. And so this means that if you are a higher than productive, higher than average productivity person, it's worth it to live in the expensive town because you're being paid more than the average productivity that's captured in rent, right?

• 39:57Speaker 00

  But if you're a low, if you're lower than average productivity, you flee high productive areas. You go to more marginal areas because those are the only places you can basically afford to make a living.

• 40:06Dwarkesh Patel?

  Okay, that's very interesting. That's actually one of the questions I was really curious about, so I'm glad to hear an answer on that. Another one is, so yeah, the idea is, you know, capital, land is soaking up the profits that capitalists and laborers are entitled to in the form of rent. But when I look at the wealthiest people in America, uh, there, yeah, there's people who own a lot of land, but they bought that land after they became wealthy from doing things that were capital or labor, depending on how you define starting a company. Like sure, Bill Gates owns a lot of land in Montana or whatever, but like the reason he has all that wealth to begin with is because he started a company, you know, that's like basically labor or capital, however you define it.

• 40:42Speaker 00

  Right.

• 40:43Dwarkesh Patel?

  So how do you explain the fact that all the wealthy people are, you know, capitalists or laborers?

• 40:47Speaker 00

  Well, so the thing is, one of the big misapprehensions people have is that that when they think of billionaires, they think of people like Bill Gates and, um, and Elon Musk and Jeff Bezos. Those are actually the minority billionaires. Most billionaires are hedge funds, are people involved in hedge funds.

• 41:01Dwarkesh Patel?

  Yeah.

• 41:02Speaker 00

  You know, bankers and what are bankers most, what are two thirds of banks? It's real estate, you know? And so, um, but more to your point, like if I, if it is like, point that directly into it, it's like, I don't necessarily have a problem with a billionaire existing. You know what I mean? If someone like genuinely like brings something new into the world and like, you know, I don't necessarily buy the narrative that like billionaires are solely responsible, everything that good that comes out of their company, you know, I think they, they like to present that image. But I don't necessarily have a problem with a billionaire existing. I have a problem with.

• 41:34Speaker 00

  You know, working class people not being able to feed their families, you know? And so like the the greater issue is the fact that the rent is too high rather than that Jeff Bezos is obscenely rich.

• 41:45Dwarkesh Patel?

  No, no, I I guess my point wasn't that like I'm not complaining that your solution would not fix the fact that billionaires exist. I also like that there's billionaires. What I'm pointing out is it's weird that if your theory of like where all the surplus in our society is getting, you know, given away is that it's going to landowners and yet the most wealthy people in our society are not landowners. Doesn't that kind of contradict your theory?

• 42:11Speaker 00

  Well, a lot of the wealthy people in our society are landowners, right? And it's just like, it's not the so the so the thing is, is that basically making wealth off land is a way to make wealth without being productive. Right? And so my point is, is that so like you said in your interview with Glazer that it's like, OK, the Google Plex, like the value of that real estate is probably not, you know, compare that to like the market cap of Google. But now compare the value of all the real estate in San Francisco to the market caps of some of those companies in there, you know? Look at the people who are charging rent to people who work for Google. That's where the money is actually going is that and and, you know, investors talk about this is that it's like I have to like if you earn $100,000 in San Francisco as a family of four, you are below the poverty line. Right?

• 42:56Speaker 00

  You know, the money is going to basically upper middle class Americans and upper class Americans who own tons of residential land and are basically and also the old and the wealthy especially are essentially this entire class of kind of hidden landed gentry that are extracting wealth from the most productive people in America and young people especially. And and it is creates really weird patterns essentially, especially with like service workers who can't afford to live in the cities where their work is demanded.

• 43:30Dwarkesh Patel?

  Yeah. OK, so what do you think of this take? This might be economically efficient. In fact, I think it probably is economically efficient, but the effect of a land value tax would be to shift to Basically shift our sort of societal subsidy away from upper middle class people who own, happen to own land in urban areas and shift that to the super wealthy and also super productive people who will like control the half an acre that Google owns and like Mountain View. So it's kind of like a subsidy, not subsidy, but it's easing the burden on super productive companies like Google and so that they can make even cooler products in the future. But it is in some, in some sense, a little aggressive. You're going from upper middle class to like, you know, tech billionaire.

• 44:14Speaker 00

  Right.

• 44:14Dwarkesh Patel?

  But it's, it's still be economically efficient to do that.

• 44:18Speaker 00

  Well, no, I don't quite agree with that because it's like, although there are a lot of upper middle class Americans who own a lot of the land wealth, it's not the case that they own where the majority of the land wealth is. The majority of the land wealth in urban areas is actually in commercial real estate, is the central business district. If you, and I work in mass appraisal, so I've seen this myself in the models we build, is that if you look at the transactions in cities and then you plot where the land value is on like a graph, it looks like this. And this is the city center and that's not a residential district. So the residential districts are sucking up a lot of land value and the rent is too damn high. But the central business district, and this even holds even in the age of Zoom, it's taken a tumble, but it's starting from a very high level.

• 44:58Speaker 00

  That central residential, I'm not residential, but commercial real estate is super valuable, like orders, like an order of magnitude more valuable than a lot of the other stuff. And a lot of it is very poorly used. In Houston especially, it's incredibly poorly used. We have all these central parking lots downtown. That is incredibly valuable real estate and just a couple of speculators are just sitting on it, doing nothing with it. And that could be housing, that could be offices, that could be amenities, that could be a million sorts of things. And so when you're talking about a land value tax, those are the people who are going to get hit first. And those are people who are neither, you know, nice, you know, nice, friendly, upper middle class Americans, nor are they hard

• 45:40Speaker 00

  working industrialists, you know, making cool stuff. They're people who are doing literally nothing. Now,

• 45:47Speaker 00

  If you do a full land value tax, yeah, it's going to shift, you know, the burden in society somewhat. But I feel that most analyses of property taxes and land value taxes that conclude that they are regressive. I think that's mostly done on the basis of our current assessments. And I feel like our assessments could be massively approved, improved. And that if we improve the assessments, we can show where most of our land values actually concentrated. And then we can make decisions about exactly, you know, are we comfortable with these tax shifts?

• 46:16Dwarkesh Patel?

  Yeah, yeah.

• 46:18Dwarkesh Patel?

  Hey, guys. I hope you're enjoying the conversation so far. If you are, I would really, really appreciate it if you could share the episode with other people who you think might like it. You know, put the episode in the group chat you have with your friends, post it on Twitter, send it to somebody who you think might like it. All of those things helps out a ton. Anyways, back to the conversation. So while back, I read this book, How Asia Works. You must be familiar with it.

• 46:46Speaker 00

  I'm a fan.

• 46:47Dwarkesh Patel?

  Yeah. And one of the things, I think Joseph Stedwell was the author, one of the things he talks about is, so he's trying to explain why some Asian economies grew gangbusters in the last half of the 20th century. And one of the things he points to is that these economies implemented land reform, where basically, I guess, they were distributed land away from, I guess, the existing aristocracy and gentry towards, you know, the people who are like working the land. And while I was reading the book at the time, I was kind of confused because, you know, we've like, there's something called like the Kosian, the Kosian, I forget the name of the argument.

• 47:23Dwarkesh Patel?

  Basically, the idea is regardless of who initially starts off with a resource, the incentive of that person will be to, for him to like, give that resource or lend out that resource to be worked by the person who can make most productive use of it. And Stedwell was pointing out that these like small, you know, like these peasant farmers, basically, they will pay attention to detail of property rotation and making the maximum use of this land to get like the maximum produce. Whereas if you're like a big landowner, you will just like try to do something mechanized that's not nearly as effective. And in a Poor country, what you have is a shit ton of labor. So you want something that's like labor intensive.

• 48:00Dwarkesh Patel?

  Anyways, backing up a bit, I was confused while I was reading the book because I was like, well, wouldn't, wouldn't the, wouldn't what you would expect to happen in a market that basically the peasants get a loan from the bank to work, uh, to buy, I guess, rent out that land. And then they are able to make that land work more productively than the original landowner. Therefore, they are able to like make a profit, um, and everybody benefits basically. Why, why isn't there a cost in solution to that?

• 48:23Speaker 00

  Because any improvement that the peasants make to the land will be a signal to the landowner to increase the rent because of Ricardo's law of rent.

• 48:30Dwarkesh Patel?

  Yep. Okay.

• 48:31Speaker 00

  And that's exactly what happened in Ireland when, um, and George talks about this in progress and poverty. Is that a lot of people were like, why was there famine in Ireland? It's because the Irish are, you know, bad people, you know, why didn't they, they're, they're lazy. Why didn't they improve? And it's like, because if you improve the land, all that happens is you still are forced into one sided competition and the rent goes out.

• 48:50Dwarkesh Patel?

  Yep. Okay. That makes sense. Um, is the goal that the taxes you would collect at the land value tax? Are they meant to replace existing taxes or are they meant to give us more services like UBI? Cause they probably can't do both, right? Like you either had to choose getting rid of existing taxes or.

• 49:08Speaker 00

  Well, it depends how much UBI you want. You know what I mean? It's like you can, you know, it's a sliding scale. It's like, how many taxes do you want to replace versus how much like, I mean, you can have a budget there. It's like, if you can raise, you know, I've shown in the book, the exact figures of how much I think a land value tax could raise. And I forget the exact figures, but like you can pull up a graph and overlay it here of, you know, whether you're talking about the federal level or federal, local and state. You know, there's $44 trillion of land value in America, and I believe we can raise about four trillion in land rents annually with a hundred percent land value tax. And we probably do less than that in practice, but, um, even on the low end, um, I forget what figure I quote for the low end. Like you could fully pay for any one of social security, um, Medicare plus Medicaid together. So the second one is healthcare or defense.

• 49:51Speaker 00

  Entirely with the lowest estimate of what I think land rents could raise. And then I think you can actually raise more than that, um, because I think, and I give an argument in the book for why I think it's closer to like four trillion. And that could pay for all three and have room over for a little bit of extra. And so, I mean, it's up to you, like, like that's a policy decision of whether you want to spend it on spending, whether you want to spend it on offsetting taxes, or whether you want to spend it on UBI. I think the best political solution, because like if I bite the bullet that there might be some regressivity issues left over, you want to do what's called a UBI, or what, you know, in George's time was called a citizens dividend, right? You know, this will smooth over any remaining regressivity issues. And then, but I very much am in favor of getting rid of some

• 50:33Speaker 00

  of these worst taxes, you know, not just because they have dead weight loss and land value tax doesn't, but also because there's this tantalizing theory called ATCOR, all taxes come out of rent, which suggests that if you reduce other taxes, it increases land values, which means that if it's true, in the strongest sense, it means the single tax, right? Land value tax replace all taxes would always work. And I'm not sure if I buy that. I want to see some empirical evidence, but I think at least some weak form of it holds, so that when you offset other worst taxes, not only do you get rid of the dead weight loss from those, but you also wind up raising at least a little bit more in land value tax revenue.

• 51:18Dwarkesh Patel?

  Yes, yeah. I mean, as a libertarian, or I guess somebody who has libertarian tendencies, my concern would basically be like, this obviously seems better than our current regime of taxing things that are good, basically, capital and income. But my concern is, the way I'm guessing something like this would be implemented, is it would be added on top of, rather than repealing those taxes, and then, so, yeah, I guess like, we would want

• 51:44Speaker 00

  I get this one a lot. Yeah, no. And so I have, you know, I've been a libertarian in my past, and I have a soft spot for libertarianism. I used to be a Ron Paul guy, I went back in the day for a hot minute. And so I think the thing to assuage your concerns there is, what is land value tax? It's property tax without a tax on buildings. So, the natural path to actually getting land value tax, comes from reforming existing property tax regimes,

• 52:09Dwarkesh Patel?

  Right.

• 52:10Speaker 00

  by reducing an entire category of taxation,

• 52:13Dwarkesh Patel?

  Sure, yeah, yeah.

• 52:13Speaker 00

  which is the tax on buildings. And so, that's, that's what I think is the most plausible way to get a land value tax, like in Houston, like in Texas here, if we were to start by just capture the same, like what I actually proposed for a first step. It's not 100% land value tax federally. I don't even know how you get to there. I think what you actually do is you start in places like Texas and like here legalized split rate property tax. Thus we tax buildings and land at separate rates. Set the rate on buildings to zero, collect the same dollar amount of taxes. Let's start there. There's proposals to do this in various cities around the nation right now. I think there's one in Virginia. There's a proposal to do it in Detroit. I think there's some talk of it in Pennsylvania and some places, and I'd like to see those experiments run and observe what happens there. I think we should do it in Texas.

• 52:56Speaker 00

  And that would be something that I think would be very friendly to the libertarian mindset because very clearly we're no new revenue. Right? And we're exempting an entire category of taxation. Most people are going to see a savings on their tax bill. And the people who own those parking lots downtown in Houston are going to be paying most of the bill.

• 53:14Dwarkesh Patel?

  Yeah. By the way, what do you make of, is there like a Georges critique of government itself in a sense that government is basically the original, you know, land squatter. And it's basically charging the rest of us rents for, you know, staying on rent that it's neither productively improving. As much as at least it's like getting rents from us for, like, if you think about, you know, even your landlord usually is not charging you 40%, which is like what the income tax rate is in America, right? And it's like almost you can like view the America as like the landlord of America.

• 53:46Speaker 00

  Well, I mean, it's like, I mean, I mean, if you want to take the full, like if you're asking, is Georges some, you know, compatible with full anarcho capitalist libertarianism? Probably not 100%. I think, you know, we can have a little government as a treat. But I think, you know, I think it's not a coincidence that if you look throughout America's founding, I don't think it's a coincidence that originally, like people talk about, it's like, oh, it used to be only white men who could vote. White landowning men could vote, like a government by the landowners for the landowners of the landowners. Right? And that's very much kind of the traditional English system of government. You know, just neo-feudalism, right?

• 54:26Speaker 00

  And so I think Georgism certainly has a critique of that, that it's like government is often instituted to protect the interests of landowners. But what's interesting is that if you look throughout history, you know, I'm very much a fan of democracy, you know, rule of the people. And it's like, I think we, you know, I kind of sympathize with. With Milton Friedman here, where he's like, you know, he might want to have less government than we have now, but he doesn't believe we can have no government. And then he goes on to endorse, you know, the land value tax is the least worst tax because income tax especially, I feel like is a gateway drug to the surveillance state, you know? Um, one of the advantages of land value taxes, you don't even care necessarily who owns the land. You're just like, hey, 4732 Apple Street, make sure the check shows up in the mail.

• 55:12Speaker 00

  I don't care how many shell companies in the Bahamas you've like obscured your identity with. Just put the check in the mail, Mr. Address, you know? Uh, whereas the income tax needs to do this full anal probe on everyone in the country and then audits the poor at a higher rate than the rich. And it's, it's, it's just this horrible burden we have. And then it'll, it gives the government this kind of presumed right to know what you're doing about everything you're doing, this massive invasion of privacy.

• 55:42Dwarkesh Patel?

  Yeah, no, that's, that's fascinating. Speaking of shell companies of the Bahamas, by the way.

• 55:45Speaker 00

  Yes.

• 55:47Dwarkesh Patel?

  Uh, there's this interesting speculation about what would happen if crypto really managed to divorce and private, I guess, make private your log of transactions or whatever. And then, um, I guess the idea is the only legible thing left to the government is land, right? So it would like force the government to institute a land value tax because like you can't tax income or capital gains anymore. That's all on like the blockchain and like obscured in some way. And yeah, yeah. So that, I mean, it's like crypto, the gateway drug to Georgism. Cause it'll just move the income and capital to the other realm.

• 56:20Speaker 00

  Yeah, it's just so weird, you know? I've gone on record as being a pretty big crypto skeptic, you know what I mean? But I have noticed a lot of crypto people get into Georgism. I mean, not the least of which is Vitalik Buterin, who endorsed my book.

• 56:31Speaker 00

  Um, you know, who's a huge fan of Georgism. It's like, I mean, I'll, I'll take fans from anywhere, even, even from people I've had sparring contests with, you know? I'm generally pretty skeptical that crypto can fulfill all its promises. I am excited by those promises and if they can prove me wrong, that would be great. And I think there's some logic to what you're saying is that if we literally couldn't track transactions, then I mean, I guess we don't have much to tax, except land. I don't think that'll actually come to pass just based off of recent events.

• 57:00Speaker 00

  You know, and that's basically my position on it, but I have noticed a lot of crypto people just, they're some of the easiest people to convince about Georgism, which was completely surprising to me. But I've learned a lot by talking to them. It's very interesting and weird.

• 57:15Dwarkesh Patel?

  Yep, yep. So there were some other interesting questions from Twitter. Ramon Dario Iglesias asks, how do you transition from a world today where many Americans have homes, or at least are aspiring to have homes, to a world where, I mean, obviously it would be like a different regime, they might still have homes, but who knows? Like their property will be just be like, thought of in a completely different way. How do you transition to that world? Like, what would that transition look like?

• 57:38Speaker 00

  Right, right, right, right. So there's this issue called, that I have to grapple with, which is called Gordon Tullock's transitional gains trap, right? So if you think about taxi medallions in like New York City, right? You know, it's like, it's this artificially scarce asset that allows you to operate a taxi, right? And the first generation that got their taxi medallions basically got in cheap and then afterwards, like made out like gangbusters. But the second generation had to buy those taxi medallions at the fully priced in value. And now when you come in and you're like, okay, we're going to abolish taxi medallions, if like, say you were going to do that, you would screw over that entire second generation who bought in in good faith after the value of the asset had been fully priced in. Even if you admit that the system is now unfair, removing that unfairness screws over

• 58:22Speaker 00

  the people who played by the quote unquote unfair rules. You know, so how do you grapple with that? And I think it's something that Georgists need to grapple with because we can't just imagine a future utopia without accounting for Being fair to people who play by the rules, including people like myself, like I'm a homeowner, right? Am I intending to screw over myself and everyone like me? And so I think this is where it's really important to do the math of knowing exactly who's gonna be a winner, who's gonna be a loser, who's gonna pay more, who's gonna pay less. I think it's really salient that a lot of the value of land is commercial downtown real estate. And I think that a revenue neutral property tax shift to land where we exempt the taxation of all buildings, but collect the same amount in property taxes as we're doing now, but just

• 59:06Speaker 00

  from the land, and then a modest citizens dividend is a really good first step. And then over the years, you can raise the land value rate as you also decrease things like income tax and sales tax. I think that's a transition that gets us there without really screwing anyone over. And for any edge case, like a poor sympathetic widow who has no income and but has a high value home, you just make it so she doesn't have to pay the land value tax until she dies or sells the estate.

• 59:32Dwarkesh Patel?

  Yeah, yeah, yeah. And like, I guess even in there, the worst case scenario is a status quo where they don't have to play pay land value taxes, which is already the case now, right?

• 59:42Speaker 00

  Right. I mean, nobody cares about the people who are being evicted and displaced by the status quo.

• 59:47Dwarkesh Patel?

  One, like, I guess, snafu in terms of like figuring out how to price the land is by the time that a land value tax has passed, it'll have been like years after this political talk of having a land value tax. And that talk will in turn affect the prices of homes that are sold in that time.

• 1:00:05Speaker 00

  Absolutely.

• 1:00:06Dwarkesh Patel?

  And so then you'll look at the land selling value and be like, oh, wow, this this house on like the outskirts of San Francisco only sold for $200,000. And does that mean that like the unimproved land there is only worth $100,000? And so wouldn't that just wouldn't that really conflate the data when you actually go about implementing this of like what the actual unimproved land is worth?

• 1:00:28Speaker 00

  Right. Well, so it's important to remember that land selling value is derived from land rental value, not the other way around. So land selling value is the net present value of the future flow of income that can be generated from the property. The property's inherent productivity is kind of inherent to it. And the selling price of it is based off of, you know, the capitalization of that value minus the expectation of any taxes, right? Right? And so a 100% land value tax will theoretically reduce the selling price to zero. But the land will still be as productive as it always was. It's just that the flow of those rents are being redirected. Right? And so that's the thing is that, and also in mass appraisal,

• 1:01:12Speaker 00

  one of the things you do is you decapitalize the effect of, um, of the tax.

• 1:01:18Dwarkesh Patel?

  But I'm saying, how do you even figure out? You don't know in the mind of the property owner or the property seller, like what is, what do, what do they think the probability is of a tax? And that, um, since you don't know that, it's like hard to estimate what is the actual like capitalization, you know, the rent value.

• 1:01:36Speaker 00

  So are you concerned about like this, the societal effects of the depreciation of land prices? Are you more concerned about just the calculation issue?

• 1:01:42Dwarkesh Patel?

  The calculation issue.

• 1:01:42Speaker 00

  So one, here, here's the thing empirically, um, if the land value, if the land value, um, basically if the land selling price has dropped to zero, then you are fully capturing all of the land rents. And if it's above zero, you have not captured all the, all of the land rents.

• 1:02:00Dwarkesh Patel?

  Oh, okay. So like maybe in the first year you implement this, it's like not, you know, maybe you only implemented like a, you're, you're like, basically in the first two years you implement this, you would like be trying to mess with the rate.

• 1:02:12Speaker 00

  If it's like, it's like, I mean, it's more complicated than this, but if there's any vacant lots in the area and they're selling for anything.

• 1:02:18Dwarkesh Patel?

  Yeah.

• 1:02:19Speaker 00

  There's still land rent in that, in, in that property.

• 1:02:21Dwarkesh Patel?

  Gotcha. But so this is not something you'd be able to figure out day one. You would have to like over a course of years of, of fudging the numbers.

• 1:02:27Speaker 00

  We're doing property tax assessments right now, you know? We're doing mass appraisal all the time right now. And if you just keep it updated every year, I mean, you could do it every six months. If you had the right technology, which is something I'm pushing for, you know? And so you can see the prices change in real time as transactions come in. And you can use multiple regression and geographic weighted regression to work out the difference between the improvements in the land prices. And, um, If you had a rental registry and knew what everyone was paying in rents, you'd be able to keep even better track on what's going on with that.

• 1:02:56Dwarkesh Patel?

  Yeah, this might be actually a good point to talk about your new startup. This is actually something I didn't know about either. So yeah, what is the idea? What are you up to?

• 1:03:03Speaker 00

  Right. So my new startup is, you know, so I'm transitioning out of video games and into municipal property tax assessment, mass appraisal. And so my new startup, it's called Geoland Solutions for now. We'll probably have a new name for it by the time that this podcast airs. But the idea is that, you know, I think the best criticism to Georgism is, you know, well, how are you actually going to separate land value from improvement, from building value, right? You know, how like, we can't do a land value tax till we put a price on every parcel of land, right? So how are you going to do that? And I thought that was the best, most good faith, you know, criticism remained. And it seemed like, it's like, well, we've got to get good at that, right?

• 1:03:47Speaker 00

  And so I looked into it and I realized that there is a lot of research papers that have been posted in the last 15 years about how to practically do this. And then I went and I started interviewing a bunch of assessors. And I realized that the state of the practice is pretty far behind. Only 15% of most property tax assessment offices even use multiple regression. A lot of them are using the cost approach, which is basically where you, it's what Ed Glaser talked about in your interview with him, where you estimate the cost of building and you apply depreciation and you subtract it from the observed selling price to get, you know, the assumed land price. And that works, okay. But a lot of assessment is not only using essentially only that method,

• 1:04:27Speaker 00

  but also another issue is that just a lot of those cost tables are very out of date. Assessments themselves are not always done every year. And it's not unheard of to find places that haven't done reassessments in, you know, more than 10 years. Most places, it's like, you know, one to five. But even that, I think we should be doing everything we can to get all the latest mass appraisal technology and research. And so we've hired some people who have, like, basically, one of our first hires was one of the guys who was just first author on all these papers we were reading. And we're just here to update municipal property tax assessors on the latest methods so that we can

• 1:05:11Speaker 00

  Accurately know what all the land in America is worth, you know? And then this will solve a lot of regressivity issues too, because we know that a lot of landlords are actually under assessed relative to homeowners, believe it or not, because they're more likely to protest their property taxes. And minorities tend to be over assessed and poor people tend to be over assessed. That's why property taxes are sometimes called regressive, is the assessments need to be fixed.

• 1:05:41Dwarkesh Patel?

  I see. I guess because if you have more property, getting your rate change from like 1% to 1.8% is like worth thousands of dollars rather than like hundreds of dollars.

• 1:05:54Speaker 00

  Right, and there's a lot of other issues too, is this is like, there's more, there's more value in the like, the more, there's all sorts of reasons that you can have these things, you know, often from no malintent whatsoever, right? You know, but just like, just out of date assessments can also cause all sorts of issues.

• 1:06:10Dwarkesh Patel?

  Yeah, yeah. I guess one worry that people might have is, listen, income taxing is like, you know, obviously very inefficient, but is the, I think you in the book, you're talking about the percentage of income that, of taxed income that is literally just spent on figuring out how much income tax to collect and whether people have paid or whatever. So I get that, but at least it has this nice property of, there is like, it feels like there is this hard figure that ought to exist of like, I made this much income this year, whereas figuring out how much land is worth, you know, just like, I get that it's basically like, yeah, if you figure it out, like the rent value, that's like the value of land,

• 1:06:50Dwarkesh Patel?

  but it just feels much more murky and therefore it might potentially enable corruption in the level of like, you know, like whoever's doing the assessment or however that method of assessment is happening, they'll just like use these fancy algorithms to nudge it one way or another that benefits big corporations or, you know, whoever they want.

• 1:07:09Speaker 00

  So that's a really, that's a good argument, but the reply to that is that we did need to move towards more transparency, right? Because land value follows certain rules that should logically make sense, right? We know some things. That drive locational value. First of all, we should move towards open source models. Right. Which is something that we want to do and open data whenever possible. A lot of these cities will post open data portals. Like my mission in life is to be able to like. Advance the state of the art of this technology and make it so anyone can kind of check on stuff. You should be able to in any city in America. Some cities have this, but not enough. You should be able to look up your property tax assessment on a map and compare it to your neighbor. And what you shouldn't see is a Christmas tree effect where your neighborhood looks like Christmas tree lights of like green and red.

• 1:07:51Speaker 00

  Of people whose property tax assessments like massively differ. That's the case in a lot of cities. Like if the value, like if the land values have been correctly assessed in this neighborhood. Most of these parcels should be about the same, like probably the cul-de-sac's worth a little bit more, you know, but like. Your prop, your neighbor's land shouldn't be worth 20% more than yours. And if it is, it'll stick out on a map like a sore thumb. And if the data and the algorithms are all open source and open data, you should be able to check anyone's math. And you should be able to use that to then protest your taxes if they seem off. And that's kind of the argument for land value taxes is that. I mean, you can hide all kinds of stuff in income taxes and capital taxes. I mean, that's what the Caymans and the Bahamas are for.

• 1:08:37Speaker 00

  But if you want to, I mean, it's very easy to find people who are getting a break on their property taxes, like all this corruption. I'm not saying it won't happen, but it'll be very easy to see because you'll be able to see just this mansion. That suddenly has this discontinuity on the land value map. It's like, well, someone gave this person a break and. Maybe, maybe we should, maybe we should write an article in the local newspaper about this.

• 1:09:01Dwarkesh Patel?

  Yeah, it'll be way better than how income taxes work where none of it's like open to potentially even the government itself, right? But okay, so another concern is. That's fine for things that are like above ground and legible, but what about? You find out through like, yeah, I don't know, like some sort of surveying or whatever, that this land has a lot of oil under it and then you buy it. But obviously you're not going to tell the government, hey, I just found like however many.

• 1:09:26Speaker 00

  Oh, so this is the search theoretic critique and.

• 1:09:28Dwarkesh Patel?

  Or no, no, no, not even that. It's literally like you won't declare it. So in a sense, you're still being a speculator, but in fact, you're incentivized even more to be speculator in the sense that as soon as you declare that there's oil underneath this ground, then the government is going to like start taxing you for it. So you just want to like hang on to that for, you know, forever, as long as like you can like, you know, keep it private.

• 1:09:48Speaker 00

  Right, right. So we need to talk about mineral policy in America because especially in the state of Texas, like mineral rights and land rights are totally different, right? Usually when you buy land in Texas, in America, like you actually don't have the mineral rights.

• 1:10:00Dwarkesh Patel?

  Oh, really? Okay.

• 1:10:01Speaker 00

  Like, those are, those are very severable. Like, a lot of people are very interested in, in getting those mineral rights. And so usually like, if you're not paying attention, generally speaking, you're not getting the mineral rights when you're buying land. And if you are, you're paying more for them. And so, I mean, I think a good example of this is probably like, you know, you want to create some, I think with the case of minerals, you can't just have a full, I think, as kind of an acknowledgement of Kaplan's, like search theoretic thing, like you have something more like the Norwegian model where you need to basically give some incentive to someone to produce or to not withhold that resource, right? A good example would be the treasure, the treasure law in England, because England

• 1:10:44Speaker 00

  has all this ancient, like Anglo-Saxon treasure and Roman treasure. And so before what they would have is someone would find it and like, go like hide it or melt it down because they didn't want the government to tax them. And so they pass this treasure law, which is not perfect, but it's okay. But they're like, we, this is our heritage, right? We want that in a museum. So here's the deal. If you find treasure, you're gonna get paid, and the landowner's gonna get paid. So there's an incentive for people to go out with metal detectors, and there's an incentive for a landowner to let people do that. And then the government's gonna put it in a museum.

• 1:11:19Dwarkesh Patel?

  Yep.

• 1:11:20Speaker 00

  You know, you're gonna, you're gonna be rewarded for the discovery of that thing, but that thing is itself, its value is going to be captured because it's the heritage of the British people. The opposite of this is the Spanish government, whenever someone finds a ship full of gall, a galleon full of gold doubloons on the bottom of the ocean, if you go and you invest the capital, bring that up to the surface, you know, and you're in Spanish waters, or the Spanish government finds you, or you like take it not to Spain, a Spanish Admiralty Court is going to try to get its claws on that gold. In the view of the Spanish government, like- Basically, the incentives they're producing is to make sure that nobody ever, ever recovers a ship.

• 1:11:59Dwarkesh Patel?

  Yeah. Or they do, it just ends up in some sort of like, you know, foundry in another country.

• 1:12:05Speaker 00

  Right, right, right, right. The Spanish government's approach to sunken treasure basically incentivizes people never to go after.

• 1:12:10Dwarkesh Patel?

  Yeah, yeah, yeah. I guess a general critique of Georgism in general, or implementing it, would be, listen, the reason America is wealthy and other developed countries are wealthy is because they are very strong in terms of honoring contracts, especially honoring people's property rights. And, you know, if we get to a scenario where the government is saying, okay, but in this like case, we're going to, I mean, I guess it depends on how you think about the contract of property, but in some sense, it's a contract we have the government that like, hey, I have this property. And once you don't honor that, like, the people will get too concerned to want to invest in America or in American assets, and that will just have like all kinds of economic

• 1:12:53Dwarkesh Patel?

  repercussions where people are like, oh, I guess like my property is not mine, maybe like other things I thought I was investing in, like my stocks are not mine, so why should I buy these stocks in America?

• 1:13:01Speaker 00

  Well, this is a, this is a, this is a fully general argument against change. And it also is like, I don't agree with all the assumptions. Like, you know, if America doesn't honor its agreements, what are they worth? Well, we've violated all kinds of treaties, not like with the Indians especially, but also like all sorts of international treaties. And, you know, I mean, like, we've made all kinds of times where we've like changed rules on things and changed asset classes. You know, we had an entire period where we just banned all sales of alcohol, and then we had a time where we completely undid that and brought it all back. You know, there's been times where we've like made major, major changes to the rules of what kind of asset classes we have.

• 1:13:46Speaker 00

  I mean, this, this is kind of like brought up with like, you know, any kind of like labor protections and things is.

• 1:13:53Speaker 00

  You know, is it's like, well, we have these rules and therefore we can never change them. And I think, I think the best answer to this is that you need to acknowledge Gordon Tullock's transitional gains trap. And if there's someone who's going to be, you know, put out, then you make sure that there's some compensation in the system to smooth over the transition. But the rule of law doesn't imply that any change to the status quo is going to undermine trust in it. And I don't think that, and I think it's important to remember that George is not interested in seizing land. That's a very big distinction from the Maoist position, which is murder the landlords or, or the more like modest Asian reforms.

• 1:14:35Speaker 00

  Asian reforms, it's like, we're just gonna, so first of all, when you're talking about how Asia works, like they took the land away from the big landowners, gave it to the peasants. And it made those countries way more productive, right? And like, I don't think anyone would like, look at those Asian countries now and compare them to where they were and be like, well, the rule of law is weaker now than it used to be.

• 1:14:54Dwarkesh Patel?

  Yeah.

• 1:14:54Speaker 00

  But George isn't even advocating for that. He's just advocating for raising taxes on land and exempting all of the building taxes. So I don't think it amounts to seizure of land. And I think for those reasons, but even if it did amount to that, I think, you know, sometimes it's worth biting some bullets.

• 1:15:11Dwarkesh Patel?

  Yeah, yeah. Um, okay, let's move on to the dessert. Let's move on to like some, some more fun interpretations and applications of Georgism.

• 1:15:19Speaker 00

  Sure.

• 1:15:19Dwarkesh Patel?

  So, um, one, I think Bern Hovard had this blog post on the diff. I don't know if you follow anyways, but he's, he's like a great finance writer. And he was talking about how if you have a Facebook account or a YouTube channel with like millions of subscribers, you're in some sense, like you were like very early to YouTube or Facebook and now you have this land. And Facebook punishes you if you're, have a big account, but not posting frequently or not getting enough engagement. It'll like, in the future, you'll have a harder time reaching people. And, you know, Bern Hovard had this like George's, George's interpretation of that, where it's like, you have this productive asset of, you know, people to attend, like this, uh, this.

• 1:16:02Dwarkesh Patel?

  Initial sort of profile that you're able to build in the early days of Facebook, if you're not like posting on it, we're not going to give you the advantage of having millions of buyers. But anyway, so there's all kinds of like ways you can apply George's them to, you can think of like the app store as this sort of like rent seeking from Apple where they charge you 30% tied.

• 1:16:21Dwarkesh Patel?

  And yeah, there's all kinds of other places in the digital world where you can think of this. Like, what is your sort of like, how do you think about George's them in the context of those kinds of things?

• 1:16:30Speaker 00

  Right. So I've actually written a policy paper on how to apply the theories of land value tax to virtual worlds. And, and so the question is virtual real estate is when does something actually operate like a land like asset? And then to what extent does George's principles apply, right? And that doesn't necessarily mean just do LVT. It means that, you know, so, so first of all, let me define what I mean by a land like asset. A land like asset has three properties. It is scarce in supply, it is necessary for production, and it obtains locational value by virtue of its position in some kind of graph. Right? Um, and so as an example, I create like a fictional MMO and I give the example of a unicorn, a permit and a plot of land.

• 1:17:14Speaker 00

  The unicorn is scarce, but it's not necessary for production. Any value you could get from the unicorn, you could get some other way. It's just really nice to have. And there's only like 10,000 on the server. A permit is like a permit to brew potions. You're part of the witches guild. You can brew potions. So like my apprentice witch, she has to pay rent to me to gain access to my permit to be allowed to brew potions. But all permits are fungible. So there's no locational value. And then a plot of land, right? Like we've talked about. Where you can also, and so this becomes a real speculative asset. Domain names are probably the closest thing to this. And Vitalik Buterin has actually written a post about how to apply George's theory to domain names and also all the wrinkles that are involved.

• 1:17:55Dwarkesh Patel?

  By the way, he did this on your blog, right? As a guest post?

• 1:17:58Speaker 00

  Well, progressandpoverty.substack.com is not technically my blog. It's a group blog where a lot of us George's post. But so, yeah, so, so my blog in the sense of our blog, sure. And he cross posted it. He posted it also on his own blog. And so, but there's other considerations to remember when we're, when we go away from literal land is like, so for instance, in domain names, you know, especially with the Ethereum name system, you have issues of identity, right? That don't apply like if someone buys this house from you. Probably people aren't gonna be like, maybe the next person who lives here is gonna get some of your mail for like a week or two. But like, no one's gonna think that they're you necessarily. But if I buy vitalec dot e.

• 1:18:39Dwarkesh Patel?

  Yeah.

• 1:18:39Speaker 00

  Like, there might be some confusion. Like, I might be able to get some transactions that were meant for him. And so there's these other considerations to like, and he deals with all of that. And so I wrote a policy paper about how to apply LVT in virtual worlds and stuff. That was more in these more kind of literal simulacra of the real world in these like virtual worlds than kind of the things you're talking about of like YouTube accounts and and charts in, in like, in basically app stores and stuff, which are user-generated content platforms. But I haven't fully analyzed user-generated content platforms, but I do think chart positions are a sort of virtual land. You know, and you do essentially, they do essentially charge rent for that.

• 1:19:23Speaker 00

  Not just to the platform in their flat 30% fee across everything, but also in the kind of advertising Red Queen's race you have to do to stay on those charts. You essentially have to buy that position and then keep it. You know, and so basically like the first, there's this huge first mover advantage that turns into rent seeking. And I haven't fully analyzed exactly how you apply George's theory there, but I do think there's something to it. I also think there's something to extremely long-lived copyrights and patents. It's a little undercooked at the moment. I don't have a fully fledged theory of it. But certainly cases like other monopoly assets like orbital real estate, radio spectrum, any kind of

• 1:20:06Speaker 00

  like being able to capture the right to the possibility space. Like, especially like, you know how like John Carmack had a lot of algorithms, like some of which were patented and he wasn't even allowed to use them in his own games? Because someone else had speculantly patented like.

• 1:20:20Dwarkesh Patel?

  Oh, really? That sucks.

• 1:20:22Speaker 00

  You know, it was like the, like Carmack's reverse was like this particular algorithm that they weren't allowed to use in like Quake 3 or something because someone had speculatively patented it. And there's like no other way to do that thing. So Quake 3, this one particular. Sub routine had to be like 25% slower because they because someone had patented like essentially like like imagine if you could like patent the Pythagorean theorem, you know?

• 1:20:45Dwarkesh Patel?

  Yeah.

• 1:20:46Speaker 00

  So like that kind of nonsense and you can just rent seek off that for 20 years.

• 1:20:50Dwarkesh Patel?

  Jesus. Oh, that's funny. Anyway, I guess we can move on to another juicy implication that you were just talking about, which is space. There is like this idea. I mean, eventually, hopefully humanity will conquer space and like the rest of the galaxy. So, and this is where like Georgism will be really interesting and applicable because we obviously want to. We want to encourage and incentivize people to like go to new worlds and make use of like stars and planets. But we obviously don't want it to be the case that if you got to Mars a year earlier, like if Musk gets to Mars a year before Bezos. He has, you know, like forever rights to

• 1:21:28Speaker 00

  Right.

• 1:21:29Dwarkesh Patel?

  Everything on Mars and all the resources, right? So, yeah, Georgism in space would be, I think, I think is actually a place that makes a lot of sense. But I mean, have you have you put much thought into like, you know, interstellar Georgism?

• 1:21:41Speaker 00

  Interstellar Georgism is actually current international law.

• 1:21:45Dwarkesh Patel?

  Oh, really?

• 1:21:45Speaker 00

  The inner through the Outer Space Treaty. The Outer Space Treaty currently said, and I think the Outer Space Treaty will last for about five minutes. Once the interplanetary space race gets gets going in earnest, but the The current law, the law of the international order of the Outer Space Treaty basically says that nobody's allowed to claim Interstellar bodies like the moon or Mars for China or the US. Like, we have a flag there, but it's not American territory.

• 1:22:11Dwarkesh Patel?

  Yeah.

• 1:22:12Speaker 00

  Right? It's it's basically international waters, so to speak, right? And once the actual possibility of having permanent bases shows up, then we will have to hash that out. But so basically, I think we should take that and run with it and basically be if you are going to, you know, Take possession of interstellar bodies, you know?

• 1:22:34Speaker 00

  It will become a question of who exactly becomes the government in that scenario. Is it like some international coalition? Is it the UN? I'm not a huge fan of the UN, you know? Or is it just like, it turns out to be like, whatever sovereign government gets there first just gets to claim it. But can you have Georgism within those confines? I think we certainly should.

• 1:22:53Dwarkesh Patel?

  Yeah.

• 1:22:53Speaker 00

  You know, because otherwise what you're gonna get is that the, you're gonna get underinvestment, you know? You're gonna get so much underinvestment because the first people to get there are gonna basically charge rent to all the people who come next.

• 1:23:05Dwarkesh Patel?

  Yeah, yeah. And then I just remembered the other question I wanted to ask about copyright, which is, that's a really interesting and complicated area because it's hard to think of what is the intrinsic sort of value of the land of the idea and what is the improvement you've made?

• 1:23:21Speaker 00

  Right.

• 1:23:22Dwarkesh Patel?

  And so like, what are you going to call like the improvement of like the song you discovered? Maybe like the melody is like, the melody would have existed anyways, but like the specific lyrics you came up with? I don't know.

• 1:23:31Speaker 00

  Well, copyright, it's not clear to me exactly what the implication of Georgism is. It's like Georgism, if you zoom out, it's not exactly just about land, right? That's where people, a lot of people like, kinda like, why are you so obsessed about land? It's mostly about enclosure of, enclosure of natural monopolies, right? And, and, and, and, and, and economies just based entirely around rent seeking. And it's clear we have this with like eternal copyright. If we had eternal, if we had the copyright laws we had today, when Disney was first getting started, like the Brothers Grimm would still be under copyright and they would not have been able to get off the ground with a lot of their early properties. And then they pulled the ladder up right behind them.

• 1:24:13Speaker 00

  It's clear they're rent seeking in a lot of ways and refusing to give back to the commons from which they first enriched themselves. And the question then becomes like, you know, can you easily parse copyright as land? I mean, it's a very undercooked theory, but there's something there of like, Probably what it cashes out to is just copyright terms should be shorter. You know, like at some point when an idea has become part of the cultural consciousness for like so long, it should become part of just the background collective commons. You know, because all ideas are essentially remixed and built on top of other ideas, but we want to incentivize people to create new ideas in the first place. It's not a perfect analogy to land, but there is something there about rent seeking that needs to be addressed.

• 1:24:58Speaker 00

  And it probably just cashes out to just reducing copyright terms.

• 1:25:01Dwarkesh Patel?

  Yep, yep. Let's talk about the political feasibility of this idea. So,

• 1:25:08Dwarkesh Patel?

  I mean, I just mean land value tax in general. Do you think it'll be something that will get passed in a democracy? You know, there's like, you know, a lot of people have homes or want to have homes, but on the other hand, if you like just redistribute. If you don't have like, I don't know, many acres in the middle of San Francisco, you would probably maybe still come out net ahead. But would you, could you be able to explain that to people? And obviously there's like tenants who would have definitely benefited from this. Anyways, in general, what is, what is your thought on like how politically feasible this is now or would be in the future?

• 1:25:35Speaker 00

  I think it's more politically feasible than we think. I think it just right now has low salience. And if more people start talking about it, I think it's going to make a lot of sense, especially if it's pitched as property tax reform. Like right now in Texas, you know, you have people like Huffines who are trying to abolish property tax, which will turn the state into California like that.

• 1:25:51Dwarkesh Patel?

  Why? Huh? Why? How come?

• 1:25:54Speaker 00

  How, why does he want to abolish property tax?

• 1:25:56Dwarkesh Patel?

  Why would it turn into California?

• 1:25:57Speaker 00

  Because California has some of the lowest property taxes in the nation.

• 1:25:59Dwarkesh Patel?

  Yeah.

• 1:26:00Speaker 00

  And Proposition 13, and it creates a, a entire layer of landed gentry and really, really, really expensive housing. Like housing is already getting expensive in Austin and property taxes have an effect of lowering property prices. Property taxes are an imperfect land value tax. And so basically I, it'll just reproduce the economic conditions that empirically exist in California.

• 1:26:21Dwarkesh Patel?

  Yep. You know, there's like, there's this like funny saying that the Texas constitution is not a government document, but rather an anti-government document. But one of the, I guess, the positive byproducts of your Georgia is since it makes taxing income so hard, governments are forced to tax property and hopefully eventually land and therefore.

• 1:26:42Speaker 00

  Bone to pick with the Texas constitution because Houston had a, had a single tax mayor in 1911. And had an active Georgists land value tax. And it would have still had it today if it wasn't for the state cuts for for a state judge who basically shut them down.

• 1:26:56Dwarkesh Patel?

  Why? What was the reason?

• 1:26:58Speaker 00

  Because there's a clause in the state constitution of Texas that says all property taxation has to be uniform and that's interpreted as uniform across both the buildings and the land. You can't tax them at separate rates.

• 1:27:09Dwarkesh Patel?

  Yeah. Wait, so does that mean that constitutionally you could just couldn't do it in a Texas?

• 1:27:13Speaker 00

  It's up to interpretation. There's some people interpreted that it's like it. What that that clause was written to mean, you can't tax this guy at a higher rate than that guy. You have to tax them based on the value of their property. And then you could claim that it's still being uniform or just taxing land. And we have all these exemptions and categorizations already. This is just another one of those. Why? You know, we tax agricultural land at a different rate. You know what I mean? Like if you put a bunch of cows on a property, suddenly it's like it's magically less valuable.

• 1:27:42Dwarkesh Patel?

  Yeah.

• 1:27:42Speaker 00

  You know, so why can't we, you know, like target just the land? And so if you have the right judge, maybe you could get away with that. But anyway, to go go towards political feasibility, I think it could be more feasible than we think. Especially pitched this property tax reform because people are like property taxes are too high. Hey, everyone, let's exempt all your buildings. I think you could build a coalition that's excited about that. And especially if you do the math and show who like, like what the change in your taxable rate is going to be. I think, you know, you know, just a revenue neutral property tax shift to land can be quite popular. There's a lot of cities around the US right now where this is being floated. You know, organizations like Strong Towns and the Center for Property Tax Reform are working on a lot. And Lincoln Land Institute are like talking to places about it. Detroit is talking about it right now. And they could desperately use it.

• 1:28:27Speaker 00

  And I think it could pass, you know, and then in terms of, I think Henry George's aliens is coming back like, and especially in Norway. Like the ruling center party coalition just passed a, you know, they're very successful resource management policy with oil. They also have one from the early 1900s in hydropower, which was set up by Norwegian Georgists. And so the ruling center party coalition just put one in for salmon farming aquaculture locations. A new severance tax on that, and they name checked Henry George when they implemented it in the speech. And so I think. If they are willing to, you know, stand up to the landowners in Oslo and pass a land value tax, that would be the next step. I'm not sure if they're brave enough to do that. But we're starting to see this kind of bubble up. And so I think a revenue neutral

• 1:29:12Speaker 00

  property tax shift to land is the politically popular way to do it. Because it can be done on the local level without having to change a whole bunch of laws. You know, it's a little complicated in Texas because that stupid state constitutional provision. But in other states, they don't have those. There's other states that any municipality could do it right now if they wanted.

• 1:29:32Dwarkesh Patel?

  And I guess another part of this question then, or that answer is, well, one of the things you talk about in the book is, you know, in some sense, the value of your land is caused by the other people around you, of other properties, of like other amenities and companies or whatever that are in. So it's kind of like a publicly contributed. But if you think about it that way, doesn't it make sense that your land taxes should go to that community, which is the one that's creating all this value, rather than being, say, distributed federally? So maybe we should have land value taxes on local levels, but then it goes to pay towards local amenities. So it's like, if you live right next to the subway, and the reason your property is so valuable is because like you're right next to the subway, then that goes towards making the New York subway better, but it doesn't

• 1:30:16Dwarkesh Patel?

  go towards like, you know, I don't know, like some sort of the city hall in Kentucky or something.

• 1:30:21Speaker 00

  Right. I mean, it's like, if you wanted to create a model for a, you know, bottom up decentralized America, like, I would take that bargain. We still got to like, fund the federal government somehow, you know. And so like, I would like to repeal, you know, the federal income tax and have that funded by land value tax. But it's like, I mean, if that's like, as far as I could ever get, I'd shake your hand and take that deal right now. You know, sounds, sounds good.

• 1:30:42Dwarkesh Patel?

  Yeah, fair enough. One more question. This was actually from Twitter from Craig Fratrick. The question is basically, if, I mean, one of the reasons why we think of land as being sort of like a public thing is because it's your land value is contributed by people around you. But what if you own so much land that really you are the one that's contributing to the value of all your land, right? If you're thinking of like, something like Disney World. Like they basically own like half of Orlando or something. And they're the ones that are creating nearby amenities, which are making the rest of Disney World valuable. So in that case, aren't they entitled to all the proceeds?

• 1:31:19Speaker 00

  And what's funny is like, in a way, yes. And so what's interesting is like, this is often like poses a gotcha question for georgists. But we actually like internally, like this is called the Disneyland or the Disney World question. You know, and it's actually a really interesting case. And the thing you have to realize now is who is Disney World in this situation? Disney World is the government in that case in point. Disney World is the community. Disney World is the city. It's a private city. And then there's all these questions of who is a citizen of Disney World? And is it an equitable democracy or whatever, which we'll leave aside for the moment. But the point is, is that Disney World has fully internalized the positive externalities of their own building. Right? And so the incentive structure has changed. We fully acknowledge that we just bite that bullet.

• 1:32:04Speaker 00

  So the question then becomes, you know, um, what do you do about it? It's a really interesting situation, essentially a private city. You know, and so there can be certainly issues with company towns, especially when they, you know, enforce local monopolies, essentially like bad local laws where it's like you have to buy from the company store or whatever. You know, which is mostly an issue of governance. But in terms of like land use, actually, if an entire landowner owns an entirely large enough area to internalize all of their positive building things that actually, you know, they are actually, you know, that that does change the situation. And then you need to see them less as the private owner of a parcel and more as a private operator of a city. Right?

• 1:32:49Speaker 00

  And that changes the governance question and it becomes a completely different category of problem. And so then there's questions of it's like, you know, what, what, what is the right mix of taxes and subsidies? And do you even want to have these sort of entities in the first place? And what is the governance question looks like? But the important thing to realize is that you are no longer dealing with a private landowner. You were dealing with a private city.

• 1:33:09Dwarkesh Patel?

  Wait, okay, so is maybe one way to think about Georgism that somebody has to be collecting the rents? And what Georgists are saying is, we want the rents collected by the government and not by the person who is like a private landowner. Presumably because the government will do more public facing things with it, but like, rents have to be collected. We're just trying to decide who will collect the rents.

• 1:33:32Speaker 00

  Right, rents will be collected one way or another. And if we leave it to the status quo, private actors free riding off their neighbors will collect them and make everything worse. They will cause less investment and they will hold the best land out of use and there'll be less building than there should be and the rent will be too damn high. And the rent has to be collected one way or another, so it might as well be collected on behalf of the community. Right? Because not only will this fix the incentives, but then it also shares the wealth with the people actually produce the wealth. And if the community is itself this giant private city, then that kind of changes the equation a bit. And I have not like fully delved into the Disney World issue and the Disney World question. And that's a little separate academically from actually existing Disney World and how anyone feels about that institution in particular.

• 1:34:16Speaker 00

  But the important thing to realize is that we're now dealing with a different domain, you know, because then the question is, it's like, you know, who is the citizen of Disneyland? Who is the tenant of Disneyland? What is the governance of Disneyland? It's like you realize that now Disneyland essentially is the government. And I think that's actually like kind of literally true in actually existing Disney World because they have their own like special district that operates essentially as a private government. And that's just, it's just its own kind of question. But the point is very much, yes, the rents have to be collected one way or the other, so they might as well be collected on behalf of the community. One way to implement that is through a government, right? You know, because we have this nice little democracy we can use. But you can all, there's also this movement, you know, there's this whole charter cities movement, and then a movement I like even better called starter cities, which is less

• 1:35:01Speaker 00

  like, let's find some, you know, third world country to like, hope our sovereignty doesn't get revoked in five years, like, but let's like build cities somewhere in America where zoning is pretty loose. You know, you could have everyone who lives there basically be a shareholder of a private entity and share out the land rents that way. Another way to implement it would just be ground leases rather than land value tax within a private city. And then everyone who lives there is de facto a shareholder of the city. And there's some people who are trying to build stuff like that, which I'm very much interested in. Awesome, awesome. Okay, final question. What is next for you? So what is next for me? So I'm still a game developer and, you know, so nights and weekends, I'm overseeing a project that'll release next year, Defender's Quest 2, after a good decade of development.

• 1:35:43Speaker 00

  I'm happy for that to be finished. But then additionally, you know, I am working on a startup, which is called Geoland Solutions for now. The name will almost certainly have changed by the time of time this podcast airs, but if you go to geoland solutions.com, it'll redirect to whatever our new website is. And that is a municipal mass appraisal company. We're going to partner with local municipalities. We've already got a couple of customers who are interested in what we're doing. And we're going to massively update the state of the practice of municipal mass appraisal in America to be more accurate, more efficient, and more and more up to date with the latest models and more transparent, you know, leaning into open source and open data solutions wherever possible. Yep.

• 1:36:29Speaker 00

  And I think that can be the practical step towards Georgism, not just to implement Georgism, but even to advocate for it. Because, you know, in the Edward Glazer interview, you know, one of the critique, I'm super happy to have Glazer's endorsement, even if he thinks Georgism isn't a panacea. Yeah. One of the things about his critique of it not being a panacea, and I think, you know, it's a polysea, even if it's not a panacea, you know? I'll settle for curing multiple diseases, even if I'm not curing literally all of them, is that, um, is that I think he's under the impression that land isn't a big deal. And how important you think Georgism is depends on how much the land is worth. And to do that, we have to measure it. And we're not super good at measuring it right now. And I think we need to get super good at measuring it. And I've decided, you know,

• 1:37:14Speaker 00

  when I was talking about this originally, you know, basically someone, you know, challenged me. It's like, if you really think you can do this. Then the reason I don't think you can do this is because if you really could, then people would give you millions of dollars to go do it. And well, we just closed around, led by Sam Altman, you know? And that's exactly what happened. And now we're gonna do it. So I'm really grateful to that commenter for challenging me in that way. Because I'm like, okay, well, I really see my life's work as like making Georgism possible and practical. And I think the way to do that is to measure the value of the land and to put those tools out there for anybody to be able to pick up.

• 1:37:49Dwarkesh Patel?

  Yep, awesome. Okay, so the book is Land is a Big Deal. And where else can people find you?

• 1:37:56Speaker 00

  Yeah, so you can find me at a couple of places. One, the website landisabigdeal.com. You can find me on Twitter at Lars Usprime. And the book is based on a series of articles that you can find at gameofrent.com. And what else? We have another website. Yeah, well, geolandsolutions.com, which will redirect you to whatever the new name is. And that's everything I do.

• 1:38:22Dwarkesh Patel?

  Yeah, and this is one of those books. I mean, it's like there's books you read where you're like, oh, that's interesting. You know, like, I guess I shifted my priorities slightly. And there's books like, oh, fuck, why did I not think about it that way? That's like, wow, that's like changes everything about like how I think about, in this case, you know, economics. And it really is one of those things where I'm look. I think you had the metaphor in the book about like observing the cat in a picture.

• 1:38:43Speaker 00

  Yeah, seeing the cat, yeah.

• 1:38:44Dwarkesh Patel?

  Exactly. So yeah, anyways, I do highly recommend the book. It's one of those books you'll read where you'll just have a completely new perspective on an entire field. Awesome. Okay, thanks, Lars. Thanks for coming on today. And thanks for making your way all the way over here to do this interview live.

• 1:38:58Speaker 00

  Yeah, well, thanks for grilling me. Thanks for all the hard questions. You know, it's like, I really, I really, I really like to be challenged in that way. And like really engage with the best faith, you know, hard hitting critiques, you know, to like make sure we like really understand what we're talking about here. Because it, none of this matters unless it works.

• 1:39:13Dwarkesh Patel?

  Yep.

• 1:39:14Speaker 00

  Right? And so it's like, I'm not here to like defend Henry George's honor. I'm here to like really explore whether this can actually be a solution to our problems.

• 1:39:21Dwarkesh Patel?

  Yep, yep, yep. Awesome.

• 1:39:24Dwarkesh Patel?

  Hey, thanks for listening. If you enjoyed that episode, I would really, really, really appreciate it if you could share it. This is still a pretty small podcast, so it is a huge help when any one of you shares an episode that you like. Post it on Twitter, send it to friends who you think might like it, put it in your group chats, just let the word go forth. It helps out a ton. Many thanks to my amazing editor, Graham Besselou, for producing this podcast, and to Mia Ayana for creating the amazing transcripts that accompany each episode, which have helpful links, and you can find them at the link in the description

• 1:40:05Dwarkesh Patel?

  below. Remember to subscribe on YouTube and your favorite podcast platforms. Cheers. See you next time.