"Land Value Tax Won't Fix San Francisco"

The first thing I thought of when I saw Mr. Smith's post was "Zoning" (it wasn't some flash of brilliance on my part, we've been down this road before)
Yglesias at Moneybox:

Nice view. Shame if someone spoiled it with some buildings.

Photo by Ezra Shaw/Getty Images

I love the idea of a land value tax. Instead of taxing human labor (and disincentivizing work) or taxing accumulated capital (and disincentivizing savings) you tax land. You get revenue (good!) in a progressive way (because landowners are rich!) without any bad incentives (amazing!) and everyone's happy. Noah Smith thinks it could greatly ameliorate the class tensions currently gripping San Francisco.

Here I'm afraid that I'm skeptical. There are lots of places in the United States of America—most places, even—where a tax on land value would be a great thing for housing affordability. For example, if Harris County in Texas replaced its property tax with a land value tax it would alter the incentives facing property owners in the Houston area. You'd get more building, less idle land, more housing supply, and lower rents. But in a place like San Francisco (or Cambridge, Mass.; or Manhattan; or Santa Monica, Calif.; or D.C.), the constraint on the supply of new buildings isn't really taxes it's zoning. The median value of an owner-occupied house in San Francisco is $750,900—almost double the California average and more than quadruple the national average. Under the circumstances, the financial incentives to build new housing units are already extremely strong. The problem is that it's hard to get regulatory permission to build....MORE

As I said in the July 2013 post "The Economist Calls for More Taxes on Land":

They are a bit late getting to the party, this discussion has been pursued in relation to the means of production for years and as far as our little corner of the www goes we made mention of the FT Alphaville commentary back in 2012's "The Road to Serfdom: Where the Robots Are Taking Us":

Not Hayek's "The Road to Serfdom". Rather this is a journey back to medieval society where all income is subject to taxation by the Church or the manor or both. At least in the current case it is freehold rent which is paid in cash rather than the labor rent that villeins and serfs owed their liege.

Let me explain.
On Satuday Worthwhile Canadian Initiative had a post "Capital-biased technical change vs low interest rates?" about the flow of income from productivity gains accruing to capital in larger and expanding proportion rather than to labor:

Paul Krugman says that recent technical change has been capital-biased. That robot story sounds plausible to me too. But if so, why are real interest rates so low? (Yes I know there's a global recession on, but real interest rates were falling even before the recession). Maybe we are forgetting a third factor, land, and land rents are rising?

Suppose there were a new technology that caused both wages and interest rates to fall. Why wouldn't capitalists and workers say "Stuff that, let's go back to the old technology!"? Any individual firm, or group of firms, that went back to the old technology, while borrowing at the new low interest rates and paying the new low wages, would make super-normal profits. And all the other firms would eventually choose to, or have to, follow it back....MORE

One of his commenters made a very sharp observation:

Nick,
This is right (and krugman is right). Asymptotically, when robots do all the work including the development and manufacturing of robots, all rents will flow to the owners of land just like a few hundred years ago. At that point the prescriptions of Henry George will be self evidently true. Until then a great deal of rents will flow to the owners of non-land capital. Watch for ever broadening, ever lengthening IP protections, and continuing income polarization.

Posted by: K | December 08, 2012 at 03:25 PM

That's where I went all medieval on folks around me.
The story was advanced by Izabella Kaminska yesterday. From FT Alphaville:
The robot economy and the new rentier class

It seems more top-tier economists are coming around to the idea that robots and technology could be having a greater influence on the economy (and this crisis in particular) than previously appreciated. Paul Krugman being the latest.

But first a quick backgrounder on the debate so far (as tracked by us)....MORE

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See also this FT opinion piece from 2011.

...MORE
( The Road to Serfdom: Where the Robots Are Taking Us really is worth a read)

Then there was another link to Izabella on this topic in "The Theory of Everything" and more in a handful of other posts.
Then I got bored.
Started babbling:

...Harking back to last week's post on the robotic ride to serfdom the villein occupied the social space between the freeman and the slave, below the thane but above the feudal cotter (cottage in return for labor).
Thus the alpha-villein would be top dog.
And of course, a cotter rill is the brook beside the cottage.

Joseph Cotterill is one of the denizens of Alphaville.
Meanwhile her "Attack of the killer rentiers" is up to 24 comments today (I swear she throws red meat to the baying hounds on purpose)
See also one of the most-prescient-of-all-time econ paper in ""TAXES, CAPITAL AND JOBS"".