Geoism and Natural Ability

Worker/Boss conflict - "They're fighting the wrong person - Landlords get all the money

Economics in Six Minutes (Source: twoplustwoequalsfor.tumblr.com)

The Geoist economic system is designed to promote equality. By recovering land rents for the use of the whole community, rather than a few individuals, it closes avenues for one person to become wealthy without working, while others work hard and receive very little money. One’s wealth consists of what they produce, nothing more and nothing less. This is reasonable and just, and preserves incentives to work hard.

But what about people who have more natural ability to produce, or people who produce more wealth with the same amount of exertion. When working, they would receive more wealth for the same amount of labour. In other words, they receive more return to their labour. While it is justified that those who add more to the economy should receive more from the economy, an element of injustice could also be seen, where two people could put in the same effort and get unequal reward.

If we take two computer programmers to serve as an example, who put the same amount of effort into their jobs, the first programmer, who had better programming ability, might produce twice as much good software code as the second programmer. If they were paid according to how much they produce, the first programmer would receive more. But they both put in the same effort! Why should one get more out of luck to be born with better ability?

If we redistributed income from the better programmer to the other programmer, then that would constitute a taking of the fruits of an individual’s labour. This is not to be advised, as it increases the size of government and throws the door open to more income redistribution, such as that which outright breaks the link between effort and reward, eroding incentives to work hard. Geoism can solve this quandary through income pre-distribution, rather than income redistribution.

Labourers who receive more return to their labour would be smart to seek to produce at the best quality locations. This would multiply their natural abilities, allowing them to fulfil their impulses to seek the most money under the market economy. In turn, good capitalists and entrepreneurs who own capital in good locations would seek the best workers, as this would maximise their capital yields.

Smart owners of superior land would seek the most productive enterprises (those with the best workers providing highest capital yields), as this would allow them to extract the most rent, as long as land taxes are based on assessed land values, not actual rents.

While at first this would increase the gap between the naturally able rich and the poor who contribute equal labour to the economy, let some time pass. As those with the most natural ability tend, through market forces, to work on the most productive land, ground rents would be calculated on the assumption that that land would be used by the highest quality workers, as the tendency mentioned in the previous paragraph spreads to all landowners, and increases.

The increased yield of labour that some workers have over other workers would be taken in rents for the locations on which they work. The increased rents that landowners receive would be accounted for in land value assessments, and collected for the good of all. Those who have less natural ability would still receive the same reward for labour, once rents are taken into account.

The same mechanism could be used to sort out capital of varying quality, without having to contend with the higher investments sometimes required for higher yield options that might impede the market solution of more investment money flowing towards the highest yielding capital, or to complement that market mechanism. The highest yielding capital would tend towards land with the highest rent, while the lower yielding capital would tend to land with the lowest rent.

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