LVT and NIMBY are both cases where we’ll crafted messaging can find common ground between free market conservatives and social justice liberals. Know your audience, appeal to their interests and concerns, don’t lecture or wag your finger at them.
"While George’s lifetime predated our Euclidean system of zoning, it is clear that he would have found it an abhorrent barrier to human freedom... zoning is a regulatory tax on production which grants landowners the right to exclude others from their community and ultimately curtails our freedom to live and work on land in the manner that best serves human need."
Really?
George recognised, I thought, that public goods can lift land values (i.e. when they have benefits greater than their costs).
Would he have not recognised that some regulations to internalise externalities can do the same?
Who knows. The guy is dead, and didn't comment on it, and dubious interpretations of what George, or Jesus, would have thought about modern inventions, like zoning or smartphones, seem a bit contrived to me.
If he wouldn't have recognised that regulations preventing harmful externalities while placing minimal burden on the regulated party can promote higher aggregate welfare (i.e. can maximise land rents) then he would have been missing a trick.
Whether zoning fulfills that promise is an empirical question, specific to time and place, which has not been answered in general terms, despite blithe assertions to the contrary.
George was a fervent opponent of monopolistic barriers to free commerce, of which zoning is an obvious example. While it is of course impossible to know his exact views on a subject he did not see, opposition to zoning is a pretty clear extension of his principles and I don't think it's much of a stretch to say so.
It's not obvious to everyone that zoning is an obvious example of a monopolistic barrier, or that opposition to zoning is a clear extension of George's principles.
The inherent monopoly is in the physical stuff, i.e. land. It's not automatically true that land use rules on top of that make for a more monopolistic situation. It depends how much those rules actually bind private behaviour and preclude what would have otherwise occurred, i.e. in the case of residential building, how much zoning rules reduce new housing supply per annum. That's an empirical question. No sweeping assertions are valid.
George as I understand it also agreed with views such as Adam Smith's that land rents tend to rise in accordance with (and as a measure of) the good governance of the state.
Regulations having benefits greater than costs raise land rents, and are synonymous with what we think of as good governance in the regulatory realm.
So, overall, I'd be surprised if George would have supported policy prescriptions (such as complete opposition to land use regulation) that worsen quality of life and lower land rents. Or, if he would have, we should probably downplay that if we want people to take his other intellectual contributions at all seriously.
I'm just not sure that putting words in the mouth of the dead guy, in a way that suggests he'd have held policy views ignorant of both the classical and modern economics of land rents, is doing either the dead guy or the present argument any favours.
Additional comment on syntax: a "regulatory tax" is not a thing. I've seen a lot of economics texts and never come across it. Anyone inventing a brand new thing represented by that phrase should probably define their terms.
Well, I disagree on the question of monopoly (working from differing definitions) but for practical purposes it's a relatively small difference. I assume that you would agree that we should remove zoning everywhere that doing so will cause land rents to rise- and that is the vast majority of zoned areas. Doing so would practically end SFH zoning overnight, which is really the main complaint of YIMBYs.
I do not understand why separation of (some) uses is not a safety and convenience justification for a lot of zoning. Even leaving the canonical abattoir aside, you have small coffee roasting and small breweries and all manner of other productive activity that is done separately from other residential and commercial activity by mutual concurrence. I understand that restrictive and poorly-reasoned zoning decision are bad, but fail to understand the resistance to some amount of straightforward separation of uses. Generally I agree with this piece, in most regards except the multiple ad hominem swipes at ALL zoning regs seems a bit sweeping.
I'll defend myself slightly by pointing out that I don't really call for zoning abolition but rather "upzoning" and relaxation of rules on density, height, setbacks, etc.
It is indeed true that optimal land use regulation could well require the use of zoning to manage externalities (although I'm sympathetic to the idea that this could be achieved by abolishing zoning and just directly regulating the externalities themselves). But my argument is more that we're far far beyond that point at the moment, especially in the way we try to regulate built form, rather than just separation of incompatible uses.
I agree with the author but I'm not sure they've sufficiently explained their logic.
The main goal of zoning regulations is to correct negative externalities of certain land uses. Land value tax handles this inherently, as land values near a producer of a negative externality falls and land values near positive externalities rise. Thus, in a theoretical sense, zoning regulations are at best superfluous. In a more practical sense, you could look at Pigouvian taxes as a corrective measure rather.
Fair point Robert! While LVT does work nicely with land use regulations (LURs) as it inherently prices-in positive and negative externalities, I do also think that LURs *can* be an efficient way to maximize the total sum of those externalities within a jurisdiction. Obviously we're well away from that outcome at the moment though, and LVT will help better-align incentives with it. Pigouvian taxes are a good alternative as well.
Loved this article Stephen! You have by far the best modern analyses of these dynamics.
I wonder about this a lot: how feasible is it for broad upzoning in other places? I see that it was done in NZ and CA has passed some legislation, but it seems there still exist plenty of mechanisms with which new development can be opposed.
Do you think there's a place in the world that might experiment with an LVT extensive enough to achieve some of these outcomes? To your point, the ideal outcome is the marriage of the two.
Again, loved this read and all your other writing!
I actually think broad upzoning is very feasible. We're really seeing YIMBY start to win recently, such as in NZ, California's SB 9, Oregon's HB 2001, Minnesota's 2040 plan, etc. Noah argues as much here: https://noahpinion.substack.com/p/the-long-march-of-the-yimbys
Meaningful LVT is much farther away, and the first step in the process will be cities experimenting with switching to split-rate taxes (this is in the works in a few US cities).
One of my hopes is that once meaningful upzoning takes place and only partly improves the situation, political momentum will start to build for alternative methods to capture and redistribute land rent, like community land trusts, cohousing, and other proto-LVT policies.
LVT and NIMBY are both cases where we’ll crafted messaging can find common ground between free market conservatives and social justice liberals. Know your audience, appeal to their interests and concerns, don’t lecture or wag your finger at them.
"While George’s lifetime predated our Euclidean system of zoning, it is clear that he would have found it an abhorrent barrier to human freedom... zoning is a regulatory tax on production which grants landowners the right to exclude others from their community and ultimately curtails our freedom to live and work on land in the manner that best serves human need."
Really?
George recognised, I thought, that public goods can lift land values (i.e. when they have benefits greater than their costs).
Would he have not recognised that some regulations to internalise externalities can do the same?
Who knows. The guy is dead, and didn't comment on it, and dubious interpretations of what George, or Jesus, would have thought about modern inventions, like zoning or smartphones, seem a bit contrived to me.
If he wouldn't have recognised that regulations preventing harmful externalities while placing minimal burden on the regulated party can promote higher aggregate welfare (i.e. can maximise land rents) then he would have been missing a trick.
Whether zoning fulfills that promise is an empirical question, specific to time and place, which has not been answered in general terms, despite blithe assertions to the contrary.
George was a fervent opponent of monopolistic barriers to free commerce, of which zoning is an obvious example. While it is of course impossible to know his exact views on a subject he did not see, opposition to zoning is a pretty clear extension of his principles and I don't think it's much of a stretch to say so.
It's not obvious to everyone that zoning is an obvious example of a monopolistic barrier, or that opposition to zoning is a clear extension of George's principles.
The inherent monopoly is in the physical stuff, i.e. land. It's not automatically true that land use rules on top of that make for a more monopolistic situation. It depends how much those rules actually bind private behaviour and preclude what would have otherwise occurred, i.e. in the case of residential building, how much zoning rules reduce new housing supply per annum. That's an empirical question. No sweeping assertions are valid.
George as I understand it also agreed with views such as Adam Smith's that land rents tend to rise in accordance with (and as a measure of) the good governance of the state.
Regulations having benefits greater than costs raise land rents, and are synonymous with what we think of as good governance in the regulatory realm.
So, overall, I'd be surprised if George would have supported policy prescriptions (such as complete opposition to land use regulation) that worsen quality of life and lower land rents. Or, if he would have, we should probably downplay that if we want people to take his other intellectual contributions at all seriously.
I'm just not sure that putting words in the mouth of the dead guy, in a way that suggests he'd have held policy views ignorant of both the classical and modern economics of land rents, is doing either the dead guy or the present argument any favours.
Additional comment on syntax: a "regulatory tax" is not a thing. I've seen a lot of economics texts and never come across it. Anyone inventing a brand new thing represented by that phrase should probably define their terms.
Well, I disagree on the question of monopoly (working from differing definitions) but for practical purposes it's a relatively small difference. I assume that you would agree that we should remove zoning everywhere that doing so will cause land rents to rise- and that is the vast majority of zoned areas. Doing so would practically end SFH zoning overnight, which is really the main complaint of YIMBYs.
I do not understand why separation of (some) uses is not a safety and convenience justification for a lot of zoning. Even leaving the canonical abattoir aside, you have small coffee roasting and small breweries and all manner of other productive activity that is done separately from other residential and commercial activity by mutual concurrence. I understand that restrictive and poorly-reasoned zoning decision are bad, but fail to understand the resistance to some amount of straightforward separation of uses. Generally I agree with this piece, in most regards except the multiple ad hominem swipes at ALL zoning regs seems a bit sweeping.
I'll defend myself slightly by pointing out that I don't really call for zoning abolition but rather "upzoning" and relaxation of rules on density, height, setbacks, etc.
It is indeed true that optimal land use regulation could well require the use of zoning to manage externalities (although I'm sympathetic to the idea that this could be achieved by abolishing zoning and just directly regulating the externalities themselves). But my argument is more that we're far far beyond that point at the moment, especially in the way we try to regulate built form, rather than just separation of incompatible uses.
I agree with the author but I'm not sure they've sufficiently explained their logic.
The main goal of zoning regulations is to correct negative externalities of certain land uses. Land value tax handles this inherently, as land values near a producer of a negative externality falls and land values near positive externalities rise. Thus, in a theoretical sense, zoning regulations are at best superfluous. In a more practical sense, you could look at Pigouvian taxes as a corrective measure rather.
Fair point Robert! While LVT does work nicely with land use regulations (LURs) as it inherently prices-in positive and negative externalities, I do also think that LURs *can* be an efficient way to maximize the total sum of those externalities within a jurisdiction. Obviously we're well away from that outcome at the moment though, and LVT will help better-align incentives with it. Pigouvian taxes are a good alternative as well.
Loved this article Stephen! You have by far the best modern analyses of these dynamics.
I wonder about this a lot: how feasible is it for broad upzoning in other places? I see that it was done in NZ and CA has passed some legislation, but it seems there still exist plenty of mechanisms with which new development can be opposed.
Do you think there's a place in the world that might experiment with an LVT extensive enough to achieve some of these outcomes? To your point, the ideal outcome is the marriage of the two.
Again, loved this read and all your other writing!
Thanks for the kind words Joel.
I actually think broad upzoning is very feasible. We're really seeing YIMBY start to win recently, such as in NZ, California's SB 9, Oregon's HB 2001, Minnesota's 2040 plan, etc. Noah argues as much here: https://noahpinion.substack.com/p/the-long-march-of-the-yimbys
Meaningful LVT is much farther away, and the first step in the process will be cities experimenting with switching to split-rate taxes (this is in the works in a few US cities).
One of my hopes is that once meaningful upzoning takes place and only partly improves the situation, political momentum will start to build for alternative methods to capture and redistribute land rent, like community land trusts, cohousing, and other proto-LVT policies.
Fixed, thanks v much Zach! Hope you get the chance to visit NZ soon enough :)