Why NIMBYs Are Not Enough

A Response to Tyler Cowen

Cranes over new construction. Photo by Quang Nguyen Vinh.

In his recent Bloomberg column, “A Land Tax Won’t Make Cities More Affordable”, Tyler Cowen leveled a sharp criticism at Georgists and others (like Martin Wolf, who recently stated that “the case for a land value tax is overwhelming”) who argue that a land value tax can help solve the ills of America’s cities. The problem with American cities, he argued, is not that they have a poorly-adjusted system of taxation. Instead, the issue is the citizens themselves, who have no interest in fixing the ills of their communities- and sometimes, a distinct interest in keeping them dysfunctional.

“It’s not the tax system that makes urban and suburban real estate so expensive, it’s the political system.”

-Tyler Cowen

Specifically, he argues that, in cities, “electoral systems that favor incumbent landowners and homeowners. The administration of a land tax would be ruled, in large part, by those very same political interests.” As a result, city government is essentially captured by the landed interests, and any attempt to implement a land value tax or other kinds of value capture can only end by being subverted- either as carveouts or benefits given during the implementation, in the process of assessing land value for the tax to function, or in the subsequent political rebellion caused by shifting taxes off of capital and onto land. One way or another, government works to the ultimate benefit of homeowners and other rent-seeking parties.

In doing so, Tyler has fallen back on perhaps one of the oldest critiques of Georgism- and, to his credit, the one that is perhaps the most difficult to refute. Simply put, Georgism is a fool’s dream because the political situation precludes it. A number of socialists- particularly Marxists- have critiqued Georgists on this very ground as naïve for supposing that the landlords would ever allow such a system to be implemented. According to this theory, rent-seekers have captured the levers of power and would be willing to do anything, legal or otherwise, to prevent their privileges from being infringed upon. Others have argued that Georgism is simply too obscure to ever become popular- you can’t implement a land value tax, because no one has heard of it. Some simply assume that a material change in political economy is impossible.

To be fair, georgism has never been adopted wholesale by any country. In the present, it is rather obscure. Those are reasonable objections, perhaps, to a claim that georgism will inevitably be implemented. The obvious problem remains, though, that they are not reasonable objections to whether we should attempt to implement georgism. In fact, Tyler concedes that the economic arguments for the benefits of a land value tax—that it causes no economic waste or inefficiencies and stimulates new construction— are perfectly sound! His only objection is that taxing land is simply not politically viable.

Arguments that georgism is a waste of time because it is politically impossible amount to begging the question: we shouldn’t bother with trying to convince people to implement this policy, because no one will be convinced to implement this policy. That remains an open question—and the existing evidence doesn’t favor the skeptics. Shifting taxation from property onto land has been a key part of urban reform in a number of cities in Pennsylvania, proving that it is hardly an impossible feat.

Even more damning, all of the arguments mustered by Tyler could apply equally to his favored method of urban reform: YIMBYism. The NIMBYs that are unassailably entrenched in city governments, according to Tyler, are the ones at fault for the current sorry state of the housing market, and they are no more likely to look kindly upon the YIMBYs than upon the Georgists. If any reform that might upset the NIMBYs is impossible, how can anyone assert that YIMBYism is more attainable than a land value tax?

As a matter of fact, the successes of YIMBYism show us that this argument is fundamentally flawed. Urban reform can in fact be accomplished- people can be persuaded! There are cities and governments out there that want to improve themselves, that want to provide more housing and better amenities to their citizens. They’ve embarked on ambitious programs of upzoning, eliminating parking minimums, even altering the minutia of building codes and setback standards. Sure, there are cities like Palo Alto that are hostile to YIMBYism and LVT. But there are also cities which are not, and there is no reason to suppose that cities and governments interested and engaged in urban reform can’t be convinced to try land value taxation. The success of cities that do implement reforms will then act as a shining example for other cities looking for a better way.

That doesn’t mean it will be easy. Tyler is right in saying that there are many people with a strong interest in opposing land value taxation. It will take time, effort, and resources to convince people that ultimately everyone will be better off by changing the property tax system. It will take deliberate, careful implementation to ensure that land value taxes are effective once they are in place. It will take time for the positive effects of the new system to be felt. Like all serious political reforms, there are no shortcuts; it will be a long and heavy haul to make a positive difference. But it is possible, if motivated men and women are willing to put in the work.

The Marxist argument that government is totally and completely captured by existing economic interests leads inevitably to the conclusion that any meaningful reform is impossible. The only way to achieve positive change is via revolution. Those of us who believe in the possibility of self-government, however, reject this assertion. While economic interests may influence government, ultimately it is responsible to the people—and the people can be convinced to change the system for the better. Not always easily, and not always quickly. But the lesson of history is that progress is possible.

“Social reform is not to be secured by noise and shouting; by complaints and denunciation; by the formation of parties, or the making of revolutions; but by the awakening of thought and the progress of ideas. Until there be correct thought, there cannot be right action; and when there is correct thought, right action will follow. Power is always in the hands of the masses of men. What oppresses the masses is their own ignorance, their own short-sighted selfishness.”

-Henry George

I don’t think Tyler believes that reform is impossible. He doesn’t strike me as an advocate for revolution- in fact, the very YIMBYism that he supports proves that landed interests aren’t invulnerable. I hope that he is able to reconsider his objection to land value taxation, and perhaps even contribute to the great work that must be done going forward.