Henry George and the Bubble

Steve Sailer recently asked someone to “summon the ghost of Henry George” to   “explain why high land prices are not a good thing for America”. I`ve been quite interested in the economics of Henry George since I was a student at U of Chicago because I felt George brought some economic rigor to the quest to create a more equal society.

Henry George thought dips in the business cycle occurred when the returns to land and monopoly capital or taxation of labor and capital investment reached levels an economy could not support. According to George, in a free market economy, the way out of a depression was to let prices drop–or lower taxes–to a level the existing economy might support.

The banking industry has been working hard to keep that from happening. In a practical sense, a 20-50% dip in California, Arizona, Nevada and Florida real estate values that have been driven up by high immigration levels and lowering the wages of Americans, would mean banks would have to write-off substantial assets.

If George is right, what we really ought to be doing is simply allow land prices in high immigration states to drop and regulate banks so mortgages are written off to the the point citizens are unlikely to abandon their homes. That would mean the banks that financed mass immigration in the Southwest and Florida would be turned over to new owners and management. Such a major restructuring would present the ideal time to humanely enforce immigration laws and develop alternative employment for illegal immigrants in their home countries.

Moving forward, George would advocate putting in places taxes on land that would automatically adjust to prevent future accumulation of high levels of private equity in land but preserve the investment of owners in their housing structures. This would considerably contain enthusiasm of financial interests for mass immigration.