Wouldn't the self-assessed tax lead to unfair competitive practices? Imagine a small bookstore opening in the same town as a Barnes and Noble. What if there's no tax level that the small store can afford that prevents a mega-corp like B&N from buying out their property?
Imagine you live in a neighborhood with deep community or family ties. Someone down the street wins the lottery/makes an 8-figure exit and wants to buy out the block for a mega mansion. Can tax rates be low enough for you to raise your own valuation to "defend" your middle class home against vast wealth? What does that do to local government revenues?
The very rich regularly spend $15m or more on a home. If Jeff Bezos came by my house and decided he liked the view, I would have to start paying $300k in taxes or move (if 2% tax). I get that making $15m for my house would make me rich, but this is our first home as a family and all our memories are here. I shouldn't be forced to choose like that - protection from arbitrarily being forced out of my home is one of the main reasons to own a home in the first place.
> What if there's no tax level that the small store can afford that prevents a mega-corp like B&N from buying out their property?
Be bookstore owner. Set the value to be twice as much as comparable neighbor property. Get bought by B&N. Buy property next to you, move your books, pocket the difference.
> I get that making $15m for my house would make me rich, but this is our first home as a family and all our memories are here.
Price it accordingly. :)
Yes, the whole idea is that the tax is much lower (1% maybe) than the value of the land.
Also, some regulations might be added, that eg. a person who got forcefully bought-out, has a year or two to move out, just to make it less convenient to use it "aggressively", while allowing wise long-term investments.
I don't see this as very helpful. The above poster views their home as something to protect from the market. It is a safehaven for family and friends and community connections, it is something that holds all the most important things in life and so it is above market mechanisms to the extent possible. Seeing this and purposefully advocating a system which forces them to put an actual price on their family memories supposes that there should be zero aspects of our life which are safe from market mechanisms. That seems like an impoverished way of looking at life.
Not trying to sound an a--hole (maybe I do) but isn't this your problem? If you want something, then you gotta work or provide to have it. Why do you want society to go out of its way, and make laws to protect your "stuff". Now, if many people think alike then it could be beneficiary.
Owning a piece of land is not really owning it. Not in the USA, and most of the world. You are having a "privilege" of using the land vs. paying some taxes.
That being said I don't approve of home taxes in the US. The taxes should be applied equally on all citizens to provide the required amenities (roads, cables, sanitary, etc...) The money should go to maintain the relevant infrastructure.
I'm not sure if the taxes you pay on your home value in the US goes to relevant infrastructure; or else (nor do I really care!)
... do you think bezos is in the majority or this person (i.e. would society be "going out of its way" for him if it prevents someone like Bezos from being able to do what's described)
I think the property/personal home example is hard to defend. Consider industrial property, such as a factory or warehouse. The most reasonable application of self-assessed tax would be to any property that can be valued on purely economic/objective bases.
I think the biggest problem with it, even with industrial stuff, is that it's ignoring transaction costs of moving buildings?
Eg. I buy a property that I want to use as a factory. Some people who work for me move their own accomodation to be close to my factory. I spend absolutely tons of time and money filling my factory with machines, some of which are bolted to walls or have to be constructed inside the warehouse.
The price I'm willing to accept for this property isn't the price of the property, it's the cost to me of moving all my people and goods and rebuilding things. Plus the cost of the interruption to my production flow etc.
Caveat I know nothing about manufacturing but the point is more general, property isn't even close to fungible.
Tesla wouldn't sell their hyperfactory thing for the price they bought it for!
Everyone would be overpaying tax to the extent that their reliance on property isn't fungible, I'm not sure what the implications of that are but property is so fundamental and so much money that they'd be huge.
Recall there are two goals:
- allocative efficiency (property belongs to whomever can derive most value from it)
- investment efficiency (people have incentives to invest in property, build Gigafactories, etc)
If I understand, your argument is that self-assessed taxes would eliminate investment efficiency.
The property owner should factor transaction costs into their own value of the building. This would increase their assessment of the land-value, and increase their taxes. This works because, keeping land valuations constant, the one with the highest transaction costs is the one who can derive the most efficiency from the land.
> I think the biggest problem with it, even with industrial stuff, is that it's ignoring transaction costs of moving buildings?
Then maybe the rule is that you will be forced to sell to anyone who pays you N × the value you self-assessed at, where N > 1. E.g. if transaction costs average 20%, you have to sell to anyone who will pay 1.2 times your self-assessed value.
Exactly, that's what I meant but I should have emphasised it more.
Everyone overpays, but they overpay in proportion to how sticky their business is to a specific property. It would take someone who knows more about commercial property to dissect what businesses would get destroyed by that.
> Consider a system where property owners themselves specify what the value of their property is, and pay a tax rate of, say, 2% of that value per year. But here is the twist: whatever value they specify for their property, they have to be willing to sell it to anyone at that price
Valuing an asset takes work. The process consumes resources. There is a reason we have brokers for assets where one needs someone standing ready to auction. Making this proposal belies a fundamental misunderstanding of the history of markets.
But property taxes already face this challenge: the assessing authority has to specify a value – which may then be disputed by the property-owner in a costly appeals process.
This proposal lets the actor with the keenest interest and best knowledge of the property set a value, and lets the 'challenge' occur in the marketplace, by someone who's willing to buy it at that price. It lets the "brokers" and other experts of the world set the assessed value, by their actions (or potential actions), at a higher resolution than the current processes (which wait for actual sales or later bureaucratically-settled re-assessments).
Not to mention that homeowners wanting to sell their home also face the same challenge: they need to assess the market and determine what they are willing to sell their home for.
"... people are not experts at property valuation, and would have to spend a significant amount of time and mental effort figuring out what self-assessed value to put for their house, and they would complain much more if they accidentally put a value that’s too low and suddenly find that their house is gone."
The solution: users would choose an AI to generate real time valuations.
In the property/personal home context, I think this is a bad idea, because if the AI gets it wrong, and you're forced to sell your house, that is bad. However, this idea could work very well in other types of property markets (this was all discussed in the article).
There is clearly problem with the immediate nature of such market, that is being forced to move out quickly out of a property if one undervalues it.
Then there is clearly the problem with current market set up, which basically allows people to trade with infinite length property rights, especially on land. This gives incentive to buy and never sell, because you know that new generations will have to live somewhere and you will be the one able to provide this service. Esentially leading back to pure feudalism.
A middle ground solution could be to make the land market with land tax not immediate, ie. sell whenever someone else outbids you, but as auction for the property every, let's say, 7 years.
This would give you enough time to consider investing into the property withou losing it right away due to trivial underpricing. It would also solve the optimal property allocation, just on longer term. Another advantage for agricultural land would be that a piece of land couldn't enter the market unless it underwent the seventh sabbatical year of
resting, which you could actually enforce under this system.
* > The solution: users would choose an AI to generate real time valuations.*
Sadly this isn't a solution, it just adds another layer of complexity to the decision making process. AI isn't magically unbiased, there's a multitude of ways for human bias/ particular interests to enter the model, from feature selection to model layout up to interpretation of the results.
So now people have to be both experts at assessing housing and neighborhood values and AI to make an informed decision.
That's the big problem of market-based social designs: There's always the fundamental asymmetry between a professional, better-equipped actor (a corporation specialized in that particular market, or a rich person like the bezos example, who can outsource that to employees) and a normal person.
Regulation, society's solution to that problem, tries to level the field: People knowledgable in the problem domain think about possible negative externalities and risks to citizens, and implemenent barriers for abuse.
Normally I would agree with you completely, indeed AI is (very) far from perfect. However, I think we're hung up on the home property example. As Vitalik suggests, this proposal works a lot better in situations where the underlying property is more fungible, and the participants in the market are more or less equal. The property example I like from the article is radio spectrum licenses.
I'd also add that using an AI also doesn't necessarily mean something opaque. A hand-made decision tree would be preferable to a neural net, for example. The decision tree could prompt you for your human decision if it encounters an outlying, uncertain instance.
I actually find the housing problem quite apt, because it so easily illustrates the problem of information asymmetry of the market participants. If you can't guarantee that, you don't have an efficient market. How can you prevent that, if not with the help of protection through law (i.e. regulation)?
> this idea could work very well in other types of property markets
Constantly offering to the market is market making. It's a difficult, risky and specialized domain in any asset classes. Most markets cannot support real-time market making for the simple reason that price discovery is expensive and intrinsically tied to liquidity.
> As it turns out, it is absolutely possible to have a system that contains markets but not property rights: at the end of every year, collect every piece of property, and at the start of the next year have the government auction every piece out to the highest bidder.
I know this is just a hypothetical example, but...the government takes all property at the end of the year, except for money? Since presumably people need something with which to buy property at the auction. How does this work out at all from individual economic incentives? Seems like that just incentivizes everyone to try to end up with as much money and as little property as possible as the end of the year. And does the money from the highest bidder go to the previous owner? That would make sense, but this article implies that it just becomes government revenue.
This is basically just a system with no ownership and maximum of 1 year leases for everything. If you rent an apartment with 1 year leases, you don't have an incentive to try to sublet your apartment for the last day of the lease every time the lease comes up for renewal because no one will pay you very much for one day's use of the apartment and you wouldn't be able to use the apartment for that day.
I like the self assessed property tax idea, although presumably if someone wants to buy your property and you are not ready to sell, you should be able to "correct" the assessment and pay the back taxes (for the year only) in order to discover the true price.
That sounds like a case for absolutely everyone to undervalue their property unless and until someone wants to buy it (and speculators have little incentive to try to buy houses when nobody actually accepts offers at the low rates implied by their tax valuations)
If no one wants to buy your house at the current value then it is by definition not undervalued. To your second point, speculators can put in any offer they want, it doesn't have to be at or right above your current valuation. If you claim your house is only worth 200k and they offer 500k, suddenly you have a tough choice, either sell, or pay a large tax bill.
If I value my property at a dollar, I'm signalling that I don't want to pay property tax and don't have the slightest interest in selling my property either, ergo there is no reason whatsoever for any speculator to waste their time bidding on it (unless the government becomes a property speculator, or somebody with deep pockets really resents my tax avoidance).
Of course, the system also needs a mechanism to deal with the opposite: nuisance bids from people who don't have the will or ability to actually complete the purchase. Buying property is not like buying shares.
Wouldn’t it work to have the government run an auction-style website where the self-assessed property values are kept hidden, but people can submit a bid to buy a piece of property. If that bid is greater than or equal to the property’s assessed value, the property owner is given the option to increase their valuation to just above the bid price. If the property owner instead decides to sell, the bidder is obligated to go through with the deal (perhaps at the assessed value rather than the bid price).
His thought about designing incentive structures and systems to solve problems and remove (inefficient, corruptible) humans from the equation is solid. I think many of the more rational theorists, irrespective of their political bent, would concur that this is an ideal approach.
What's missing is the how. He's far too optimistic about the complexity and inertia inherent in the very constructs he believes we should revise.
Above all is the question of incentivizing progress: it's much easier to describe sensible, efficient solutions than it is to move societies towards them.
Our human desires and values are the whole point of the system, though. Anyone designing a "political economy" should treat the experience of the people living in it as the most important thing -- abstract concepts like "efficiency" are ultimately just ways to affect that experience.
I think you're conflating two different things: that such systems should generally be oriented towards maximizing human wellbeing (which I wholeheartedly support) and such systems should be vulnerable to human input/error (problematic in almost every conceivable situation).
Of course you can't swap every system we have for a fair and automated equivalent. You also run into problems around the question of what we should optimize for, which will be swayed by a person's political opinion. Ideal systems would probably lie at a balancing point between socialism and capitalism (as a model, equivalent to tuning parameters), but establishing that point and getting everyone to agree on it would be extremely challenging.
Yeah, I think the question of what we should optimize for is the fundamental problem here. There's really nothing called "human wellbeing" that can be maximized. Everyone has different perspectives, values, goals, ideas, dreams, and so on. It's impossible to turn all these ways of seeing the world into a working system without involving the people themselves, especially given how people's perspectives change over time.
There are prime movers that do things. Generally they're all higher ups on the food chain that either enter due to political party grooming or making a tonne a money. But since a lot of them are in conflict it doesn't end up looking like a coherent system anyway. So you need some prime movers to battle it out with these ideas in mind.
Really you just want to become one of those people, something that takes decades of work.
>However, markets are socially constructed because they depend on property rights that are socially constructed, and there are many different ways that markets and property rights can be constructed, some of which are unexplored and potentially far better than what we have today.
This would be an interesting hypothesis to explore with swarm reinforcement learning. It seems to me that rights have a lot to do with optimal/stable cooperation strategies in certain types of games, and maybe RL can uncover better strategies, or maybe not.
The simplest well-studied problem of this sort is the iterated prisoner's dilemma. The strategies we have today are remarkably similar to the Axelrod's original strategies three decades ago.
A lot of talk about personal data ownership and markets, mentions repay-me, datum, enigma, but there is also synapse, ocean, iota-ish, numerai-ish, streamr.
When I saw the name “Eric Posner” as a coauthor of the book Vitalik mentions, I figured he must be related to Richard. Indeed, Eric is Richard’s son. Richard Posner has some extremely fascinating writing.
I like how engineers have expanded their ambition from starting as almost clerks to scientists (when the job of a programmer was almost exclusively data entry a few decades ago) to nowdays feeling like they can understand and modify everything in society with these powerful tools below their fingertips.
I think Vitalik (the author of this piece and co-founder of Ethereum) in particular thinks differently than Bitcoin creator Satoshi. Vitalik doesn't think there are any easy answers to things like how to incentivize mining and so forth. He believes there needs to be a study of 'cryptoeconomics': https://vitalik.ca/general/2018/03/28/plutocracy.html
You are right. One of PG's main contribution is to provide a path for engineers to come into money (makers make money; as opposed to professional managers). Today engineers are (re) inventing money itself, thus "owning" the unit in which they come into money.
Vitalik can’t get his own flawed cryptocurrency to be useful or usable (except for scammers) and yet he wants to tell everyone how to solve the rest of the world’s problems?
Imagine you live in a neighborhood with deep community or family ties. Someone down the street wins the lottery/makes an 8-figure exit and wants to buy out the block for a mega mansion. Can tax rates be low enough for you to raise your own valuation to "defend" your middle class home against vast wealth? What does that do to local government revenues?
The very rich regularly spend $15m or more on a home. If Jeff Bezos came by my house and decided he liked the view, I would have to start paying $300k in taxes or move (if 2% tax). I get that making $15m for my house would make me rich, but this is our first home as a family and all our memories are here. I shouldn't be forced to choose like that - protection from arbitrarily being forced out of my home is one of the main reasons to own a home in the first place.