- 30 Dec 2016 13:45
#14756443
Several years ago I was active in the now defunct forum of Attac in Germany. There another member urged me to study the property theory of Heinsohn and Steiger. He had convincing arguments, and at the time I was still naive, so I obeyed. Of course it was a disappointment, for it is no coincidence that this theory is not a part of mainstream economics. Nevertheless, the ideas of Heinsohn and Steiger are sufficiently interesting for a presentation on this forum, where land value taxation is sometimes advocated.
The basic point is that property is indispensable for supplying credits. Property generates rents, and it can be sold. Therefore it is an excellent security in order to back up credits. Thus property involves a premium, namely the right to receive a credit. Liquidity originates from property. Since a bank receives the security in exchange for the credit, the interest originates from the premium of the property. Its height is still determined by the premium of liquidity.
In general capitalism emerges as soon as land becomes a private property, for land is a reliable security. Securities must maintain their value during the currency (term) of the credit. Land is durable, so that its premium remains intact. Credits create money. In other words, money is simply a claim on property, and solvency corresponds to property. So the amount of money is determined by the available property. The debtor must pay (transfer) the premium of property to the creditor.
Note that the debtor retains the right to use his property. Entrepreneurs compete for credits. They exchange their premium on property with the premium on liquidity (the opportunity to make profits). In fact the interest on credit forces the entrepreneurs to become profitable. This in turn furthers innovation. So the driving force for productivity is institutional, namely the creation of debts, which must be served. During a crisis the state can stimulate the economy by supplying additional property, for instance by selling state-owned land.
Heinsohn and Steiger do not discuss land value taxation. However, it is clear that land will be a poor security, as soon as its taxation becomes a heavy burden. Its ability to support credits would diminish. Thus a rigoruous taxation of land is not desirable.
The basic point is that property is indispensable for supplying credits. Property generates rents, and it can be sold. Therefore it is an excellent security in order to back up credits. Thus property involves a premium, namely the right to receive a credit. Liquidity originates from property. Since a bank receives the security in exchange for the credit, the interest originates from the premium of the property. Its height is still determined by the premium of liquidity.
In general capitalism emerges as soon as land becomes a private property, for land is a reliable security. Securities must maintain their value during the currency (term) of the credit. Land is durable, so that its premium remains intact. Credits create money. In other words, money is simply a claim on property, and solvency corresponds to property. So the amount of money is determined by the available property. The debtor must pay (transfer) the premium of property to the creditor.
Note that the debtor retains the right to use his property. Entrepreneurs compete for credits. They exchange their premium on property with the premium on liquidity (the opportunity to make profits). In fact the interest on credit forces the entrepreneurs to become profitable. This in turn furthers innovation. So the driving force for productivity is institutional, namely the creation of debts, which must be served. During a crisis the state can stimulate the economy by supplying additional property, for instance by selling state-owned land.
Heinsohn and Steiger do not discuss land value taxation. However, it is clear that land will be a poor security, as soon as its taxation becomes a heavy burden. Its ability to support credits would diminish. Thus a rigoruous taxation of land is not desirable.
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