| Subject: | RE: [socialcredit] Questions for Ed Dodson | | Date: | Tuesday, August 16, 2005 09:22:31 (-0700) | | From: | William B. Ryan <w_b_ryan @.....com>
|
Ed, you still didn't answer the question. It begged
for a "yes" or "no" followed by whatever commentary
you wanted to supply in justification or explanation
for the "yes" or "no." I wanted you to stick to the
stipulations inherent to the question. We were not
talking about a McDonald's corporation that purchased
land parcels, we were talking about a landowner who
erected McDonald's restaurants in a thought experiment
to discover first principles.
We were talking about two identical McDonald's erected
on two identical parcels of land, except that one was
a thousand miles from the closest human habitation,
the other surrounded by hundreds of homes.
The capital investment in both cases was the same;
also, in both cases, the land investment was identical
since the landowner got both parcels for free.
Until the day both restaurants opened their doors, not
a penny in rent had been collected at either location
since the beginning of time.
We shall further stipulate the obvious that the
McDonald's a thousand miles from the closest human
habitation had exactly zero sales, inasmuch as it had
no customers.
So, scrap the earlier question; you wouldn't answer
it.
1. What should the experiment tell us about capital?
I'll telegraph the answer: It should tell us that the
value of capital is zero in the absence of sales, a
point Douglas made in Credit-Power and Democracy. The
people who bring us the McDonald's to the corner
conveniently down the street profit only if we
purchase goods and services from them, perhaps not
even then.
2. What should the experiment tell us about "rent" on
"site location"? Ditto. The "unearned increment of
association" represents the gains from association we
forgo in isolation. What I trying to get at, Ed, is
that there is nothing to "tax" before production and
there is no production in the absence of profit, or
the prospect thereof.
I invite reply.
-
--- Ed Dodson <ejdodson@comcast.net> wrote:
[Ryan] Is it not correct in Georgist terms that the
McDonald's a thousand miles from anywhere will collect
no rent in the foreseeable future inasmuch as it will
presumably have no sales; whereas, the McDonald's
surrounded by hundreds of homes will collect rent
because it will in fact have sales?
--------------------------------------
Ed here:
If McDonalds establishes a restaurant at the margin of
production, but the margin of production has extended
out where no one is willing to pay anything for
access, then McDonalds will have access to that land
rent free. They would not receive location rent
(either imputed or actual) becuase the location
yields no rent in the market.
If McDonalds acquires a location in a bustling city,
the location will likely have a high location rental
value. The owner from whom McDonalds purchases the
deed to the site will be the big winner (provided the
community, as most communities have done to date,
failed to collect the rental value via taxation. Under
typical conditions today, McDonalds pays a huge price
for control over the land but from that point on may
be a net beneficiary or victim of all the combined
taxes levied on the land, on the building, on its
gross revenue, on its equipment and on its fixtures.
McDonalds in the bustling city will likely experience
an imputed net location rent, but still may not be
profitable if its gross revenue forecasts fall short,
or its other costs of doing business rise.
Let me add one other possible scenario. McDonalds
acquires from the long-time landowner a city block,
constructs a 50-story office building on the site and
puts in a large McDonalds restaurant on the street
level, and leases out space to other businesses. In
this case, McDonalds will collect location rent from
the other businesses who lease space in the building.
Some portion of the tenants' total leasing fee is a
return on capital goods (i.e., on the building), and
some portion is a return to the location.
I hope this provides the clarification you were asking
for.
-
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