The World Bank Group’s ‘The Changing Wealth of Nations’ counts the value of urban land as “produced capital”, not “natural capital”. Your argument that the value targeted by LVT is only 6% of global wealth is therefore wrong, as are all arguments that are downstream of it.
From ‘The Changing Wealth of Nations 2021’, page 28: “Produced capital and urban land: machinery, buildings, equipment, intangible wealth such as intellectual property and mineral exploration, and residential and nonresidential urban land. (For the sake of brevity, the term produced capital is used to include produced capital and urban land.)”
Thanks for the correction. I’ve now modified the post to cite the World Bank as estimating the true fraction of wealth targeted by an LVT at 13%, which reflects my new understanding of their accounting methodology.
Since 13% is over twice 6%, this significantly updates me on the viability of a land value tax, and its ability to replace other taxes. I weakened my language in the post to reflect this personal update.
That said, nearly all of the arguments I made in the post remain valid regardless of this specific 13% estimate. Additionally, I expect this figure would be significantly revised downward in practice. This is because the tax base for a naive implementation of the LVT would need to be substantially reduced in order to address and eliminate the economic distortions that such a straightforward version of the tax would create. However, I want to emphasize that your comment still provides an important correction.
My revised figure comes from the following explanation given in their report. From ‘The Changing Wealth of Nations 2021’, page 438:
Drawing on Kunte et al. (1998), urban land is valued as a fixed proportion of the value of physical capital. Ideally, this proportion would be country specific. In practice, detailed national balance sheet information with which to compute these ratios was not available. Thus, as in Kunte et al (1998), a constant proportion equal to 24 percent is assumed; therefore the value of urban land is estimated as 24 percent of produced capital stock (machinery, equipment, and structures) in a given year.
To ensure transparency, I will detail the calculations I used to arrive at this figure below:
Total global wealth: $1,152,005 trillion
Natural capital: $64,542 trillion
Produced capital: $359,267 trillion
Human capital: $732,179 trillion
Urban land: Calculated as 24% of produced capital, which is 0.24 × $359,267 trillion = $86,224.08 trillion
Adding natural capital and urban land together gives: $64,542 trillion + $86,224.08 trillion = $150,766.08 trillion
To calculate the fraction of total wealth represented by natural capital and urban land, we divide this sum by total wealth: $150,766.08 trillion ÷ $1,152,005 trillion ≈ 0.1309 (or about 13%)
Ideally, I would prefer to rely on an alternative authoritative source to confirm or refine this analysis. However, I was unable to find another suitable source with comparable authority and detail. For this reason, I will continue to use the World Bank’s figures for now, despite the limitations in their methodology.
13% of total wealth isn’t anything to shrug off, if you ask me. Especially given that cuts to other, more distortionary taxes, is likely to flow through into increased land rents by some positive amount. (See intra-Georgist debates around EBCOR/ATCOR).
The World Bank Group’s ‘The Changing Wealth of Nations’ counts the value of urban land as “produced capital”, not “natural capital”. Your argument that the value targeted by LVT is only 6% of global wealth is therefore wrong, as are all arguments that are downstream of it.
From ‘The Changing Wealth of Nations 2021’, page 28: “Produced capital and urban land: machinery, buildings, equipment, intangible wealth such as intellectual property and mineral exploration, and residential and nonresidential urban land. (For the sake of brevity, the term produced capital is used to include produced capital and urban land.)”
Thanks for the correction. I’ve now modified the post to cite the World Bank as estimating the true fraction of wealth targeted by an LVT at 13%, which reflects my new understanding of their accounting methodology.
Since 13% is over twice 6%, this significantly updates me on the viability of a land value tax, and its ability to replace other taxes. I weakened my language in the post to reflect this personal update.
That said, nearly all of the arguments I made in the post remain valid regardless of this specific 13% estimate. Additionally, I expect this figure would be significantly revised downward in practice. This is because the tax base for a naive implementation of the LVT would need to be substantially reduced in order to address and eliminate the economic distortions that such a straightforward version of the tax would create. However, I want to emphasize that your comment still provides an important correction.
My revised figure comes from the following explanation given in their report. From ‘The Changing Wealth of Nations 2021’, page 438:
To ensure transparency, I will detail the calculations I used to arrive at this figure below:
Total global wealth: $1,152,005 trillion
Natural capital: $64,542 trillion
Produced capital: $359,267 trillion
Human capital: $732,179 trillion
Urban land: Calculated as 24% of produced capital, which is 0.24 × $359,267 trillion = $86,224.08 trillion
Adding natural capital and urban land together gives:
$64,542 trillion + $86,224.08 trillion = $150,766.08 trillion
To calculate the fraction of total wealth represented by natural capital and urban land, we divide this sum by total wealth:
$150,766.08 trillion ÷ $1,152,005 trillion ≈ 0.1309 (or about 13%)
Ideally, I would prefer to rely on an alternative authoritative source to confirm or refine this analysis. However, I was unable to find another suitable source with comparable authority and detail. For this reason, I will continue to use the World Bank’s figures for now, despite the limitations in their methodology.
Thanks, I appreciate the update.
13% of total wealth isn’t anything to shrug off, if you ask me. Especially given that cuts to other, more distortionary taxes, is likely to flow through into increased land rents by some positive amount. (See intra-Georgist debates around EBCOR/ATCOR).