This interview is outstanding because Dwarkesh is prepared and does not pitch Lars softballs. It’s a challenging interview (although very much in a kind collegiate, spirit) that demonstrates Lars’ depth of knowledge. It’s very impressive Lars’ graciousness and open mind is exemplified by how he ends the interview:
Thanks for grilling me. Thanks for all the hard questions. You know, I really, I really, I really like to be challenged in that way and like really engage with the best faith, hard-hitting critiques to make sure we like really understand what we're talking about here. Because none of this matters unless it works. I'm not here to like defend Henry George's honor. I'm here to like really explore whether this can actually be a solution to our problem.
One of my best episodes ever. Lars Doucet is the author of Land is a Big Deal, a book about Georgism which has been praised by Vitalik Buterin, Scott Alexander, and Noah Smith. Sam Altman is the lead investor in his new startup, ValueBase.
Talking with Lars completely changed how I think about who creates value in the world and who leeches off it.
Georgism is often reduced to its main policy prescription that we should have a land value tax, which is a tax on the unimproved value of land, but not a tax on any buildings or infrastructure on top of the land, anything humans add. But the basic insight of it is that it's kind of reflected in the aphorisms you hear from real estate agents when they say things like “The three laws of real estate are location, location, location” and “Buy land, it's the one thing they're not making any more of”.
It's basically this insight that land’s hidden role in the economy is really underrated. Control over land is the oldest struggle of human history. It goes beyond human history. Animals have been fighting over land forever. That's what they're fighting over in Ukraine and Russia right now, right?
The fundamental insight of Georgism is that over the last century, we've had this huge conflict — all the oxygen's been sucked up by capitalism and socialism duking it out. We have this assumption that you either have to be pro worker or pro business that you can't be both. Georgism is genuinely pro pro worker and pro business. But what it's against is is land speculation. And if we can find a way to share the earth, then we can solve the paradox that is the title of George's book, progress and poverty, why does poverty advance even when progress advances?
Lars observes the pitfalls of land monopolies in video games:
My connection with game development, actually clued me into Georgism. I'd heard about Georgism before. I'd read about it. I thought it was interesting.
But then I started noticing this weird phenomenon in online multiplayer games going back 30 years repeatedly of virtual housing crises, which is the most bizarre concept in the world to me — a housing crisis in the Metaverse and predecessors to the Metaverse and as early as Ultima Online when I was 19. You could build houses in the game and put them down somewhere. And so what I found was that houses were actually fairly cheap. You could work long enough in a game to afford to buy blueprints for a house, which will be put it somewhere. But there was no land to put it on.
At the time, I thought, oh, well, I guess the server failed — I didn't really think much about it. I was like, “This stinks…I didn't join the game early enough, I'm screwed out of housing.” And then I kind of forgot about it.
20 years later, I checked back in. And that housing crisis is still ongoing in that game. That housing crisis remains unsolved! You have this entire black market for housing. And then I noticed that that trend was repeated in other online games, like Final Fantasy 14. And then recently in 2022, with all this huge wave of crypto games, like Axie Infinity, Decentral Land and the Sandbox. Then Yuga Labs' Bored Ape Yacht Club, the other side, had all these big land sales.
At the time, I was working as an analyst for a video game consulting firm called Naavik. I told my employers we are going to see all the same problems happen. We are going to see virtual land speculation. They're going to reproduce the conditions of housing crisis in the real world. And it's going to be a disaster.
I called it, and it turns out I was right. And we've now seen that whole cycle kind of work itself out. And it just kind of blew my mind that we could reproduce the problems of the real world so articulately in the virtual world without anyone trying to do it. It just happened. And that is kind of the actual connection between my background in game design and kind of getting George-pilled as the internet kids call it these days.
Georgism rehabilitating capitalism and saving us from socialism:
People are now paying 50% of their income just for rent. And that's not sustainable in the long term. The cycle you have there is revolution. I’m not kidding.
Look through history, you either have land reform or you have revolution. And you know, it's, it's either like either you have a never-ending cycle of, of, of transfers of income from the unlanded to the landed. Eventually the unlanded will not put up with that. You know, there was a real chance in the 19th century, at the end of the 19th century of America going full on socialist or communist and the only thing that saved us. It's either Georgism or communism. And if you want to save capitalism and not go Totalitarian we need Georgism.
What George failed to anticipate was the automobile. And the automobile kicked the can down another couple generations. And it came at the cost of sprawl. And the cost of sprawl are enormous in terms of pollution and poor land use.
But now we've come at the end of that frontier and now we're at the same question. And it's like, you see this resurgent interest in leftism in America and that's not a coincidence. Because the “rent is too damn high”, poor people and young people feel shoved out of the promise and social contract that was given to their parents and they're jealous of it and they're wondering where it went.
- Lars also noticed how broken CA is:
It's more politically feasible than we think. I believe it currently has low salience, but if more people start discussing it, it will make a lot of sense, especially if it's presented as property tax reform. For example, in Texas, there are people who want to abolish property tax, which would turn the state into California. California has some of the lowest property taxes in the nation, and Proposition 13 has created an entire layer of landed gentry and extremely expensive housing. Housing is already becoming expensive in Austin, and property taxes have the effect of lowering property prices. Property taxes are an imperfect land value tax, so it will simply reproduce the economic conditions that empirically exist in California.
- Selling the idea
- Tax buildings and land at separate rates
- Set the rate on buildings to zero
- Collect the same dollar amount of taxes.
It can be pitched as property tax reform, because people feel that property taxes are too high. Hey, everyone, let's exempt all your buildings. You could build a coalition that's excited about that, especially if you do the math and show, for example, what the change in your taxable rate is going to be. A revenue-neutral property tax shift to land can be quite popular.
The most plausible way to get a land value tax would start by just capturing the same revenue. What I actually proposed for our first step is not 100% land value tax federally.
I think what you actually do is you start in places like here in Texas with, legalized split-rate property tax:
- Gordon Tullock's Transitional Gains Trap Think about taxing medallions in New York City It's this artificially scarce asset that allows you to operate a taxi. The first generation that got their taxing medallions basically got in cheap. And then afterward made out like gangbusters. But the second generation had to buy those taxi medallions at the fully priced in value. And now when you come in and you're like, oh, okay, we're going to abolish taxi medallions, you would screw over that entire second generation who bought in in good faith after the value of the asset had been fully priced in. Even if you admit that the system is now unfair, removing that unfairness screws over the people who played by the “unfair rules”. I think it's something that Georgists need to grapple with because we can't just imagine a future utopia without accounting for being fairer to people who played by the rules, including people like myself. Like I'm a homeowner, right? Am I intending to screw over myself and everyone like me? And so I think this is where it's really important to do the math of knowing exactly who's going to be a winner, who's going to be a loser, who's going to pay more, who's going to pay less. I think it's really salient that a lot of the value of land is commercial downtown real estate. I think that a revenue-neutral property tax shift land where we exempt the taxation of all buildings, but collect the same amount in property taxes as we're doing now, but just from the land and then a modest citizen's dividend is a really good first step. And then over the years, you can raise the land value rate as you also decrease things like income tax and sales tax. I think that's a transition that gets us there without really screwing anyone over. And for any edge case, like a poor sympathetic widow who has no income but has a high-value home, you just make it so she doesn't have to pay the land value tax until she dies or sells the estate.
- Experiments In Transitioning to Land Value Tax
There are a lot of cities around the US right now where this is being floated. Organizations like Strong Towns and the Center for Property Tax Reform are working on this, the Lincoln Land Institute is talking to places about it. I think there's one in Virginia. Detroit is talking about it right now, and they could desperately use it. I think it could pass. I'd like to see those experiments run and observe what happens there.
I think we should do it in Texas. And that would be something that I think would be very friendly to the libertarian mindset because very clearly there’s no new revenue. And we're exempting an entire category of taxation. Most people are gonna see savings on their tax bill and the people who own those parking lots downtown in Houston are gonna be paying most of the bill.
In terms of Henry George's relevance, it seems to be coming back, especially in Norway. The Ruling Center Party coalition just passed a very successful resource management policy with oil, and they also have one from the early 1900s in hydropower, which was set up by Norwegian Georgists. The Ruling Center Party coalition just put one in for salmon farming aquaculture locations, a new severance tax on that, and they name-checked Henry George when they implemented it in the speech. So I think if they are willing to stand up to the landowners in Oslo and pass a land value tax, that would be the next step. I'm not sure if they're brave enough to do that, but we're starting to see this kind of bubble up.
A revenue-neutral property tax shift to land is the politically popular way to do it because it can be done on the local level without having to change a whole bunch of laws.