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The factors of production are the fundamental categories of what makes an economy. According to classical economics, there are three categories:
Land: Anything made by nature such as resources, water, and land itself
Capital: Anything made by man
Labor: Effort by man to provide goods or services
Profit is likewise split into three categories based on its source: rent (land), wages (labor), and interest (capital).
Of the three, land is a bit different from the other two because no one made it. This insight was pointed out by Adam Smith, David Ricardo, and Thomas Paine. Paine believed that the value of land should be taxed because doing so does not rescue the amount of land and also deters land speculation. In addition, he believed that the revenue from such a tax should be redistributed as a basic income. In the late 19th century, Henry George started a movement advocating for a land value tax. This tax would have taxed the value of land. Unlike a property tax, it would only affect the land rather than the improvements made to the land. Thus it would incentivize landowners to make the most efficient use of their land.
In contrast, the marxian school renames them to labor, subjects of labor (land), and instruments of labor (capital). They're essentially the same thing but it's very clear that Marx was trying to say that labor is the only active ingredient in the production of wealth. This is also where we get the labor theory of value which states that the value of a product is the amount of socially necessary labor required to produce it. It's similar to the cost theory of value except it only focuses on labor. It's the whole cornerstone of socialism. The LTV is used to say that owners of capital are rent seekers because they're not providing any labor, the profit made by capital owners is called surplus labor. This all begs the question of how the capital got there in the first place. Socialists seem to either assume that it started from land rent or ignore the question entirely. If land rent is really the cause of all of capitalism's flaws, perhaps the LVT is the solution.
Neoclassicals have the opposite problem. Like the marxists, they conflate land with capital but give both the capital treatment rather than the land treatment. What I mean is that they completely ignore the concept of land rent that classical economists talked about. According to them, gains from land speculation are just as legit as gains from running a business. Neoclassical economics (as well as the austrian school) originates from the marginal revolution from which we get the subjective theory of value. Neoclassical economics differs from classical economics in that while the latter, detailed how gains made from rent are unearned, neoclassical economics throws it out the window. Keynesian economics is along the same lines. The boom bust cycle is just the natural result of people overspending during the good times and saving too much during the recessions. This school teaches that the best way to alleviate recessions is for the government to spend more money. Like the neoclassicals, keynesians consider rent to be as valid as interest and wages.
In economics, one that really seems to divide the right and left is whether we should prioritize efficiency or equity. The right favors efficiency-based policies while assuring everyone that they also bring about some equity. The left favors equity-based policies while assuring everyone that they also bring more efficiency. But the LVT promises to bring forth a great deal of both. It would be efficient because it would make land more easily available and focus investment on capital rather than land speculation. It would be equitable because land ownership is correlated with wealth and it would make rent and home ownership more affordable.
To learn more about the LVT, click here: https://debatepolitics.com/threads/a-tax-which-could-solve-many-economic-problems-today.464081/
Land: Anything made by nature such as resources, water, and land itself
Capital: Anything made by man
Labor: Effort by man to provide goods or services
Profit is likewise split into three categories based on its source: rent (land), wages (labor), and interest (capital).
Of the three, land is a bit different from the other two because no one made it. This insight was pointed out by Adam Smith, David Ricardo, and Thomas Paine. Paine believed that the value of land should be taxed because doing so does not rescue the amount of land and also deters land speculation. In addition, he believed that the revenue from such a tax should be redistributed as a basic income. In the late 19th century, Henry George started a movement advocating for a land value tax. This tax would have taxed the value of land. Unlike a property tax, it would only affect the land rather than the improvements made to the land. Thus it would incentivize landowners to make the most efficient use of their land.
In contrast, the marxian school renames them to labor, subjects of labor (land), and instruments of labor (capital). They're essentially the same thing but it's very clear that Marx was trying to say that labor is the only active ingredient in the production of wealth. This is also where we get the labor theory of value which states that the value of a product is the amount of socially necessary labor required to produce it. It's similar to the cost theory of value except it only focuses on labor. It's the whole cornerstone of socialism. The LTV is used to say that owners of capital are rent seekers because they're not providing any labor, the profit made by capital owners is called surplus labor. This all begs the question of how the capital got there in the first place. Socialists seem to either assume that it started from land rent or ignore the question entirely. If land rent is really the cause of all of capitalism's flaws, perhaps the LVT is the solution.
Neoclassicals have the opposite problem. Like the marxists, they conflate land with capital but give both the capital treatment rather than the land treatment. What I mean is that they completely ignore the concept of land rent that classical economists talked about. According to them, gains from land speculation are just as legit as gains from running a business. Neoclassical economics (as well as the austrian school) originates from the marginal revolution from which we get the subjective theory of value. Neoclassical economics differs from classical economics in that while the latter, detailed how gains made from rent are unearned, neoclassical economics throws it out the window. Keynesian economics is along the same lines. The boom bust cycle is just the natural result of people overspending during the good times and saving too much during the recessions. This school teaches that the best way to alleviate recessions is for the government to spend more money. Like the neoclassicals, keynesians consider rent to be as valid as interest and wages.
In economics, one that really seems to divide the right and left is whether we should prioritize efficiency or equity. The right favors efficiency-based policies while assuring everyone that they also bring about some equity. The left favors equity-based policies while assuring everyone that they also bring more efficiency. But the LVT promises to bring forth a great deal of both. It would be efficient because it would make land more easily available and focus investment on capital rather than land speculation. It would be equitable because land ownership is correlated with wealth and it would make rent and home ownership more affordable.
To learn more about the LVT, click here: https://debatepolitics.com/threads/a-tax-which-could-solve-many-economic-problems-today.464081/