The Role of Land Markets in Economic Crises
Abstract supplied by Wiley Publishing: It is widely recognized that the economic crisis of 2009 was caused by unsound lending for real estate. Largely ignored, however, is that this contraction was easily predicted on the basis of a well-established pattern of land speculation, premature subdivision, and excessive building on marginal land that recurs approximately once every 18 years. Capital locked up in projects that are started during a land bubble is effectively lost during the downturn, leaving the nation without sufficient capital to finance ordinary business operations during the recovery period. The best instrument for avoiding this boom-bust cycle is the property tax and, more specifically, the portion that falls on land. We explore here the ways in which the property tax influences the intensity, timing, and location of development. We also examine why frequent and accurate assessment are essential to make the property tax an effective method of preventing speculative real estate bubbles.
DetailsThe Unwieldy Time-Dimension of Space
Abstract supplied by Wiley Publishing: This paper introduces the concept of “time-indivisibility,” and suggests that it may interfere with optimal allocation of durable resources, and especially permanent resources. Space on the earth's surface is taken as a representative permanent resource. The limitations of leasing and lending as time-dividers are briefly sketched. A simple technique is advanced for analyzing on an annual basis the effects of time-indivisibility, and it is demonstrated that permanent goods do not tend to be allocated in keeping with the equimarginal ideal. The technique is further developed to analyze the effects on allocation of depreciation and appreciation, the latter tending to aggravate and the former to meliorate the diseconomies inherent in time-indivisibility.
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