I’ll take a stab at it. What the hell, it can’t get more confusing can it?
JS was trying to establish a way to determine “value” within a command economy. Some one stated that you can not do this due to too many factors. JS picked housing values as an example because property tax assessment is centralized and does not necessarily reflect the value of the property. Mainly because the number of similar homes within a neighborhood for sale at a given time is too low to give an accurate number. (My guess here I don’t think JS actually said that)
JS’s method relies on the property owner to assign a value to eth property and be taxed based on it. To avoid low balling the number and thereby avoiding paying the appropriate amount of tax the owner is required to sell should an offer be made for the house at the value the owner has assigned it.
Everyone agrees that there’s something wrong here, but I understand how it can provide a viable means of assessing the value of the property by the people with the largest stake in it. Your example of enemies forcing you out is invalid because you’ve already agreed that the value you assigned to your house is what you would sell for if some one offered to buy.
My objection would be that the value of the house appears to be fixed in time and not subject to change as circumstances warrant.
Well, if you are going to defend a position you should at least be coherent because you are contradicting it.
My objection was:
Because a rich person can afford to buy your house at a premium over market value, evcit you, and then sell the house. JS responded:
So, what is it? if you buy your house for 100 grand is it fair that you should be able to keep it unless you want to sell it or is it fair that you should value it so high that no one can buy it and therefore pay astronomical taxes?
Well, if you are going to defend a position you should at least be coherent because you are contradicting it.
My objection was:
Because a rich person can afford to buy your house at a premium over market value, evcit you, and then sell the house. JS responded:
So, what is it? if you buy your house for 100 grand is it fair that you should be able to keep it unless you want to sell it or is it fair that you should value it so high that no one can buy it and therefore pay astronomical taxes?
I have already said this and I will repeat it: fair market value is that at which a seller who is willing but not forced to sell and a buyer who is willing but not forced to buy, conduct the transaction. Your example is flawed because you are forcing people who do not want to sell. How much is the market value of that old photo of your wife? 20 cents? Does that mean you would be willing to sell it for 20 cents? No, you would not let it go for $1000. Does that mean it is worth $1000 in the market? No.
The fair market value would be set by an appraiser by comparing sales of similar items in similar conditions. This is done this way by all appraisers. They compare with recent sales of similar items. When I sold my home, the buyer had it appraised for a mortgage and the appraiser took into consideration what similar homes had sold for in the neigborhood in the recent past. The only thing he did not do is ask me what I thought my house was worth.
The idea was/is to assign value to the property honestly, not fairly. If you bought the house for 100k but value it at 250k that’s fine. The kids heights are all notched on the walls etc etc. But you value it at 250k. You’ve honestly looked at the taxation, emotional attachment and assigned a value. The stick, which makes everyone uneasy, is the selling condition. But that’s what ensures an honest valuing on your part.
Its thought experiment is assigning value honestly through a central planning authority to see if it can be done.
So Grey, tell me, do you think it is a good idea, or even workable, that you have to pay taxes depending on how willing to move you are? Suppose I don’t mind selling, then I can asses my property at market value. But suppose my neighbor has a similar house, worth the same, but he has a family and a job and it would cause him hardship to move so he has to assess his house at five times market value and pay five times more tax. Is that reasonable? Is that workable? What are the benefots over the current system?
As Grey mentioned, the purpose of the thought experiment wasn’t so much one of fairness, but one of honestly assessing the value of one’s home/property for tax purposes. The kicker being that to derive an honest assessment of your property for tax purposes, you would be forced to sell your home to someone willing to purchase it from you at the assessment.
Is it fair? Within the (limited) framework of the thought experiement it is (although not necessarily fair in all cases). Would it be fair within the framework of our current (i.e. free market) system? Probabaly not.
I don’t see where I’m being contradictory. js_africanus stated that you could assess the value of your property at a extremely high price (in order to disuade others from forcing you to sell), but in turn you would be expected to pay the corresponding tax assessed based on your valuation of your property. No one is forcing you to assess your property at $100 billion dollars.
What you are being force to do is to derive a valuation of your property for tax assessment purposes that, in the event someone offered to pay you for your property at that assessment valuation, you be required to sell your property. What you are going to be forced to do is come up with a valuation for your property that minimizes the taxes you have to pay on that property but maximizes your “return on investment”, so to speak.
So in the system outlined by js_africanus, what would be the rational (economic) thing to do? If I bought a home for $100,000 in such a system, knowing that I’d be required to pay taxes on the home based on what value I assess it and also that someone may want to buy my home at that value (forcing me to sell), I would probably do the following: assess a value to my home above what I originally paid for it - say $150,000. The additional $50,000 is added to my original price to offset the chance that someone would want to purchase my home (they have to give me $150,000).
Sure, my taxes would be lower had I assessed my property at a lower level, but I would be compensated (to the tune of $50,000 on top of the original $100,000) in the event that I were forced to sell. Other people would probably make similar assessments of their property. The tricky part is coming up with a valuation that tries to minimize taxes but maximizes the amount on initial investment plus the hassle/hardship of having to sell. The other tricky part (and why it wouldn’t be fair in all cases) is not accounting for other costs associated with being forced to sell (such as time/effort required to find a new place, transportatons costs, not accounting for cost of living increases, availability of similarly assessed homes, etc.).
So, what’s to stop a really rich person from coming in and buying up everyone’s home, then assessing the value of those home’s at two, three, four, x times what they were originally assessed at? Well, nothing really. Is it fair? Probably not. How likely is it to happen? Can’t say for certain. My guess is that if a rich person were to buy up poor people’s property, forcing them to sell and having them find another place to live, the taxes collected on the assessed property would be used by the government to help the poor people find another place to live. After all, if you want to hypothesize greedy rich people buying up property in the thought experiment, I can hypothesize the government stepping in to assist the poor, displaced home-owners.
I can make similar “fairness” claims with regards to the current system we have in place in the United States. Is it fair for the government to be able to “take” my property under the aegis of “eminent domain?” What if I don’t want to sell my property? Tough - the government can (and does) take property under eminent domain all the time. All the government is required to do is compenstate you for taking your property at a fair and reasonable price (I’m assuming that it is based on the market value of your property).
What if you paid 100,000 dollars for your property and your property is assessed at market value of only 80,000? Is it fair that you are forced to sell your home (via eminent domain) at below what you paid for it?
Is it fair that your neighbor’s property is assessed at the same market value as your property, even though your neighbor’s home is falling apart and in disrepair, while your property has undergone extensive improvements (free-rider problem)?
The free market is a wonderful thing. It often produces optimal (fair) outcomes in many instances. But it doesn’t necessarily and in all cases result in optimal (fair) economic outcomes. Of course, neither does js_africanus’s thought experiment either (that is, necessarily fair outcomes all the time).
This example is so bizarre. “Forced dislocation pricing”?
This home pricing scheme seems to start with the assumption that picking up and moving to another place has an inflexible (from person to person) cost. If I’m wrong, I would love to hear why.
Of course, reality has no relation to the thought experiment. Some people, like those with children or those who really desire a particular location will be forced to artificially inflate the value of their homes. Young single people with portable jobs will be the new Donald Trumps of residential real estate.
Furthermore, as usual, it assumes that people can simply pluck a figure out of the air and have it be the right figure. Of course, market value as determined by home sales in your area is a tried and true method with no real drawbacks - and js_africanus has shown no advantage to society from the new scheme - so I suggest we implement it tomorrow!
Well, maybe it makes sense to you but from where i’m standing it seems like a terribly stupid idea and I still can’t see what is the benefit of this scheme.
Youa re saying You are never really secure you can keep your house but you can diminish the chance somewhat by payying higher taxes. i don’t think that’s fair. Sorry. I don’t think anyone would think that’s fair.
Suppose you have a dispute with your bank or with some big corporation or with your boss. For them it is trivial to drive you out of your house. Yes, they have to pay you, but they can chase you out of one house after another. Sorry but it sounds incredibly stupid to me.
As I say, we have a free market which works fairly well and now we have this proposal for a new system. What exactly is the benefit of this sytem? And does anybody really think this is viable? I just can’t believe anyone who knows what he’s talking about would even seriously consider this is even possible.
>> Is it fair that your neighbor’s property is assessed at the same market value as your property, even though your neighbor’s home is falling apart and in disrepair, while your property has undergone extensive improvements (free-rider problem)?
I don’t know where you live but that’s not the way it works in DC where each house is assessed on its own merits. So your example is not valid. At least not in DC.
Sailor’s right about this. If you’re going to hang the threat of forced relocation on someone if they price their house too low, then they are forced to price it higher to eliminate the risk.
Remember, this whole thought experiment was to suggest a way to determine the REAL value of something, in this case a house.
But in this example, what you are measuring is the value of the house + the cost of moving + the emotional attachment to the house + a number of other intangible factors.
The result would be that people would ALWAYS estimate high, because the only advantage to estimating low is a slight reduction in taxes. So your measurement will be WRONG. If you base state decisions on this (i.e. trying to determine how much it will cost to add additional housing into the neighborhood, or the cost to build up a new neighborhood in the area), then your estimates will be all wrong.
This whole thought experiment came about to show how you could get around the information problem in central planning. js_africanus was pointing out that there are methods to extract accurate information from the public, and used this as an example.
His point is valid in the sense that there are ways to extract information from the economy. Statistical analysis, past performance, other trends. Economists and city planners have to do this all the time. But MY point is that all of these methods can never be better than gross approximations, and even then they only work with a small subset of valuations. What this thread has shown that even a relatively straightforward method, on a very visible and well understood commodity, has many, many flaws.
Now, how about a central planning trying to decide how soft state pillows should be, or what color running shoes should be. As the products become more numerous, and decision-making becomes more subjective, the odds of a central planner accurately judging what the people want goes way down.
But the real kicker is in all the secondary interactions. A complex economy is very close to a chaotic system in that it can be impossible to predict the ripples of a change after a couple of interactions. Did Henry Ford have any chance of seeing that the introduction of the car would in part be responsible for the cruiser culture of the 50’s? Did anyone foresee drive-inn theaters and the changes in sexuality that the rumble seat brought? Did the inventors of the microprocessor have any way of predicting the world-wide web?
Or another way to look at it - even the best investors in the world are lucky to see annual returns of greater than 10-15%. These are people who look much like central planners in that it’s their job to look at trends in society and predict winners and losers. And even the best do little better than random picks.
And at the micro level, it gets worse. A planner decides that the new shoes should be red. But now there’s a shortage of red dye, because the factory had no way of knowing. So they order more ochre tint than they expected to, so the factory that makes it has to adjust. And so it goes, until you find that after three or four generations the decision to make red shoes results in a shortage of chairs in the local school through an odd chain of interaction.
Central planning is like balancing a pencil on your finger - you’re always in a reactive mode, trying to adjust to the changes. A capitalist economy is more like hanging a pencil from your fingers - if it moves out of its stable position, forces naturally build to push it back again. It is more efficient, and the pencil stays in place much better, and with less effort.
Sailor "And since I still have no idea what the purpose of presenting that idea might be "
I believe, that if you read the posts, you will note that the idea was “proposed” ( :rolleyes: ) as a hypothetical method to see if a command economy can get realistic price information from an unwilling populace. No less than 5 people have tried to point this out, but you’ve seem to have missed those posts some how. Let me quote a few:
To start with, let’s go to the original post:
JS:
I added this quote to note that JS’s example was based upon the reality of OlentZero’s magical mystery database.
Zwaald stated:
JohnT:
JS again:
Zwaald again:
And, again Zwaald:
JS, again:
And, again, JS:
Italics mine.
Anyway, until this thread gets back on topic I’m bowing out. I’m sure that is no great loss to a number of you, but honestly: this thread is about Communism viz Capitalism, not about the worthiness of somebody’s hypothetical scenario that he spun in response to a second posters statement that was based upon a third posters imaginary, nonexistant global distribution database.
I can’t be the only one who feels that this has been a huge waste of a perfectly good thread.
>> I believe, that if you read the posts, you will note that the idea was “proposed” ( ) as a hypothetical method to see if a command economy can get realistic price information from an unwilling populace.
JohnT, when I said "I still have no idea what the purpose of presenting that idea might be " I meant that I do not understand the purpose of presenting an idea saying at the same time “when I think about the proposal, I just know that it isn’t a good idea. But I really can’t come up with a solid argument except that nobody will like it”. Well, if it’s a bad idea why present it? And If you don’t know why it’s a bad idea don’t complain when others help you out in finding out why it is a bad idea. And when others respond to your post you cannot say “hey, it was only a thought experiment and you are not allowed to find flaws in what I said”. Sorry, if you post something, expect it to be scrutinized. And if you don’t want the thread to be highjacked by silly “thought experiments” then don’t post them. The idea was presented as a way to assess the value of real estate and I am proving it would not be workable. JS did not withdraw it but rather insisted it was workable so if you want to blame anyone for the continued highjack it is not me who is to blame. And as long as he continues to say it is workable I will continue to say it is not workable because I am not about to play the game that it is only a "thought experiment"and so we pretend it is workable and then build on that. It is not workable.
In summary the process is this: One side says a planned economy is possible and good. The other side says it is a bad thing, among other things because the planners cannot have all the necessary information. Here JS comes in and proposes his bizarre plan to show the planners can have the necessary information. I am showing the plan will not work and would be a disaster and therefore cannot be used to support the idea that the planners can have that information not to mention that it would not provide planners with any better information than they could get with traditional assessments. Now, as long as someone is insisting the plan would work I will be there showing it would not work and therefore anything built on that premise collapses. If you want to call this a highjack you can take it up with JS who is the one insisting the plan would work and that would show a planned economy is possible.
To say it was only an “imaginary thought experiment” and therefore not open to question, so let’s just play along and pretend it is viable and possible and then use it as an argument to support the idea that a planned economy is possible is just disingenous. It is not viable and therefore it cannot be used to support anything. We might as well do the thought experiment that pigs can fly and then build an airline based on that premise.
Can an ideology be declared evil if its expression in reality turns out to be evil? Can we look at the Crusades, the Inquisition, the witch hunts, the fight against science, the protection of pederasts, inter alia and conclude that Christianity is evil? Or does the evil have to be within the internal logic of the ideology itself?
That, as a general discussion, would be another highjack and I’m not sure we want to discuss the Crusades here. Or do we?
In what it particularly pertains to communism, I have already explained why it inevitably leads to loss of freedom and from there on to tiranny and repression. There’s no doubt it is inherently evil.
I did that in the last post… to quote the proper bit “I think it’s within common sense to assume any government that was imposed by another (ie: a Soviet puppet in a Warsaw pact country) wouldn’t be free no matter what system of government was involved.” So my answer to that would be Soviet influence was either the defining variable or damn near.
You might say i’m being obstructive but certainly not intentionally so… I surely don’t feel as I am being so at all. Taking your word for it I have just reread every reply… from the OP on.
I apologize… truly… for I fail to see the evidence I’m looking for… to wit: Why the assumption communism brings about lack of free speech and power in government (vote). Certainly I haven’t seen a cite. If my eyes are going out on me let me know…
I still rather feel I’m in bounds asking for a cite on this. How does an economic theory lead to censorship? How does a people’s government invariably end up stripping the vote? These are fair questions and deserve straight answers.
We can go back and forth all day and get nowhere. Bottom line I asked for a cite and nobody has found it yet. If I missed it (I just reread them all but I’m not Perfect like some then please show it to me… otherwise I’m ducking out of this thread. If there is no cite I’ve proven my point… the theories are baseless.
Feel free to prove me wrong… bring a cite.
*I’m not going to get into a pissing contest over this…if you don’t have a cite don’t expect a reply.
People do not like to lose freedom in those areas and they begin to talk and act in order to regain those freedoms lost
The communist government has no option but to restore those freedoms or restrict freedom of speech and other political freedoms.
I can’t see what is so difficult to understand. That is a simple theory and it is what has happened in every single instance in the real world so I think it is reasonable to assume it is correct. See: Soviet Union, Cuba, North Korea, China, and all other countries which have been subject to communist rule. When people protest they were silenced and if they would not shut up they were killed.
>> if you don’t have a cite don’t expect a reply
That would be wonderful. I hope you are a man of your word.
then please show it to me… otherwise I’m ducking out of this thread. If there is no cite I’ve proven my point… the theories are baseless.