Heterodox
93-570: Business cycles are intervals of general expansion followed by recession in economic performance. The changes in economic activity that characterize business cycles have important implications for the welfare of the general population, government institutions, and private sector firms. There are many definitions of a business cycle. The simplest defines recessions as two consecutive quarters of negative GDP growth. More satisfactory classifications are provided by, first including more economic indicators and second by looking for more data patterns than
186-497: A single tax on land. They did not distinguish between the intrinsic value of land and ground rent. Their theories originated in France and were most popular during the second half of the 18th century. The movement was particularly dominated by Anne Robert Jacques Turgot (1727–1781) and François Quesnay (1694–1774). It influenced contemporary statesmen, such as Charles Alexandre de Calonne . The physiocrats were highly influential in
279-493: A Bayesian statistical paradigm. Later, economist Joseph Schumpeter argued that a Juglar cycle has four stages: Schumpeter's Juglar model associates recovery and prosperity with increases in productivity, consumer confidence , aggregate demand , and prices. In the 20th century, Schumpeter and others proposed a typology of business cycles according to their periodicity, so that a number of particular cycles were named after their discoverers or proposers: Some say interest in
372-425: A company enlarges its scale through taking over or merging with other companies. Land value tax A land value tax ( LVT ) is a levy on the value of land without regard to buildings , personal property and other improvements upon it. Some economists favor LVT, arguing it does not cause economic inefficiency , and helps reduce economic inequality . A land value tax is a progressive tax , in that
465-460: A company stock's current earnings. Intellectual capital contributes to a stock's return growth. Unlike long-term trends, medium-term data fluctuations are connected to the monetary policy transmission mechanism and its role in regulating inflation during an economic cycle. At the same time, the presence of nominal restrictions in price setting behavior might impact the short-term course of inflation. In recent years economic theory has moved towards
558-404: A cycle that needed to be explained and instead viewing their apparently cyclical nature as a methodological artefact. This means that what appear to be cyclical phenomena can actually be explained as just random events that are fed into a simple linear model. Thus business cycles are essentially random shocks that average out over time. Mainstream economists have built models of business cycles based
651-487: A form of fluctuation. In economic activities, a cycle of expansions happening, followed by recessions, contractions, and revivals. All of which combine to form the next cycle's expansion phase; this sequence of change is repeated but not periodic. The explanation of fluctuations in aggregate economic activity is one of the primary concerns of macroeconomics and a variety of theories have been proposed to explain them. Within economics, it has been debated as to whether or not
744-499: A good that is fixed in supply, such as land, does not change if it is taxed. By contrast, the price of manufactured goods can rise in response to increased taxes, because the higher cost reduces the number of units that suppliers are willing to sell at the original price. The price increase is how the maker passes along some part of the tax to consumers. However, if the revenue from LVT is used to reduce other taxes or to provide valuable public investment, it can cause land prices to rise as
837-515: A heterodox branch in economics until being systematized in Keynesian economics in the 1930s. Sismondi's theory of periodic crises was developed into a theory of alternating cycles by Charles Dunoyer , and similar theories, showing signs of influence by Sismondi, were developed by Johann Karl Rodbertus . Periodic crises in capitalism formed the basis of the theory of Karl Marx , who further claimed that these crises were increasing in severity and, on
930-520: A household. It later became subject to a land tax known as "geld". The physiocrats were a group of economists who believed that the wealth of nations was derived solely from the value of land agriculture or land development . Before the Industrial Revolution , this was approximately correct. Physiocracy is one of the "early modern" schools of economics . Physiocrats called for the abolition of all existing taxes, completely free trade and
1023-407: A leading case. As well-formed and compact – and easy to implement – statistical methods may outperform macroeconomic approaches in numerous cases, they provide a solid alternative even for rather complex economic theory. In 1860 French economist Clément Juglar first identified economic cycles 7 to 11 years long, although he cautiously did not claim any rigid regularity. This interval of periodicity
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#17328559264411116-520: A network of free enterprises searching for profit. The problem of how business cycles come about is therefore inseparable from the problem of how a capitalist economy functions. In the United States, it is generally accepted that the National Bureau of Economic Research (NBER) is the final arbiter of the dates of the peaks and troughs of the business cycle. An expansion is the period from a trough to
1209-445: A one period change, that is unusual over the course of one or two years, is often relegated to “noise”; an example is a worker strike or an isolated period of severe weather. The individual episodes of expansion/recession occur with changing duration and intensity over time. Typically their periodicity has a wide range from around 2 to 10 years. There are many sources of business cycle movements such as rapid and significant changes in
1302-422: A peak and a recession as the period from a peak to a trough. The NBER identifies a recession as "a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production". There is often a close timing relationship between the upper turning points of the business cycle, commodity prices, and freight rates, which
1395-497: A recession is defined as two declining periods of GDP. Expansion may be caused by factors external to the economy, such as weather conditions or technical change, or by factors internal to the economy, such as fiscal policies , monetary policies , the availability of credit , interest rates , regulatory policies or other impacts on producer incentives. Global conditions may influence the levels of economic activity in various countries. Economic contraction and expansion relate to
1488-418: A recession or depression. This debate has important policy consequences: proponents of exogenous causes of crises such as neoclassicals largely argue for minimal government policy or regulation ( laissez faire ), as absent these external shocks, the market functions, while proponents of endogenous causes of crises such as Keynesians largely argue for larger government policy and regulation, as absent regulation,
1581-494: A result of efficiency gains if speculators stop hoarding unused land. Real estate bubbles direct savings towards rent-seeking activities rather than other investments and can contribute to recessions . Advocates claim that LVT reduces the speculative element in land pricing, thereby leaving more money for productive capital investment. At sufficiently high levels, LVT would cause real estate prices to fall by taxing away land rents that would otherwise become 'capitalized' into
1674-561: A result of higher productivity, by more than the amount that LVT removed. Land tax incidence rests completely upon landlords, although business sectors that provide services to landlords are indirectly impacted. In some economies, 80 percent of bank lending finances real estate, with a large portion of that for land. Reduced demand for land speculation might reduce the amount of circulating bank credit. While landowners are unlikely to be able to charge higher rents to compensate for LVT, removing other taxes may increase rents, as this may affect
1767-435: A solution. Statistical or econometric modelling and theory of business cycle movements can also be used. In this case a time series analysis is used to capture the regularities and the stochastic signals and noise in economic time series such as Real GDP or Investment. [Harvey and Trimbur, 2003, Review of Economics and Statistics ] developed models for describing stochastic or pseudo- cycles, of which business cycles represent
1860-468: A tax upon ground-rents, they would not probably be disposed to pay more for the use of the ground. Whether the tax was to be advanced by the inhabitant, or by the owner of the ground, would be of little importance. The more the inhabitant was obliged to pay for the tax, the less he would incline to pay for the ground; so that the final payment of the tax would fall altogether upon the owner of the ground-rent. Henry George (2 September 1839 – 29 October 1897)
1953-696: A type of fluctuation found in the aggregate economic activity of nations that organize their work mainly in business enterprises: a cycle consists of expansions occurring at about the same time in many economic activities, followed by similarly general recessions, contractions, and revivals which merge into the expansion phase of the next cycle; in duration, business cycles vary from more than one year to ten or twelve years; they are not divisible into shorter cycles of similar characteristics with amplitudes approximating their own. According to A. F. Burns: Business cycles are not merely fluctuations in aggregate economic activity. The critical feature that distinguishes them from
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#17328559264412046-627: A war was the Panic of 1825 . Business cycles in OECD countries after World War II were generally more restrained than the earlier business cycles. This was particularly true during the Golden Age of Capitalism (1945/50–1970s), and the period 1945–2008 did not experience a global downturn until the Late-2000s recession . Economic stabilization policy using fiscal policy and monetary policy appeared to have dampened
2139-485: Is also commonplace, as an empirical finding, in time series models for stochastic cycles in economic data. Furthermore, methods like statistical modelling in a Bayesian framework – see e.g. [Harvey, Trimbur, and van Dijk, 2007, Journal of Econometrics ] – can incorporate such a range explicitly by setting up priors that concentrate around say 6 to 12 years, such flexible knowledge about the frequency of business cycles can actually be included in their mathematical study, using
2232-484: Is an effective method to promote transit-oriented development . The value of land reflects the value it can provide over time. This value can be measured by the ground rent that a piece of land receives on the market. The present value of ground-rent is the basis for land prices. A land value tax (LVT) will reduce the ground rent received by the landlord, and thus will decrease the price of land, holding all else constant. The rent charged for land may also decrease as
2325-562: Is associated with Henry George , whose ideology became known as Georgism . George argued that taxing the land value is the most logical source of public revenue because the supply of land is fixed and because public infrastructure improvements would be reflected in (and thus paid for by) increased land values. A low-rate land value tax is currently implemented throughout Denmark , Estonia , Lithuania , Russia , Singapore , and Taiwan ; it has also been applied to lesser extents in parts of Australia , Germany , Mexico ( Mexicali ), and
2418-432: Is caused by the concentration of population . That general rate should have to be spent on breaking out small green spots in the midst of dense industrial districts, and on the preservation of large green areas between different towns and between different suburbs which are tending to coalesce . This idea influenced Marshall's pupil Arthur Pigou 's ideas on taxing negative externalities. Pigou wrote an essay in favor of
2511-440: Is due to variation of building design and quality. Modern statistical techniques have improved the process; in the 1960s and 1970s, multivariate analysis was introduced as an assessment tool. Usually, such a valuation process begins with a measurement of the most and least valuable land within the taxation area. A few sites of intermediate value are then identified and used as "landmark" values. Other values are interpolated between
2604-423: Is impractical because of uncertainty regarding land titles and tenure . For instance, a parcel of grazing land may be communally owned by village inhabitants and administered by village elders. The land in question would need to be held in a trust or similar body for taxation purposes. If the government cannot accurately define ownership boundaries and ascertain the proper owners, it cannot know from whom to collect
2697-407: Is not stable over different time periods because of economic shocks , random fluctuations and development in financial systems . Ludvigson believes consumer confidence index is a coincident indicator as it relates to consumer's current situations. Winton & Ralph state that retail trade index is a benchmark for the current economic level because its aggregate value counts up for two-thirds of
2790-563: Is now often known as Georgism . Its relevance to public finance is underpinned by the Henry George theorem . After the 1868 Meiji Restoration in Japan, land tax reform was undertaken. An LVT was implemented beginning in 1873. By 1880 initial problems with valuation and rural opposition had been overcome and rapid industrialisation began. In the United Kingdom , LVT was an important part of
2883-466: Is shown to be particularly tight in the grand peak years of 1873, 1889, 1900 and 1912. Hamilton expressed that in the post war era, a majority of recessions are connected to an increase in oil price. Commodity price shocks are considered to be a significant driving force of the US business cycle. Along these lines, the research in [Trimbur, 2010, International Journal of Forecasting ] shows empirical results for
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2976-416: Is supposed to account for business cycles thanks to the multiplier and the accelerator. The amplitude of the variations in economic output depends on the level of the investment, for investment determines the level of aggregate output (multiplier), and is determined by aggregate demand (accelerator). Economic expansion An economic expansion is an increase in the level of economic activity , and of
3069-484: Is used. Because the supply of land is essentially fixed , land rents depend on what tenants are prepared to pay, rather than on landlord expenses. Thus, if landlords passed LVT on to tenants, they might move or rent smaller spaces before absorbing increased rent. The land's occupants benefit from improvements surrounding a site. Such improvements shift tenants' aggregate demand curve to the right (they will pay more). Landlords benefit from price competition among tenants;
3162-523: The Fathers of the Church laid down the duty of the rich toward the poor in no uncertain terms. As St. Ambrose put it: "You are not making a gift of what is yours to the poor man, but you are giving him back what is his. You have been appropriating things that are meant to be for the common use of everyone. The earth belongs to everyone, not to the rich." In addition, the Church maintains that civil authorities have
3255-476: The Kiautschou Bay concession , which had successful implementation of LVT, bringing increased wealth and financial stability to the colony. The Republic of China would go on to implement LVT in farms at first, later implementing it in the urban areas due to its success. Alfred Marshall argued in favour of a "fresh air rate", a tax to be charged to urban landowners and levied on that value of urban land that
3348-634: The Town and Country Planning Act 1947 , but it was repealed when the Labour government lost power in 1951. Senior Labour figures in recent times have advocated an LVT, notably Andy Burnham in his 2010 leadership campaign, former Leader of the Opposition Jeremy Corbyn , and Shadow Chancellor John McDonnell . The Republic of China was one of the first jurisdictions to implement an LVT, specified in its constitution. Sun Yat-Sen would learn about LVT from
3441-474: The United States (e.g., Pennsylvania ). It is also known as a location value tax , a point valuation tax , a site valuation tax , split rate tax , or a site-value rating . Most taxes distort economic decisions and discourage beneficial economic activity. For example, property taxes discourage construction, maintenance, and repair because taxes increase with improvements. LVT is not based on how land
3534-459: The early history of land value taxation in the United States . A participant in the Radical Movement , Thomas Paine contended in his Agrarian Justice pamphlet that all citizens should be paid 15 pounds at age 21 "as a compensation in part for the loss of his or her natural inheritance by the introduction of the system of landed property." "Men did not make the earth. It is the value of
3627-530: The goods and services available. It is a period of economic growth as measured (for example) by a rise in real GDP . The explanation of fluctuations in aggregate economic activity between economic expansions and contractions ("booms" and "busts" within the " business cycle ") is one of the primary concerns of macroeconomics . Typically an economic expansion is marked by an upturn in production and in utilization of resources. Economic recovery and prosperity are two successive phases of expansion, whereas
3720-458: The price of oil or variation in consumer sentiment that affects overall spending in the macroeconomy and thus investment and firms' profits. Usually such sources are unpredictable in advance and can be viewed as random "shocks" to the cyclical pattern, as happened during the 2007–2008 financial crises or the COVID-19 pandemic . The first systematic exposition of economic crises , in opposition to
3813-431: The tax burden falls on land owners, because land ownership is correlated with wealth and income. The land value tax has been referred to as "the perfect tax" and the economic efficiency of a land value tax has been accepted since the eighteenth century. Economists since Adam Smith and David Ricardo have advocated this tax because it does not hurt economic activity, and encourages development without subsidies. LVT
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3906-511: The 1938–1939 Parliament, called the London Rating (Site Values) Bill. Although it failed, it detailed legislation for the implementation of a system of LVT using annual value assessment. After 1945, the Labour Party adopted the policy, against substantial opposition, of collecting "development value": the increase in land price arising from planning consent. This was one of the provisions of
3999-611: The 19th and first half of the 20th century, specifically the period 1815–1939. This period started from the end of the Napoleonic wars in 1815, which was immediately followed by the Post-Napoleonic depression in the United Kingdom (1815–1830), and culminated in the Great Depression of 1929–1939, which led into World War II . See Financial crisis: 19th century for listing and details. The first of these crises not associated with
4092-541: The 19th century. ( See: Productivity improving technologies (historical) .) A table of innovations and long cycles can be seen at: Kondratiev wave § Modern modifications of Kondratiev theory . Since surprising news in the economy, which has a random aspect, impact the state of the business cycle, any corresponding descriptions must have a random part at its root that motivates the use of statistical frameworks in this area. There were frequent crises in Europe and America in
4185-622: The Committee of the Association for the Relief of the Manufacturing Poor, both identified the cause of economic cycles as overproduction and underconsumption , caused in particular by wealth inequality . They advocated government intervention and socialism , respectively, as the solution. This work did not generate interest among classical economists, though underconsumption theory developed as
4278-560: The basis of which, he predicted a communist revolution . Though only passing references in Das Kapital (1867) refer to crises, they were extensively discussed in Marx's posthumously published books, particularly in Theories of Surplus Value . In Progress and Poverty (1879), Henry George focused on land 's role in crises – particularly land speculation – and proposed a single tax on land as
4371-697: The business cycle, notably the paradox of thrift , and today this previously heterodox school has entered the mainstream in the form of Keynesian economics via the Keynesian revolution. Mainstream economics views business cycles as essentially "the random summation of random causes". In 1927, Eugen Slutzky observed that summing random numbers, such as the last digits of the Russian state lottery, could generate patterns akin to that we see in business cycles, an observation that has since been repeated many times. This caused economists to move away from viewing business cycles as
4464-472: The business cycle. For almost 30 years, these economic data series are considered as "the leading index" or "the leading indicators"-were compiled and published by the U.S. Department of Commerce . A prominent coincident, or real-time, business cycle indicator is the Aruoba-Diebold-Scotti Index . Recent research employing spectral analysis has confirmed the presence of Kondratiev waves in
4557-430: The commercial convulsions of earlier centuries or from the seasonal and other short term variations of our own age is that the fluctuations are widely diffused over the economy – its industry, its commercial dealings, and its tangles of finance. The economy of the western world is a system of closely interrelated parts. He who would understand business cycles must master the workings of an economic system organized largely in
4650-658: The cycling of monetary systems. Since 1960, World GDP has increased by fifty-nine times, and these multiples have not even kept up with annual inflation over the same period. Social Contract (freedoms and absence of social problems) collapses may be observed in nations where incomes are not kept in balance with cost-of-living over the timeline of the monetary system cycle. The Bible (760 BCE) and Hammurabi 's Code (1763 BCE) both explain economic remediations for cyclic sixty-year recurring great depressions, via fiftieth-year Jubilee (biblical) debt and wealth resets. Thirty major debt forgiveness events are recorded in history including
4743-641: The debt forgiveness given to most European nations in the 1930s to 1954. There were great increases in productivity , industrial production and real per capita product throughout the period from 1870 to 1890 that included the Long Depression and two other recessions. There were also significant increases in productivity in the years leading up to the Great Depression. Both the Long and Great Depressions were characterized by overcapacity and market saturation. Over
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#17328559264414836-457: The demand for land. Assuming constant demand, an increase in constructed space decreases the cost of improvements to land such as houses. Shifting property taxes from improvements to land encourages development. Infill of underutilized urban space is one common practice to reduce urban sprawl . LVT is less vulnerable to tax evasion , since land cannot be concealed or moved overseas and titles are easily identified, as they are registered with
4929-452: The different typologies of cycles has waned since the development of modern macroeconomics , which gives little support to the idea of regular periodic cycles. Further econometric studies such as the two works in 2003 and 2007 cited above demonstrate a clear tendency for cyclical components in macroeconomic times to behave in a stochastic rather than deterministic way. Others, such as Dmitry Orlov , argue that simple compound interest mandates
5022-399: The economic activity of communities, including public investments, the economic rent of land was the best source of tax revenue. This book significantly influenced land taxation in the United States and other countries, including Denmark, which continues grundskyld ('ground duty') as a key component of its tax system. The philosophy that natural resource rents should be captured by society
5115-470: The economic crisis in former Eastern Bloc countries following the end of the Soviet Union in 1991. For several of these countries the period 1989–2010 has been an ongoing depression, with real income still lower than in 1989. In 1946, economists Arthur F. Burns and Wesley C. Mitchell provided the now standard definition of business cycles in their book Measuring Business Cycles : Business cycles are
5208-435: The economic cycle is framed in terms of refuting or supporting Say's law; this is also referred to as the " general glut " (supply in relation to demand) debate. Until the Keynesian revolution in mainstream economics in the wake of the Great Depression , classical and neoclassical explanations (exogenous causes) were the mainstream explanation of economic cycles; following the Keynesian revolution, neoclassical macroeconomics
5301-445: The economy to come to short run equilibrium at levels that are different from the full employment rate of output. These fluctuations express themselves as the observed business cycles. Keynesian models do not necessarily imply periodic business cycles. However, simple Keynesian models involving the interaction of the Keynesian multiplier and accelerator give rise to cyclical responses to initial shocks. Paul Samuelson 's "oscillator model"
5394-678: The economy. However, this was followed by stagflation in the 1970s, which discredited the theory. The second declaration was in the early 2000s, following the stability and growth in the 1980s and 1990s in what came to be known as the Great Moderation . Notably, in 2003, Robert Lucas Jr. , in his presidential address to the American Economic Association , declared that the "central problem of depression-prevention [has] been solved, for all practical purposes." Various regions have experienced prolonged depressions , most dramatically
5487-417: The effects of a land value tax, pointing out how it would not hurt economic activity, and how it would not raise contract rents. Ground-rents are a still more proper subject of taxation than the rent of houses. A tax upon ground-rents would not raise the rents of houses. It would fall altogether upon the owner of the ground-rent, who acts always as a monopolist, and exacts the greatest rent which can be got for
5580-568: The existing theory of economic equilibrium , was the 1819 Nouveaux Principes d'économie politique by Jean Charles Léonard de Sismondi . Prior to that point classical economics had either denied the existence of business cycles, blamed them on external factors, notably war, or only studied the long term. Sismondi found vindication in the Panic of 1825 , which was the first unarguably international economic crisis, occurring in peacetime. Sismondi and his contemporary Robert Owen , who expressed similar but less systematic thoughts in 1817 Report to
5673-697: The fluctuations of a business cycle are attributable to external (exogenous) versus internal (endogenous) causes. In the first case shocks are stochastic, in the second case shocks are deterministically chaotic and embedded in the economic system. The classical school (now neo-classical) argues for exogenous causes and the underconsumptionist (now Keynesian) school argues for endogenous causes. These may also broadly be classed as "supply-side" and "demand-side" explanations: supply-side explanations may be styled, following Say's law , as arguing that " supply creates its own demand ", while demand-side explanations argue that effective demand may fall short of supply, yielding
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#17328559264415766-483: The idea that they are caused by random shocks. Due to this inherent randomness, recessions can sometimes not occur for decades; for example, Australia did not experience any recession between 1991 and 2020. While economists have found it difficult to forecast recessions or determine their likely severity, research indicates that longer expansions do not cause following recessions to be more severe. According to Keynesian economics , fluctuations in aggregate demand cause
5859-607: The idea) remains committed to a local form of LVT, as do the Green Party of England and Wales and the Scottish Greens . The 1931 Labour budget included an LVT, but before it came into force it was repealed by the Conservative-dominated national government that followed. An attempt at introducing LVT in the administrative County of London was made by the local authority under the leadership of Herbert Morrison in
5952-466: The improvements only, and not the earth itself, that is individual property. Every proprietor owes to the community a ground rent for the land which he holds." This proposal was the origin of the citizen's dividend advocated by Geolibertarianism . Thomas Spence advocated a similar proposal except that the land rent would be distributed equally each year regardless of age. Adam Smith, in his 1776 book The Wealth of Nations , first rigorously analyzed
6045-446: The incentive to build on remote sites and so reduces urban sprawl . For example, Harrisburg, Pennsylvania 's LVT has operated since 1975. This policy was credited by mayor Stephen R. Reed with reducing the number of vacant downtown structures from around 4,200 in 1982 to fewer than 500. LVT is arguably an ecotax because it discourages the waste of prime locations, which are a finite resource. Many urban planners claim that LVT
6138-455: The landmark values. The data is then collated in a database, "smoothed" and mapped using a geographic information system (GIS). Thus, even if the initial valuation is difficult, once the system is in use, successive valuations become easier. In the context of LVT as a single tax (replacing all other taxes), some have argued that LVT alone cannot raise enough tax revenue . However, the presence of other taxes can reduce land values and hence
6231-453: The landowners who benefit from them. Thus, LVT captures the land value of socially created wealth, allowing a reduction in tax on privately created (non-land) wealth. LVT generally is a progressive tax, with those of greater means paying more, in that land ownership correlates to income and landlords cannot shift the tax burden onto tenants. LVT generally reduces economic inequality , removes incentives to misuse real estate, and reduces
6324-609: The marginal social cost of public services rendered to specific activities, and replacing them with taxes on site values, would substantially improve the economic efficiency of the jurisdiction." LVT's efficiency has been observed in practice. Fred Foldvary stated that LVT discourages speculative land holding because the tax reflects changes in land value (up and down), encouraging landowners to develop or sell vacant/underused plots in high demand. Foldvary claimed that LVT increases investment in dilapidated inner city areas because improvements don't cause tax increases. This in turn reduces
6417-509: The market economy as due to exogenous influences, such as the State or its regulations, labor unions, business monopolies, or shocks due to technology or natural causes. Contrarily, in the heterodox tradition of Jean Charles Léonard de Sismondi , Clément Juglar , and Marx the recurrent upturns and downturns of the market system are an endogenous characteristic of it. The 19th-century school of under consumptionism also posited endogenous causes for
6510-486: The market will move from crisis to crisis. This division is not absolute – some classicals (including Say) argued for government policy to mitigate the damage of economic cycles, despite believing in external causes, while Austrian School economists argue against government involvement as only worsening crises, despite believing in internal causes. The view of the economic cycle as caused exogenously dates to Say's law, and much debate on endogeneity or exogeneity of causes of
6603-556: The only direct effect of LVT in this case is to reduce the amount of social benefit that is privately captured as land price by titleholders. LVT is said to be justified for economic reasons because it does not deter production, distort markets, or otherwise create deadweight loss . Land value tax can even have negative deadweight loss (social benefits), particularly when land use improves. Economist William Vickrey believed that: "removing almost all business taxes, including property taxes on improvements, excepting only taxes reflecting
6696-571: The overall GDP and reflects the real state of the economy. According to Stock and Watson, unemployment claim can predict when the business cycle is entering a downward phase. Banbura and Rüstler argue that industry production's GDP information can be delayed as it measures real activity with real number, but it provides an accurate prediction of GDP. Series used to infer the underlying business cycle fall into three categories: lagging , coincident , and leading . They are described as main elements of an analytic system to forecast peaks and troughs in
6789-516: The overall output of all goods and services, while the terms " inflation " and " deflation " refer to increasing and decreasing prices of commodities, goods and services in relation to the value of money. On the microeconomic level, expansion may involve enlarging the scale of a company . The ways of expansion include internal expansion and integration. Internal expansion means a company enlarges its scale through opening branches, inventing new products, or developing new businesses. Integration means
6882-436: The owners of valuable land who tend to be the rich, and since the amount of land is fixed, the tax burden cannot be passed on as higher rents or lower wages to tenants, consumers, or workers. Several practical issues complicate LVT implementation. Most notably, it must be: Levying an LVT requires an assessment and a title register. In a 1796 United States Supreme Court opinion, Justice William Paterson said that leaving
6975-540: The period since the Industrial Revolution, technological progress has had a much larger effect on the economy than any fluctuations in credit or debt, the primary exception being the Great Depression, which caused a multi-year steep economic decline. The effect of technological progress can be seen by the purchasing power of an average hour's work, which has grown from $ 3 in 1900 to $ 22 in 1990, measured in 2010 dollars. There were similar increases in real wages during
7068-555: The platform of the Liberal Party during the early part of the twentieth century. David Lloyd George and H. H. Asquith proposed "to free the land that from this very hour is shackled with the chains of feudalism." It was also advocated by Winston Churchill early in his career. The modern Liberal Party (not to be confused with the Liberal Democrats , who are the heir to the earlier Liberal Party and who offer some support for
7161-409: The price of real estate. It also encourages landowners to sell or develop locations that they are not using. This might cause some landowners, especially pure landowners, to resist high land value tax rates. Landowners often possess significant political influence, which may help explain the limited spread of land value taxes so far. A land value tax has progressive tax effects, in that it is paid by
7254-430: The public. Land value assessments are usually considered public information, which is available upon request. Transparency reduces tax evasion. Land acquires a scarcity value owing to the competing needs for space. The value of land generally owes nothing to the landowner and everything to the surroundings. The Catholic Church asserts in its 1967 " universal destination of goods " principle: Everyone knows that
7347-497: The relation between oil-prices and real GDP. The methodology uses a statistical model that incorporate level shifts in the price of crude oil; hence the approach describes the possibility of oil price shocks and forecasts the likelihood of such events. Economic indicators are used to measure the business cycle: consumer confidence index , retail trade index , unemployment and industry/service production index . Stock and Watson claim that financial indicators' predictive ability
7440-410: The revenue that can be raised from them. The Physiocrats argued that all other taxes ultimately come at the expense of land rental values. Most modern LVT systems function alongside other taxes and thus only reduce their impact without removing them. Land taxes that are higher than the rental surplus (the full land rent for that time period) would result in land abandonment . In some countries, LVT
7533-516: The right and duty to regulate the legitimate exercise of the right to ownership for the sake of the common good, including the right to tax. LVT considers the effect on land value of location, and of improvements made to neighbouring land, such as proximity to roads and public works. LVT is the purest implementation of the public finance principle known as value capture . A public works project can increase land values and thus increase LVT revenues. Arguably, public improvements should be paid for by
7626-862: The so-called recurrence quantification correlation index to test correlations of RQA on a sample signal and then investigated the application to business time series. The said index has been proven to detect hidden changes in time series. Further, Orlando et al., over an extensive dataset, shown that recurrence quantification analysis may help in anticipating transitions from laminar (i.e. regular) to turbulent (i.e. chaotic) phases such as USA GDP in 1949, 1953, etc. Last but not least, it has been demonstrated that recurrence quantification analysis can detect differences between macroeconomic variables and highlight hidden features of economic dynamics. The Business Cycle follows changes in stock prices which are mostly caused by external factors such as socioeconomic conditions, inflation, exchange rates. Intellectual capital does not affect
7719-480: The study of economic fluctuation rather than a "business cycle" – though some economists use the phrase 'business cycle' as a convenient shorthand. For example, Milton Friedman said that calling the business cycle a "cycle" is a misnomer , because of its non-cyclical nature. Friedman believed that for the most part, excluding very large supply shocks, business declines are more of a monetary phenomenon. Arthur F. Burns and Wesley C. Mitchell define business cycle as
7812-658: The tax. Clear titles are absent in many developing countries. In African countries with imperfect land registration, boundaries may be poorly surveyed, and the owner can be unknown. The owner of a vacant lot in a thriving city must still pay a tax and would rationally perceive the property as a financial liability, encouraging them to put the land to use in order to cover the tax. LVT removes financial incentives to hold unused land solely for price appreciation, making more land available for productive uses. Land value tax creates an incentive to convert these sites to more intensive private uses or into public purposes. The selling price of
7905-561: The two quarter definition. In the United States , the National Bureau of Economic Research oversees a Business Cycle Dating Committee that defines a recession as "a significant decline in economic activity spread across the market, lasting more than a few months, normally visible in real GDP , real income, employment, industrial production, and wholesale-retail sales." Business cycles are usually thought of as medium term evolution. They are less related to long-term trends, coming from slowly-changing factors like technological advances. Further,
7998-444: The use of his ground. More or less can be got for it according as the competitors happen to be richer or poorer, or can afford to gratify their fancy for a particular spot of ground at a greater or smaller expense. In every country the greatest number of rich competitors is in the capital, and it is there accordingly that the highest ground-rents are always to be found. As the wealth of those competitors would in no respect be increased by
8091-431: The valuation process up to assessors would cause bureaucratic complexities, as well as non-uniform procedures. Murray Rothbard later raised similar concerns, claiming that no government can fairly assess value, which can only be determined by a free market . Compared to modern property tax assessments, land valuations involve fewer variables and have smoother gradients than valuations that include improvements. This
8184-687: The vulnerability of economies to property booms and crashes. The philosophies and concepts underpinning land value taxation were discussed in ancient times, stemming from taxes on crop yield . For example, Rishis of ancient India claimed that land should be held in common, and that unfarmed land should produce the same tax as productive land. "The earth ...is common to all beings enjoying the fruit of their own labour; it belongs...to all alike"; therefore, "there should be left some for everyone". Apastamba said "If any person holding land does not exert himself and hence bears no produce, he shall, if rich, be made to pay what ought to have been produced". Mencius
8277-566: The world GDP dynamics at an acceptable level of statistical significance. Korotayev & Tsirel also detected shorter business cycles, dating the Kuznets to about 17 years and calling it the third sub-harmonic of the Kondratiev, meaning that there are three Kuznets cycles per Kondratiev. Recurrence quantification analysis has been employed to detect the characteristic of business cycles and economic development . To this end, Orlando et al. developed
8370-452: The worst excesses of business cycles, and automatic stabilization due to the aspects of the government 's budget also helped mitigate the cycle even without conscious action by policy-makers. In this period, the economic cycle – at least the problem of depressions – was twice declared dead. The first declaration was in the late 1960s, when the Phillips curve was seen as being able to steer
8463-528: Was a Chinese philosopher (around 300 BCE) who advocated for the elimination of taxes and tariffs, to be replaced by the public collection of urban land rent: "In the market-places, charge land-rent, but don't tax the goods." During the Middle Ages, in the West, the first regular and permanent land tax system was based on a unit of land known as the hide . The hide was originally the amount of land sufficient to support
8556-403: Was largely rejected. There has been some resurgence of neoclassical approaches in the form of real business cycle (RBC) theory. The debate between Keynesians and neo-classical advocates was reawakened following the recession of 2007. Mainstream economists working in the neoclassical tradition, as opposed to the Keynesian tradition, have usually viewed the departures of the harmonic working of
8649-504: Was perhaps the most famous advocate of recovering land rents for public purposes. A journalist, politician, and political economist , he advocated a " single tax " on land that would eliminate the need for all other taxes. George first articulated the proposal in Our Land and Land Policy (1871). Later, in his best-selling work Progress and Poverty (1879), George argued that because the value of land depends on natural qualities combined with
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