[PaulHoule]

The article points that adding any more costs just costs the operator money and won't change their behavior unless the costs are so high that the bank is forced to foreclose. Maybe on some that level that is a good thing and clears the market but in the current situation the banks just won't make loans unless this happens.

It makes me think of the "poker game" model of nuclear power plant construction where the vendor is quoting a price lower than they know it will cost because otherwise they wouldn't make the sale. If commercial buildings were properly priced at the outset, banks would be financing fewer of them.

[marcosdumay]

Yes, the idea of a land value tax is to make it high enough to for banks to foreclose. The entire thing is about making sure land is used on the most socially benefiting way possible.

[dragonwriter]

> The entire thing is about making sure land is used on the most socially benefiting way possible.

The idea of land value tax is to make the government effectively the universal landowner and everyone else renters, and renters paying a high enough rent that it is economically infeasible to use land for any but the most financially remunerative purpose.

Having it optimizing for social utility rather than maximizing negative externalities requires a finely optimized system of Pigovian taxes and subsidies, otherwise you are nailing the accelerator to the floor on the divergence between market incentives and social utility.

[epistasis]

It would make sense to have those Pigouvian taxes no matter what. But having an LVT is orthogonal, and it doesn't make the bad economic incentives that much worse. Especially since most economic activity subject to pigouvian taxes will not be much affected by land value taxation.

[dragonwriter]

> It would make sense to have those Pigouvian taxes no matter what. But having an LVT is orthogonal

It is absolutely not orthogonal; LVT by design makes doing things with property that are less financially remunerative unviable, it’s key selling point is eliminating “less productive” uses by that mechanism. This exacerbates any divergence between market incentives and social utility.

[marcosdumay]

Ok, good point.

If you optimize a lot, the social optimum is almost never the most profitable use for anything.

[estearum]

> The article points that adding any more costs just costs the operator money and won't change their behavior unless the costs are so high that the bank is forced to foreclose.

That is assuming operators are roughly zero-IQ automatons who can't factor future costs into present decisions?