.

Stewardship or ownership? A challenging question. Is there a conflict?

Most parcels of land in this country (neither most acreage nor, perhaps, most in value) are, I expect, occupied by the owner and used as the home. And it is my impression that most owners are rather good stewards. My knowledge, of course, reflects no careful sampling and is incomplete, casual, anecdotal. In fact it consists largely of impressions from the plane and some auto travel, an occasional walk, and what advertisers and reporters give me in the media.

This conclusion leads to another: For a considerable portion of this country the structure of land ownership encourages good stewardship. The owner has concern for his neighbors and his place in the community. The house and land are major investments to be nurtured and made more valuable - for sale or for bequest to children. The rather comforting impressions about land use in so much of residential America, however, do not embrace all land about which we as a community should be concerned.

Land Differs from Man-made Capital

Why imply that an owner might not be a good steward? Who has more interest than an owner in preserving and enhancing the worth of possessions? As a rule, no one. But for land there are relevant and important considerations not found in ownership of machines or household property or most of what one thinks of as wealth. My concern grows out of the characteristics of land that make it "different." My listing is not necessarily in order of importance.

1. Nature made land. The great mass of the earth's surface is the product of nature - in striking contrast to housing or machines. But what one pays to own or use land has little effect on the quantity physically in existence. Some persons believe that land as the creation (gift) of nature really belongs to everyone. Try to convince my neighbor, however, that each Californian, each Chinese, should own a portion of the land under his house. Still, taxation can achieve some of the same result.
   
   a. Human use of land can erode and destroy elements of value.
   
   b. Investment of labor and savings can and do alter the physical dimensions and character of plots of "land"; for legal purposes the results will usually be treated as land. For our purposes, however, their worth should be excluded.
   
   c. Things above the earth's surface (air rights, the broadcast spectrum) and below (minerals) should often be included as "land," but there is not space for me to do so here.
   
2. "Location, location, location" - how often we are reminded of its influence on land value and its importance as a unique characteristic. Whereas economists can attribute homogeneity to many outputs and inputs, the concept most definitely does not apply to land. No two plots of land can be identical because no two units can be in the same location. Each owner has a (little) monopoly.
   
3. Land as a physical unit is immobile - though the same is not true of the factors influencing land values.
   
4. The value of a parcel of land depends to varying extent upon what exists in the "neighborhood," the surroundings next door and beyond - including governmental facilities. What an owner of land does on his parcel has effects for those around. So not only "no man" but "no parcel is an island, entire of itself."
   
5. Buildings on land, the result of decisions made in the past, affect, perhaps for many years, what may be done profitably with a parcel.
   
6. A special body of law applies to land.
   
7. The permanence and fixed-quantity nature of land give rise to something of significance in the present discussion. Some actions have long-lasting results. Some, in essence, are irreversible. Decisions about land use can have a "time element" that is much longer than is involved in typical economic choices.
   

This list of seven "differences" could be extended. Mason Gaffney has identified twenty-five, and most of his factors would contribute to my discussion. In fact, I shall draw on a few without explicit identification. What appears here will, I hope, establish the point that land does have differences from human efforts and man-made capital.

The Individual and the Community

The owner or occupier of a parcel of land - who may be the same person or different ones -serving his (may I be permitted to use the masculine pronoun to include, respectfully, the feminine?) interests will often exert some effects on neighbors, both at once and perhaps indefinitely into a long future. The crux of our concern is how to take account of others, in space and in time. I can affect others, and they can affect me, perhaps for a long time.

To the extent that some guide seems desirable, would the Golden Rule not serve? Or Kant's "Categorical Imperative"? Yes and no. Perhaps these two rules are hopelessly naive. Reciprocity cannot be assumed. Are we not likely to know our own interests better than those of others? Would it not be better than most alternatives to aim at producing for others whatever we would like them to produce for us?

Two among several obstacles appear. We do not know much about the "beyonds," the benefits and the costs. And often it is group or collective (community) interests that are involved in land use. Moreover, the conditions under which a group acts will often require some considerable element of coercion.

Spillovers, neighborhood effects, third-party results, such terms suggest some of the issues that arise when one owner does something, or fails to do so, with a plot of land. Because we have an interest in what goes on around us, nearby, and sometimes in remote locations, "we" have developed instruments for trying to serve such interests, e.g., zoning, deed restrictions, covenants, contracts, etc. Compulsions to do some things with land and prohibitions against doing others lead to results that in some cases are close to what simple ownership would produce. In other cases the results are close to those of stewardship for some broad or remote interest.

One range of issues involves learning about the "things" around and beyond us or our parcel. What are the probable and possible benefits and costs? Another set of issues concerns the "doing." What are the instruments? How are they used? What do the law and private conditions permit?

Owners and others have an interest in using political power to adapt the rules imposed by government - for example, renters versus owners (rent controls). Such efforts raise complex issues of ethics. Is it ethical to use political force to make others do with land what they would not do voluntarily with their market power? Under what conditions?

Environmentalism

Currently problems of land use are sometimes associated with environmentalism - particularly land use restrictions imposed to protect spotted owls and kangaroo rats. Generally, I suppose, aspects of ethics are not of obvious direct concern. But they are involved whenever burdens are imposed to benefit someone. If there can be benefits without burdening anyone significantly, then the only ethical aspect involves responsibility for any failure to act.

My eyes have been opened by literature from the Foundation for Research on Economics and the Environment." Their reports concern broader ranges of problems than those of land. They provide some evidence that voluntary actions do accomplish much and that government actions can be misguided and unproductive.

Some cases get into the news, and into the courts, when a group or community seeks benefits by depriving the landowner of something. Reading a long article about the record of "takings" litigation, in preparing for this paper, was a humbling experience. Judges have faced a large variety of situations.

A more or less typical case will consist of a group, the community, trying to get benefits without paying the landowner. My instinctive reaction is that the community should compensate the owner. Presumably the benefits are great enough to provide for payment. Is it not unethical for a group seeking to benefit itself to use the compulsory power of government to deprive one or a few landowners without payment?

The U.S. Constitution has language that, to this layman, seems to protect an owner against the desire of those who exert the power of government without compensation. Even a majority must recognize limits on the use of government. Is this not ethically admirable? I think so. Yet objections arise.

For example, one sometimes hears that "the public" should be able to do something good regardless of its willingness (and perhaps its ability) to pay. Special assessments on property in the area might be appropriate.

Of course, the attractions of "doing good with the other fellow's property" can be tempting. In some cases the appeal approaches the overwhelming, most clearly where irreversible change is at issue. But I would be reluctant to concede the point, except with restraints yet to be formulated (as far as I know).

A gray area lies between governmental actions that are clearly takings and the authority to regulate, e.g., for public health and safety, without obligation to compensate landowners or others who suffer. I am not prepared to suggest concepts that would narrow substantially the gray area. The issues are inherently difficult here, as with some other aspects of public policy. For example, there is yet no agreement on the meaning of "fairness" in taxation, though Robert Gilmour has kid out some of the issues in his presentation for this series.

One complication arises from a point central in Georgist thinking: The (alleged) taking may be of value created by the community with little or no contribution by the owner. After all, the history of land prices reveals, strikingly in some urban areas, increases that by any reasonable reckoning are unearned. Is there any real ethical obligation to pay for taking what the community has given? So stated, the answer seems to me clearly "no." But in searching out what is "right" is there no need to distinguish between what happened before and after acquisition by the present owner? If he paid a prior owner for what the community did, he would suffer from an uncompensated taking. What would be ethical?

Governments are responsible not only for takings but also, along with the community, for "givings." These are especially appropriate for financing government. What could be clearer than this familiar Georgist point?

One might dream of a principle that a taking of land would not require compensation for values created by the community. I cannot envisage what results such a rule would have in the land market - except undoubtedly confusion. Perhaps a time limit of five or ten years, or some other period, could be set. Is there enough practical prospect to warrant some discussion?

Perhaps a cutoff date for acquisition by the current owner would be feasible. Whatever an owner had paid for would be compensated but not amounts accruing during his ownership. Then two adjacent owners might get very different amounts at a taking. The person who bought last month would get full compensation while one who acquired when land prices in the area were lower would receive less.

The principle seems clear. Implementation would present problems that some Georgists and others seem not always to recognize adequately:

1. What the law and markets call "land" does not correspond precisely with the concept underlying the theory of land value taxation. Investment in preparing sites, many possible forms of input beyond the creation of nature, become land as dealt with in the market. But in an economic sense such inputs are of capital and labor. They should not in fairness be treated as land for tax purposes. Moreover, more than fairness is involved. Incentives to prepare and develop sites will be affected. The adequacy of records of past inputs will vary. For many years income tax considerations have given rise to need for accurate accounting to distinguish investment for which depreciation can be taken from land.
   
2. Developers may seek their rewards in the form of enhanced land values or land price increments. Development can be better or worse. As judged by buyers, better products will bring higher prices than poorer products. What may appear as capital gain is in economic reality a combination of reward for risk-taking (entrepreneurship of person and capital) and an equivalent of interest.

To some observers land speculation seems always undesirable. There is not space here to discuss this except to say that land development does include speculation that can be constructive.

Legislation now before Congress would implement one element of this policy as embodied in the Republican Contract with America. So these issues are getting more attention than they once did.

The Ethics of Idling or Underusing Land

Individuals, businesses, nonprofit organizations, and governments (from special districts to the United States as a whole) own land that is essentially idle or substantially underused. What are the ethical considerations? Remember, the owner did not create this resource. No one else can create land to take the place of what is idled, as can be done with machines and other man-made capital.

Relative to potential usefulness, idle land runs the gamut from remote deserts to land whose use may be only a little below potential. It may even be questioned whether a given piece of land is being underutilized. Application of principles involved here must encounter many fuzzy areas and difficult issues.

Professor James Buchanan in his 1990 Henry George lecture at St. Johns University, to which I am indebted, made a point so fundamental that it may be overlooked. The greater the quantity of production capacity - i.e., the larger the available supply of creative resources - the better off we all can and will be, and not merely for the obvious reasons. There is an additional benefit: the division of labor, specialization, can be more extensive, and thus more productive, according to the quantity of resources usable. So with land. The theory seems to me persuasive, although specifying the precise locations or magnitudes of such benefits would hardly be possible.

Any withdrawal of land from potential use would tend to deprive the participants in of an economy of some benefit achievable from the division of labor (beyond the more obvious product of the land). How much benefit would be lost depends on a variety of factors.

In any case this line of reasoning would not be likely to induce any appreciable, purposeful modification of landowner behavior or public policy. The most that might result from a deliberate effort would perhaps be to tilt government policy when specific issues arise. For example, here is a reason to assess vacant land more nearly on the basis used for other real estate as against frequent relative underassessment.

A more significant factor can affect thinking about public policy. Underused locations in a city force people to travel farmer between home and work. More expenditure on streets and utilities must follow from population dispersal due in part to idle (underutilized) locations. The owners of such plots force avoidable costs on others. Such burdens depress needlessly real levels of living but go largely unrecognized by the victims. More gasoline consumption and auto wear and accidents and time not used joyfully - in other words, urban sprawl. The landowner who uses a lot on a major street to sell used cars may be making what for him at the time is the best use. Nothing compels him to account for burdens on others who pass by. And neighborhood realities in fact foreclose what would be in the broader interest. Each urban area has its unique elements of underused land. The human costs imposed are dispersed and uncountable, but certainly they are candidates for cost-effective reduction.

There seems to me an overwhelmingly real community interest in trying to reduce such human burdens. Site value taxation can certainly help to achieve more compactness in human habitation. The principle seems clear to me as it has to countless others over many years (though probably not to many of those who actually bear the burdens!) Some steps of implementation would be obvious and doable. To serve the community best, there should be conscious effort to formulate agreement on the kind of open space worth its cost, e.g., parkland, and its ideal location. Underutilization (idleness) of plots of land (recall, location cannot be duplicated) imposes burdens. Market forces have no reliable mechanisms for ending some of these burdens, nor can the coercion of government properly be called upon to relieve them. Persuading the public would require a difficult educational effort.

Stewardship

The term "stewardship" used in setting the goals for this seminar series was not my formulation. But I welcome it as a challenge. The steward manages for others. This is praiseworthy, and perhaps a welcome offset to the self-seeking focus associated with economics!

The steward has obligation and responsibility beyond his own personal concerns. Parents act as stewards in considering the interests of their children. The title of this paper seems to imply that this aspect of landownership might be enhanced, particularly beyond the family. "We," individually and collectively, should perhaps try to take account of the interests of others in the neighborhood, which might be conceived rather broadly, and of those who will come later.

Uniqueness of location and fixity of supply do distinguish land. They call out, it seems to me, for explicit consideration and action. But where and when is action "appropriate"? Who should take the action? If land needs stewardship, who should select the stewards? These are slippery (or prickly) questions.

Some land issues seem to have a more or less worldwide significance, e.g., the expansion of deserts or the destruction of rain forests. Some may be less far-reaching but extend beyond any one country's borders. "Our" stewardship responsibility may or may not extend so broadly.

In the United States some stewardship concerns are nationwide - involving the huge and widely varied public domain and, conceivably, matters not tied to specific locations, such as the preservation of topsoil. Farm programs, I believe, were once "sold" to national taxpayers as investments in food supply for the future. Rivers, for example, raise important interstate issues, some of which were addressed by a recent Lincoln Institute of Land Policy conference on land policy and flooding. There are statewide and community and neighborhood cases. Although many may have some things in common, there is also likely to be much diversity. Stewardship opportunities and obligations may have to be sorted out case by case.

One consideration should be "who pays and who benefits." The more local the case, the more likely it is that those who pay the costs also get the benefits, or at least that they will share costs or benefits, or both, with their direct descendants. But nonresident landowners may be forced to pay without getting much in return, and vice versa. Over years or generations, it becomes very complicated to determine, measure, and allocate the costs and benefits of stewardship possibilities and actions (and inaction).

And as one thinks about stewardship beyond the community around and for larger areas - a river basin, a region including parts of several states, the country, the world - one will wonder about who will be qualified to judge wisely.

The Need for Knowledge

Chokes must and will be made. Inaction is a form of choice. Problems involve space, location. What can one, or a group, know about the many different locations possibly affected? And when the results extend over time? When thinking of narrow self-interest and enlightened stewardship, the time horizon or horizons can be very long. Some of the persons affected are not yet born; others may be elderly and in pressing need for benefits at once or soon.

Unknowns will plague anyone seeking responsible answers to the many complex issues that inevitably arise because of the special characteristics of land. Markets reflect many of these forces. But there are others. Who should choose the decisionmakers? We look chiefly to government officials - legislators, the executive (elected and civil servants), the judiciary, the military (Corps of Engineers), and sometimes more-or-less voluntary groups with some authority from government. The making of laws, their administration, their interpretation by judges-all aspects call for knowledge and many qualities not always in abundance, but, one hopes, increasingly present with growing awareness and interest.

My education has included no formal training in ethics. I might have been led to different conclusions if I had been able to prepare for this lecture by reading the writings of ethicists. But I see no general formula for bringing the various and frequently different elements into the making of decisions. It seems inherent in the nature of land that, because circumstances differ and no two parcels are identical, one should examine each case both for its individual elements and the elements it shares with other cases.

In short, we need more knowledge of how to assess both the facts of each case on its own and the similarities and differences between that case and others. Perhaps it seems self-serving for an academic to call for more research. Be that as it may, our judgments about the ethics, as well as the economics, politics, and aesthetics of our choices about land will benefit from study and suffer from ignorance.