And as a matter of hard fact, most governments operate a fairly Georgist system with oil exploration and extraction, or just about any mining activities, i.e. they auction off licences to explore and extract.
The winning bid for the licence must, by definition, be approx. equal to the rental value of the site (or the rights to do certain things at the site). And the winning bid, if calculated correctly, will leave the company with a good profit on its operations in future, and as a matter of fact, most mining companies and most oil companies make profits, end of discussion, there is no disincentive for exploration at all.
Or do you think that when Western oil companies rock up in Saudi Arabia, that the Saudis don’t make them pay every cent for the value of the land/natural resources? The Western oil companies just get to keep the additional profits made by extracting, refining, shipping the stuff.
I may be misunderstanding their argument, but it seems to be overstated and overlooks some obvious counterpoints. For one, the fact that new oil discoveries continue to occur in the modern world does not strongly support the claim that existing policies have no disincentive effect. Taxes and certain poorly-designed property rights structures typically reduce economic activity rather than eliminating it entirely.
In other words, disincentives usually result in diminished productivity, not a complete halt to it. Applying this reasoning here, I would frame my argument as implying that under a land value tax, oil and other valuable resources, such as minerals, would still be discovered. However, the frequency of these discoveries would likely be lower compared to the counterfactual because the incentive to invest effort and resources into the discovery process would be weakened as a result of the tax.
Secondly, and more importantly, countries like Saudi Arabia (and other Gulf states) presumably have strong incentives to uncover natural oil reserves for essentially the same reason that a private landowner would: discovering oil makes them wealthier. The key difference between our current system (as described in the comment) and a hypothetical system under a naive land value tax (as described in the post) lies in how these incentives and abilities would function.
Under the current system, governments are free to invest resources in surveying and discovering oil reserves on government-owned property. In contrast, under a naive LVT system, the government would lack the legal ability to survey for oil on privately owned land without the landowner’s permission, even though they’d receive the rental income from this private property via the tax. At the same time, such an LVT would also undermine the incentives for private landowners themselves to search for oil, as the economic payoff for their efforts would be diminished. This means that the very economic actors that could give the government permission to survey the land would have no incentive to let the government do so.
This creates a scenario where neither the government nor private landowners are properly incentivized to discover oil, which seems clearly worse than the present system—assuming my interpretation of the current situation is correct.
Of course, the government could in theory compensate private landowners for discovery efforts, mitigating this flaw in the LVT, but then this just seems like the “patch” to the naive LVT that I talked about in the post.
I think this view is quite US-centric as in fact most countries in the world do not include mineral rights with the land ownership (and yet, minerals are explored everywhere, not just US, meaning imo that profit motive is alive and well when you need to buy licences on top of the land, it’s just priced in differently). From Claude:
In a relatively small number of countries, private landowners own mineral rights (including oil) under their property. The United States is the most notable example, where private mineral rights are common through the concept of “mineral estate.” Even in the US though, there are some limitations and government regulations on extraction.
The vast majority of countries follow the “state ownership” model, where subsurface minerals including oil are owned by the government regardless of who owns the surface land. This includes:
Most of Europe (including UK, France, Germany)
Russia
China
Most Middle Eastern countries
Most African nations
Most Latin American countries
Canada (where the provinces generally own mineral rights)
Mexico (where oil specifically is constitutionally defined as state property)
Australia (where states own mineral rights)
Even in countries that technically allow private mineral ownership, state-owned companies often have exclusive rights to develop oil resources (like Saudi Aramco in Saudi Arabia or PEMEX in Mexico).
The US system of widespread private mineral rights is quite unique globally. There are a few other countries that have limited forms of private mineral rights, but none with the same extensive private ownership system as the US.
In regards to this argument,
I may be misunderstanding their argument, but it seems to be overstated and overlooks some obvious counterpoints. For one, the fact that new oil discoveries continue to occur in the modern world does not strongly support the claim that existing policies have no disincentive effect. Taxes and certain poorly-designed property rights structures typically reduce economic activity rather than eliminating it entirely.
In other words, disincentives usually result in diminished productivity, not a complete halt to it. Applying this reasoning here, I would frame my argument as implying that under a land value tax, oil and other valuable resources, such as minerals, would still be discovered. However, the frequency of these discoveries would likely be lower compared to the counterfactual because the incentive to invest effort and resources into the discovery process would be weakened as a result of the tax.
Secondly, and more importantly, countries like Saudi Arabia (and other Gulf states) presumably have strong incentives to uncover natural oil reserves for essentially the same reason that a private landowner would: discovering oil makes them wealthier. The key difference between our current system (as described in the comment) and a hypothetical system under a naive land value tax (as described in the post) lies in how these incentives and abilities would function.
Under the current system, governments are free to invest resources in surveying and discovering oil reserves on government-owned property. In contrast, under a naive LVT system, the government would lack the legal ability to survey for oil on privately owned land without the landowner’s permission, even though they’d receive the rental income from this private property via the tax. At the same time, such an LVT would also undermine the incentives for private landowners themselves to search for oil, as the economic payoff for their efforts would be diminished. This means that the very economic actors that could give the government permission to survey the land would have no incentive to let the government do so.
This creates a scenario where neither the government nor private landowners are properly incentivized to discover oil, which seems clearly worse than the present system—assuming my interpretation of the current situation is correct.
Of course, the government could in theory compensate private landowners for discovery efforts, mitigating this flaw in the LVT, but then this just seems like the “patch” to the naive LVT that I talked about in the post.
I think this view is quite US-centric as in fact most countries in the world do not include mineral rights with the land ownership (and yet, minerals are explored everywhere, not just US, meaning imo that profit motive is alive and well when you need to buy licences on top of the land, it’s just priced in differently). From Claude: