Stewardship Economy
 
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Glossary

Many of the terms used in Stewardship Economy: private property without private ownership have a long history of meanings that shift over time and in different contexts.  The glossary indicates their meaning in the context of this book and its supplements.

The full glossary is available here.

On this page I set out the way that I use a number of key terms – land, environment, natural world, rent, market rent, market value, true cost, stewardship, stewardship fee, Universal Income and stewardship economy:

Land, the environment and the natural world

This book emphasises the fundamental distinction between three very different categories – people;  artefacts (things made by people);  and everything that occurs in nature without the intervention of people.  I use the term ‘natural world’ to refer to this third category – all those sites, spaces, forces and opportunities that occur in nature without the intervention of people.

      I divide the ‘natural world’ into ‘land’ and ‘the environment’.  ‘Land’ is the solid surface of the planet.  It includes agricultural, urban, residential, industrial, and commercial land;  public spaces, highways, derelict sites, moorland and wilderness.  Land comprises the location, described by its co-ordinates, and the topsoil.

      This use of the term ‘land’ is close to the everyday commonsense use of the word, but different from its meanings in both law and economics.  It is close to the way that it is used in writings on surveying and valuing and is probably what is meant by ‘land’ in the International Accounting Standard on Leases (IAS 7) although the term is not explicitly defined there.  The Royal Institute of Chartered Surveyors  (RICS 2006:7) interprets land as comprising the location combined with the physical ability and legal right to use and construct improvements on the site.

      This differs from its usage in economics, including writings on Land Value Taxation, where ‘land’ is used to mean what I call in this book the ‘natural world’ and includes the oceans, atmosphere, mineral reserves and so on.

      It also differs from the legal meaning of ‘land’, which includes any changes (‘improvements’) brought about by people such as buildings, drainage, irrigation systems, roads and bridges.  By contrast, I explicitly exclude improvements from ‘land’.  Most places you can think of, then, are in this terminology a combination of ‘land’ and ‘improvements’.

‘The environment’ refers to all aspects of the natural world that are not land.  It includes bodies of water  including oceans, seas, lakes and rivers.  It includes spaces below the surface including the sea bed, aquifers, deposits of minerals and hydrocarbons and the spaces occupied by underground railways, cables, drains and so on.  It includes spaces above the surface – the electromagnetic spectrum, the atmosphere, the ozone layer, airspace, satellite orbits and indeed the whole of the solar system – but not the space occupied by buildings or improvements attached to the land.

      ‘Land’ and  ‘the environment’ refer to a space, to its potential use and to its naturally occurring contents.  These may include natural resources  (such as topsoil, water, minerals, fossil fuels, wild animals, naturally occurring plants and trees and biodiversity);  sinks (space to dump household waste, sewage, industrial and agricultural pollutants, carbon dioxide, radioactive isotopes etc.);  and amenities (aspects of the natural world that are consumed directly rather than being transformed through the process of production – things like natural beauty, views, sites of spiritual and cultural significance, wilderness, recreation space and so on).

      There are several ways in which the assignment of something to the category of ‘artefact’ (made by people) rather than ‘the natural world’ – or to ‘land’ rather than ‘environment’ – borders on the arbitrary and is made for instrumental rather than principled reasons:

q       The ‘natural world’ is nothing like a state of nature, but has been shaped by people over the millennia.  Improvements, such as drainage or land reclamation, are treated in a stewardship economy as gradually decaying in value until they can be considered to have become part of the natural world.  This does not have to do with ‘naturalness’ but with the ownership claims that people can reasonably have (The How? Supplement: Chapter 6).

q       I do not include cultivated plants, trees and farm animals as part of the ‘natural world’ or ‘the environment’ but as ‘artefacts’.  This is not intended to diminish their status as living beings but because it is appropriate for farmers to own these beings in a stewardship economy.

q       The distinction between ‘people’ and ‘the natural world’ may also seem false.  We are all part of nature.  Why distinguish between, say, a dam made by a beaver and a dam made by humans?  The reason that I do so is to make it easier for us humans to sort out our thinking about our property claims to the natural world.  Beavers have other ways of dealing with property.

q       A small stream flowing through a plot of land, used only by the steward of that land, is considered to be part of that land.  A river flowing through a plot of land, to which others have rights to abstract water, to travel, to fish and so on, is considered to be part of a network of water  resources and so to be part of the environment.  The classification of a larger stream is made by a regulatory body according to agreed criteria.

 

Rent

I use the word ‘rent’ to refer to regular payments made for the use of any part of the natural world, particularly for the use of land.

      This differs from the way the term is used in an everyday and commercial sense, where the ‘rent’ of a property includes both rent for the use of land (the plot of ground, or site) and rental for the improvements (the bricks and mortar).

      It also differs from the way that the term is used by economists.  They apply the term ‘economic rent’ , or just plain ‘rent’, not just to payments made for the use of land and the natural world but for anything that is scarce and cannot be produced in larger quantities at will (that is fixed in supply).  So they use the term ‘rent’ to refer to payments for a rare painting, the use of a patent or intellectual property, or a unique opera singer.  They also refer to the super-normal profits that occur where there is imperfect competition as ‘rent’  (Robert Kuttner 1999:27). I restrict the use of rent to payments for the use of land and the environment, not to people (even when their contribution is unique) or artefacts (even where these are fixed in supply).  So I restrict rent to payments for the use of the natural world or, as Fred Harrison and James Robertson say, ‘payments that people make for what they take from the value of common resources’.

 

Market rent

The ‘market rent’ of a plot of land or aspect of the environment is the ‘estimated amount for which a property should lease (let) on the date of valuation between a willing lessor and a willing lessee on appropriate lease terms in an arms-length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently and without compulsion’  (RICS 2009:42).  The market rent reflects the potential revenue from land when it is put to its highest and best permissible use, and is not necessarily related to the rent that is being paid for its current use.

      In the context of stewardship the appropriate lease terms refer to land or the environment but not to buildings and improvements;  and include an indefinite duration, annual reviews, annual payments (as monthly instalments) and liability for any damage , pollution or other disimprovement to the land or environment.

      It is easiest to determine the market rent of a plot of land when it has no buildings or other improvements on it.  When the rent of unimproved land is established by offering it to the highest bidder in the open market, this sale determines the market rent of the land.

      ‘Market rent’ is also used to apply to a resource rent  of some aspect of the environment – for example the spectrum auctions  revealed the market rent, or resource rent, of those parts of the electromagnetic spectrum.

 

Market value

The ‘market value’ – of a plot of land, a property comprising land and improvements such a buildings or an aspect of the environment – is the ‘estimated amount for which a property should exchange on the date of valuation between a willing seller and a willing buyer in an arms-length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently and without compulsion’.

 

True cost

I use the term ‘true cost’ of something to an individual or firm to mean the sum of the private costs (direct cost to them) and the external costs (costs borne by others, by society or by the environment).  Economists call the true cost the ‘social cost’.

 

Stewardship

The term steward is thought to be derived from ‘sty-ward’, a person who looks after farm animals.  It has been consistently used to mean ‘one who manages the affairs of an estate on behalf of his employer’.  ‘Stewardship’ has been used more generally to describe a responsible approach to managing something on behalf of others – for example a conservationist approach to the natural world, a sense of responsibility to other people, other species, future generations, God.

      Many people would think of stewardship as managing the natural world on behalf of something greater than just humankind.  ‘Dark Greens’  recognise our responsibility not just to humankind but to all living things and to Gaia herself – because they recognise that we are not separate from nature, but part of it  (Ralph Metzner 1995:66).  People of faith may understand this responsibility in recognition of God’s dominion over the world and the universe.

      Each of these groups come to the word ‘stewardship’ with rather different assumptions.  And the term is used with other meanings in other contexts.  For example Christians also use it to describe something quite different – the practice of tithing a proportion of income to the church.  And the UK Department for Environment, Food and Rural Affairs (Defra) and Natural England administer an Environmental Stewardship Scheme that makes payments to farmers who protect and enhance the natural environment.

      Nick Dennys (2002: 14) points out that if we are to bring about stewardship we need to celebrate, value and protect the environment;  and that democracy in valuation  requires the use of market valuations.  He advocates the return of this value to the community.

      The steward of a part of the natural world has:

o        the right of access – to use it in the way that they choose, within the constraints of any relevant regulations

o        the responsibility of car e – to manage it responsibly and husband it for future generations, accepting liability for any damage done to it

o        the duty of compensationto pay an annual fee, equal to its market rent, into a fund that is used to benefit everyone

o        ownership, in the conventional sense, of any buildings or other improvements.

      We do not and cannot own the Earth but can, and must, act as its steward.

      Stewardship, then, is a very particular form of private property rights  (The Why? Supplement: Chapter 1) – a relationship between people and the whole of the natural world, not just the parts that might be deemed worthy of conservation.

      ‘Green’ versions of stewardship insist that our responsibility is to all living things, both now and for ever.   ‘Brown’ versions are more likely to discount our responsibility to other species and to future generations.

Stewardship fee

A stewardship fee is an annual fee that is paid to secure the stewardship of a plot of land, equal to its market rent.

A stewardship fee is a charge on the market rent of land.  If the revenue were to be used as revenue for the state, it would be not a fee or charge but a Land Value Tax.  Supporters of Land Value Taxation from time to time question whether the term conveys its intended meaning in the 21st century (Robert Andelson: 2000:xxiii).   I prefer to talk about ‘stewardship’ for several reasons:

      ‘Land Value Taxation’ is used to refer to the collection of any proportion of the market rent of land  – and people are usually talking about less than 25 per cent.  I use ‘stewardship’, on the other hand, to describe the collection of 100 per cent of the market rent.  It is helpful to have a term that always refers to this most radical end of the Land Value Tax spectrum – both because some supporters of Land Value Taxation would distance themselves from stewardship, which they think is too extreme to be of practical interest, and because methods of valuation  that work well when less than 50 per cent of the market rent is collected cannot be used in a stewardship economy (Page 114).

      ‘Stewardship fee’ avoids several other possible confusions that accompany the term Land Value Taxation.  One is that it avoids any confusion about the meaning of the term ‘land’.  Another is that the word ‘value’ seems to suggest to many people that the land itself has an intrinsic value, probably because the term ‘Land Value Taxation’ was introduced at a time when the agricultural sector was of much greater economic importance, markets for produce were more local and the ‘original and indestructible powers of the soil’ were as important as its location.

      ‘Stewardship fee’ also has the advantage of avoiding the word ‘tax’, which should be reserved to mean ‘income derived by the sovereign or state from its subjects or citizens’.  The precise demarcation between a tax and a charge (or fee) may be contested, but the special characteristic of a tax is that it is unrelated to any specific benefit provided by the state;  while a charge, or fee, is a payment for receiving some identifiable benefit.  A stewardship fee is a charge for the right, conferred by the state on the steward, to use a specific plot of land or an aspect of the environment for a defined length of time.  Although part of the revenue from stewardship fees may provide income for the state, the rest is distributed as a Universal Income.

      Most importantly, the term ‘stewardship’ emphasises that this is more than just a different way of raising revenue.  It is an entirely different property system – private property without private ownership (Page 32 and The Why? Supplement: Chapter 1) .

 

Universal Income

An essential feature of stewardship is that the stewardship fees are pooled and used for the benefit of all, either as government revenue or as a small independent income in the form of a Universal Income that is distributed to everybody.

Rather than using the term ‘Citizen’s Income’ or ‘Basic Income’ in the context of stewardship, I refer to a Universal Income.  This is in part because I want to emphasise the universal and unconditional entitlement rather than become bogged down in the inevitably exclusive definitions of citizenship and limitations to entitlement.  It is mainly, however, because discussions about Citizen’s Income and Basic Income have tended to focus on an income funded from conventional taxation, while I am referring to a potentially more generous income that is available when some of the revenue from stewardship fees is available as a source of funding.  Universal Income is not to be confused with the very different benefit proposed by the coalition government, the Universal Credit.  

 

Stewardship economy

A stewardship economy is one in which the natural world is held in stewardship, and things made by people are held in ownership.

      In a stewardship economy the income from stewardship fees may be used instead of conventional taxes as a source of revenue for the state;  or distributed to the whole population as a Universal Income.  The income from environmental charges is distributed on an equal per capita basis as Environmental Dividend  or invested for the benefit of future generations.

 


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