The Limits of Intellectual Property

What is it that we own when we claim an idea as ours? Surely, not the atoms in the air that carry the sound of our voice, nor the pixels on a screen that carry our words. What we own is not the matter, the energy, or the space in which an idea takes shape. We own something more elusive: the improbable act that arranged these things into a meaningful configuration. We own a transformation.

In The Origin of Moral Claims, we rooted the human concept of justice in our ability to distinguish between natural causes and human agency. When a stone falls from a cliff, we may mourn its impact. But when a hand pushes another off that cliff, we demand accountability. Justice, then, emerges from agency and from the ability to trace consequences back to a willful act.

The same principle underlies the concept of property. Labor, as a transformation of nature, creates something that did not exist before: a configuration unlikely to occur without human intent. This improbability, the deviation from the natural drift toward disorder, is what we recognize and reward. To labor is to inject order into a chaotic world, and the resulting order, the transformation, is what we rightly attribute to the agent. However, it is an understatement to say that nowhere is this more contested than in the realm of intellectual property. 

An idea begins as a silent configuration in a single mind, existing as a low-entropy structure formed by improbable neural firings, experiences, associations, and abstractions. To express it is to take this improbable state and encode it, through language or gesture or machine, into forms that others can receive. Each act of communication reproduces the pattern, transmitting it from one brain to another. But in doing so, it also initiates the entropy clock.

As ideas spread, they change. They become simplified, distorted, reinterpreted, reframed. They are copied imperfectly, reused creatively, and recombined with others. This is not a flaw of communication, but its essence. In thermodynamic terms, the unique, ordered configuration diffuses. The idea moves toward equilibrium with its environment. What was once a distinct act of agency becomes part of a wider informational field.

To protect intellectual property is to resist this diffusion; this is an assertion, for a time, of the uniqueness and authorship of the configuration. This time-limited exclusivity is not merely a legal convenience, but a moral echo of the act of creation. It acknowledges that the improbable arrangement of thoughts deserves recognition and reward, but only so long as it remains improbably arranged. Entropy gives us the limit.

There is a point at which an idea has spread so widely, and been so altered by the medium of its transmission, that the original act can no longer be distinguished. It becomes part of the background informational noise. Consider, for an extreme example, the inventor of the wheel. To continue to claim exclusive rights beyond this point is to claim ownership of something no longer uniquely traceable. The agent has faded; the transformation has dissolved.

Scientific studies support this thermodynamic model of informational diffusion. Theories of social contagion and rumor dynamics show how ideas lose coherence and traceability as they spread. Entropy-based measures in information theory demonstrate how structure degrades over time and with replication. Legal scholars have even begun to describe "legal entropy" in relation to shifting precedents and uncertainties in intellectual property law.

We can imagine a mathematical expression of this decay. Let the distinctiveness of an idea's configuration be a function that decays with time and dissemination. As it spreads, the probability of its re-creation without reference to the original increases. When this probability crosses a certain threshold, the justification for exclusivity vanishes.

This is not mere speculation, but a potential foundation for reform. Just as physical property rights are constrained by use and waste, intellectual property rights must be constrained by relevance and reach. A theory of property grounded in justice must recognize not just the birth of an act, but the moment it ceases to be distinguishable as one.

To own an idea, then, is to own an act that begins within one’s mind, a configuration wrought by improbable labor. But like all acts, it fades with time. Justice demands that we let go when the trace is lost, when the pattern becomes part of the common field, when entropy has done its work. In that release, we affirm not just fairness, but the very principle that made ownership possible in the first place: the recognition of agency.

Decoupling land from improvements: evaluating 100% LVT

Mihali A. Felipe

Abstract

One of the main criticisms in the implementation of the land value tax (LVT) is in its evaluation. To demonstrate the feasibility of a society where unimproved land is entirely a rental, game rules to arrive at 100%LVT are proposed. The main features of the game are a lock/unlock mechanism, incrementing and decrementing rent, and a hostile takeover stage. The rules are designed to allow the bidding on the rent be independent of the purchase of improvements, thus protect owners of improvements from losing the full market value of the improvements.

doi:10.5281/zenodo.7781550

Introduction

Recently there has been rising interest in the potential for land value taxes (LVT) [1] to help combat housing crises and wealth inequality. However, one of the recurring questions raised by skeptics of this proposal to collect land rent is whether land values can even accurately be evaluated. Critics assert that the market value of land cannot be accurately separated from the value of improvements such as buildings. If land values are inaccurately valued, any attempt to collect them would have the undesirable effect of falling on improvements and thus discouraging the productive use of land, as well as inducing horizontal inequities in tax obligations. One desirable solution to this problem would be to create a market mechanism for accurately establishing land values, with prior examples including periodic leasing [2] of land parcels, and Harberger mechanisms [3] for self-assessment. This article aims to put the criticism of value inseparability to rest by demonstrating a mechanism by which land values can be priced by market actors while also being cleanly decoupled from the value of improvements.

For the purposes of this article, the LVT is defined as the periodic market rent of unimproved land. It corresponds to what people would willingly pay to rent unimproved land for a given period. The LVT is not one value but can be thought of as contour lines of values over a surface in a given geographic area (GA) that change with market conditions. This time dependent surface will be referred to as ‘LVT-s’. 

Because people construct relatively immovable improvements on land (e.g., a building or a house), having land ownership change hands almost always requires ownership of the improvements to change hands as well. This is where the separation between the value of the land and the improvements becomes critical. In an optimal situation, the value of improvements will be at market value when the rental land changes hands. The values of land and improvements need to be decoupled or else the owners of improvements would either lose too much or gain too much value from them. Indeed, Henry George's 19th century solution was to let owners enjoy some of the surplus of the land. However, there are better technological tools available today, and it is worthwhile to propose newer methods to get closer to LVT-s. 

Indeed, there have been numerous schemes proposed to evaluate the LVT-s ranging from property appraisal, historical data, or a combination of these, to more sophisticated artificial intelligence and machine learning methods applied in tandem with GIS. [4][5] Of these, property appraisals are still the most accepted and common method. While these methods may deliver accurate results and offer ease in implementation, they are inherently indirect and not directly subject to market revelation and thus subject to appeal. Furthermore, they have the weakness of being unable to react quickly to abrupt changes in the market. 

In this article, a hypothetical society is proposed where land allocation is handled using a more direct method of valuation: the market itself will be utilized to determine both values of the unimproved land and the improvements, and thus appraisals are made unnecessary. A dynamic set of data is produced, which can be smoothed-out over space to form the LVT-s. The proposal relies on a modified system of bidding and an algorithm to increase and decrease the rents over time. The rules are designed to deter manipulations of the market by bad faith actors. 

The Criterion for Land Value

In order to proceed, the LVT-s has to be expressed in a more practical way. Because the supply of land is fixed and therefore land value only comes from demand, the LVT-s is the surface made by the rent where the rental payments for plots of land are at the maximum without prompting general abandonment. Or more technically, this can be expressed in the following manner. Consider a GA where all plots of land are for rent on a monthly basis. If Rij are the rents per square area per month, where ij are indices for specifying geographic location, then the surface formed by all Rij describe the LVT-s if the following condition is met: all Rij are at a maximum in the GA without initiating abandonment or the consideration of abandonment in any plot of land. 

Pre-abandonment is therefore the subjective and central criterion and the LVT-s is the surface made by the values right at pre-abandonment. Abandonment resulting from the inability to pay rent, as opposed to abandonment by choice or personal necessity (e.g., sudden change in health conditions), is highly undesirable and has to be avoided; this is because the improvements on the land are immovable and abandonment is when the tenant decides to forgo the value of the improvements due to the inability to pay. Looking at it another way, the rental payments should not eat into the value of the improvements and should not disincentivize the creation of more improvements. Thus, a method to measure the maximum of Rij without triggering abandonment needs to be devised. 

The Rules for Land Use

All plots of land are rentals and information about them are listed on a public rental exchange board. Rentals may be transferred by incumbent tenants to another willing party at any time. Rentals are pre-populated with zero values. Zero-rent rentals are subject to direct bidding for immediate occupation. Collected rental payments are redistributed as a dividend to all residents on a monthly basis. 

Abandoned rentals are those that are unoccupied and no payment of rent is being made. Abandoned rentals are subject to direct bidding for immediate occupation. 

Occupied land rentals in the GA are either in the locked or unlocked state as opted by the incumbent tenant. The exceptions are zero-rent rentals which are always unlocked. 

In the locked state, the tenant pays Rij, and bidding by others on the rental is disallowed. In the unlocked state, the tenant pays cRij but bidding by others on the rental is allowed. Unlocked rentals that do not receive bids for tu consecutive months switch into locked rentals and Rij is updated and assigned the value cRij. (Here, suggested values are c=0.92 and tu=6.) 

Tenants can switch between locked and unlocked states after a period of ts months from the last switching. Tenants do not have to unlock to sell their improvements and transfer the land rental. (A suggested value is ts=3.)

A hostile takeover phase is entered from an unlocked rental if a higher bid Rij' is made against the Rij of an incumbent tenant. The higher bidder is called a hostile and secures the bid with a deposit of dRij' which will be returned only after a successful transfer of the rental. The deposit goes to the dividend if the transfer is unsuccessful. (A suggested value is d=0.1.) 

The incumbent tenant can then either 

1. Stop the hostile takeover by switching the rental to locked state and accepting the lesser of Rij' or Rij'' (see below) for the rent, or 

2. Transfer the rental to the hostile within tt months upon negotiating a settlement for the improvements. Rij is then assigned the new value Rij' and the rental is locked. (A suggested value is tt=2.) 

Rij'' is the average of rents of nearby rentals and the new bid. Suggested formulae are the following:

Rij'' = (1/(n+1)) (∑Rij,adj + Rij')  (1)

where, Rij,adj are the rents of adjacent rentals, or if there are no adjacent rentals, 

Rij'' = (1/3) (Rij,1st + Rij,2nd + Rij')  (2)

where Rij,1st and Rij,2nd are the rents of the first and second nearest rentals, respectively.  

Delinquency happens when the rental is occupied but tenants are td months behind in rental payments. This opens the rental for direct bidding, which has to be settled within tb months of the first bid. The rent is multiplied by a factor q every td- consecutive months of no bids. Delinquent tenants are liable for the unpaid rent before they can challenge any bids. (Suggested values are td=4, tb=2, q=0.96 and td-=2.) 

In summary, a rental may be abandoned, locked, unlocked, zero-rent, in hostile takeover, or in delinquency. These are all announced in the exchange board.

LVT-s algorithmic search:

In the GA, Rij are increased monthly, unless any of the following criteria are true:

1. the rental is either unlocked or has been unlocked within tr+ months. 

2. an adjacent rental or the next nearest rental has been unlocked within ta+ months. 

3. an adjacent rental or the next nearest rental is abandoned or zero-rent.

4. there was a hostile takeover on the rental within th+ months.   

(Suggested values are tr+=6, ta+=4 and th+=6.) 

Rij are decreased monthly if:

1. an adjacent rental or the next nearest rental is abandoned, or if 

2. half or more of the adjacent rentals or the next nearest rental is unlocked for ta- consecutive months. (A suggested value is ta-=4.)

Below are suggested formulae for increasing and decreasing the rent.  

To increase Rij, increment by eRij'''; to decrease Rij, decrement by fRij'''. (Suggested values are e=0.01 and f=0.02.) 

Here, Rij''' is the average of the rents of the rental and nearby rentals  

Rij''' = (1/(n+1)) (∑Rij,adj + Rij) (3)

where, Rij,adj are the rents of adjacent rentals; or if there are no adjacent rentals 

Rij''' = (1/3) (Rij,1st + Rij,2nd + Rij)  (4)

where Rij,1st and Rij,2nd are the rents of the first and second nearest rentals, respectively. 

Suggested values may require adjustment to obtain a stable society. 

Discussion

In the society rules presented above, the LVT-s is arrived at through probing by an algorithmic search process and through the participation of players by bidding. The algorithmic search process increases, decreases or does nothing to the rent depending on local unlocking, abandonment, and hostile takeover events. Thus, the algorithm is constantly updating the LVT-s based on the market data input by players each period.

Unlocking is used as a proxy for pre-abandonment and is therefore the indicator that the rent lies near the LVT-s (that is, within ±100(1-c)%). In a society where land is a rental and the rent is kept near the LVT-s, there will always be a healthy amount of unlocked plots of land. Because the rent is kept near the LVT-s, the full market value of the improvements are retained. 

Unlocking can be a way to lower one's rent. The decision to lock or unlock by an incumbent tenant is a choice between paying the full rent with the security of keeping the rental or paying a discounted rent with the risk of entering hostile takeover. That is, an unlocking decision is where the tenant deems that the benefit of having a slightly lower payment offsets the cost of the guarantee of tenure, the latter being 100% LVT.  

Delinquency can be another way to lower one’s rent; this is however risky because the rental becomes open to direct bidding and one can lose market value of improvements this way. As a means to lower rent, delinquency can be thought of as the incumbent re-bidding on the rent. This option can be useful, for example, during a financial crisis. 

There are two types of bids in the rules. The first type is the direct bid. Direct bids apply to zero-rent rentals, abandoned rentals and delinquencies. Direct bids are perhaps the type of bid that most people are familiar with.

The second type of bid is through hostile takeover and applies to unlocked rentals. The bidding process within hostile takeovers is asymmetric in the sense that the bid of the hostile is pitted against an averaged value, which includes the bid of the hostile. The asymmetry is by design and prevents predatory takeovers. It protects the incumbent from being ousted by an unreasonably high bid and thus from being forced to lose the market value of improvements on the rental. Indeed, a hostile takeover attempt may in fact lower an incumbent tenant's rent if the rent is already anomalously high. The deposit that is required from the hostile discourages frivolous bids.

In summary, although the times and coefficients may need to be optimized to reach stability, a fair land value rental system can be envisioned where the market rent of unimproved land can be separated from the value of the improvements. There is no apparent inherent reason the system cannot be made to reach steady state. Rents increase through bids and algorithmic search, and they decrease through unlocking, bids, delinquency, and algorithmic search. The rules are designed to determine the unimproved value of land in a dynamic way.  

References

[1] George, Henry. 1879. Progress and Poverty; an Inquiry into the Cause of Industrial Depressions and of Increase of Want with Increase of Wealth: the Remedy. New York: D. Appleton Co.

[2] Government of the Hong Kong Special Administrative Region. Land Tenure System and Land Policy in Hong Kong. Seen May 26, 2023  https://www.landsd.gov.hk/en/resources/land-info-stat/land-tenure-system-land-policy.html

[3] Posner, Eric A., Weyl, E. Glen. 2017. Property Is Only Another Name For Monopoly. Journal of Legal Analysis. 9, 1, 51.

[4] Zang, Kiefer. 2022. Deterring Metaverse Speculators & Increasing Liquidity: Proposing a Bid-Based Land Value Tax. Seen May 21, 2023 https://economicsdesign.com/deterring-metaverse-speculators-increasing-liquidity/ 

[5] ValueBase. Seen May 21, 2023 https://www.valuebase.co/

License 

https://creativecommons.org/licenses/by-nc-sa/4.0/legalcode

Online version is the most up to date. 

Latest saved is in https://doi.org/10.5281/zenodo.7781550

For an older version, see ver 1.0: https://zenodo.org/record/7770938

unLibetarian unChristian non-Institute

 

Some say that people often argue because they are speaking different languages. This is not one of them. "Libertarian" "Christian" "Institute" is just wrong.

The Difference

The difference between labor and land is that land is conserved while labor is subject to erasure by the second law of thermodynamics. That is one quick way to differentiate between the two. You may have added improvements to land, and so you validly own the labor in those improvements, but all those decay with time. The space however remains.

Hence to say you own the space, because you found it and put a fence around it at some point in time is bogus. You were free to use it, but when there's no more space for others and people start becoming landless, then principles of liberty (in contrast to mere "freedom") have to kick in.

Rich people have no more rights to Nature than poor people, and people who are "there first" have no more rights to Nature than people who come later. Life isn't fair, and we all have different capabilities, but Nature was given to us with no partiality.

"If we are all here by the equal permission of the Creator, we are all here with an equal title to the enjoyment of his bounty -- with an equal right to the use of all that nature so impartially offers.1 This is a right which is natural and inalienable; it is a right which vests in every human being as he enters the world, and which during his continuance in the world can be limited only by the equal rights of others. There is in nature no such thing as a fee simple in land. There is on earth no power which can rightfully make a grant of exclusive ownership in land. If all existing men were to unite to grant away their equal rights, they could not grant away the right of those who follow them. For what are we but tenants for a day? Have we made the earth, that we should determine the rights of those who after us shall tenant it in their turn? The Almighty, who created the earth for man and man for the earth, has entailed it upon all the generations of the children of men by a decree written upon the constitution of all things -- a decree which no human action can bar and no prescription determine." Henry George - Progress and Poverty.

The core Georgist principle

The core Georgist principle is the equal right to use Nature (or Land, which therefore includes land). This is sometimes referred to as “common property.” From this principle, it follows that the economic rent of Land (matter, energy, space - anything natural) is for the benefit of all. This is apart from Labor (man made entropy changes to Nature). Labor is therefore what's true property.

With that laid out, we can see what is justly private and justly common. Crops don’t just grow. They involve labor (entropy changes). What natural is in them are in a configuration in space and time because of the laborer’s labor (entropy changes). Crops get to the marketplace because of labor (entropy changes). The things of Nature in the crop are merely borrowed but there is justly privately owned labor mixed in it. Usually for convenience we just say the crop is privately owned because the borrowed Nature has almost no economic rent - or as Locke puts it, there is enough and as good (of the matter, energy, space used) for others.

Certain aspects of Nature however generate economic rent. Consider the land the crop was raised in. If it was land where there are no developments, the market rent of comparable empty land may be zero. That is, someone who wants to build a house or grow crops can find land freely. This is not the case in highly developed areas where there may be only a few empty lots available. The market rent of land (in its natural state or raw) is therefore what a user owes everyone else for using the land. It is the value that he enjoys for himself to use and is denying others while he is using it.

The right to use nature vs. private property on nature

Natural law can be distilled to two things: the right to life (equal in dignity) and the right to use nature (also referred to as common property). Without these two assumptions, there can be no liberty. Other derivative true rights come from these two. For example, the right to speech comes from the right to use nature - consider, vocal speech is the right to use the air to generate sound waves to convey ideas to another person. Hence temporal and intermittent possession, control, exclusion, enjoyment are already covered by the right to use.

However, a property right to land (and Nature in general) indefinitely entails: the right of possession + the right of control + the right of exclusion + the right of enjoyment + the right of disposition. There's no universal natural law that says people may have this "bundle of rights" to land - but many here pretend it is natural law. In fact, property rights on land is merely a claim backed by a threat of force, and therefore by aggression and nothing else.

The problem is that property rights on land harms others; this is measurable by market means as it is the economic rent a title holder demands from others either to use the land (rental), or to have the title transferred to them (exchange), or without the payment of rental or the full amount of the market price, the denial of others from the economic benefits of the land. It's as if the title holder of land should take the credit for the activity around the land and even the weather.

Henry George gave a succinct solution to this problem - common property on land means its economic rent should remain common. 

In reply to a "A middle class letter to the poorest of the poor"

Dear Middle Class:

I don't think you have thought about your ire for the 'poorest of the poor' too thoroughly. Let me enumerate the points that you might have missed.

1. The poor have little to do with the broken system that is taxing you of your income. It is a system offered as a solution by the middle to upper classes to fund society. Sure, they have voted for it, but the upper class and the middle class offer them no other better choices. It is the middle to upper classes that decided to tax income.

2. There is little upward mobility for them. Anecdotes about certain people making the hop from the lower class to classes above do not negate the fact that the vast majority of the poor will remain poor not because they cannot be hardworking but because there is no incentive to be hardworking.

3. It is said that the Philippines is a rich country or that it has lots of natural resources. But where is all this wealth going to? Think about this. It goes to a few private individuals. But to whom should these natural resources belong? Shouldn’t it be everyone? But the returns are not there. Had it been so, you would have been able to feed everyone and provide wealth that everyone could pay for their healthcare. The Philippines is rich enough in natural resources to feed and care for everyone.

4. What is the most useful natural resource to everyone? It is not gold. It is not beaches. It is not coral reefs. It is geographic space - or in other words the land itself. In fact, it is the natural resource that the poor is denied of and whose value the poor is denied of. They are not only unable to access it (forcing them to live in slums) they are also denied of its value (forcing them to beg for dole outs and vote for the next politician handing them a lifeline). But the access to land and therefore its value is their common right as human beings.

5. What then is the solution that would be equitable to everyone? Remove or diminish income taxes, collect the rent of land, streamline government, and use the funds to provide services and/or a UBI to everyone. This is not new. The classical liberals have talked about this centuries ago. Collecting the rent of land has the effect of land being returned to its natural state - common. Has this ever worked? See how much land is privately owned in Singapore or Hong Kong. Most of land is leased/rented with the rent funding government services.

When the poor are not worrying about how to get the basic things needed to survive, they would have more time to spend for upward mobility. Don't beat on them too much.

Sincerely,

A Just Nation


Re: https://www.facebook.com/rodolfo.caparino/posts/2995485123828135

Thermodynamics and Ownership

We assert that you own your labor since you own the activity resulting from your living. The act of acquiring already pre-existing matter and energy around is ones own and thus we say one owns his body; the act of acquiring itself is labor. It is not the pre-existing matter and energy itself that is owned, but the activity that got mixed into it producing higher orders of organization. This activity is not a vague notion but rather can be described scientifically through entropy and information. "As entropy quantifies the degree of disorder in a system, any envisioned lifeform must have a higher degree of order than its supporting environment." (Azua-Bustos, Vega-Martinez, 2013) This is how we recognize the existence of life in other planets.

When people say they own Land however (for example, because of scarcity), they are making a claim that is quite different. They are claiming that the already pre-existing matter and energy itself is owned. But how do you do that without employing mere force or threat of force? It is a kind of ownership that is through aggression or backed by aggression rather than an ownership through created labor. How does one reserve land for ones self indefinitely without a guarantor who is willing to exact force on behalf of that person? Or how do you own land absolutely, in the right-libertarian sense, without a monopoly of force - or ironically, a State?

The Ownership of Labor and Property

It all starts with life. Life acquires from Nature what it needs to make itself survive. You can think of life as having its own will. It accumulates matter and energy from its surroundings borrowing from it to lower entropy, and thus higher order. So our bodies are composed of borrowed matter, and energy, in higher order of organization. The organization and the will are key. Our physical makeup is borrowed. Labor is not mere energy. It is directed energy by the will, our free will. This willful transfer of energy is a decision of the will to go from a lower entropic state to a higher entropic state. An exertion of work is a sacrifice of your internal body order to perform that work. This sacrifice to perform that work is why you own that work.

To get the lower entropy, life acquires energy from its surroundings as Nature provides. Here on Earth, the energy comes from the Sun, to photosynthesis, and to other life forms. Borrowing is the most precise term when describing your relationship to your physical makeup. Just as while you are borrowing anything, it is a tacit agreement among everyone that it is yours to use for the time being, it is also a tacit agreement in a just society that your body’s physical makeup is yours. You are borrowing atoms and energy from nature. Furthermore, you are taking and releasing matter and energy as you live. And after death you give it all back.

The necessity for matter and energy to be seen as borrowed from Nature rather than absolutely owned arises from the consideration of liberty: all human lives individually are of equal importance and of equal dignity. We cannot start from anywhere else. To decide otherwise leads to tyranny, which is exactly the opposite of liberty. Because all human life draws from Nature to survive, it follows that all human life has as much right to Nature as any other. To strengthen this argument, consider the opposite scenario where one life can absolutely own Nature. It can be seen by induction that if a part of nature can be absolutely owned by one, then all of nature can be owned. When all of nature is owned, human life is born in a world where all nature that is within proximate distance is already owned by others, but who themselves can access nature freely. It would be a situation where there’s haves vs. have-nots as far as Nature is concerned. If one considers that no one made Nature, then there’s clearly an injustice: the haves tyrannizing the have-nots.

For all useful purposes, the body is owned because life has mixed its processes (labor) with the atoms and have bound them together with energies in high organization and structural order. This provides a key to how we come to an equitable way to find ownership of Nature outside our bodies, it is by labor. Labor itself is owned, and one mixes labor with Nature to have an owned item. This is in fact merely a restating of Locke. But what about the injustice and tyranny mentioned in the previous paragraph? And don’t we just have the same thing? No, because if we treat Nature as only borrowed, we can measure how much infringement we have on each other. Thus, if we can measure how much infringement happens, then we can employ restitutions.