One of the areas for which Flowhold Title requires a degree of consideration is agricultural land. Part of the reason for this is that agriculture, above other forms of land use, tends to spend capital improving the very land they work on. This raises a difficulty for Flowhold, as the rate of charge is due to the current value of the land. If someone is spending money on improving their land, by no means should that go onto their costs, the same as there should be no additional land costs for someone adding an extension to their house. For it to do so old dramatically lessen the drive to improve agricultural land.
Interestingly, this problem was first raised by Alfred Marshall (a noted economist in the UK) directly to Henry George. From his book Principles of Economics:
We may call to mind that the land has an “inherent” income of heat and light and air and rain, which man cannot greatly affect; and advantages of situation, many of which are wholly beyond his control, while but few of the remainder are the direct result of the investment of capital and effort in the land by its individual owners. These are the chief of its properties, the supply of which is not dependent on human effort, and which would therefore not be increased by extra rewards to that effort: and a tax on which would always fall exclusively on the owners.
On the other hand those chemical or mechanical properties of the soil, on which its fertility largely depends, can be modified, and in extreme cases entirely changed by man’s action. But a tax on the income derived from improvements which, though capable of general application are yet slowly made and slowly exhausted, would not appreciably affect the supply of them during a short period, nor therefore the supply of produce due to them. It would consequently fall in the main on the owner; a leaseholder being regarded for the time as owner, subject to a mortgage. In a long period, however, it would diminish the supply of them, would raise the normal supply price of produce and fall on the consumer.
Flowhold potentially suffers the same defect, except for the mechanism of compensation provided by Flowback. It is necessary to account for the difference in land value brought about by the labour of the owner; effectively valuing the land for the purposes of Flowhold as if the changes had not occurred. This way, the normal benefits of performing capital improvements to land are retained as capital value and realised by the owner upon sale of the land. Upon sale, the capitalised value of the improvements are valued as part of the purchase; this portion of the price must be contributed by the state and the basis for the land reset.
This reveals one of the complexities of the Flowhold / Flowback system. How well can such a pricing be carried out? Over time, with this happening across neighbouring properties, how can this process avoid coupling the revealed changes? Is it even necessary to do so? It is easy enough for me to wave my hands and say ‘statistics’, but a robust basis needs to be developed, not only for this – perhaps the simplest Flowback situation – but the process more generally.
But why then, with these complexities would someone consider Flowhold title for agricultural land? There are two very good reasons; vastly reduced capital requirements, and reducing the effects of the vagaries of the weather.
Flowhold makes it easy for someone to get started in agriculture. No fixed, ponderous loans or requirements for inordinate amounts of capital just to purchase the land. Just a payment stream to the state that will vary over time to reflect the changing capacity of the land. Under Flowhold, an extended drought will be automatically mitigated by a rapid reduction in the current costs of holding the land. On the other hand, the excess provided by a bumper season will be tempered by increased charges.
The costs of the land will vary tightly with the benefits able to be wrought from it.
Another aspect to consider is that infrastructure construction, both private and public,
in support of agriculture can see a return through increases in rent, in the instances where significant conversion to Flowhold Title has occurred. This doesn’t necessarily make infrastructure investment more certain as some claim. Benefits still have to actually occur to the extent expected for there to be the expected return. Rent cannot be raised in expectation of a benefit, only in response to one acknowledged by the market.. However, collection is more efficient and dependant on the market needs than particular owners whims.
There is much to be considered and work to be done, however agricultural land presents itself as an ideal opportunity to fully develop the theory and practice required to see the full benefits of the Flowhold system in use.