Harberger Taxes + Crypto: Abundance Through Scarcity with Graven Prest

a topic that I curiously know something about. Like so many strange regulations that exist. I'm curious, why are you so enthusiastic about them? Well, that's what the whole talk will be about. But honestly, I think we can change the world with these things.

Uh, you've heard about them because there have been a lot of nerds for a long time really excited about this really excited about this , and now we're starting to experiment more and see what they can do in the world, and it's just exciting. I want everyone to know. All of it, just from this random tax. That's great. Yes, I can't wait, you know, while we wait for Justin, give it to me, yes.

Great, fantastic. Let's begin. Health. Very good. Hello everyone.

Thank you for being here today at ETH Denver and coming to my talk. I know that Balaji and Kevin Owocki are speaking at Schelling Point. So it's a tough competition. I appreciate you being here. Maybe you didn't get a ticket for Schelling Point, but I'll still try to make your time here worthwhile.

Since I am not Balaji, they may not know who I am. I will introduce myself by saying that I am a maximalist of public goods. I am an optimist. I believe that one day we will be able to live in a world that looks like this, or at least representative of it, where we have fantastic technology, humans, nature, all coming together to live harmoniously. It won't be a utopia, but it can be a proto-topia.

That's a better term that I like. We can progress towards something better if we can work together and apply the right systems. One of the secrets that I believe will lead us to achieve this future is accepting the truth that digital scarcity is a good thing. Clearly, the goal is not to create scarcity everywhere. That wasn't what the last image was about.

And I know that's a caricature of cryptocurrencies in general. We take something free like a JPEG, add some artificial scarcity, and I'll get rich, not you. I'm going to leave the rest of the world behind. TRUE? That's a caricature of cryptocurrencies.

But there are things in the world that are inherently scarce or derive their meaning from being scarce. We can create an emotion. We can create a connection with something because it is scarce. But there are also practical things in the world where scarcity is necessary. Well, our brains and our attention spans are limited, and the internet is full of endless possibilities; In some way, in that flow of information, we need to filter in order to understand it.

In Web 2.0, what we did was rely on an algorithm, did was rely on an algorithm, right? We said, "Yes, figure it out for me. Tell me what's important to me." We do it all the time.

Social media, Google searches, all of that Social media, Google searches, all of that . And, oh, did that work? Is it producing the results we want producing the results we want ? Don't know. Web 3, we have a new opportunity.

We can start designing things with a purpose. We can embrace scarcity where it makes sense and, hopefully, channel it into something better. And ultimately , that's how I see it. I think so , the goal is not to create scarcity everywhere. Actually, it's the complete opposite.

It is abundance. But this is the universe. That's life. You must find the balance. You have to accept the fact that there will be shortages in some places.

And instead of wishing it would disappear, accept it and look for a way to create more of that abundance. And this is where I think the Harberger taxes come in. There is a lot of confusing terminology and competing nomenclature about what these taxes should be called. Partial common property, SALSA, COST, depreciable licenses, all kinds of names. But regardless of what you call them, I think they're superheroes.

So, this meme has a double meaning. There are amazing things we can do with Harberger taxes. So, what are they? Well, some of you may have heard of them. Vitalik tweets about them from time to time.

That's why so many enthusiasts are excited about it. And they were really revitalized by the book "Radical Markets" that came out in 2018. But the roots of this idea go back to Henry George in the late 19th century. So, what are they? Harberger taxes are a way to allocate scarce resources efficiently and productively.

Another name for that is property rights, a property rights system. And if you disagree with everything else in this presentation, if you only get one point, it's because there are other forms of property rights, because if you live here in the United States, the predominant system worldwide is...Private Property Rights. You don't even think you can design something different, but you can. So Harberger taxes are one of the most amazing, one of the most exciting, and perhaps the most efficient way I know of allocating scarce resources.

And how it works is that the owner of a scarce asset must set an "always for sale" price for their assets. That usual selling price is public, which means that someone can come and buy it from you based on that price. The second rule is that you must also pay a proportional fee based on that sale price. There's no way around it . In other words, if you don't pay your fee or your tax, you lose the asset fee or your tax, you lose the asset .

So, let's think about what this actually does, the dynamics that this creates. When you sell something, you want to sell it for as much money as possible. This is normal. This is what we do regarding private property rights. But there is no negotiation in a Harberger tax system .

So, even more importantly, you'll want to set the highest price possible. There is no negotiation. Someone can accept your offer at any time. You want to feel like you sold it for a good amount of money, but that doesn't go unchecked. With that second rule, you're paying the continuous rate.

Nobody likes to pay too much. Even if you like to overpay, you can't keep doing it because your bank account will run out. So, there's a good balancing force there. And the result of this returns to equilibrium, right? There's all sorts of economic jargon and math to prove this, but the bottom line is that if you have a proper rate structure, the dominant strategy, the winning strategy in the market, is to be honest about your self-assessed valuation of your asset.

So, no games are being played. Just be honest and be productive. You can't just sit on assets, hoard them, and keep them away from the rest of the market. So you start to get a more productive market, honesty, and you start to see really beautiful things. If that were the end of the story, it would be an idea that would change the world.

Economies are made or destroyed by the allocation of scarce resources. But that's not all. With Harberger taxes, we have this other mechanism. We raised these funds, but what should they be used for? Public goods, should they be used for?

Public goods, right? Things we all share and from which we all benefit. And if we do that, especially on blockchains, we have quadratic financing, retroactive public goods , all these amazing ideas for financing and creating more with public goods. We need financing mechanisms for that. And I think the Harberger taxes are one of the most exciting.

So I hope you're getting excited about what can be done with this. Um, and the next question is: where can they be applied? The canonical example, going back to Henry George, is the land. Humans have needed it to live, to produce, to exist and to prosper. As we move more of our lives into the digital world, you can, yes, have land in the metaverse.

I work on a project that does some of that, but there are other ways of being grounded when you live on the internet. It could be your name. It could be a real estate space on a website real estate space on a website . Advertisements or some kind of privileged position in a system. That's like real estate .

It's like the earth. But to return to what I mentioned earlier, Harberger taxes are perfect for allocating scarce resources. So think of any system where there is an inherent or necessary scarcity for its proper functioning; Harberger taxes are a great candidate to manage that point in the system. So, if they're so great, why is it that most of you probably don't even know what Harberger taxes are? Why haven't we implemented them everywhere yet?

Let's just say we're working on it. But there are three reasons I'm going to analyze to try to convince you that we can overcome them and start to see how Harberger taxes prevail. The first one is technical. This idea originated in 1879 with Henry George. I've mentioned it a couple of times already.

He wrote a book called Progress and Poverty. And it sold millions of copies. It was on par with the Bible, among the best-selling books of the time. People were super excited about him. But to actually implement their version of the idea, there was no self-evaluation mechanism.

So he was trying to create an administrative mechanism to achieve this. It was too expensive, too difficult, the technology didn't exist. In 1962, Arnold Harberger, who gives his name to what we call Harberger taxes today, gave a speech where he talked more about the use of self-assessment mechanisms. There were other people who had proposed it and used it in different ways, but I guess he kept the name. And finally, in 2015, we had smart contracts, and I think they are the perfect foundation for trying to implement these things on a global scale with minimal administrative cost.

There is also the advantage that it is very difficult to move from one form of property rights to another, especially when it is not proven. Blockchains and smart contracts also gave us the ability to create new assets to experiment with, and people have been...the first on-chain Harbor asset was probably Simon de la Rouviere's "always for sale" artwork in 2019. It's a really cool concept art project . They should take a look at it.

Other people building in this space, like Nifty Apes, are doing things with loans. Fuel gnomon, which isn't very clear in the slide, is doing something similar to an ENS with Harbor taxes. And then the project I work on, Geo Web, we try to use it to build consensus for geospatial augmented reality . And finally, there is a group within Radical Exchange. Radical Exchange is the non- profit organization that emerged from the book Radical Markets.

There is a group there trying to develop standards, smart contracts, and reusable tools so that others can apply this idea to the blockchain. Second challenge: education and understanding. When was the last time you thought about investment efficiency or allocation efficiency? For the average person, the answer is never, right? Therefore, it's difficult to have an intuition about these kinds of things until you start using them.

So most people hear this idea, maybe they think it's great, but they're afraid the rich will take it all, the rich will take it all, right? They're going to buy everything and hoard it. I have some breaking news for you. The wealthy already own many things, and there are no effective controls to prevent them from withholding productive assets that the rest of the people could use more effectively. And secondly, and this is not the whole story, but even if the rich bought everything.

They would have to set a very high self-assessed price. They would pay many fees and we would get more public goods. It wouldn't be so bad if everyone paid their fair share, would it? There are no legal loopholes in this system. But that's not actually how it works.

So I'm going to explain a quick example here. We have Mr. Moneybags. He owns a large bank. He has bought all the assets.

He rated them quite highly. And you can see that he's actually going to lose money. Harbor taxes are an iterative game Harbor taxes are an iterative game . There isn't just one step, is there? Step one, your bank account is going down.

The rest of us, the community fund, have more public goods again. The same thing happens. And again, the same thing happens. But Mr. Moneybags probably didn't get rich by making bad investments.

So it has to lower its self-assessed price has to lower its self-assessed price , right? It lowers it to 50. It still has a net loss. So we continue to get some public goods. He's losing a little less money, but you know, he has to bring it down again.

So he has to lower it to 10. So that he can at least break even with this asset. We are still receiving some money for public goods. He is reaching the point of equilibrium, but this idea is taking shape. She can now buy that asset from Mr.

Moneybags on the open market and set a higher self-valued price. Note that she did not have more money than he did. She was simply more effective using this asset than he was. So she was able to justify a higher price . She's adding to her bank account.

She is allocating more money to public goods. And it ends up being a more productive and fair market where it's not just about the capital you have. And then just about the capital you have. And then , um, fun fact, I was using those icons and those names because the game we know as Monopoly was actually invented by someone trying to teach everyone about Henry George's ideas about land taxes. There are two versions of the rules.

One of them was the rules we know where you try to crush your opponent, to dominate the world. The other one was, hey, let's work together and grow community wealth. For board games, I guess it's more fun to crush your friend, right? But in society, that might not be what we want, right? So this brings us to our final challenge, and that is culture.

Um, it's social. You are here, you understand. You are part of this movement, crypto. But for Harberger taxes, we have a big hill to climb. Um, especially in the United States, it's almost blasphemous to say that perhaps private property rights aren't the greatest thing in the world.

Um, and that's simply not true. Returning to the main point. If you leave here knowing that property rights can be designed, that you can make different trade-offs, and that you can produce different outcomes, that's a victory. Even if you could perhaps devise something better than Harberger taxes. But hey, we need to change that by having these conversations and getting more people to understand this, analyze these examples, and then talk and really think about the world they want to live in in order to take all this back.

If we have those conversations, I truly believe we can move forward and do amazing things. I invite you to be a part of it. There are many ways. Share that information about the monopoly. Let's talk about how we can design property rights.

The next time you have Thanksgiving dinner, try to steer the conversation in that direction. This shouldn't be political. I know that...well shouldn't be political. I know that...

well , I consider it somewhat apolitical, but take on the challenge. Help us spread the word. Two, build something. I mentioned the radical exchange group on partial common ownership. We are experimenting.

We're in a " experimenting. We're in a " buildathon". There are all sorts of great opportunities to do so. And finally, they can support one of these radical experiments. I work on a project.

Even if they're not interested in the metaverse or augmented reality, or if they think it's all just talk. But if you like this economic topic, join us at Geo Web. Claim some land. Show that this cycle can work and that we can do truly amazing things. I'm just going to conclude.

Thank you all for being here at ETH Denver and listening to my talk. I have some links there if you want to scan them and follow my work. I'll be around here all week in the BiddleHub area. And if you have any questions, I have three minutes left. I would love to interact with any of you.

So we have time for exactly one question because, as you can see, your screen is malfunctioning a little. We'll bring in the audiovisual team to restart it. In fact, Justin, if you want, come here and do that reset while we're at it. I think it could be good. Okay it.

I think it could be good. Okay , one question. Let's do it this way. Brilliant. Brilliant.

How are you, Graven? It's great to see you. Excellent talk. Geo Web has been functionally active for about five or six weeks and Harberger taxes are something very new to people. So, with the launch of Geo Web and the first month 's 100 ETH per parcel transition now a reality, what has been the reaction from Geo Web users, and have they noticed any increased discussion about this unique incentive and tax structure ?

Are people starting to recognize it while using Geo Web? We have work to do, my friend, no doubt about it. Yes, we are trying to combine many things. We have received excellent feedback. It's amazing to be here at ETH Denver talking to people about this.

I would still say that when I explain what Geo Web is, I start with the topic of the Harberger tax. A very small percentage of people, even in this small crypto bubble, less than 10%, know about Harberger taxes. We have a lot of work to do. I invite anyone who wants to help to be part of that movement. You can find us.

We'll even give them some ETH to claim land, explore, and get their feedback. We're trying to improve the user experience and all that. But it's really about testing these experiments and creating a more efficient regenerative system. Thank you. Have a good day.

Thank you, Graven. I know there are other questions, so this is a good area to meet and ask questions later. And we'll begin our next chat.