The comment by Marcus Spiller (AFR 3-5 January, Our cities should be allowed to water their own green shoots) on why per kl charging for water was better than “property” taxes nicely illustrates what is wrong with the teaching of economics and economic history in Australia. Land value rating is Australia’s sensible way of meeting the fixed costs of spatial network infrastructure. Land captures the external benefits of available infrastructure: it is reflected in land values. By rating land values to recover those fixed costs from landholder beneficiaries, users can be charged per kilolitre at economically efficient short run marginal cost. This is the George-Hotelling-Vickrey Theorem outlined by Nobel Prize winners William Vickrey, Joseph Stiglitz and others. Australia had a world first system for financing infrastructure. We have thrown it away for a mess of corporatized and privatized pottage and pillage.
Terry Dwyer PhD (Harvard)