The solution of the social question: collective land ownership and abolition of income taxes In 1896, Walras published in the Revue socialiste the “Theorie de la propriete”, which, he believed, was to fill a gap

Although ownership applies to all social wealth, Walras clarified beforehand that it is sufficient to develop a theory of the ownership of personal abilities, and a theory of land ownership, as those of other components (other assets, services and so on) derive from them. Regarding personal faculties, they “are, by natural law, owned by the individual” (OEC IX: 185 [142]). What he calls “Theorem I” of the “Theorie de la propriete” follows directly from the definition of the human being as such, that is, “fulfilling a farsighted and free destiny” (OEC IX: 102). In other words, for Walras, a human being “feels, knows and possesses himself. He has a destination and he pursues it, and he does so while knowing that he has a destination, and that it is he himself who has to pursue it.” (OEC IX: 102 [77]). This implies that his personal faculties belong to him, so that he might enjoy them based on their efforts, according “to the principle of inequality of positions” (OEC IX: 186 [142]).

Conversely, land ownership is based on “the principle of equality of conditions” because all human beings “must be able to benefit equally from the natural resources available” (OEC IX: 189 [144]) to pursue their purpose and fulfil their destinations. “Theorem II” states that “land is, by natural law, the property of the State”, and Walras thus asserts that “any alienation of land is against natural law, because it wrongs future generations.

Walras had already advocated the ethical need for the state to redeem all of the land, but it is only in “Theorie de la propriete” that he is able to fully justify his opinions. Walras considers land as a factor of production. Moreover, he notes that “for all, the land owner is a man who sells, at the price of rent, the natural fertility of land” (OEC XII: 236). If the land has intrinsic value, rent is natural and therefore cannot accrue to individuals, but must return to the community, that is, the state that represents its present and future interests. Rent collected by individuals is therefore contrary to dis­tributive justice, since the only legitimate income for individuals is the one provided by their own labour and savings. Taxing rents is justified. If, according to justice, rent accrues to the state, it means it must be the owner of the land that generates it; oth­erwise we would face a contradiction with Lemma I of the “Theorie de la propriete”, according to which “the owner of a thing is the owner of its service.” (OEC IX: 178 [136], original emphasis). Therefore, land is, on account of natural law, the property of the State.

However, while it is fair that the State should become the owner of all the land, it is still necessary that this ownership should be legitimate. On this point Walras’s position is clear: The State has no right to expropriate property owners, but must respect Lemma II, “the owner of a thing is the owner of its price” (OEC IX: 178 [136], original emphasis). The State must therefore redeem the land. “Theorie mathematique du prix des terres et de leur rachat par l’Etat” (1880) is devoted to the cost and financing of this acquisition: Walras takes up again H.-H. Gossen’s theory, and thereby considers he had demon­strated that “the State could therefore redeem all the land by amortizing the purchase price by means of rents” (OEC XII: 360). However, the equilibrium price of an asset in an efficient market is equal to the sum of discounted expected earnings (the rents in this case) and, therefore, the internal rate of return of the asset coincides with the discount rate. Nevertheless, since the net income rate corresponds to the interest rate paid on the debt that the state has incurred to buy the land, it is impossible for future rents to write off the debt. Walras considers that individuals underestimate the upward trend of rent in a progressive economy, which only the state can anticipate properly, ultimately as the increase in land rent is largely due to improvements in infrastructure, decided by the State.