A Most Harmonious Disagreement

Many students ask the question, “What does modern-day economics have to say about all this? Is George’s theory taught, or approved of, in anyone else’s curriculum?” There is one point, at least, about which modern-day economics completely agrees with Henry George. And, the more closely we examine that point, the less it seems to be merely one happy convergence between two essentially different analyses. In fact, it begins to look like modern-day economics doesn’t disagree with Henry George at all.

“That taxes levied upon land values,” wrote Henry George, “or, to use the politico-economic term, taxes levied upon rent, do not fall upon the user of land, and cannot be transferred by the landlord to the tenant, is conceded by all economists of reputation. However much they may dispute as to other things, there is no dispute upon this point.” Thus, the public collection of land rent “cannot add to prices, nor check production.” That was true then, and it is true now; the fixed quantity of land (its utterly inelastic supply, in other words) is a natural fact.

This fact has far-reaching implications. Henry George did not stress the general agreement on this point to court mainstream approval; he meant to show that the logic of the mainstream would lead to the very conclusions that academic economists were so busily denouncing! If, as generally agreed, taxation should bear as lightly as possible on production, there is a good enough reason to shift to a public revenue source that does not add to prices or costs.

It follows logically, then, that a policy of public collection of land rent would lead to:

— lower prices (for producers and consumers would be unburdened by taxation)

— lower rents (due to the reduction or elimination of land speculation)

Both of which would lead to:

— non-inflationary growth in employment (unhindered by advancing speculative rents, producers move to meet increased demand; increases in money supply are balanced by increases in production)

Which is every politician’s dream, is it not?

Grandiose, utopian claims — but mainstream economics textbooks make no attempts to refute them. Samuelson & Nordhaus’ Economics goes so far as to endorse the single tax movement for the unquestioned efficiency of its proposal. However, there is immediate and, indeed, rather frantic backpedaling from that position. Samuelson reminds us that “an economy cannot run on efficiency alone,” and that land value taxation “may also be perceived as unfair.” He never says it would be unfair — for it is not the business of mainstream economists to make such value-loaded judgements — only that it might be perceived so. (He omits the fact that fairness was Henry George’s primary argument; when George contended that “in justice is the highest and truest expediency” his point was not mystical but practical.)

Samuelson’s discussion of rent, and the single tax, comes in a chapter devoted to income distribution. But “this theoretical section,” he instructs the teacher, “may be skipped in brief courses.” Furthermore, although he lauds the efficiency of LVT in this optional section, he refers to it not at all, not even in a cross-reference, in later chapters on taxation policy and alternative economic systems. In effect, Samuelson whispers that LVT is a non-inflationary, non-distorting source of public revenue, and then launches right back into his mainstream lecture.

— Lindy Davies, September 4, 1997

Here's what folks have been saying:

The transformation of POLITICAL ECONOMY to ECONOMICS makes it extremely difficult for practitioners of the former discipline to communicate with the latter. Political Economy is a study of the nature of WEALTH and the laws of its production and distribution. Economics, as best as I can determine, is a study of the optimum use of scarce resources or a theory of exchanges. It relies heavily on statistical and mathematical methods for governmental bookkeeping or accounting purposes. To combat Henry George's influence, there was a subtle transition to the neo-classical or marginalist schools over a century ago. It could easily be interpreted as a conspiracy among the academics and "scholars" of the time. After all, if you can't define WEAlTH, don't know the difference between LAND and CAPITAL or what real CAPITAL is etc., there remains only different interpretations of government compiled statistics. Economists such as Samuelson might throw a bone here and there to advocates of lvt but I doubt whether they really understand what POLITICAL ECONOMY was all about. For a clear understanding of how POLITICAL ECONOMY was destroyed, there is no better place to start than Henry George's SCIENCE OF POLITICAL ECONOMY, 1897, especially Books I and II.
Roy Davidson <[email protected]>
Green Valley, Az USA - Monday, September 08, 1997 at 14:04:50 (EDT)
As far as I can see political economy is for people who want to change the system, and economics is for people who want to understand the system and work it. And I'm in the latter category for sure. Why should I care about political economy?
Max Schmoo <[email protected]>
Brooklyn, NY - Monday, September 08, 1997 at 19:00:35 (EDT)
Samuelson must have been beaten as a child.
Rob Wagner <[email protected]>
Austin, TX us - Saturday, September 13, 1997 at 02:54:30 (EDT)
So Max -- is your mortgage paid up? Big, ain't it? Ever wonder why it takes so long to build up equity?
Lindy Davies <[email protected]>
in Maine, - Monday, September 15, 1997 at 16:02:15 (EDT)
The "academic theory" of the Land Value Tax is pure bunco. There is only one true "Value" and that is "Labor". All other standards of value are contingent upon the services of labor. All forms of commerce in the "real" world rely on the services of labor to develop value. Therefore, it is the value of "Commerce" that should be taxed, not labor or land values.
William D. Grazier <[email protected]>
Duluth, Mmn US - Tuesday, September 16, 1997 at 17:37:12 (EDT)
Why do you put things in "Quotes", Bill? To hedge on what they "Mean"? If labor creates all value, then why tax commerce? You're making our argument: landowners do not create the value of their land. So land rent should be paid to the community.
Lindy in Maine
- Tuesday, September 16, 1997 at 20:23:57 (EDT)
Well you don't have to be quite so "snotty" about it
Max <[email protected]>
- Wednesday, October 01, 1997 at 09:23:42 (EDT)
isn't change built into the system...working and understanding it without lvt will benefit some to the detriment of others
- Thursday, October 02, 1997 at 16:30:31 (EDT)
Back to archive | Earthy Discussions | Email us | Learn more