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The servitude of intellectual leaders. Academic economists are mostly kept by landowners, or their bankers, or other special interests, obediently to rationalize the system of which they are the high priests. (Gaffney, 1997). (Today we would include thinktank intellectuals, media pundits, and hate-radio commentators and talk-show hosts among the high priests.) Read the whole article
Mason Gaffney: The Power of Neo-classical Economics
Fred Foldvary: Geo-Rent: A Plea to Public Economists
MAINSTREAM LITERATURE: READ BETWEEN THE LINES Mainstream microeconomic and public finance textbooks almost never bring the idea geo-rent taxation into the sunlight. The respected journals, too, give very little attention to these ideas. The principles behind the idea of geo-rent taxation make sense, however. Indeed, those very same textbooks and journal articles establish many of the principles that sustain the idea. But the principles are scattered throughout the literature. The literature is compartmentalized in such a fashion that prevents students from seeing how the principles form a powerful idea. In this sense, geo-rent lurks between the lines of the public-economics literature.
Here I highlight eight mainstream topics where geo-rent principles surface:
(a) “producer surplus,”
(b) deadweight loss analysis,
(c) the Henry George Theorem,
(e) public goods,
(g) club-good models, and
(h) the Tiebout model. Read the entire article
Mason Gaffney: Land as a Distinctive Factor of Production
What ever possessed the neo-classicals to leave such a mess? One needs to know something of their times and politics. J.B. Clark and E.R.A. Seligman of Columbia University were obsessed with deflecting proposals, strongly supported at the time and place they wrote, to focus taxation on land. Henry George, after all, was nearly elected Mayor of New York City in 1886 and 1897. Frank Knight, founder of The Chicago School, followed them closely. That explains why some of the points made herein may seem obvious to readers who have been spared the formal conditioning imposed on graduate students in economics. In graduate training, however, the obvious is obscured, silenced, or denied. Hundreds of books on economic theory are published with "land" absent from the index. Denial is reinforced by dominant figures using sophistical, pedantic cant, which students learn to ape to distinguish themselves from the laity and advance their careers.2
The dominance of "fusers" is shown by the prevalence of 2-factor models, wherein the world is divided into just labor and capital.3 Land is melded with capital, and simply disappears as a separate category, along with its distinctive attributes. A number of economists don't buy it, but don't do anything about it - acquiescing in error by silence, indifference, passivity, or anxiety of the professional consequences. They handle the question by "going into denial," as it were, resolving a vexing issue by pretending it isn't there. Anything else spoils the web of interpretation through which their art seeks to make human experience intelligible.4 donning blinders hedging, especially against such motivated forces as have an interest in hiding unearned wealth behind the skirts of capital.
The market exchange of capital for land causes an elementary failure in the minds of many. Land and capital each have their prices and may be bought and sold for money. Each alike is part of an individual's assets, colloquially called his "capital". Each is a store of value to the individual. What is true of each individual must be true for all together, is the thinking: it is the "fallacy of composition." We will see herein that society cannot turn land into capital (A-6), and land is not a store of value for society (A- I 0).
The discipline has not totally eliminated land, but marginalized it. The discipline has not totally terminated land: it is too subtle for outright skullduggery, preferring equivocation and confusion. Rather, it has marginalized it. There is a subdiscipline called "Land Economics," and a journal of that name. There are journals of Agricultural Economics, Urban Economics, Regional Science, Environmental Economics, Natural Resources, and more. There are also whole disciplines of Geography, Economic Geography, Military Science, Biogeography, Geology, Geometry, Surveying, Astronomy, Theology, Ecology, Oceanography, Meteorology, Soils, Physiography, Topography, and Hydrology, all dealing with The Earth and Nature and Creation as definable topics distinct from man's works. ...
Common micro theory finesses Time. It deals with economic relations as though they occurred at a point in time (and space as well); as though they were relations of coexistence, rather than a cavalcade of events in sequence. Sometimes two points are allowed (short run and long). Thus micro theory can ignore the birth of capital, its growth, maturity, senescence, death, burial, and replacement, vital elements of its difference from land. Time, and relations of sequence, are hived off to the far satellite of "finance," usually not even taught in departments of economics. Time is also referred to under "history of economic thought," as an obsession of some 19th century Austrians who wrote quaintly of "roundabout" (time-using) methods of production.5 Relations of sequence are found in macro, but not firmly integrated with microtheory, which is the enduring core of the discipline. Microtheory still deals with relations of coexistence in time, and space as well. As A. A. Milne once wrote, "It isn't really anywhere, it's somewhere else instead." Of neoclassical theory we may add, "It isn't really anytime, it's some other time instead."6
A compulsive trendiness grips theorists, who produce new words and concepts monthly, raising insurmountable barriers of communication. These seal off the profession not just from the outside world, not just from reality, but from itself, as it subdivides economic thought within elaborate mazes behind ever thicker walls of new argot. Jesuits quibbling with Jansenists in 18th Century France were never more arcane nor tiresome than most economic theorists today. These elaborate structures rise, however, upon the spaceless, timeless basis of micro theory inherited from J.B. Clark and Frank Knight. They can be no better than their foundations. Indeed, that is what makes them so tiresome.
All that is confusing for students and others. Land does have distinctive qualities for economic analysis and policy. This essay gives 10 primary reasons why land is distinct from capital (and of course from mankind itself) as an economic input. Then it gives 18 important economic consequences thereof, and their policy implications. Making land markets, land policy, and land taxation work well for the general welfare is a major challenge for economists and statesmen. They have neglected it too long by crediting and following the peculiar neo-classical sophisms that obscure or deny all distinctions between land and capital. Read the whole article Truth will not be made manifest by
As with all nineteenth century moral philosophers, Henry George subscribed to a belief in natural law. The natural order of things as he saw it required that land be held in usufruct and that rent from such should be returned to society. The theory was inspired by his deeply religious roots and grounded in his reading of the prominent thinkers that predated him. The natural order was also a moral order, and the failure to comply with the order of nature and society as he saw it was a perversion of justice. The fruits of the land belonged to everyone, just as the fruits of one’s own labor were uniquely one’s own. Since one owned one’s body, one was entitled to keep the product of one’s physical efforts. Society had no more right to confiscate the earnings of one’s sweat and brow than it ought to leave in the hands of rich landowners the rent that was everyone’s inherent birthright to be shared. There were just and unjust taxes, and the only just tax was that which grew out of rent, of the unearned increment that visited certain land sites as windfall gains because of the efforts and investments by the community. Income and excise taxes were unjust and confiscatory— even theft, as especially were tariffs. Taxing or collecting land rent alone was the means of ending poverty and restoring progress. Indeed many Georgists reject use of the word tax entirely, preferring instead to talk instead about rent collection. There is even a lapel button Georgists use that says “Abolish all taxes; collect ground rent instead.”
Georgist Economics: Moral Premises
What distinguished Henry George’s views from those of his adversaries in the last decade of his life was his assertion that economics was necessarily a moral science. Unlike those who became the founders of the American Economics Association in 1885, most of whom were transitional figures to what would become neoclassical economics, the primary focus of George and his disciplines was economic justice. This is not to say that explanation was cast aside; indeed the subtitle of his magnum opus, Progress and Poverty, was An Inquiry into the Cause of Industrial Depressions and of Increase of Want with Increase of Wealth . . . The Remedy. Why, he asked, in the midst of such boundless plenty is there such abject poverty? He would dedicate his book, first published in 1879, “to those who, seeing the vice and misery that spring from the unequal distribution of wealth and privilege, feel the possibility of a higher social state and would strive for its attainment.” He had known poverty first hand when he was struggling to support his young family and establish himself as a printer, a journalist and a publisher. He could also see before him the fruits of land and nature easily available to be harvested but for its legal capture by monopoly titleholders. He wrote of all this in some six books and countless other essays, the focus always on the theme of economic justice. ...
It is far easier to outline the basic premises
of Georgist economics than it is to do so for the emerging field of ecological
economics. Georgism is a tradition that grew out of a clearly formed tradition
of 19th century classical economics and has been refined further for the
past century. It was neoclassical economics that diverged from the reigning
orthodoxy. The differences between the classical tradition as represented
and defended by Henry George and the emerging neoclassical school were vividly
portrayed from their earliest divergence, even to the staging of formal debates
between George and the new orthodoxy’s adherents. 75 In
contrast, ecological economics along with other emerging heterodox schools
is itself very much a reaction to the neoclassical tradition’s insensitivities
and failures. The differences between ecological economics and the floundering
discipline of neoclassical economics are as much by way of the former’s
criticism of the latter as they are an enunciation of clear starting points.
75This history is well chronicled in Mason Gaffney, The Corruption of Economics, London: Shepheard-Walwyn, 1994, as well as in several biographies of Henry George’s life.
76Originally in New York Times, October 12, 1986, sec. 3; quoted more recently in “The Puzzling Failure of Economics,” The Economist, August 25, 1997.
77This is the criticism brought to bear on neoclassical economics by E.O. Wilson in Consilience: The Unity ofKnowledge, New York: Knopf, 1998.
78Economist Albert O. Hirschman of the Princeton Institute for Advanced Study begins one book, Essays on Trespassing (New York: Cambridge University Press, 1981,) page v, with a quote from the Russell SageFoundation’s current view:
. . . the discipline[of economics] became progressively more narrow at precisely the moment when the problems demanded broader, more political, and social insights. (From Russell Sage Foundation, Annual Report, 1979, New York, 1980, p. 12.)
Without enumerating further criticisms that have been levied against neoclassical economic thinking, something that has been done far better elsewhere than is possible here, suffice it to say that some of the most compelling charges have been made by the ecological economists.79 The most trenchant one as explicated by economist Nicholas Georgescu-Roegen is its violation of the basic laws of physics.80 It assumes a continuing draw-down of the earth’s store of energy, of which there is, of course, only a finite amount. If the economy continues to expand to include all elements of the earth, it will consume so many resources, particularly energy resources, that ultimately life itself is destroyed. One study calculated that if everyone in the world lived at the level of the average American, three “earths” would be necessary to accommodate us all. 81 The challenge, argue the ecological economists, is to structure economic analysis and the economy itself in such a way that markets are contained and that existence outside economic reach is respected and preserved. Whereas other studies of the environment within the framework of conventional neoclassical economics attempt to price nature in a way that its value is assured, ecological economists work from the conviction that such an approach is questionable if not futile, as it can never achieve any accurate and reliable market values for such existence.82 ... read the whole article
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Wealth and Want
... because democracy alone hasn't yet led to a society in which all can prosper