If you spend much time around Georgists, you'll probably hear Henry George's name mentioned in a respectful and affectionate tone. It isn't that we agree with everything he ever said (though I've heard there are several who do). Rather, it is that, taken together, his ideas best express and inform our understanding of what it would take to create economic and social justice in our own time and place.

And most Georgists would say that, were you to compile a short list of American prophets, Henry George's name should be on that list. We commend his ideas to your attention.

Nic Tideman: Basic Tenets of the Incentive Taxation Philosophy

The physiocrats of 18th century France: Quesnay, Turgot, Condorcet and others who sought to reform that country's tax system prior to its bloody revolution understood the importance of collecting a nation's revenue from levies upon land. The 19th century English philosophers Herbert Spencer and John Stuart Mill understood the injustice of claims to the ownership of land, though they could not bring themselves to recommend the fiscal measures that flow naturally from that insight.

But the person whose writings gave greatest impetus to our ideas was the 19th century American social philosopher, Henry George. His books and speeches contain powerful elucidations of ideas that we espouse. We particularly recommend Progress and Poverty and Protection or Free Trade. It should be understood that while we admire George's work, we do not regard him as an infallible authority. Our commitment is to principles of justice that we believe are part of the understanding of all open-minded people. George is the person who, in our view, has provided the best written expression of these principles so far.

 Some Georgist Errors to Discard

1, Capital and labor. George went overboard identifying capital with labor, because labor produces capital. He saw labor, rather than saving and investing, as the source of capital.

2, Capital formation. George as a theorist was insouciant about the need for market incentives to create capital. In this respect he slightly and superficially resembled Marx and Keynes, but only in theory. In practise, he saw the role of taxation in weakening such incentives, and so he advocated untaxing capital. His policy proposals do recognize the need for incentives for capital. It is his rationale that is rather twisted – he thought that by untaxing capital he was untaxing labor. This left a blind spot among some of his modern like-thinkers, who are not alert to the bias and distortions involved in untaxing capital while taxing labor (Gaffney, 1995).

3, Income-creating spending. George needlessly belittled the role of income-creating investing in creating jobs. Again, his policy proposal, to untax capital, would foster such job creation, but he went out of his way to deny the relationship, which he regarded as patronizing to labor as such.

4, Role of interest rates. George had little concept of the role of interest rates and rates of return in allocating or rationing capital. He had almost no concept at all of the role of interest rates in conserving working capital from being sequestered and wasted in “pyramid-building” kinds of projects (whether developmental, premature, or just megalomaniac). He dismissed his contemporary Austrian economists for what he took as merely scientistic obscurity, pomp and pretense, while he missed the valid analysis underlying them (Gaffney, 1976). In a word, they taught that the function of interest rates is to direct capital away from “hard path” technology, reserving it for the “soft-path.” Those were not their exact terms or concepts. The way they saw it, higher interest rates discourage what we now call “upstream” production (mining, primary products) in favor of more downstream production (processing, storing, packaging, distributing, recycling, etc.), nearer the ultimate consumer. (“Near” may mean in space or in time, or some combination.) They called them “higher” and “lower” stages of production, but a rose by any other name … .