also known as the margin of cultivation
Thomas Flavin, writing in The
Now, it is quite true that all taxes of whatever nature are paid out of
the products of labor. But must they be for that reason a tax on labor products.
Let us see.
I suppose you won't deny that a unit of labor applies to different kinds
of land will give very different results. Suppose that a unit of labor produces
on A's land 4, on B's 3, on C's 2 and on D's 1. A's land is the most, and
D's is the least, productive land in use in the community to which they belong.
B's and C's represent intermediate grades. Suppose each occupies the best
land that was open to him when he entered into possession. Now, B, and C,
and D have just as good a right to the use of the best land as A had.
Manifestly then, if this be the whole story, there cannot be equality of
opportunity where a unit of labor produces such different results, all other
things being equal except the land.
How is this equality to be secured? There is but one possible way. Each
must surrender for the common use of all, himself included, whatever advantages
accrues to him from the possession of land superior to that which falls to
the lot of him who occupies the poorest.
In the case stated, what the unit of labor produces for D, is what it should
produce for A, B and C, if these are not to have an advantage of natural
opportunity over D.
Hence equity is secured when A pays 3, B, 2 and C, 1 into a common fund
for the common use of all — to be expended, say in digging a well,
making a road or bridge, building a school, or other public utility.
Is it not manifest that here the tax which A, B and C pay into a common
fund, and from which D is exempt, is not a tax on their labor products (though
paid out of them) but a tax on the superior advantage which they enjoy over
D, and to which D has just as good a right as any of them.
The result of this arrangement is that each takes up as much of the best
land open to him as he can put to gainful use, and what he cannot so use
he leaves open for the next. Moreover, he is at no disadvantage with the
rest who have come in ahead of him, for they provide for him, in proportion
to their respective advantages, those public utilities which invariably arise
wherever men live in communities. Of course he will in turn hold to those
who come later the same relation that those who came earlier held to him.
Suppose now that taxes had been levied on labor products instead of land;
all that any land-holder would have to do to avoid the tax is to produce
little or nothing. He could just squat on his land, neither using it himself
nor letting others use it, but he would not stop at this, for he would grab
to the last acre all that he could possibly get hold of. Each of the others
would do the same in turn, with the sure result that by and by, E, F and
G would find no land left for them on which they might make a living.
So they would have to hire their labor to those who had already monopolized
the land, or else buy or rent a piece of land from them. Behold now the devil
of landlordism getting his hoof on God's handiwork! Exit justice, freedom,
social peace and plenty. Enter robbery, slavery, social discontent, consuming
grief, riotous but unearned wealth, degrading pauperism, crime breeding,
want, the beggar's whine, and the tyrant's iron heel.
And how did it all come about? By the simple expedient of taxing labor products
in order that precious landlordism might laugh and grow fat on the bovine
stupidity of the community that contributes its own land values toward its
And yet men vacuously ask, "What difference does it make?"
O tempora! O mores! To be as plain as is necessary, it makes this four-fold
- First, it robs the community of its land values;
- second, it robs labor of its wages in the name of taxation;
- third, it sustains and fosters landlordism, a most conspicuously damnable
- fourth, it exhibits willing workers in enforced idleness; beholding their
families in want on the one hand, and unused land that would yield them
abundance on the other.
This last is a difference that cries to heaven for vengeance, and if it
does not always cry in vain, will W. C. Brann be able to draw his robe close
around him and with a good conscience exclaim, "It's none of my fault;
I am not my brother's keeper."
Mason Gaffney: Full
Employment, Growth And Progress On A Small Planet:
Relieving Poverty While Healing The Earth
artificial scarcity on marginal returns to labor and capital.
Underuse of better lands forces labor and capital (which is mobile,
like labor) to resort to worse or “marginal” lands, thus
scattering and spreading out settlement, raising aggregate demands on
land, and wasting capital (George, 1879). This lowering of the
“margin of production” lowers the marginal productivity of
labor and capital, and hence their economic rewards, tilting the
distribution of income in favor of landowners, creating an illusion
of overpopulation (Malthus), and lack of investment outlets (Marx,
Keynes, Hobson et al.). Read
the whole article
Karl Williams: Social
Justice In Australia: INTERMEDIATE KIT
We've just seen how returns from
land are, by nature, monopolistic and,
by rights, should be returned to the community. But how do we calculate
WHO GETS THE COCONUTS?
It's perhaps best illustrated by the Robinson Crusoe scenario,
finds himself alone on a desert island. Rob naturally settles on the
best available land which, for argument's sake, can produce 20 coconuts
per acre per month. Along comes Man Friday, who gets the second-best
land producing 18 coconuts per acre. This best, freely-available land
of Friday is called the marginal land and, as we'll see, determines
both the level of wages and that of rent.
For how much could Rob rent out his land - 2 coconuts or 20
per acre? Friday would only be prepared to pay 2, because he can
already get 18 from his. So here's our first definition, that of the
Law of Rent: The application of labour and capital equipment being
equal, the rent of land is determined by the difference between the
value of its produce and that of the least productive land in use. So
if Man Saturday comes along (the next day?!) and finds that the best
available land can only produce 15 coconuts per acre, Rob could rent
his land out to Saturday for 5 coconuts per acre, and Friday for 2.
What then determines the level
When Friday came along and could work land yielding 18 coconuts per
acre in a month, then he wouldn't accept wages offered by Rob for less
than 18 coconuts. But when Saturday arrived, suddenly Friday could only
command 15 per month, because Rob knows that the going rate (that
applicable to Saturday at the margin) is only 15. So here we have the
Law of Wages, which is the corollary of the law of rent: Wages are the
reward that labour can obtain on marginal land, i.e. the most
productive land available to it without paying rent.
Of course it all gets more complicated by technology, trade
immigration, the existence of a pool of unemployed, personal
preferences, levels of education etc., but these strong underlying laws
always hold. But let's now tie up the factors of production. Rent is
the return to land, wages are the return to labour, and interest is the
return to capital. The law of interest can be stated thus: Interest is
the return that the use of capital equipment can obtain on marginal
land, i.e. the most productive land available to it without paying rent.
PROGRESS AND POVERTY, SIDE BY
So here's the alarming paradox of progress marching side by side
poverty. Those who have grabbed the best land get richer and richer
(from increasing rent) while the tenants and wage-earners get poorer
and poorer for having to accept lower and lower wages as the margin is
pushed out to less productive land). Henry George, in his classic Progress and Poverty
drove home this point, but took about 600 pages to deal with all the
complications and fine details not examined here. It's no wonder that
the unmasking of this great paradox - the title of his book - hit the
19th century world like a great revelation. And it's no wonder that
vested interests, through the neoclassical economics that they
fostered, knew they had to shut him up. And, by successfully silencing
him, it's no wonder that, despite all efforts, increasing and ever more
alarming disparities of wealth are the norm world-wide.
But, anyway, how many coconut-basketsful of LVT should we
Chuck away all those calculators, guys, for the answer is simple: Collect the rent, the whole rent, and
nothing but the rent.
Assuming that everyone has to do the same amount of work to produce
their differing yields of coconuts, when Friday came along then we'd
collect 2 coconuts per acre from Rob. This would leave 18 coconuts in
each of their hands, and 2 coconuts of rent or LVT collected. When
Saturday arrived we'd collect 5 from Rob and 3 from Friday, which would
leave 15 coconuts in everyone's hands and 8 coconuts of rent collected.
Result: everybody effectively shares equally in the bounty of Our One
Earth, and we have a natural, non-punitive form of revenue raising with
which to fund infrastructure.
We've already seen how speculators can presently hold on to idle
parcels of land, waiting for unearned increases in their value to
accrue to them. But here's another
curse of land speculation: by
locking up productive land, it forces newcomers out to less productive
land. By "pushing back the margin", the evil of speculation
simultaneously raises rents and lowers wages. LVT makes it impossible
for speculators to enjoy unearned income. ... Read the
Louis Post: Outlines of Louis F. Post's
Lectures, with Illustrative Notes and Charts (1894)
b. Normal Effect of Social Progress upon Wages and Rent
In the foregoing charts the effect of social growth is ignored, it being
assumed that the given expenditure of labor force does not become more productive.93
Let us now try to illustrate that effect, upon the supposition that social
growth increases the productive power of the given expenditure of labor force
as applied to the first closed space, to 100; as applied to the second, to
50; as applied to the third, to 10; as applied to the fourth, to 3, and as
applied to the open space, to 1. 94 If there were no increased demand for
land the chart would then be like this:
93. "The effect of increasing population upon the
distribution of wealth is to increase rent .. . in two ways: First, By
lowering the margin of cultivation. Second, By bringing out in land special
capabilities otherwise latent, and by attaching special capabilities
to particular lands.
"I am disposed to think that the latter mode, to
which little attention has been given by political economists, is really
the more important." — Progress and Poverty, book iv, ch.
"When we have inquired what it is that marks off
land from those material things which we regard as products of the land,
we shall find that the fundamental attribute of land is its extension.
The right to use a piece of land gives command over a certain space — a
certain part of the earth's surface. The area of the earth is fixed;
the geometric relations in which any particular part of it stands to
other parts are fixed. Man has no control over them; they are wholly
unaffected by demand; they have no cost of production; there is no supply
price at which they can be produced.
"The use of a certain area of the earth's surface
is a primary condition of anything that man can do; it gives him room
for his own actions, with the enjoyment of the heat and the light, the
air and the rain which nature assigns to that area; and it determines
his distance from, and in great measure his relations to, other things
and other persons. We shall find that it is this property of land, which,
though as yet insufficient prominence has been given to it, is the ultimate
cause of the distinction which all writers are compelled to make between
land and other things." — Marshall's Prin., book iv, ch. ii,
94. Of course social growth does not go on in this regular
way; the charts are merely illustrative. They are intended to illustrate
the universal fact that as any land becomes a center of trade or other
social relationship its value rises. ...
d. Effect of Confiscating Rent to Private Use.
By giving Rent to individuals society ignores this most just law, 99 thereby
creating social disorder and inviting social disease. Upon society alone,
therefore, and not upon divine Providence which has provided bountifully,
nor upon the disinherited poor, rests the responsibility for poverty and
fear of poverty.
99. "Whatever dispute arouses the passions of men,
the conflict is sure to rage, not so much as to the question 'Is it wise?'
as to the question 'Is it right?'
"This tendency of popular discussions to take an
ethical form has a cause. It springs from a law of the human mind; it
rests upon a vague and instinctive recognition of what is probably the
deepest truth we can grasp. That alone is wise which is just; that alone
is enduring which is right. In the narrow scale of individual actions
and individual life this truth may be often obscured, but in the wider
field of national life it everywhere stands out.
"I bow to this arbitrament, and accept this test." — Progress
and Poverty, book vii, ch. i.
The reader who has been deceived into believing that Mr.
George's proposition is in any respect unjust, will find profit in a
perusal of the entire chapter from which the foregoing extract is taken.
Let us try to trace the connection by means of a chart, beginning with the
white spaces on page 68. As before, the first-comers take possession of the
best land. But instead of leaving for others what they do not themselves
need for use, as in the previous illustrations, they appropriate the whole
space, using only part, but claiming ownership of the rest. We may distinguish
the used part with red color, and that which is appropriated without use
with blue. Thus: [chart]
But what motive is there for appropriating more of the space than is used?
Simply that the appropriators may secure the pecuniary benefit of future
social growth. What will enable them to secure that? Our system of confiscating
Rent from the community that earns it, and giving it to land-owners who,
as such, earn nothing.100
100. It is reported from Iowa that a few years ago a workman
in that State saw a meteorite fall, and. securing possession of it after
much digging, he was offered $105 by a college for his "find." But
the owner of the land on which the meteorite fell claimed the money,
and the two went to law about it. After an appeal to the highest court
of the State, it was finally decided that neither by right of discovery,
nor by right of labor, could the workman have the money, because the
title to the meteorite was in the man who owned the land upon which it
Observe the effect now upon Rent and Wages. When other men come, instead
of finding half of the best land still common and free, as in the corresponding
chart on page 68, they find all of it owned, and are obliged either to go
upon poorer land or to buy or rent from owners of the best. How much will
they pay for the best? Not more than 1, if they want it for use and not to
hold for a higher price in the future, for that represents the full difference
between its productiveness and the productiveness of the next best. But if
the first-comers, reasoning that the next best land will soon be scarce and
theirs will then rise in value, refuse to sell or to rent at that valuation,
the newcomers must resort to land of the second grade, though the best be
as yet only partly used. Consequently land of the first grade commands Rent
before it otherwise would.
As the sellers' price, under these circumstances, is arbitrary it cannot
be stated in the chart; but the buyers' price is limited by the superiority
of the best land over that which can be had for nothing, and the chart may
be made to show it: [chart]
And now, owing to the success of the appropriators of the best land in securing
more than their fellows for the same expenditure of labor force, a rush is
made for unappropriated land. It is not to use it that it is wanted, but
to enable its appropriators to put Rent into their own pockets as soon as
growing demand for land makes it valuable.101 We may, for illustration, suppose
that all the remainder of the second space and the whole of the third are
thus appropriated, and note the effect: [chart]
At this point Rent does not increase nor Wages fall, because there is no
increased demand for land for use. The holding of inferior land for higher
prices, when demand for use is at a standstill, is like owning lots in the
moon — entertaining, perhaps, but not profitable. But let more land
be needed for use, and matters promptly assume a different appearance. The
new labor must either go to the space that yields but 1, or buy or rent from
owners of better grades, or hire out. The effect would be the same in any
case. Nobody for the given expenditure of labor force would get more than
1; the surplus of products would go to landowners as Rent, either directly
in rent payments, or indirectly through lower Wages. Thus: [chart]
101. The text speaks of Rent only as a periodical or continuous
payment — what would be called "ground rent." But actual
or potential Rent may always be, and frequently is, capitalized for the
purpose of selling the right to enjoy it, and it is to selling value
that we usually refer when dealing in land.
Land which has the power of yielding Rent to its owner
will have a selling value, whether it be used or not, and whether Rent
is actually derived from it or not. This selling value will be the capitalization
of its present or prospective power of producing Rent. In fact, much
the larger proportion of laud that has a selling value is wholly or partly
unused, producing no Rent at all, or less than it would if fully used.
This condition is expressed in the chart by the blue color.
"The capitalized value of land is the actuarial 'discounted'
value of all the net incomes which it is likely to afford, allowance
being made on the one hand for all incidental expenses, including those
of collecting the rents, and on the other for its mineral wealth, its
capabilities of development for any kind of business, and its advantages,
material, social, and aesthetic, for the purposes of residence." — Marshall's
Prin., book vi, ch. ix, sec. 9.
"The value of land is commonly expressed as a certain
number of times the current money rental, or in other words, a certain
'number of years' purchase' of that rental; and other things being equal,
it will be the higher the more important these direct gratifications
are, as well as the greater the chance that they and the money income
afforded by the land will rise." — Id., note.
"Value . . . means not utility, not any quality inhering
in the thing itself, but a quality which gives to the possession of a
thing the power of obtaining other things, in return for it or for its
use. . . Value in this sense — the usual sense — is purely
relative. It exists from and is measured by the power of obtaining things
for things by exchanging them. . . Utility is necessary to value, for
nothing can be valuable unless it has the quality of gratifying some
physical or mental desire of man, though it be but a fancy or whim. But
utility of itself does not give value. . . If we ask ourselves the reason
of . . . variations in . . . value . . . we see that things having some
form of utility or desirability, are valuable or not valuable, as they
are hard or easy to get. And if we ask further, we may see that with
most of the things that have value this difficulty or ease of getting
them, which determines value, depends on the amount of labor which must
be expended in producing them ; i.e., bringing them into the place, form
and condition in which they are desired. . . Value is simply an expression
of the labor required for the production of such a thing. But there are
some things as to which this is not so clear. Land is not produced by
labor, yet land, irrespective of any improvements that labor has made
on it, often has value. . . Yet a little examination will show that such
facts are but exemplifications of the general principle, just as the
rise of a balloon and the fall of a stone both exemplify the universal
law of gravitation. . . The value of everything produced by labor, from
a pound of chalk or a paper of pins to the elaborate structure and appurtenances
of a first-class ocean steamer, is resolvable on analysis into an equivalent
of the labor required to produce such a thing in form and place; while
the value of things not produced by labor, but nevertheless susceptible
of ownership, is in the same way resolvable into an equivalent of the
labor which the ownership of such a thing enables the owner to obtain
or save." — Perplexed Philosopher, ch. v.
The figure 1 in parenthesis, as an item of Rent, indicates potential Rent.
Labor would give that much for the privilege of using the space, but the
owners hold out for better terms; therefore neither Rent nor Wages is actually
produced, though but for this both might be.
In this chart, notwithstanding that but little space is used, indicated
with red, Wages are reduced to the same low point by the mere appropriation
of space, indicated with blue, that they would reach if all the space above
the poorest were fully used. It thereby appears that under a system which
confiscates Rent to private uses, the demand for land for speculative purposes
becomes so great that Wages fall to a minimum long before they would if land
were appropriated only for use.
In illustrating the effect of confiscating Rent to private use we have as
yet ignored the element of social growth. Let us now assume as before (page
73), that social growth increases the productive power of the given expenditure
of labor force to 100 when applied to the best land, 50 when applied to the
next best, 10 to the next, 3 to the next, and 1 to the poorest. Labor would
not be benefited now, as it appeared to be when on page 73 we illustrated
the appropriation of land for use only, although much less land is actually
used. The prizes which expectation of future social growth dangles before
men as the rewards of owning land, would raise demand so as to make it more
than ever difficult to get land. All of the fourth grade would be taken up
in expectation of future demand; and "surplus labor" would be crowded
out to the open space that originally yielded nothing, but which in consequence
of increased labor power now yields as much as the poorest closed space originally
yielded, namely, 1 to the given expenditure of labor force.102 Wages would
then be reduced to the present productiveness of the open space. Thus: [chart]
102. The paradise to which the youth of our country have
so long been directed in the advice, "Go West, young man, go West," is
truthfully described in "Progress and Poverty," book iv, ch.
iv, as follows :
"The man who sets out from the eastern seaboard
in search of the margin of cultivation, where he may obtain land without
paying rent, must, like the man who swam the river to get a drink,
pass for long distances through half-titled farms, and traverse vast
areas of virgin soil, before he reaches the point where land can be
had free of rent — i.e., by homestead entry or preemption."
If we assume that 1 for the given expenditure of labor force is the least
that labor can take while exerting the same force, the downward movement
of Wages will be here held in equilibrium. They cannot fall below 1; but
neither can they rise above it, no matter how much productive power may increase,
so long as it pays to hold land for higher values. Some laborers would continually
be pushed back to land which increased productive power would have brought
up in productiveness from 0 to 1, and by perpetual competition for work would
so regulate the labor market that the given expenditure of labor force, however
much it produced, could nowhere secure more than 1 in Wages.103 And this
tendency would persist until some labor was forced upon land which, despite
increase in productive power, would not yield the accustomed living without
increase of labor force. Competition for work would then compel all laborers
to increase their expenditure of labor force, and to do it over and over
again as progress went on and lower and lower grades of land were monopolized,
until human endurance could go no further.104 Either that, or they would
be obliged to adapt themselves to a lower scale of living.105
103. Henry Fawcett, in his work on "Political Economy," book
ii, ch. iii, observes with reference to improvements in agricultural
implements which diminish the expense of cultivation, that they do not
increase the profits of the farmer or the wages of his laborers, but
that "the landlord will receive in addition to the rent already
paid to him, all that is saved in the expense of cultivation." This
is true not alone of improvements in agriculture, but also of improvements
in all other branches of industry.
104. "The cause which limits speculation in commodities,
the tendency of increasing price to draw forth additional supplies, cannot
limit the speculative advance in land values, as land is a fixed quantity,
which human agency can neither increase nor diminish; but there is nevertheless
a limit to the price of land, in the minimum required by labor and capital
as the condition of engaging in production. If it were possible to continuously
reduce wages until zero were reached, it would be possible to continuously
increase rent until it swallowed up the whole produce. But as wages cannot
be permanently reduced below the point at which laborers will consent
to work and reproduce, nor interest below the point at which capital
will be devoted to production, there is a limit which restrains the speculative
advance of rent. Hence, speculation cannot have the same scope to advance
rent in countries where wages and interest are already near the minimum,
as in countries where they are considerably above it. Yet that there
is in all progressive countries a constant tendency in the speculative
advance of rent to overpass the limit where production would cease, is,
I think, shown by recurring seasons of industrial paralysis." — Progress
and Poverty, book iv, ch. iv.
105. As Puck once put it, "the man who makes two
blades of grass to grow where but one grew before, must not be surprised
when ordered to 'keep off the grass.' "
They in fact do both, and the incidental disturbances of general readjustment
are what we call "hard times." 106 These culminate in forcing unused
land into the market, thereby reducing Rent and reviving industry. Thus increase
of labor force, a lowering of the scale of living, and depression of Rent,
co-operate to bring on what we call "good times." But no sooner
do "good times" return than renewed demands for land set in, Rent
rises again, Wages fall again, and "hard times" duly reappear.
The end of every period of "hard times" finds Rent higher and Wages
lower than at the end of the previous period.107
106. "That a speculative advance in rent or land
values invariably precedes each of these seasons of industrial depression
is everywhere clear. That they bear to each other the relation of cause
and effect, is obvious to whoever considers the necessary relation between
land and labor." — Progress and Poverty, book v, ch. i.
107. What are called "good times" reach a point
at which an upward land market sets in. From that point there is a downward
tendency of wages (or a rise in the cost of living, which is the same
thing) in all departments of labor and with all grades of laborers. This
tendency continues until the fictitious values of land give way. So long
as the tendency is felt only by that class which is hired for wages,
it is poverty merely; when the same tendency is felt by the class of
labor that is distinguished as "the business interests of the country," it
is "hard times." And "hard times" are periodical
because land values, by falling, allow "good times" to set
it, and by rising with "good times" bring "hard times" on
again. The effect of "hard times" may be overcome, without
much, if any, fall in land values, by sufficient increase in productive
power to overtake the fictitious value of land.
The dishonest and disorderly system under which society confiscates Rent
from common to individual uses, produces this result. That maladjustment
is the fundamental cause of poverty. And progress, so long as the maladjustment
continues, instead of tending to remove poverty as naturally it should, actually
generates and intensifies it. Poverty persists with increase of productive
power because land values, when Rent is privately appropriated, tend to even
greater increase. There can be but one outcome if this continues: for individuals
suffering and degradation, and for society destruction. ... read the book
Fred Foldvary: A
Geoist Robinson Crusoe Story
Once upon a time, Robinson G.
Crusoe was the only survivor of a ship
that sunk. He floated on a piece of wood to an unpopulated island.
Robinson was an absolute geoist. He believed with his mind, heart, and
soul that everyone should have an equal share of land rent.
Since he was the only person on this island, it was all his. He
surveyed the island and found that the only crop available for
cultivation was alfalfa sprouts. The land was divided into 5 grades
that could grow 8, 6, 4, 2, and zero bushels of alfalfa sprouts per
month. There was one acre each for 8, 6, and 4, and 100 acres of
2-bushel land. For 8 hours per day of labor, he could work 4 acres. So
he could grow, per month, 8+6+4+2 = 20 bushels of alfalfa sprouts, much
more than enough to feed on.
One day another survivor of a sunken ship floated to the island. His
name was Friday George. Friday was a boring talker and kept chattering
about trivialities, which greatly irritated Robinson. "I possess the
whole island. You may only have this rocky area," said Robinson. ... Read the whole piece
H.G. Brown: Significant
Paragraphs from Henry George's Progress & Poverty, Chapter 4: Land Speculation
Causes Reduced Wages
There is a cause, not yet adverted to, which must be taken into consideration
fully to explain the influence of material progress upon the distribution
That cause is the confident expectation of the future enhancement of land
values, which arises in all progressive countries from the steady increase
of rent, and which leads to speculation, or the holding of land for a higher
price than it would then otherwise bring.
We have hitherto assumed, as is generally assumed in elucidations
of the theory of rent, that the actual margin of cultivation always coincides
with what may be termed the necessary margin of cultivation — that
is to say, we have assumed that cultivation extends to less productive
points only as it becomes necessary from the fact that natural opportunities
are at the more productive points fully utilized.
This, probably, is the case in stationary or very slowly
progressing communities, but in rapidly progressing communities, where
the swift and steady increase
of rent gives confidence to calculations of further increase, it is
not the case. In such communities, the confident expectation of increased
produces, to a greater or less extent, the effects of a combination
among landholders, and tends to the withholding of land from use, in
of higher prices, thus forcing the margin of cultivation farther than
required by the necessities of production. ... read
the whole chapter