"The neoclassical economists' view of their proper role is rather like that in The Realtor's Oath, which includes a vow 'To protect the individual right of real estate ownership.' The word 'individual' is construed broadly to include corporations, estates, trusts, anonymous offshore funds, schools, government agencies, institutions, partnerships, cooperatives, the Duke of Westminster, the Sultan of Brunei, the Medellin Cartel, Saddam Hussein, congregations, Archbishops, families (including criminal families) and so on, but 'individual' sounds more all-American and subsumes them all. This is a potent chant that stirs people to extremes of self-righteousness and siege mentality when challenged." - Professor Mason Gaffney, US Geonomic academic

It is difficult to get a man to understand something when his salary depends on his not understanding it. — Upton Sinclair (1878-1968)

Journalism in America is the business and practice of presenting the news of the day in the interest of economic privilege. — Upton Sinclair, 1920

Mason Gaffney: Henry George 100 Years Later: The Great Reconciler

Having taken shape in the 1880-1890s, Neo-Classical Economics (henceforth NCE) remained remarkably static. Major texts by Marshall, Seligman, and Richard T. Ely, written in the 1890s, went through many reprintings each over a period of 40 years with few if any changes. "It was for the Chautauqua Literary and Scientific Circle (1884) that I wrote the first edition of my Outlines, under the title Introduction to Political Economy. In this first edition of the Outlines there is to be found the general philosophy and principles that have shaped all future editions, including that of 1937" (Ely, 1938, p.81).2

To most modern readers, probably George seems too minor a figure to have warranted such an extreme reaction. This impression is a measure of the neo-classicals' success: it is what they sought to make of him. It took a generation, but by 1930 they had succeeded in reducing him in the public mind. In the process of succeeding, however, they emasculated the discipline, impoverished economic thought, muddled the minds of countless students, rationalized free-riding by landowners, took dignity from labor, rationalized chronic unemployment, hobbled us with today's counterproductive tax tangle, marginalized the obvious alternative system of public finance, shattered our sense of community, subverted a rising economic democracy for the benefit of rent-takers, and led us into becoming an increasingly nasty and dangerously divided plutocracy.

The present paper purports to identify the elements of Neo-Classical Economics (NCE) that were planted there to sap and confound George, and show how they continue to warp, debase and vitiate much of the discipline called economics. Once a paradigm is well-ensconced it becomes a power in itself, a set of reflexes to sort the true and false. Any exception spoils the web of interpretation through which art seeks to make human experience intelligible. Only the young, the brave, the energetic, the sincere and the skeptical can break off such fetters. This work is addressed and dedicated to them.

Neo-classical economics makes an ideal of "choice." That sounds good, and liberating, and positive. In practice, however, it has become a new dismal science, a science of choice where most of the choices are bad. "TANSTAAFL" (There Ain't No Such Thing As A Free Lunch) is the slogan and shibboleth. Whatever you want, you must give up something good. As an overtone there is even a hint that what one person gains he must take from another. The theory of gains from trade has it otherwise, but that is a heritage from the older classical economists.  

Henry George, in contrast, had a genius for reconciling-by-synthesizing. Reconciling is far better than merely compromising. He had a way of taking two problems and composing them into one solution, as we lay out in detail infra. He took two polar philosophies, collectivism and individualism, and synthesized a plan to combine the better features, and discard the worse features, of each. He was a problem-solver, who did not suffer incapacitating dilemmas and standoffs.

As policy-makers, neo-classical economists present us with "choices" that are too often hard dilemmas. They are in the tradition of Parson Malthus, who preached to the poor that they must choose between sex or food. That was getting right down to grim basics, and is the origin of a well-earned epithet, "the dismal science." Most modern neo-classicals are more subtle (although the fascist wing of the otherwise admirable ecology movement gets progressively less so). Here are some dismal dilemmas that neo-classicals pose for us today. For efficiency we must sacrifice equity; to attract business we must lower taxes so much as to shut the libraries and starve the schools; to prevent inflation we must keep an army of unfortunates unemployed; to make jobs we must chew up land and pollute the world; to motivate workers we must have unequal wealth; to raise productivity we must fire people; and so on.

The neo-classical approach is the "trade-off." A trade-off is a compromise. That has a ring of reasonableness to it, but it presumes a zero-sum condition. At the level of public policy, such "trade-offs" turn into paralyzing stand-offs, where no one gets nearly what he wants, or could get. It overlooks the possibility of a reconciliation, or synthesis, instead. In such a resolution, we are not limited by trade-offs between fixed A and B: we get more of both. ...

George came out of a raw, naive new colony, California, as a scrappy marginal journalist. Yet his ideas exploded through the sophisticated metropolitan world as though into a vacuum. His book sales were in the millions. Seven short years after publishing Progress and Poverty in remote California he nearly took over as Mayor of New York City, the financial and intellectual capital of the nation. He thumped also-ran Theodore Roosevelt, and lost to the Tammany candidate (Abram S. Hewitt) only by being counted out (Barker, pp.480-81; Myers, pp.356-58; Miller, p.11). Three more years and he was a major influence in sophisticated Britain. In 1889, incredibly, he became "adviser and field-general in land reform strategy" to the Radical wing of the Liberal Party in Britain, where he was not even a citizen. "It was inevitable that, when (Joseph) Chamberlain bowed out, George should become the Radical philosopher" (Lawrence, pp.105-06). It also happened that when Chamberlain bowed out, the Radical wing became the Liberal Party. It adopted a land-tax plank after 1891 (The "famous Newcastle Programme"), and came to carry George's (muted) policies forward under successive Liberal Governments of Campbell-Bannerman, Asquith, and Lloyd George.

How could a marginal man come out of nowhere and make such an impact? The economic gurus of the day, even as today, were in a scolding mode, blaming unemployment on faulty character traits and genes, and demanding austerity. They were not intellectually armed to refute him or befuddle his listeners. He had studied the classical economists, and used their tools to dissect the system. Neo-classical economics arose in part to fill the void, to squeeze out such radical notions, and be sure nothing like the Georgist phenomenon could recur.  ... read the whole essay

Bill Batt: Painless Taxation

Abstract
Real tax reform could do away with those taxes that are resented by the large proportion of our population. We could replace all taxes on wages and on interest by instead taxing economic rent. Rent is windfall income; it is income that arises not from the efforts of any person or corporation; it comes about as a surplus gain from common social enterprise. There is ample moral warrant for society to lay claim to that which it has created, as well as to that which no individual or party has earned. Analysis increasingly makes clear that economic rent in all its forms is far larger than official government figures indicate; in fact it is likely sufficient to supplant all current taxes on labor and capital (wages and interest) which are acknowledged to have so many negative effects. Recovering economic rent in all its manifestations by taxing its various bases actually can foster economic performance and yield other benefits that make it the natural source of revenue for governments. Such a tax is essentially painless. ...

The Tax Base

The next concern should be upon what base to impose a tax — not about taxing whom but taxing what. There are only three possibilities, as all revenue streams necessarily come from one of three factors of economic production —

1) upon resources found raw in nature (what was classically called land),
2) upon our labor, or
3) upon things created by human hands or minds (capital).

No other source exists; every possible tax must be on one or some combination of these parts. Each of these factors has its price: the price of land is counted in economic rent; the price of labor is in wages, and the price of capital (its liquid form) is in interest.

Any tax on capital has its downside effects, so that taxing savings causes people to save less, taxing consumption causes people to buy less, and taxing buildings causes people to build less. The result is that economists as well as businessmen usually frown upon taxing capital. Another alternative is to tax labor, but it is even more widely understood that taxing labor normally discourages people from working as much as they would in the absence of a tax. From this comes sentiment against taxing labor, even though for want of any alternative, people have today commonly come to accept it as a necessity. But electing to tax labor, just as for taxing capital, forecloses a discussion of the virtues of taxing land — not necessarily land as earth, but rather land as location. Yet land rent is the most attractive tax base of all, as rent is not earned; it is windfall income, entirely the result of being well situated in any market of scarce natural resources and where community demand (rather than one's own efforts) leads to an appreciation of that land's price. To be sure many people have learned to position themselves in situations where a land's market value is likely to rise — indeed these people come to think of themselves as astute investors. But the fact is that that market gain is not of their own doing at all; it is the result of common enterprise creating a surplus that comes to settle on land sites. An investment in land, in any form it might take, is speculation in greater or lesser degree.

Land in all its forms is a tax base that also conforms well to all the classic principles of sound tax theory as enumerated above. Land is classically taken to mean not just surfaces of the earth but places in time, in space, in any medium whether it be solid, liquid or gas, and even as a form of light, in the electromagnetic spectrum, and in life forms. One needs to return to 19th century classical economic definitions of the factors of production to appreciate the separate significance of land as it was understood in its manifold forms. One should ask how it is that land, so important to 19th century classical economic theory, has been given so little attention today in neoclassical economics. This is a story only now recovered from the dusty archives of academic economic history. Once understood and appreciated, it may be one of the greatest, if very silent, political revolutions of world history.[4] ... read the whole article

Rev. A. C. Auchmuty: Gems from George, a themed collection of excerpts from the writings of Henry George (with links to sources)

"Wise" and "Babes"

IT is as bad for a man to think that he can know nothing as to think he knows all. There are things which it is given to all possessing reason to know, if they will but use that reason. And some things it may be there are, that — as was said by one whom the learning of the time sneered at, and the high priests persecuted, and polite society, speaking through the voice of those who knew not what they did, crucified — are hidden from the wise and prudent and revealed unto babes. — A Perplexed Philosopher (Conclusion)

THAT thought on social questions is so confused and perplexed, that the aspirations of great bodies of men, deeply though vaguely conscious of injustice, are in all civilized countries being diverted to futile and dangerous remedies, is largely due to the fact that those who assume and are credited with superior knowledge of social and economic laws have devoted their powers, not to showing where the injustice lies but to hiding it; not to clearing common thought but to confusing it. — A Perplexed Philosopher (Conclusion)

POLITICAL economy is the simplest of the sciences. It is but the intellectual recognition, as related to social life, of laws which in their moral aspect men instinctively recognize, and which are embodied in the simple teachings of him whom the common people heard gladly. But, like Christianity, political economy has been warped by institutions which, denying the equality and brotherhood of man, have enlisted authority, silenced objection, and ingrained themselves in custom and habit of thought. — Protection or Free Trade, Chapter 1 econlib

Power of Thought

THE power of a special interest, though inimical to the general interest, so to influence common thought as to make fallacies pass as truths, is a great fact, without which neither the political history of our own time and people, nor that of other times and peoples, can be understood. A comparatively small number of individuals brought into virtual though not necessarily formal agreement of thought and action by something that makes them individually wealthy without adding to the general wealth, may exert an influence out of all proportion to their numbers. A special interest of this kind is, to the general interests of society, as a standing army is to an unorganized mob. It gains intensity and energy in its specialization, and in the wealth it takes from the general stock finds power to mold opinion. Leisure and culture and the circumstances and conditions that command respect accompany wealth, and intellectual ability is attracted by it. On the other hand, those who suffer from the injustice that takes from the many to enrich the few, are in that very thing deprived of the leisure to think, and the opportunities, education, and graces necessary to give their thought acceptable expression. They are necessarily the "unlettered," the "ignorant," the "vulgar," prone in their consciousness of weakness to look up for leadership and guidance to those who have the advantages that the possession of wealth can give. — The Science of Political Economy — Book II, Chapter 2, The Nature of Wealth: Causes of Confusion as to the Meaning of Wealth unabridged • abridged

WE may be wise to distrust our knowledge; and, unless we have tested them, to distrust what we may call our reasonings; but never to distrust reason itself. . . . That the powers with which the human reason must work are limited and are subject to faults and failures, our reason itself teaches us as soon as it begins to examine what we find around us and to endeavor to look in upon our own consciousness. But human reason is the only reason that men can have, and to assume that in so far as it can see clearly it does not see truly, is in the man who does it not only to assume the possession of a superior to human reason, but it is to deny the validity of all thought and to reduce the mental world to chaos. — The Science of Political Economy — Book III, Chapter 5, The Production of Wealth: Of Space and Time (unabridged)

SOCIAL reform is not to be secured by noise and shouting; by complaints and denunciation; by the formation of parties, or the making of revolutions; but by the awakening of thought and the progress of ideas. Until there be correct thought, there cannot be right action; and when there is correct thought, right action will follow. Power is always in the hands of the masses of men. What oppresses the masses is their own ignorance, their own short-sighted selfishness. — Social Problems — Chapter 22: Conclusion

LET no one imagine that he has no influence. Whoever he may be, and wherever he may be placed, the man who thinks becomes a light and a power. — Social Problems — Chapter 22: Conclusion

... go to "Gems from George"

Mason Gaffney: Property Tax: Biases and Reforms

The solution is to make the regressive taxes pinch landowners. The income tax, when new, was designed to do exactly that. Georgists like Congressman Henry George, Jr. and Warren Worth Bailey took the lead in shaping it to do so. Over time, though, it has changed into mainly a payroll tax, and as it changed it became increasingly popular with landowners. It served their greed and became the clarion call of their constant clamor for "property tax relief."

In 1942 Congress excluded 50 percent of "capital" gains from taxable income, and broadened the definition of "capital" assets. As top-bracket rates on "ordinary" income rose above 50 percent, Congress capped capital gains rates at 25 percent. Meantime, wage-tax withholding was sold as a wartime measure - "We must all do our duty." College professors were dutifully indoctrinating their students that the income tax is the perfect tax: fair, progressive, allocationally neutral, all at once.

Then income tax rates went wild, going as high as 92 percent on "ordinary" income (but capped at 25 percent for capital gains). Federal and state income taxes became the mainstay of public finance. Owners of income property soon learned to avoid almost all income taxes by claiming short tax lives by which fictitious inflated depreciation write-offs offset all their cash flow. Once a property has exhausted its depreciation "basis," owner A sells the property to owner B, who depreciates it all over again, and so on through several rounds. The only "recapture" of this excess depreciation is when A sells to B for a capital gain; in effect, the rent of income property shows up as "capital gains." This tax burden is minimized by keeping rates low on capital gains. ... Read the whole article

• land with agricultural value,
• (urban) land with largely locational value,
• land as the very soil itself, or
• even land in the broad and inclusive sense of meaning natural resources in general.

• Scene 1 has the magician display a rabbit in a cage.
• Scene 2 has the rabbit disappear.
• Scene 3 has the magician pull the "same" rabbit out of a hat.
• Scene 1 was the era of classical economics, when the 3 factors of production were labour, capital and land - and here the rabbit represents land principally in the sense of urban land with locational value, while other natural resources were accorded little or no value as they were considered to be drawn from an almost infinite storehouse.
  
• Scene 2 was the era of neoclassical economics, whose textbooks invariably started with a recognition that there were three factors of production but from then on treated land as simply a type of capital. Land was simply conflated with capital and the rabbit had disappeared!
  
• Scene 3 is the era of the environmental reform of economics, when the rabbit suddenly reappears in the form of natural resources which effectively exclude land. "Hang on!" squeals a freckle-faced boy in the front row, "that's a different rabbit!"

There is another kind of fundamentalist, the private property kind. The economics profession (my tribe) has, in recent years, largely abdicated its proper role as an arbitrator and gone over mainly to the side of private-property extremism. This is the essential meaning of "Neo-classical Economics," which is the idiom of most discourse in the field today, both in business and in the profession.

How did economics get so twisted? Don't blame Adam Smith, or David Ricardo, or John Stuart Mill, or John E. Cairnes, or Knut Wicksell, or Philip Wicksteed, sterling 19th Century writers. Rather, blame J.B. Clark, Karl Marx, Richard T. Ely, Alvin Johnson, Frank Fetter, Frank Knight, George Stigler, and a host of lesser figures who gradually warped economics into its present form. How did they do it?

• Man subjects land to private tenure. ...
• Man improves the raw land, pumping value into it. ... read the whole article

MG - It pervades the culture of the profession. Most members are looking for grants and promotions to put frosting on their cake. They call it, "Responding to the incentive structure," giggle nervously, and shuffle the blame onto "the system." They abandon personal moral responsibility, and quickly become part of the system themselves. They rationalize their own dereliction by attacking those who expose it, turning themselves into a generation of vipers. Grants come from those with money. Follow the money trail. Most administrators are even worse: they push faculty members to get outside grants, whatever the source. They only occasionally decline one when faced with embarrassing publicity.

Look at the names and histories of major grantors and patrons of the past: Stanford, Rockefeller, Russell Sage, Carnegie, Hewitt, Cornell, Wharton ... Look at the governing boards of major private and public institutions. It's all there to see, for those that have eyes to see, minds to draw the obvious conclusions, and hearts to carry on the good fight for the public interest. Upton Sinclair spelled it out pretty well back in 1923 or so, in "The Goose Step: a Study of Education in America".

It's partly a matter of coopting people by dangling money before them, and partly a matter of selecting and supporting those whose ideas are already more simpatico to the major grantors. It's hard to tell the difference, so it's hard to say who's been corrupted, and who corrupted himself at an early age....

All that interesting Georgist history is blanked out of most history books.

MG - Once the public domain was handed over to a handful of rich, politically connected people, they consolidated their position by taking control of the media, of education, and the churches. This has become so much a part of our being that people hardly think about it, and what it implies. No one needs to pay off the press: in most cities, the biggest single downtown landowner is the press itself. No one needs to pay off radio and TV stations: their spectrum assignments are the basis of their being.

• There are physics Profs. who consult for nuclear firms;
• entomology Profs. who consult for pesticide firms;
• Profs. of medicine who switch mothers' eggs around;
• Profs. of natural resource economics who are promoted for protecting the privileges of water hogs and land speculators;
• Profs. of agronomy who tailor their work to the needs of giant landowners; etc.

TPR - What's your take on the Pennsylvania story? Are the landlords running scared from the new 'Whiskey Tax Rebellion'?

MG - Pennsylvania allows its cities what is called "local option" on property tax policy. This gives each city the option of down-taxing buildings and up-taxing land. An accelerating number of cities have chosen this option, the latest being Allentown.

Landowners can't run, not without leaving their land behind; and the idea is not to scare them, but show most of them they have more to gain from un-taxing buildings than they lose from up-taxing land. Un-taxing buildings encourages new building, with all the gains that brings. When a city gets old and rundown, a lot of people get the point.

TPR - Explain exactly what would happen if America began shifting taxes off of everything else and onto land value.

MG - Exactly? The effects are too great, too pervasive to predict exactly.

• It would unleash massive forces of production, exchange, capital formation, and building, forces now trapped and frustrated in the coils of our complex, counterproductive tax mess.
• It would enhance the supply of goods and services while simultaneously lowering taxes on the poor and the workers, thus reconciling the needs of both efficiency and equity, in one stroke.
• It would raise taxes on the richest Americans, and alien landowners, too, without diluting in the least their incentives to work, to create capital, or to hire workers: it would actually fortify those incentives.
• It would spring people loose to renew large parts of our older cities, and rehab what they do not re place.
• It would let local school districts support education at much higher levels than now, without fear of driving away business.
• It would satisfy the demand for housing on land that Nature suited for housing, without invading flood plains, steep slopes, remote deserts, and other places that cost society dearly to serve and rescue.
• It would raise the demand for labor, taking people off welfare and keeping them out of jails.

One could go on at length, but Henry George summed it up in three words: "Association in Equality." Civilization advances when those conditions are met, and declines when they are denied. America has been denying them; we are all paying the price.

MG - Economic analysis, properly used, can serve the cause of environmentalism. The neo-classical economists abused both economics and the environment badly, as a byproduct of their drive to discredit classical political economy, and Henry George. John Bates Clark wrote that land is not scarce, that mankind can convert capital into land without limit, and create as much as we please. He wrote that natural resources have no value to mankind until and unless they are privatized; that privatization itself is what creates value. Our universities churn out thousands of new economists yearly, imbued with such attitudes. When Rachel Carson kicked off the new environmentalism in 1962 with her "Silent Spring," most economists trashed or disdained her: they 'd been trained that way.

Faced with the obvious growth of environmental sentiment, economists dealt with it as they have with other problems: they absorbed it in the discipline, then marginalized it. Now they can say it is part of economics, while they proceed to ignore or trivia lize it in their major policy pronouncements, wherein endless territorial expansion continues to be not just a goal, but a necessity to make the system work.

The legitimate goals of environmentalists, they coopt and distort. Here are two examples.

• They'll tell you that it's not OK to promote oil conservation by taxing withdrawals, but it is OK to do so by monopolizing the industry - monopolists are our best friends.
• They'll tell you it's not OK to check polluters by taxing their effluents, but it is OK to give them property rights to pollute, based on past emissions, and then buy those rights back from them at their price. You think I'm just making that up? I wish I were! The EPA is actually applying that idea around the country.

TPR - If Earth's ecosystem and poorest people will be the largest beneficiaries of the reform you advocate, how will it ever gain public acceptance in America's increasingly money-driven political system? If the press will never acknowledge it and the education system is so lost and blind, how can this reform ever happen? Are Georgists like the character in 1984?

MG - Every system must purify itself from time to time, or be destroyed. How long that takes depends on how strong a base you started from, and how strong your rivals are. The USA started from a strong base, built in part by the Progressives (including many Georgists) and the New Dealers (in spite of some of their destructive moves). Now, our leaders think we are riding high, just because the stock market is rising, even though real wage rates have fallen for 25 years, our debts are staggering, our liabilities and contingent liabilities exceed our assets, our biggest growth industry is building jails, our population is losing its literacy, our major cities have decayed, and so on. Marx was right about one thing, at least: the system carries the seeds of its own destruction.

Our leaders have done a good job of subverting our rivals, in part by forcing on them the ideas of neo-classical economics, the ideas that originated as part of the anti-Georgist campaigns. Japan gave us a good run for a while, but got suckered into aping our worst habits, and hence a good old-fashioned American-style land boom and bust that has knocked them out of the race for a while. Most of S.E. Asia has now followed suit.

It's a delicate balance. The haves can brainwash the have-nots just so long, until reality breaks through, as in 1929. When it does, you want to be ready with a plan tailored to the times, which Georgists at that time were not. Meantime, we keep the idea alive by recording and publicizing important facts, such as that the prosperity of Hong Kong was a product of Georgist policies; likewise that of Taipei, Sydney, Johannesburg, and other great cities.

• We support object lessons like those in Allentown, Pa., and go for a really visible one like Philadelphia.
• We combat moves to raise sales and income and payroll taxes, and awaken people to the benefits of lowering them.
• We awaken people to the possibilities of including more land income, and less payroll income, in the base of the income tax.
• We support efforts to democratize the media.
• We alert people to the corruption of academia and the kept think-tanks, and provide alternative venues by mobilizing the resources of the few Georgist-oriented foundations.
• We get on social action committees of various churches, and try to give their well-meant but often foggy-minded efforts some clearer focus, with more punch and less platitude.
• We remind people of their common rights, and the history of common property in land.
• We expose and ridicule the inconsistencies and hypocrisies of kept economists, hoping that embarrassment will convert those whom truth will not.
• We avoid the temptation to play Jeremiah, but seek to join the system and make it work better, even as Henry George and his friends did.  Read the whole article

Michael Hudson: The Lies of the Land: How and why land gets undervalued

YOU MAY THINK the largest category of assets in this countrly is industrial plant and machinery. In fact the US Federal Reserve Board's annual balance sheet shows real estate to be the economy's largest asset, two-thirds of America's wealth and more than 60 percent of that in land, depending on the assessment method.

This price appreciation is actually a "land gain", that is, it's not from providing start-up capital for new enterprises, but from sitting on a rising asset already in place, the land. Its value rises because neighbourhoods are upgraded, mortgage money is ample, and rezoning is favorable from farmland on the outskirts of cities to gentrification of the core to create high-income residential developments. The potential capital gain can be huge. That's why developers are willing to pay their mortgage lenders so much of their rent income, often all of it.

Of course, investing most surplus income and wealth in land has been going on ever since antiquity, and also pledging one's land for debt ("mortgaging the homestead") that often led to its forfeiture to creditors or to forced sale under distress conditions. Today borrowing against land is a path to getting rich -- before the land bubble bursts. As economies have grown richer, most of their surplus is still being spent acquiring real property, both for prestige and because its flow of rental income grows as society's prosperity grows. That's why lenders find real estate to be the collateral of choice.

Most new entries into the Forbes or Fortune lists of the richest men consist of real estate billionaires, or individuals coming from the fuels and minerals industries or natural monopolies. Those who have not inherited family fortunes have gained their wealth by borrowing money to buy assets that have soared in value. Land may not be a factor of production, but it enables its owners to assert claims of ownership and obligation, i.e., rentier income in the forms of rent and interest. 

Over the past 40 years I have specialised in the study of the factors that raise or lower the nation's overall real estate prices -- rising income and savings levels, shifting interest rates and the financial sector's supply of mortgage credit, as well as changes in the tax laws and related market-shaping rules. This work for Wall Street banks and institutional investors was burdened by the absence of reliable data on the value of land and buildings. The official nationwide real estate statistics do suggest that a politically motivated asymmetry is at work in the economy, benefiting real estate, which I shall now attempt to identify.

Hiding the free lunch

BAUDELAIRE OBSERVED that the devil wins at the point where he convinces humanity that he does not exist. The Financial, Insurance and Real Estate (FIRE) sectors seem to have adopted a kindred philosophy that what is not quantified and reported will be invisible to the tax collector, leaving more to be pledged for mortgage credit and paid out as interest. It appears to have worked. To academic theorists as well, breathlessly focused on their own particular hypothetical world, the magnitude of land rent and land-price gains has become invisible. But not to investors. They are out to pick a property whose location value increases faster rate than the interest charges, and they want to stay away from earnings on man-made capital -- like improvements. That's earned income, not the "free lunch" they get from land value increases.

Chicago School economists insist that no free lunch exists. But when one begins to look beneath the surface of national income statistics and the national balance sheet of assets and liabilities, one can see that modern economies are all about obtaining a free lunch. However, to make this free ride go all the faster, it helps if the rest of the world does not see that anyone is getting the proverbial something for nothing - what classical economists called unearned income, most characteristically in the form of land rent. You start by using a method of appraising that undervalues the real income producer, land. Here's how it's done.  ...

Note that the Fed's land-residual appraisal methods do not acknowledge the possibility that the land itself may be rising in price. Site values appear as the passive derivative, not as the driving force. Yet low-rise or vacant land sites tend to appreciate as much as (or in many cases, even more than) the improved properties around them. Hence this price appreciation cannot be attributed to rising construction costs. If every property in the country were built last year, the problem would be simple enough. The land acquisition prices and construction costs would be recorded, adding up to the property's value. But many structures were erected as long ago as the 19th century. How do we decide how much their value has changed in comparison to the property's overall value?

The Federal Reserve multiplies the building's original cost by the rise in the construction price index since its completion. The implication is that when a property is sold at a higher price (which usually happens), it is because the building itself has risen in value, not the land site. However, if the property must be sold at a lower price, falling land prices are blamed.

If it is agreed that any explanation of land/building relations should be symmetrical through boom and bust periods alike, then the same appraisal methodology should be able to explain the decline of property values as well as their rise. The methodology should be as uniform and homogeneous as possible. By that, I mean that similar land should be valued at a homogeneous price, and buildings of equivalent worth should be valued accordingly.

If these two criteria are accepted, then I believe that economists would treat buildings as the residual, not the land. Yet just the opposite usually is done. ...

Where did all the land value go?

AS REAL ESTATE AGENTS explain to prospective buyers, the three keys are "location, location, and location." So we are brought back to the role played by land-value gains in the strategy pursued by investors and developers.

In view of real estate's dominant role in the economy, it is ironic that no attempt has been made to provide better statistics. My research has shown that the Fed's methodology undervalues land by as much as $4.5 trillion. As matters stood in 1994, for instance, the Fed estimated the U.S. economy to hold some $20 trillion in real assets (excluding human capital, for which no official statistics are published). The land's value was calculated to be $4.4 trillion, and building values $9 trillion. My estimates based on historical values suggests that land rather than buildings represents two thirds of the nation's overall real estate value -- $9 trillion, leaving building values at just half this amount. ...

INCOME TAX LIABILITY may be minimized in two ways.

• The most general -- and also the most economically pernicious -- is through the tax deductibility of interest. ...
• The second way to minimize tax liability, is to depreciation the building, that is, annually deduct from taxable income part of the purchase price until it's all deducted and the building is "written off" ...

The tax laws governing depreciation thus turn largely on how much value is assigned to buildings relative to the land, which is not depreciable. Like manufacturers, real estate owners are permitted to count part of the revenue over and above their current expenses as a return of their capital investment, as distinct from taxable earnings on capital. No income taxes are levied on this part of their revenue. That is only fair, because an investor who buys a $100 bond only pays tax on the interest, not on the original $100 principal. Likewise, industrialists can recover their initial investment in plant and equipment without being taxed. Their "sunk cost" gets reimbursed, so that they get their capital back by the time the equipment wears out or becomes obsolete.

For real estate, however, the economics are unique. Machinery rarely can be re-depreciated, but this is not true of buildings as long as they are kept in proper repair. Maintenance and repairs typically consume about 10 percent of the rental value. For business owners, the explicit purpose of this expenditure is to maintain the building's value intact, so that it can survive year after year and avoid obsolescence while its site value rises. If a building is sold at a higher price, its assessment usually is raised. Suppose a property is sold for twice the $1 milliuon the owner paid for it. The local appraiser is likely to say; "I see you've sold your building for $2 million. Under my rule of thumb, I appraise the land as half this value, and the building as half, so that gives you a $1 million dollar building." Under this rule, the building that was formerly priced at $500,000 can be re-depreciated at a price that builds in this $500,000 gain. In this way a substantial portion of the rise in site value of non-depreciable land is treated as depreciable building value.  ...    Read the whole article

Heller and his contemporaries also knew that the incentive driving job-making investing is MRORAT, the Marginal Rate of Return after Taxes. [Economists of the 1960s, following Keynes, called it the MEC, or "Marginal Efficiency of Capital," an awkward phrase now little used. Awkward or not, and intended or not, it had great historical consequence by putting the emphasis where it belongs, on marginal rates of return, excluding rents.]

The marginal idea is pivotal. The Average ROR includes rents; the Marginal ROR is the pure return to new investment, Keynes' "inducement to invest," which is activating and functional.

These Heller ideas were invoked again by supply-siders in early Reagan times. However, policy over the course of the 80s lost the substance of that policy, keeping only the guise. Domestic leaders forgot the usage of "investment" in macro-economics.

They gradually slipped into an illusion that buying and holding and bidding up old assets like non-reproduceable lands and stocks would make jobs and produce goods. They forgot to distinguish old from new assets, and marginal from average returns on investment (average returns, recall, include rents). Both critics and supporters of "supply-side" policies now darken counsel by debating current policies in supply-side terms, when the terms no longer describe the policy at issue.

 Along with normal confusion, there is intelligence behind such error. The case for downtaxing gains depends in part on exploiting confusion, in order to pass off rent-raising as an incentive for saving and investing, and so to disguise its non-functionality and eminent taxability. The policy is called "supply side," but isn't.  

The litmus test of the sincerity of capital-formation champions is their treatment of irreproduceable land. Raising rents and land prices, and protecting the gains from taxation, is purely distributive, with no power to foster saving and investing. On the contrary, a higher share for rent and/or land purchase must mean a lower share for the investor in new capital.

Ignoring land and its distinctive attributes has the effect of treating land as though it were true, reproduceable capital, to be formed by saving and investing, to be routinely worn out and replaced in the normal course of life and business. It lets advocates of investing and capital formation abuse the legitimate case for macro incentives, exploiting the case to camouflage unearned, nonfunctional rents and increments to land value.[Brookings' major contribution to our subject is Henry Aaron (ed), 1976, Inflation and the Income Tax, with chapters by 15 eminent economists. Land is treated by none and is not in the index. [It is mentioned in passing only by one, George Lent.]]  ... read the whole article

Professor Gaffney has for the first time shown how powerful economic interests in American society essentially bought the leading figures of the newly-established American Economics Association with all the blandishments that can be used to influence academicians. Leading scholars were induced to change definitions of terms so that special interests would be advantaged. What were those interests? Primarily the railroad industry, which at the time was probably the most powerful political force in America. By changing definitions and conflating the land factor into capital, it was no longer essential for land rent to be paid in taxes, and the railroads, holders of some of the most valuable land in the nation, were thereby able to escape their full duty. This is an astonishing story, one never fully spelled out until now, and it explains both how the academic community was beholden to powerful interests and how many of the social problems we see today could have been avoided.

The classical tradition of economic thought was ably synthesized and represented by one dominant figure of the age: Henry George. All but forgotten today, perhaps in good part due to the assiduous disparagement of his economic foes, one should note that he was more widely known in his time in America than anyone except Thomas Edison. His 1879 book, Progress and Poverty, sold more copies throughout the world than any book till that time except the Bible. Born in Philadelphia the son of a publisher of religious books, he traveled to California as a young man to make his fortune as a journalist. But what he saw in land speculation and the exploitation of labor soon led him to study the classical economists and to write his ideas down. Upon publication of his book he shortly became known throughout the world, and traveled and lectured widely as a social reformer for the rest of his life. By the time he died he had become so famous that he almost won the mayoralty of the city of New York. He ran twice, losing to Tammany Hall the first time in what was probably a corrupt election (but beating the third-place finisher, Theodore Roosevelt) in 1886, and died four days before a second election he might have won in 1897. As a spellbinding orator and lucid writer, he captivated the world with his vision of societies made more just by a proper understanding of economics. Gaffney shows that it was George, not Marx, that was the primary threat to dominant interests in end-of-century United States. He had to be stopped, and he was.

In classical economics, the definition of capital grew out of labor mixed with earlier capital. Land, by conventional definition, was not capital, nor was it a component of wealth. Rather land was its own category. Conflating land into capital allowed land rent to be hidden and diluted in ways so that the unearned increment arising from social improvements fell to speculators rather than being returned to society in rent. The failure of society to recapture the appropriate level of land rent from titleholders led also to depression of labor wages at the margin, creating poverty and artificial scarcity of labor where otherwise it could be relieved. Hence the title of George's book, Progress and Poverty. George recognized that the value of any land parcel arose out of its social activity, not from anything which a titleholder might have done to it. He recognized that many, perhaps most, titleholders in land were speculators, reaping the benefit of others' investments, and selling out at last when their price was met. Hence it made sense that society had a right to a return on what it had brought about, as well as from the fact that those titles could never be other than leaseholds. That land rent, shortly confused by use of the words "single tax," was, to George, the rightful return to society.

The railroad barons of the 19th century were not just coincidentally the land barons. They also had strong holds on the founding and growth of the major American universities of the period, some of which carry their names. Johns Hopkins, Andrew Dickson White, Daniel Gilman, John D. Rockefeller, George Leland Stanford, Nicholas Murray Butler were all as attached to various universities in the country as they were to powerful railroad interests. They were able, through their control of universities either as actual presidents or as benefactors, to influence the dominant figures responsible for establishing the American Economic Association in 1885. The actual intrigue is too complex to be recounted here: who got appointed and promoted, who was funded in research, which were given endowed chairs, who got stock options, and so on. The preoccupation with defeating Henry George, Gaffney shows, was a paramount preoccupation of all of these figures. The central figures were:

• Francis Walker, first president of the AEA, then President of MIT and Director of the Census Bureau.
• Richard Ely, also founder of the AEA, and professor of economics at University of Wisconsin and later Northwestern, there granted his own Institute with railroad money.
• John Bates Clark, Professor of Economics at Columbia University, and whose patron was Julius Seelye, President of Amherst College and then Smith College.
• E.R.A. Seligman, Chairman of the Economics Department at Columbia University and scion of a wealthy banking family.

These figures are even today the honored founders of an esteemed profession. So great was their victory over rival schools of thought that they are a century later seen as paragons of clear thinking and virtue. The intrigue and the inside deals are long forgotten. The lineage to contemporary scholarship continues in a "chain unbroken from Seelye to Clark to Johnson to Knight to Stigler, Friedman, Harberger and now thousands of Chicago-oriented economists." Indeed, when Henry George ran for mayor of New York in 1897, it was against the wealthy patrician Seth Low, President of Columbia University, who had recently recruited Clark to come to Columbia. To really understand the academic tension of the period, one must look at the published papers, the speeches and debates, the newspaper articles, and the citations at the end of those articles. These, even more than the interlocking directorates of faculty appointments, explain how much George was opposed, perhaps more feared. Was it for the falsity of his views? Clearly not, as few critics then or since then have managed to strike a knock-out blow against his theories. Rather, it was the threat George represented to powerful interests that required him to be defeated, and in doing so they succeeded but only in the short run, as they were within decades victims of their very successes. Today we see that the railroads have failed in this country for lack of traffic. It will soon be evident why.

There were many arguments to be made for the classical tradition, the result of which would be to rely upon payment of rent of land according to its value to society. George recognized that land value is largely a function of how society has elected to invest in any general neighborhood; there is no argument for any one titleholder to reap the reward of what others have invested. Gaffney points out that, from the standpoint of economic theory, the framework had the following virtues:

• It reconciled common land rights with private tenure, free markets and modern capitalism, a growing and persistent problem as the industrial society took hold.
• It enabled the lowering of taxes on labor without raising taxes on capital.
• It reconciled equity and efficiency. It constituted a progressive tax because land is concentrated so much among the wealthy and because the tax cannot be shifted. It was efficient because it is neutral among different land-use options.
• It constituted no disincentive to business location or population settlement. In this way it encouraged the most efficient land use and discouraged sprawl.
• It created jobs without inflation, and raised government revenue without any penalty upon its base.
• It strengthened public revenues and at the same time promotes economy in government.

Those economists who today still persistently hold to the view that there is something special about land that make it unwise to treat as a form of capital are known as Georgists. They represent a small minority of the economics profession, but, little known as they are, they are among its most esteemed members.

Two-factor economics, however, had advantages to influential individuals and special interests. Land speculators who were positioned to profit from knowing where locational values would increase, or were in a position to cause those increases, could quickly and easily reap a private gain. Simply by holding title to parcels of real property, without doing anything at all to increase their value, one could quickly turn a profit. This is because the increment of unearned increases resulting from social investments were left for owners to reap rather than recovered by society. In three-factor economics, land rent reverted to society in an automatic and efficient manner. When a railroad magnate like George Leland Stanford extended the Southern Pacific track to the east of Los Angeles on land that he was granted by the government, all he then needed to do was to sit back and wait for the land sales to give him a return on that which was made more valuable by his investment in the line. All across America, land speculators learned that capturing monopoly titles to tracts of land allowed them to quickly and easily turn a "profit" on their investment yet hardly raising a finger....read the whole article

Bill Batt: The Compatibility of Georgist Economics and Ecological Economics

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.

To be sure, neoclassical economics emerged gradually over a period of some fifty years, and only reached its heyday, one might argue, with the arrival of Paul Samuelson. Samuelson, the MIT economist whose text has gone through some 16 editions and has outsold all other texts combined once said, “I don’t care who writes a nation’s laws . . . if I can write its economics textbooks.” 76 The neoclassical position developed ever greater abstract mathematical applications, with models ever more detached from “real world” market forces. This system of analysis now has reached a point of questionable utility due to its hermetic and Newtonian emulations.77 Little by little, one premise and formula after another have been cast aside, to a point now that there is a broad recognition among economic theorists at least that the discipline faces an intellectual crisis.78

As recently as a century ago classical economic thought still regarded land for the most part as the common heritage of mankind. From Adam Smith, through Thomas Malthus, David Ricardo, and finally with John Stuart Mill economic productivity was regarded as a function of three interacting factors: land, labor, and capital. John Locke also accepted these premises. To achieve optimal economic productivity, one had to exact the appropriate price from each of those factors. The price of labor was in wages; the price of capital was interest; and the price of land, particularly following the thinking of David Ricardo, was rent.   Rent in its classical sense means payment for the use of something in fixed supply, or, more generally, payments above the costs incurred for its creation. Disequilibriums and inefficiencies in economic development resulted if the appropriate prices were not paid for each factor. But, as we shall see, there were powerful interests in this country, bent on not seeing any rent extracted from land use, that persuaded the nascent economics profession at the end of the 19th century no longer to regard land as a separate factor and to redefine the terms of production instead in two-factor theory. This was concurrent with the inclusion of land as property, since called "real property."

As land came to be transferred to other nobility and usurped under title in fee simple rather than in usufruct, it came to be regarded as a private financial asset. Earlier it was regarded as part of nature, much like air, water, wind and weather. Accounting practices now listed land as an asset "owned" in fee simple, and as a liability on the other side of balance sheets in money "owed" to banks. This tendency has been extended today so that we have privatized much of our air, water, wind, and even sunlight. Land came to be simply one special kind of capital, nothing special, nothing requiring further treatment. Ricardo's Law of Rent became an artifact of intellectual history. The conflation of land into capital to create two-factor economics is one of the greatest paradigm shifts in the evolution of social philosophy. How the premises and terms of economic discourse have been changed has been documented for the first time in a new book by a California professor of economics, Mason Gaffney. The account is put forth in fascinating detail entitled, The Corruption of Economics. It was indeed a corruption of a discipline, a deliberate putsch by powerful economic forces with an interest in seeing such definitions changed, and we have all been paying the price since that time. This revealing thesis is what I really want to relate to you, and to explain the dire consequences it has had for us in our contemporary world. I have come to believe it; it makes sense to me, both historically and in contemporary analysis, from several perspectives.

As I explained, classical economics emerged from a school of thinkers known as the Scottish moralists in the latter part of the 18th century. There ultimately evolved three major schools of economic thought a century later,

• one continuing tradition of Adam Smith through J.S. Mill,
• a second being the aggressive and emerging school of Marxism, and
• the third a proposal for two-factor economics being pressed largely by interests in America.

Marxism was never a major force in United States; the primary challenge to the classical tradition came from what has since come to be known as neo-classical economics.

Professor Gaffney has for the first time shown how powerful economic interests in American society essentially bought the leading figures of the newly-established American Economics Association with all the blandishments that can be used to influence academicians. Leading scholars were induced to change definitions of terms so that special interests would be advantaged. What were those interests? Primarily the railroad industry, which at the time was probably the most powerful political force in America. By changing definitions and conflating the land factor into capital, it was no longer essential for land rent to be paid in taxes, and the railroads, holders of some of the most valuable land in the nation, were thereby able to escape their full duty. This is an astonishing story, one never fully spelled out until now, and it explains both how the academic community was beholden to powerful interests and how many of the social problems we see today could have been avoided.

The classical tradition of economic thought was ably synthesized and represented by one dominant figure of the age: Henry George. All but forgotten today, perhaps in good part due to the assiduous disparagement of his economic foes, one should note that he was more widely known in his time in America than anyone except Thomas Edison. His 1879 book, Progress and Poverty, sold more copies throughout the world than any book till that time except the Bible. Born in Philadelphia the son of a publisher of religious books, he travelled to California as a young man to make his fortune as a journalist. But what he saw in land speculation and the exploitation of labor soon led him to study the classical economists and to write his ideas down. Upon publication of his book he shortly became known throughout the world, and travelled and lectured widely as a social reformer for the rest of his life. By the time he died he had become so famous that he almost won the mayoralty of the city of New York. He ran twice, losing to Tammany Hall the first time in what was probably a corrupt election (but beating the third-place finisher, Theodore Roosevelt) in 1886, and died four days before a second election he might have won in 1897. As a spellbinding orator and lucid writer, he captivated the world with his vision of societies made more just by a proper understanding of economics. Gaffney shows that it was George, not Marx, that was the primary threat to dominant interests in end-of-century United States. He had to be stopped, and he was.

In classical economics, the definition of capital grew out of labor mixed with earlier capital. Land, by conventional definition, was not capital, nor was it a component of wealth. Rather land was its own category. Conflating land into capital allowed land rent to be hidden and diluted in ways so that the unearned increment arising from social improvements fell to speculators rather thabeing returned to society in rent.

The failure of society to recapture the appropriate level of land rent from titleholders led also to depression of labor wages at the margin, creating poverty and artificial scarcity of labor where otherwise it could be relieved. Hence the title of George's book, Progress and Poverty. George recognized that the value of any land parcel arose out of its social activity, not from anything which a titleholder might have done to it. He recognized that many, perhaps most, titleholders in land were speculators, reaping the benefit of others' investments, and selling out at last when their price was met. Hence it made sense that society had a right to a return on what it had brought about, as well as from the fact that those titles could never be other than leaseholds. That land rent, shortly confused by use of the words "single tax," was, to George, the rightful return to society.

The railroad barons of the 19th century were not just coincidentally the land barons. They also had strong holds on the founding and growth of the major American universities of the period, some of which carry their names. Johns Hopkins, Andrew Dickson White, Daniel Gilman, John D. Rockefeller, George Leland Stanford, Nicholas Murray Butler were all as attached to various universities in the country as they were to powerful railroad interests. They were able, through their control of universities either as actual presidents or as benefactors to influence the dominant figures responsible for establishing the American Economic Association in 1885. The actual intrigue is too complex to be recounted here: who got appointed and promoted, who was funded in research, which were given endowed chairs, who got stock options, and so on. The preoccupation with defeating Henry George, Gaffney shows, was a paramount preoccupation of all of these figures. The central figures were:

• Francis Walker, first president of the AEA, then President of MIT and Director of the Census Bureau.
• Richard Ely, also founder of the AEA, and professor of economics at University of Wisconsin and later Northwestern, there granted his own Institute with railroad money.
• John Bates Clark, Professor of Economics at Columbia University, and whose patron was Julius Seelye, President of Amherst College and then Smith College.
• E.R.A. Seligman, Chairman of the Economics Department at Columbia University and scion of a wealthy banking family.

These figures are even today the honored founders of an esteemed profession. So great was their victory over rival schools of thought that they are a century later seen as paragons of clear thinking and virtue. The intrigue and the inside deals are long forgotten. The lineage to contemporary scholarship continues in a "chain unbroken from Seelye to Clark to Johnson to Knight to Stigler, Friedman, Harberger and now thousands of Chicago-oriented economists." Indeed, when Henry George ran for mayor of New York in 1897, it was against the wealthy patrician Seth Low, President of Columbia University, who had recently recruited Clark to come to Columbia. To really understand the academic tension of the period, one must look at the published papers, the speeches and debates, the newspaper articles, and the citations at the end of those articles. These, even more than the interlocking directorates of faculty appointments, explain how much George was opposed, perhaps more feared. Was it for the falsity of his views? Clearly not, as few critics then or since then have managed to strike a knock-out blow against his theories. Rather, it was the threat George represented to powerful interests that required him to be defeated, and in doing so they succeeded but only in the short run, as they were within decades victims of their very successes. Today we see that the railroads have failed in this country for lack of traffic. It will soon be evident why.

There were many arguments to be made for the classical tradition the result of which would be to rely upon payment of rent of land according to its value to society. George recognized that land value is largely a function of how society has elected to invest in any general neighborhood; there is no argument for any one titleholder to reap the reward of what others have invested. Gaffney points out that, from the standpoint of economic theory, the framework had the following virtues:

• It reconciled common land rights with private tenure, free markets and modern capitalism, a growing and persistent problem as the industrial society took hold.
• It enabled the lowering of taxes on labor without raising taxes on capital.
• It reconciled equity and efficiency. It constituted a progressive tax because land is concentrated so much among the wealthy and because the tax cannot be shifted. It was efficient because it is neutral among different land-use options.
• It constituted no disincentive to business location or population settlement. In this way it encouraged the most efficient land use and discouraged sprawl.
• It created jobs without inflation, and raised government revenue without any penalty upon its base.
• It strengthened public revenues and at the same time promotes economy in government.

Those economists who today still persistently hold to the view that there is something special about land that make it unwise to treat as a form of capital are known as Georgists. They represent a small minority of the economics profession, but, little known as they are, they are among its most esteemed members.

• One: By 1900 the frontier was gone. The country was virtually all fenced in. Historian Frederick Jackson Turner in the 1890s underscored the frontier's importance. Its free or cheap land had been a safety valve for labor. Workers who felt exploited could go West--strike out on their own.
• Two: Prodigious concentrations of wealth materially altered the economic landscape. Some of these were based on railway land giveaways. Most were tied to natural resource monopolies -- of coal, timber, oil, cattle lands and so forth -- whose owners found ways to fend off land taxes.
• Three: A shift from local to federal power occurred in the political arena. The national government had to grow to save the Union and execute the Civil War. It also expanded to combat abuses of giant combines and trusts. To underwrite this growth, Congress turned primarily to tax-ing production and incomes.
• Four: At the urging of land monopolists who practically owned many state legislatures in the late 1800s, state governments discarded property taxes, replacing them with income and sales taxes. Local governments also gradually began to decrease their reliance on property taxes.
• Five: The property tax itself was transformed. It became less a tax on land values, increasingly a tax on improvements--that is, on houses, stores, offices and other edifices on the land. These factors gave rise to slums, to panics (as depressions were then called), and a widening gap between the haves and have-nots. As a corrective, Henry George in his 1879 masterwork, Progress and Poverty, urged Americans to address the land problem. He inspired a large popular following, but many academics, politicians, economists and captains of industry asked scornfully, "What land problem?"

• Ecologists know it.
• Sprawl and crawl people know it.
• Many elected officials, homebuyers, and people trying to start a farm or a business know it.

• Habitat volunteers build houses for the poor, making recipients and its volunteers feel real good. This is a fine example of charity combined with self-help, and it spreads awareness of a great social ill. But more housing is being abandoned and demolished than Habitat is able to build.
• This same treadmill effect undermines federal efforts. HUD has spent billions on public housing, urban renewal and enterprise zones. Some of these programs have retarded urban decline but their strongest advocates would not claim they have come close to stopping or reversing it.
• Cities offer tax abatements to revive decaying business districts. Yet after new buildings are established, the cities hit owners with the same tax burden that helped cause decay in the first place.
• Some builders turn to what I call "designer sprawl." They mimic old towns and are clearly less wasteful of land than unplanned sprawl. Yet they often invade wheat fields and wood lots far from the job centers, transit lines and cultural institutions that comprise real communities -- while large quantities of usable sites that are well served by infrastructure lie fallow in those real cities and towns. These stumbling efforts recall an architectural parallel -- when people first tried rather pathetically to restore old neighborhoods with false storefronts, tarpaper bricks and Permastone.

• Wilks, H. Mark, 1964. Rating of Site Values: Report on a Pilot Survey at Whitstable, abr. ed. (London: Rating and Valuation Association), p.14
• Wendt, Paul, Dynamics of Central City Land Values, Research Report 18 (Berkeley, Calif.: Real Estate Research Program, University of California, 1961), pp.40, 42
• Cowan, Bronson, 1958. A Graphic Summary of Municipal Improvement and Finance, International Research Commission on Real Estate Taxation (New York: Harper and Bros., 1958), passim.
• Griffenhagen Kroeger, Inc., "The Effects of Tax Exemption for Improvements and/or Personality," mimeographed (San Francisco (?): Assembly Interim Subcommittee on Tax Exemption, California Legislature, November 1962), pp.25 40
• Schwartz, Eli, and James Wert, An Analysis of the Potential Effects of a Movement Toward a Land Based Property Tax (Albany, N.Y.: Economic Education League, 1958), pp.19, 23
• Gaffney, Mason, 1970. “Adequacy Of Land As A Tax Base.” Published in Daniel Holland (ed.), The Assessment of Land Value. Madison: University of Wisconsin Press, pp.157-212, esp. Table 9.3