A Most Harmonious Disagreement

by Lindy Davies

Economists seem to be pretty good at consolidating corporations’ profits, yet they seem powerless to address persistent social problems such as persistent poverty and climate change. Why is mainstream economics so inept? Could it be that the key factor they’re missing is right under their feet?

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

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

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

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

— lower prices (for producers and consumers would be unburdened by taxation) — lower rents (due to the reduction or elimination of land speculation)

Both of which would lead to:

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

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

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

Samuelson’s discussion of rent, and the single tax, comes in a chapter devoted to income distribution. But “this theoretical section,” he writes, “may be skipped in brief courses.” Furthermore, although he lauds the efficiency of LVT in this optional section, he refers to it not at all, not even in a cross-reference, in later chapters on taxation policy and alternative economic systems. In effect, Samuelson whispers that land rent is the ideal source of public revenue, and then, without batting an eye, launches right back into his mainstream lecture.

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One Response to A Most Harmonious Disagreement

  1. As Georgists, we tend to think that all we have to do is to explain about how LVT works, and the good things about what it can do, in order to get some immediate support. This is not often true, and even when it is the limited kinds of support are unlikely to be effective, because the people whose views have been changed are not in positions of power nor indeed in politics or civil administration.

    We need a longer-term answer which through care and patience is more certain to achieve the LVT result that we desire. It must come through better education about macroeconomics, to include but not to be dominated by what Georgists are preaching. There has recently been a lot of justified criticism about the unscientific and unsatisfactory ways of the teaching of social science, particularly economics in the universities. The traditional methods no longer seem to be acceptable. A more balanced attitude to the need for better and more complete knowledge about national economics at a higher standard than before, is the right way to go.

    My recently published book called “Consequential Macroeconomics–Rationalizing About How Our Social System Works” is the means for achieving this happier state, for what was previously called the dismal science. This book (please see its description on Amazon or Barns and Noble etc.), contains irrefutable logic of a social engineering kind and it supplies the means for REALLY knowing about our how our society functions. It is a tool for investigating national policy not the policy itself, and the case for introducing LVT is used as an example rather than a policy statement. I am willing to share it with serious reviewers at no cost, if you send me a message chesterdh@hotmail.com

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