Henry George: Footnote
in the History of Economic Thought
Kris Feder, Ph.D.
[A paper presented at the History of Economics
Society, Babson College Conference, 12 June, 1994. Revised by the
author for publication, July 1994]
3. NOT PANACEA BUT PARADIGM
A. THE GEORGIST RESEARCH PROGRAM
The agenda for Georgist economic research today ranges over diverse
fields. Some of the most interesting questions have been largely
ignored, both by critics and by Georgists themselves. A fundamental
one is the issue of whether annual rent or capitalized value is the
preferred tax base. Opinions differ. George was the first to speak of
land value taxation rather than rent taxation, but he appears to treat
them interchangeably, never specifying the mathematical relationship
between the two. Rent taxation and LVT are equivalent when rents and
interest rates are stable over time, but not otherwise.
In macroeconomic theory, nonproduced land should be incorporated into
models with labor, produced inputs, time, money, credit, and taxes.
The role of land speculation in the business cycle, which depends on
financial institutions and on expectations formation, is not yet well
understood. Nor is the relationship between land tenure arrangements
and long run economic growth.
In the field of public choice, Georgists can contribute to the
growing literature on the incentives faced by voters, legislators,
politicians, and government bureaucrats under alternative
constitutional structures. There are intricate questions concerning
the appropriate distribution of land rents among the different levels
of a federal system. [
Another neglected issue is the definition of the unit of assessment
employed for tax purposes. Whether the assessment unit should be
defined by the extent of ownership or on some other basis may have
important implications for the measurement of rent and, possibly, for
productive incentives. [Vickrey: 1970] The problem of the
assessment unit is intimately connected with a set of questions
pertaining to the treatment of externalities in the Georgist program.
B. THE SYNTHESIS
Equity and Efficiency
It has long been standard in mainstream economics to lament a painful
"trade-off" between equity and efficiency. Redistributive
policies such as progressive income taxes and public assistance
typically dampen productive incentives, but policies to promote
economic efficiency, such as favorable tax treatment of savings or
capital gains, tend to widen inequality.
According to Henry George, however, a correct interpretation of
economic principles reveals that the goals of efficiency and equity
are fundamentally harmonious. In particular, land rent constitutes a
natural source of government revenue; its use for that purpose is both
efficient and fair. More broadly, a society without economic (as well
as political) justice is plagued by systemic inefficiencies, rooted in
ill-managed conflict. In the very long run, growing inequality arising
from institutional maladjustments can, and does, bring civilizations
down. Equity is necessary for intergenerational efficiency.
Capitalism and Socialism
George wrote that both the "capitalist" ideal of individual
liberty and private property and the "socialist" vision of
equality and community require the public collection of resource rents
for public uses. Once it is accepted that natural resources rightfully
belong to everyone, there is a clear rationale for a fiscal structure
which guarantees every citizen a minimum income that represents, not
public charity, but the individual's rightful share of common
property. At the same time, the reward of individual productive effort
would be undisturbed by burdensome taxation.
In the aftermath of stunning political changes worldwide, socialism
is widely perceived to have failed. Yet the Great Society has been no
stunning success either. Schumpeter's confidence in the power of
capitalism to eliminate poverty and want is an embarrassment today. [1950;
see Sievers, 1962: 40-45] The measures of welfare capitalism,
which treat the symptoms of maladjustment by forcible redistribution,
hinder the efficient operation of the capitalist engine, just as
Schumpeter warned -- but they do not work anyway.
What Georgists propose amounts to nothing less than a new paradigm of
social organization. [Harrison, 1992] They view government as
the guardian of the natural and social resources which are the common
property of all. Their program, by addressing the distributional
failures which made socialism appear attractive or inevitable, offers
an alternative which can preserve and enhance the vitality of the
market system. George himself said it best:
This revenue arising from the common property could be
applied to the common benefit, as were the revenues of Sparta.
...Government would change its character, and would become the
administration of a great co-operative society. It would become
merely the agency by which the common property was administered for
the common benefit. [George, 1879: 456-457]
Increasingly, it appears, some highly regarded mainstream economists
have expressed sympathy with the Georgist paradigm. A dozen years ago,
for example, Kenneth Boulding wrote:
One cannot help feeling that if only George rather than
Marx had been the dominant influence on reformers in the last
hundred years, again how much richer and happier the world would be.
...The neo-Georgist view ... would represent almost the only
genuinely valid criticism of revolutionary Marxism in terms of
Marxism's own ideals of human welfare and the abolition of poverty.
[Boulding, 1982: 8-10]
Gaffney puts the case succinctly:
Georgist policy has been shown as a means to revive dying
cities, and in the process to reconcile equity and efficiency, to
reconcile supply side economics with taxation, and to reconcile
capital formation with taxation of the rich. It can be seen as a
means of harmonizing collectivism and individualism, in the most
constructive possible ways. [Gaffney, 1989: 15]
In 1990, thirty distinguished economists, Nobel prize winners among
them, signed an open letter to Soviet President Mikhail Gorbachev
urging him to resist public pressure to privatize land:
[T]here is a danger that you will adopt features of our
economies that keep us from being as prosperous as we might be. In
particular, there is a danger that you may follow us in allowing
most of the rent of land to be collected privately. ...For
efficiency, for adequate revenue and for justice, every user of land
should be required to make an annual payment to the local
government, equal to the current rental value of the land that he or
she prevents others from using. [Tideman, et al., 1990, in
Noyes, 1991: 225-228]
C. THE CATALYST
If the Georgist philosophy indeed stands ready to undergo a revival,
it is easy to find the reasons. For one, the recent theoretical
developments in urban economics and other fields have generated a new
appreciation for the single tax. For another, in the United States at
least, local governments are in deepening crisis. Georgist policy
offers a ready tool for encouraging urban renewal while at the same
time replenishing municipal budgets. Perhaps most significantly,
environmental issues have come to the forefront of public attention,
fueling a debate about how scarce natural resources, including
so-called "environmental" resources, may be shared fairly
and efficiently. The Georgist paradigm can potentially offer a
conceptual framework and an ethical basis for integrating these and
other issues of public policy.
The eleven contributors to a recent volume, Now the Synthesis:
Capitalism, Socialism, and the New Social Contract, agree that "the
world is at the crossroads of a new epoch." [Noyes, 1991: 1]
It is their thesis that the philosophy of Henry George, particularly
his mechanism for socializing land rent, offers a workable synthesis
of capitalism and socialism which avoids the fatal flaws of each.
Moreover, they suspect that the global environmental crisis will
provide the catalyst for the transformation. The same conviction is
expressed in another recent collection, Commons Without Tragedy:
The Social Ecology of Land Tenure [Andelson, 1991].
Natural resource scarcity and pollution impress upon all the
realization that economic land is scarce and valuable. International
negotiations to manage the global commons must solve the problem of
efficient allocation of yet-unowned resources and equitable
distribution of their rents.
Are We All Georgists Now?
Anyone familiar with the writings of Henry George can see ideas
reminiscent of George cropping up in public discussions. Supply-siders
decry burdensome taxes on productive activity. Environmentalists
interested in "sustainable development" seek to ensure that
natural resources are shared equitably among all generations.
Economists recommend effluent charges and marketable permit systems to
ration the use of atmosphere and water. There are calls to increase
grazing and other fees for commercial use of public lands. Development
economists are beginning to admit that the problems of population and
world poverty cannot be solved without radical reform of land tenure
However, the presumed efficiency/equity trade-off manifests itself as
a conflict between economics and environment, and few participants see
how the single tax principle offers a resolution. They recognize no
link between their own views and those of the forgotten crackpot,
The environmental crisis can be the catalyst for public acceptance of
rent taxation, but both scholars and political activists must show
that the sort of arguments now gaining attention for effluent fees
(and the like) for the use of air and water resources apply as well to
user charges for ordinary ground rent. It is necessary to explicate
the connection between the Georgist rent tax, and Pigouvian taxes and
subsidies designed to "internalize" externalities. [Vickrey,
1970] The treatment of depletable resources is also tied to these
More broadly, whether George re-enters history in the coming years
may hinge in large part on the demonstration that the Georgist
paradigm not only fits with sound micro- and macroeconomlc theory, but
can help to unify and simplify the fields of land economics, natural
resource economics, environmental economics, urban economics, and the
economics of the public sector.
NOTE: Parts of this paper are based on my dissertation, "Issues
in the Theory of Land Value Taxation," Temple University, 1993.
An earlier version was presented at the 21st annual meeting of The
History of Economics Society, Babson College, June 12, 1994.
of Economics and Sociology
the National Tax Association
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