McConnell, Rent, Say's Law, etc.
[Reprinted from a Land-Theory online
discussion, 29 March 2000]
You asked about McConnell's treatment of George in his latest
He offers a fair discussion of George, but seems not to have thought
about it a lot. He apparently believes that an Economic Rent
collection occurs only when Rent is being used by a site. Therefore, a
vacant lot will incur no Rent. Rather, as if when you buy a theater
seat, but are unable to occupy it - you should get your money back.
He doesn't say this - but it is implied.. As is the supposed
difficulty in assessing land, and the fact that Rent collection
wouldn't be enough to pay what is needed by government. (Assume that
is so, but his praise of the economic advantages of a land tax should
at least make that tax the first to be collected, before all the other
impositions with their obviously unsound effects.)
I have advocated Say's Law for umpteen years. As I think we have
discussed before, supply and demand are the same thing, and don't let
anyone tell you anything different.
The act of supply is also the act of demand.
What these clowns do is to introduce money into the equation. Then
it's back to the arithmetical trick, where you prove that 3 is equal
to 4 (generally by something like multiplying each side by zero - 3x0
= 4x0 - then take out the zeros from each side and, by golly, 3 =
Perhaps we should outlaw "money" from economics and
concentrate on the real stuff -- food, clothing and shelter.
McConnell says two things spoiled Say's Law. The Great Depression and
Keynesian analysis. Obviously he doesn't understand the 'leak' in the
economy (and his pretty flow charts) caused by land speculation.
Speculative land-value like the return from any privilege is a kind of
one-way exchange (yes, Georgists are Zen, too).
That's the leak.
McConnell talks of Keynes' theory that widespread underspending
causes the problem.
He offers no clue as to why there is this underspending. It just
Whether you buy a truck for personal use, or a truck for your factory
(investment) makes no difference. In each case you swap your bologna
for a vehicle. The transfer balances.
There is also the silly Keynesian notion that savings and investment
get out of whack!
This only happens if you decide not to spend your bologna, but to
keep it under the mattress for a rainy day. (That conjures up some
If people do put some gold under the mattress (ah, that's better) it
causes no particular problem - even if lots of people do it.
The market notes lessened demand, prices re-arrange, everything
settles. I think that as modern economists frequently give some lip
service to the market process, they should try to understand it, but
then I'm incurably optimistic.
Oh, yes, one other point. I also think that Quantity Theory is
correct - not "crude". The error comes in the failure of the
clowns properly to define "money".
I just checked. No mention of Quantity Theory. Also, a single mention
of "market clearing", which I regard as a vital link in the
understanding of the market. "Market Clearing Price" is the
highest price a seller (producer) can get in the market while clearing
his shelves. A lower price means that his shelves are empty. A higher
price means that the goods "stick to his shelves".
How fast should they clear? That's the producer's decision. He knows
how quickly he wants the products to clear. The economist doesn't, for
before he has time to get his supply/demand curves drawn - conditions
have changed and so has the market clearing price.