Review of the Book

America's Economic Moralists,
A History of Rival Ethics and Economics

by Donald E. Frey

Edward J. Dodson

[America's Economic Moralists, A History of Rival Ethics and Economics, by Donald E. Frey, published by the State University of New York Press, Albany, 2009 Reviewed by Edward J. Dodson, October 2010]

INTRODUCTION

When I first began reading this volume by Donald Frey, my intention was to provide potential other readers with a brief overview and comments on some of the author's main points. What I have ended up writing is something different, combining elements of a review with an addendum to the story he tells. The material I have added comes from what I perceive as important issues not specifically addressed by Professor Frey. A major influence on how I have approached this review is the history of how political economists and economists have responded to the land question (i.e., the ethics of private versus public ownership of nature and the rent of nature). Never resolved, the land question continues to generate debate and proposals for reform, albeit at the margin of economics as a sub-discipline within the social sciences.

A fundamental principle of cooperative individualism - the system of moral principles I have come to embrace -- is that the earth is the birthright of all persons, equally. If one accepts this principle as essential to just law, the challenge is to develop a practical scheme for achieving this objective. Among all of the economic moralists introduced by Professor Frey, only Henry George met that challenge. And so, my contributions to the story will focus on Henry George's perspectives, on precursors who reached very similar conclusions, and the influence George and his collaborators had on other economic moralists.

COMMENTARY ON PROFESSOR FREY'S THEME

Donald Frey teaches economics at Wake Forest University, and this book is uncharacteristic of the research normally undertaken by an economics professor. He takes on the interdisciplinary subject of where the line is rightfully drawn between individual and societal rights. His narrative is on the whole descriptive until his final chapter, which allows the reader to reach his or her own moral or ethical conclusions.

Professor Frey selects key spokespersons as representative of the dominant perspectives arising out of the religious Enlightenment, pointing to the significant differences these forces had on the lives of people who remained in the Old World versus those who migrated to North America and the generations that followed. From there, he brings the reader forward through time, introducing the major shifts in thinking on what motivates individuals as participants in economic affairs. On one side of the debate are those whose sense of "economic morality" is little more than justification for the status quo and against societal intervention on behalf of those who are for any reason deprived of what Mortimer Adler referred to in his writing as the goods of a decent human existence. The 17th and 18th century writers explained the existence of widespread poverty sometimes as "God's will," sometimes as a consequence of "natural scarcity," and sometimes because of "free human choices." Their belief in natural law brought them to ignore or explain away the terrible conditions under which many people were forced to live.

In the presentation of this historical story, Professor Frey is forced to make choices in order to keep the book from turning into a multi-volume analysis. He provides some insight into the struggle individuals faced to move beyond the orthodoxy of their religious beliefs as well as longstanding cultural norms. For those who thought of themselves as political economists, they faced the added challenge of establishing standards of objectivity generally attached to a discipline with scientific aspirations. Prejudice and bias proved almost impossible to overcome, even among those who offered economic theories challenging conventional wisdom. He observes that for those of us living in the United States, we have a long history of adherence to ideals not necessarily supported by reality:

"American economic morality has been profoundly shaped by its Protestant colonial origins, which established an individualistic faith and individualistic economics, and which invested the individual with a host of rights and responsibilities." [p.23]

Understanding what emerged over time as the American System requires a more in depth treatment than was possible in this volume. There is, for example, the fundamental importance of access to free land enjoyed by the early European arrivals to North America and Jefferson's vision of a democratic republic populated by self-sufficient, freeholders. Moreover, for the first century and a half of the European-American experience, the day-to-day requirements of self-governance were reinforced by a distant, somewhat benign authority. This was the period described by historian Charles Andrews in The Colonial Background of the American Revolution (1961) as one of salutary neglect. Benjamin Franklin, described by Professor Frey as a "secular moralist" [p.25], also developed into one of the era's great practical philosophers who sought to reconcile intellectually the contradictions between "autonomy" and "relational" individualism. Franklin carried his real world experience of life in North America to the Old World, where he came to embrace the Physiocratic morality taught by Francois Quesnay and Anne Robert Jacque Turgot. What is also true, however, is that the Physiocratic ideal of community was vigorously opposed and resisted, and Benjamin Franklin's example of the self-made individual reinforced the conventional wisdom rising among his contemporaries. Yet, as Professor Frey observes:

"… Franklin devoted his later life to the service of his new country. It would have been difficult to have predicted his later deeds from the values promoted in his earlier teachings." [p.29]

For all his fame and the respect he earned by his deeds, the conversion in moral principles he experienced pulled him from the mainstream. He became a voice in the wilderness, as evidenced by this letter he wrote to Robert Morris in 1783:

"All Property, indeed, except the Savage's temporary Cabin, his Bow, his Matchcoat, and other little Acquisitions, absolutely necessary for his Subsistence, seems to me to be the Creature of public Convention. Hence the Public has the Right of Regulating Descents, and all other Conveyances of Property, and even of limiting the Quantity and the Uses of it. All the Property that is necessary to a Man, for the Conservation of the Individual and the Propagation of the Species, is his natural Right, which none can justly deprive him of: But all Property superfluous to such purposes is the Property of the Publick, who, by their Laws, have created it, and who may therefore by other Laws dispose of it, whenever the Welfare of the Publick shall demand such Disposition. He that does not like civil Society on these Terms, let him retire and live among Savages. He can have no right to the benefits of Society, who will not pay his Club towards the Support of it."

Franklin was not a proponent of laissez-faire as that term has come to be used. The very idea of laissez-faire as integral to the American System was anathema to the Physiocratic vision of laissez-faire, laissez-passer -- which called for the removal of entrenched privileges as a condition to the full exercise of individual liberty. Henry George would later define this societal condition as existing when there is "a fair field with no favors." What Professor Frey documents is the sad history of how this potentially liberating perspective was corrupted to justify the unregulated and unchallenged pursuit of self-interest.

Defenders of the status quo have celebrated Adam Smith as the principal architect of laissez-faire, but Smith deserves more thoughtful treatment than that offered in this volume. Professor Frey writes merely that "Smith expressed little concern about economic inequality; the rich 'are led by an invisible hand to make nearly the same distribution of the necessaries of life, which would have been made had the earth been divided into equal portions'. His meaning was clear: inequality of wealth hardly makes a difference in anyone's access to a basic standard of living. Thus Smith dismissed inequality as a relevant issue for moral discourse." [p.37] And yet, Smith qualifyingly embraced Physiocratic principles of community and their defense of ground rents as a common fund rightfully available to provide for public goods and services. He also argued that the proper role of government included protections against monopolies. As Smith writes in the Wealth of Nations (Chapter II, Of the Sources of the General or Public Revenue of Society):

"Both ground-rents and the ordinary rent of land are a species of revenue which the owner, in many cases, enjoys without any care or attention of his own. Though a part of this revenue should be taken from him in order to defray the expenses of the state, no discouragement will thereby be given to any sort of industry. The annual produce of the land and labour of the society, the real wealth and revenue of the great body of the people, might be the same after such a tax as before. Ground-rents and the ordinary rent of land are, therefore, perhaps, the species of revenue which can best bear to have a peculiar tax imposed upon them."

Earlier, Locke had attempted a similar reconciliation between the just claim of all persons to what nature provided and the practical need for law that established private rights to property. In his Second Treatise of Civil Government [Chapter V, Of Property], Locke reminds his readers of the dilemma:

"God … 'has given the earth to the children of men,' given it to mankind in common. …And though all the fruits it naturally produces and beasts it feeds belong to mankind in common, as they are produced by the spontaneous hand of nature; and nobody has originally a private dominion exclusive of the rest of mankind in any of them, as they are thus in their natural state; yet, being given for the use of men, there must of necessity be a means to appropriate them some way or other before they can be of any use or at all beneficial to any particular man."

But, in his defense of property in land, Locke adds his often-overlooked proviso:

"As much land as a man tills, plants, improves, cultivates, and can use the product of, so much is his property. He by his labour does, as it where, enclose it from the common. …Nor was this appropriation of any parcel of land by improving it any prejudice to any other man, since there was still enough and as good left, and more than the yet unprovided could use."

Locke could look around the globe and at the end of the seventeenth century see vast, unsettled, uncultivated frontiers to which the "yet unprovided" could access by migration. He could not anticipate the rate at which the virgin frontiers - even those parts of the globe occupied by tribal societies less militarily sophisticated than the European arrivals - would be claimed, even if not actually settled and cultivated. North America, for roughly two centuries after Locke, provided the primary safety valve for the overflowing population of the Old World. Professor Frey takes the reader back to the warnings of Rev. Thomas Malthus as taught to generations of English students in the book Conversations on Political Economy by Jane Marcet, and the unrelenting laws of economic scarcity when faced with a growing population:

"Population growth thus grinds away any temporary improvement. There is a moral subtext: if there is no moral obligation to change what cannot be changed, and if poverty is inevitable, there can be no ethical obligation to deal with poverty." [p.39]

Yet, in the early decades of the nineteenth century, a growing population was seen in North America as integral to the nation's manifest destiny to tame the wild continent. Away from the Atlantic coastal regions, survival demanded both individual self-sufficiency and voluntary association. Thus, the American experience and the influence of formal institutions were regionally distinctive.

MORALITY DIVINELY INSPIRED

When Professor Frey brings the Baptist educator Francis Wayland into the story, as a leading figure in a "reawakened evangelical spirit," he introduces the reader to a perspective embraced by a segment of the population disposed to think of themselves as a chosen people. Their America was dominated by long-established towns and a few major centers of population and commerce. Their America contained universities where a classical education was available to the sons of the propertied elite. In their America, Francis Wayland could without challenge teach "conventional laissez-faire economics" and "the right of property" without having to consider the ethical distinctions between property in nature and property in production raised by Locke, or Quesnay, or Smith, or - even more directly - Thomas Paine in Rights of Man (1791) and Agrarian Justice (1796). In Agrarian Justice, for example, Paine declared:

"Cultivation is, at least, one of the greatest natural improvements ever made by human intervention. It has given to created earth a tenfold value. But the landed monopoly, that began with it, has produced the greatest evil. It has dispossessed more than half the inhabitants of every nation of their natural inheritance, without providing for them, as ought to have been done, an indemnification for that loss; and has thereby created a species of poverty and wretchedness that did not exist before."

By the time Francis Wayland's The Elements of Political Economy appeared in 1837, Paine's contributions to political economy disappeared beneath memories of Paine's rejection of organized religion. Locke was all but forgotten. And, even Smith was only selectively repeated to reinforce conventional wisdoms. Almost nothing was written about the long period during which the commons were enclosed and privatized, dispossessing peasant populations throughout the Old World. To Wayland, apparently, government should not be called upon even to secure a fair field with no favors, and certainly should not impose taxes on the propertied or their property and thereby "infringe individual autonomy."[47] As Professor Frey observes, there were practical reasons why Wayland and others embraced laissez-faire above and beyond any religious beliefs:

"The abundance of America represented a clear challenge to the scarcity doctrine while making it more plausible that economic failure was due to personal moral failure."[p.48]

HAMILTON, JEFFERSON AND THEIR GENERATION

Professor Frey next selects Alexander Hamilton as representative of those who championed "a positive role for government in economics" to counter "the interplay of purely private interests."[p.49] Hamilton, as political economist, was a keen observer of human behavior and a proficient student of history. That his perspectives were so vigorously opposed by Thomas Jefferson is somewhat ironic given the close collaboration between Hamilton and James Madison on the Federalist Papers and Madison's attachment to Thomas Jefferson. A significant point of departure between Hamilton and Jefferson occurred, writes Professor Frey, over Hamilton's contention that strong public sector involvement in the economy "would benefit even the yeoman farmer or fisherman."[p.51] Yet, by 1813 and retired at Monticello, Jefferson would come to see the value of public improvements. In a letter to John Eppes, he shared his hope that revenue raised above that required for national defense and repayment of the federal debt could be invested in societal infrastructure:

"The fondest wish of my heart ever was that the surplus portion of these taxes, destined for the payment of that debt, should, when that object was accomplished, be continued by annual or biennial re-enactments, and applied, in time of peace, to the improvement of our country by canals, roads and useful institutions, literary or others."

At a time when few American writers on political economy found much of a readership, the New Englander Daniel Raymond decided to enter the field. Professor Frey includes Raymond in the story, I suspect, because Raymond was an early critic of conservative, conventional wisdom. Raymond was a realist, concluding, writes Professor Frey, that "[m]uch existing economic power is based more on artificial advantage, often created by laws, than on natural differences."[p.53] In this way, Raymond opened the door for later debates on the degree to which politics dictates economic outcomes.

A MELTING POT OR SALAD BOWL?

Americans were continuously on the move, and new arrivals from increasingly diverse parts of the Old World arrived in waves. Leaders of established communities soon recognized the need to Americanize - if not fully integrate - these new arrivals. Responding to the calls for publicly-funded education made by Horace Mann, the nation first created public school systems for those who could afford not to put their children to work in the fields or factories. Mann was a true visionary, but his faith in education as a great leveler would require introduction of numerous other reform measures and even then never measure up to the hoped for promise. Others pursued entirely new visions of societal or community structure. Professor Frey describes the most important of these utopian and utilitarian intentional experiments (and the appearance of socialist theories in their broadest sense), concluding:

"Socialist communities represented a critique of Americans' conventional economic values. When these socialist experiments dissolved, laissez-faire thinkers felt confirmed in their belief that self-interested values were more in tune with human nature. By the logic of early political economy, the lack of material incentives to motivate essentially self-interested people would doom socialist communities."[p.71]

Still to come is Professor Frey's assessment of the influence of the journalist and newspaper editor turned political economist Henry George on the American belief system. It is worth mentioning here that after George's death in 1897, a distinct back to the land movement developed with the principle of community (as distinct from "common") land ownership incorporated. With financial support from successful businessmen such as Tom L. Johnson and Joseph Fels, tracts of land were acquired and leased to members, who then constructed their own homes and businesses without further financial obligation to the community. Several of these communities (e.g., Fairhope, on Mobile Bay in Alabama; and the three Arden villages near Wilmington, Delaware) have survived into the twenty-first century. In recent decades, activists fighting against systemic poverty have sparked the community land trust movement to permanently remove land from the market economy in an effort to preserve open space, agricultural use and housing affordable to lower income households.

Reformers were far less successful in their efforts to outlaw commerce in people of color. An end to slavery in the United States came at the cost of the death of an estimated 620,000 Americans. Of some 260,000 southerners who died of battlefield wounds or disease, only a very small minority were slaveholders. A significant difference between the free citizens of the southern states and those in the northern states was whether they thought of themselves first, as a Virginian or Texan, or, first, as an American. Abolitionists, concludes Professor Frey, set the stage for a deeper consideration by future political economists of moral principles:

"The principle of human dignity, as enunciated by the abolitionists, possessed the potential for far more expansive applications. If humans possessed a fundamental dignity then it could be argued that society should order all economic relations to respect that dignity."[p.84]

WAS AMERICA MATURE ENOUGH FOR FREE TRADE?

American thinking had also been influenced by the British experiment with free trade brought on by the efforts of Richard Cobden and John Bright. Since 1815 the majority of Britons were subjected to the consequences of an Importation Act - the so-called Corn Laws -- which imposed heavy tariffs on imported corn. Landed interests profited while the cost of food in Britain skyrocketed. In 1838, Cobden and Bright formed the Anti-Corn Law League, and Cobden entered Parliament in 1841; five years later Parliament voted to repeal the Corn Laws.

During the same period, a young Herbert Spencer joined the editorial staff of the free trade journal, The Economist, and began working on his first major work, Social Statics, published in 1851. Although destined to mature into Britain's most celebrated philosopher, his early work attracted only modest public attention. This would eventually come back to haunt him after Henry George identified Spencer as a kindred spirit based on what Spencer had written on the land question in Social Statics. When Spencer backed off from his earlier positions, Henry George took on Spencer point by point in a book he titled The Perplexed Philosopher, published in 1892. Henry George's son, in the Life of Henry George (Chapter III) recalled what occurred when the two men met in London in 1881:

"[Henry George], … expected to find a man who, like himself, saw in the agrarian struggle in Ireland the raising of the question of land ownership and fundamental economic principles. Their conversation quickly turned to Ireland, for scarcely had they exchanged civilities when Spencer bluntly asked what George thought of Irish matters. The American condemned the Government and praised the League. Spencer burst into vehement dissent. 'They', said he, meaning the imprisoned Land Leaguers, 'have got only what they deserve. They are inciting the people to refuse to pay to their landlords what is rightfully theirs - rent'. This speech and the manner of its delivery so differed from what was expected of the man who in Social Statics wrote, 'equity does not permit property in land', that Mr. George was first astonished and then disgusted at this flat denial of principle. 'It is evident that we cannot agree on this matter', was all that he could say, and he abruptly left Mr. Spencer. The meeting had proved a deep disappointment. Mr. George seldom outside the family circle spoke of it, but to Dr. Taylor he wrote soon after the occurrence (March, 1882): 'Discount Herbert Spencer. He is most horribly conceited, and I don't believe really great men are'."

Henry George's assessment notwithstanding, Spencer provided in his writings further intellectual ammunition for the case against an intrusive state. As Professor Frey writes:

"Spencer managed to restate for another generation the old doctrines of laissez-faire morality in a fresh scientific idiom. With Spencer, absolute versions of property rights, freedom of contract, hostility to poor laws, tolerance of inequality, and so on, were validated by the grand process of evolution."[p.89]

Back in the United States, sentiments close to those espoused by Spencer were voiced by William Graham Sumner, influencing hundreds if not thousands of students at Yale, including economists-in-the-making Irving Fisher and Thorstein Veblen. Professor Frey's most penetrating criticism of Sumner is Sumner's failure to recognize the potential for societies to evolve:

"Sumner did not consider the possibility that evolution doesn't end, that it would turn a corner and enter an era in which cooperative virtues would best suit an evolved humanity."[p.92]

ROBBER BARON PHILANTROPHY vs. ACADEMIC INDEPENDENCE

Andrew Carnegie is then introduced as someone who "defined philanthropy carefully so that it applied to the distribution of wealth in a way that did not interfere with the operation of the laws that applied to production and accumulation."[p.93] What Carnegie and others labeled by Matthew Josephson as robber barons depended upon were laws that protected their interests, interests often monopolistic and sometimes criminal. To that point in the United States, only a very few political economists raised serious objections to the manner in which the Carnegies of the world exploited workers or devastated the natural environment in their pursuit of controlling markets and maximizing profits. Thorstein Veblen is one of the exceptions, as noted by Professor Frey. Veblen, writes Professor Frey, "made explicit that those who win in a capitalist society may win on the basis of old rules that do not favor economic progress in the present."[p.99] That, if anything, is dramatically understating the case. The old rules sanctioned and protected all manner of financial manipulation, trusts and cartels, corruption, price fixing and the use of violence to prevent workers from organizing. Even the rules ostensibly in place were seldom enforced.

A member of the academic community Professor Frey might have chosen who exhibited at least as much moral courage as Veblen was Scott Nearing, who earned his Ph.D. in Economics in 1909 from the University of Pennsylvania. While working on his doctorate, Nearing served as Secretary of the Pennsylvania Child Labor Committee, comprised of activists dedicated to ending child labor. He began teaching economics in 1908 at the Wharton School. Despite his popularity with students, Nearing's advocacy of reforms provoked the conservative trustees of the University, and he was dismissed in 1915. His case was not helped by his outspoken support for the measures advanced by Henry George to solve the entrenched problem of landed privilege. In his 1911 book, Social Adjustment, Nearing reflected on the enormity of the task undertaken by Henry George and his collaborators:

"The single tax depends, for its application, upon an awakened social conscience and an aroused feeling of social responsibility, but no machinery is prepared for awakening the social conscience or for arousing the feeling of social responsibility. The maladjustments which Henry George points out are apparent, but his solution depends upon an awakened social conscience, for the development of which he suggests no method."

The notoriety given to Nearing's case might be described as one of the earliest serious defenses of academic freedom. From a public relations perspective, Nearing's dismissal raised appropriate concerns over the objectivity of what economists said or wrote about. Another member of the Wharton faculty was quoted [in Stephen J. Whitfield, Scott Nearing: Apostle of American Radicalism, 1974, p.36], saying: "The moment Nearing went, any conservative statement became but the spoken word of a 'kept' professor." Around the United States, chairs in political economy or in economics were being filled by professors known to hold views that would not challenge entrenched institutions and practices. What was occurring at the University of Pennsylvania was not unique.

HENRY GEORGE ENTERS THE PICTURE, RISES, THEN DISAPPEARS INTO THE WILDERNESS

Nearing, more than most of his contemporaries in academe, recognized and acknowledged the important moral and intellectual contributions made by Henry George as a self-educated political economist. Professor Frey provides a succinct summary of how Henry George came to develop his theory of business cycles and his conclusion that landed privilege was (and is) the fundamental cause of widespread poverty. Though sympathetic to George's sense of moral obligation, Professor Frey dismisses George's analysis as not fully applicable to modern conditions:

"The passage of time has shown than George had some of the economics wrong: in the years since he wrote, rent payments to landlords have not swallowed up all increases in economic productivity. Instead, much technical change has economized on land, making it relatively less scarce. And if George was wrong on this issue, he would have been wrong about the ability of a single tax on land to fund all government."[104]

Responding in detail to Professor Frey's observation requires far more space than is warranted in what is intended - primarily -- to be a review of his book. However, a few comments do seem to be appropriate. First is that a thorough study of George's entire body of work indicates he fully understood the power of externalities to advance or thwart real progress. Thus, in constructing his laws of production and distribution, he was careful to describe them as laws of tendency. The form taken by government and the programs of government are powerful externalities. It is certainly true that "rent payments to landlords have not swallowed up all increases in economic productivity," but the relative share of income and net worth held by owners of land is far higher today than when George wrote. What must be factored in is that many landowners receive imputed rather than actual rent payments. A majority of owner-occupied residential properties experience net imputed land rent, capitalized into a selling price for their land parcel. The same is true of owners of vacant land, even vacant land located in economically-depressed areas. The highest rent-yielding locations are in the financial and business districts of major cities, or the suburban edge cities that have developed as an outgrowth of sprawl and the public expenditure on supporting infrastructure. Then, there are the rents that accrue to natural resource-laden lands, the broadcast spectrum, internet addresses, rights of way and takeoff/landing slots at airports. I direct the reader to the research and writing of University of California economics professor Mason Gaffney on this subject for a through analysis of rent-yielding natural assets.

Henry George has been described by some as the last of the great political economists. His problem was that the political economy he preached had already become anachronistic. In Britain, William Stanley Jevons was introducing sophisticated mathematical analysis into economics, creating general equilibrium as an analytical tool that would be adopted by a new generation of European-educated economics professors, such as Richard Ely, who "critiqued the prevailing economics as a dogmatic 'orthodoxy'."[p.106] As Professor Frey notes, Ely rejected "the autonomy values of laissez-faire,"[p.108] and became a proponent of positive law in the interest of what he discerned were ethical outcomes. What on close examination dampens the reputation of Ely as a reform-minded intellectual is his actions after being appointed in 1920 to head a newly-formed Institute for Research in Land Economics and Public Utilities at Wisconsin University. Initially, land reformers were optimistic this new institute would begin to bring greater public attention to the problem of land monopoly by gathering statistics and reporting on the developing trends. They soon learned that the Institute was being funded by corporate property interests and consistently came out in opposition to any measure to raise more public revenue by the taxation of land values.

In an address delivered during the third Henry George Memorial Congress, held in Chicago during September 1928, Emil O. Jorgensen reported on the Institute's work under Ely:

"Today the Ely Institute, which is housed in Samuel Insull's favorite university, Northwestern, not merely has upon its Board of Trustees such representatives of monopoly as Rufus C. Dawes, William S. Kies, Frank O. Lowden and General Nathan W. MacChesney, but the contributions received from the Rockefeller and Carnegie corporations, from the National Association of Real Estate Boards, the railroads, the public utilities and other interests with big axes to grind … approximate $100,000 a year. This would certainly indicate that the Institute is not 'disinterested'."

Jorgensen also noted with dismay that "Ely's popular old text-books, for instance notably his Outlines of Economics, and his Elementary Principles of Economics, two text-books used in more than 2,200 high schools and colleges in the United States, do not now merely bear the name of the Institute but they have been skillfully revised during the last few years to conform to the teachings of the Institute. These two text-books alone are now influencing the minds of at least a half million students a year."

Ely is rivaled by John Bates Clark for injecting European-influenced methodology into U.S. economics classrooms. After completing his studies at the Universities of Zurich and Heidelberg he joined the faculty at Columbia University. Professor Frey notes that Clark was in his early years concerned with the distribution of national income, although Clark's 1888 book, Capital and its Earnings is not referred to by Frey as a source of Clark's reasoning to that point in time. And, here, in this work [Clark, p.29] is his contribution to the systematic removal of land as a distinct factor of production yielding rent:

"Rent, then, for the purposes of the present essay, is the amount earned by concrete productive instruments of any and every kind. Farms, tools, buildings, ships and merchandise alike earn it. It is expressed in lump sums, not, like interest, in percentages. It has no direct reference to the value of the things that secure it. A thousand dollars earned by a farm, a building, a ship, or a car, constitute the rent of that farm, building, ship or car, whether the thing itself is worth ten thousand dollars or a hundred thousand. Whatever accrues to a man by reason of the fact that he owns an instrument of production is the rent of that instrument, irrespective of its value."

Donald Stabile [American Journal of Economics and Sociology, July, 1995] notes "Clark several times opposed treating land as a special resource," adding: "Clark disliked the notion of injustice that permeated [Henry] George's definition of rent." In the same issue of the American Journal, Mason Gaffney put a different perspective on Clark's theoretical endeavors:

"We are in debt to Professor Stabile for reviewing so clearly Henry George's contribution to marginal productivity theory. As he concludes, 'neoclassical economics might have achieved better insights . . . if Clark had followed George more closely'. However, Clark never intended to follow George except as a U-Boat stalks a troopship, I have documented this elsewhere (1994, 47-59). If Clark followed Ricardo, as Rima (cited by Stabile) alleges, it was for the same end, namely to eliminate land and its distinctive rent from the lexicon of economics. Ricardo had to be sunk, too, and Clark did his best."

When Professor Frey concludes that George, Ely and Clark shared in common "a middle position between extreme autonomy of the individual and the collectivist denial of individualism altogether,"[p.114] he mistakenly represents Ely and Clark as independent agents willing to look at fundamental relations from historical and moral perspectives. The evidence gathered by Mason Gaffney and other investigators suggests otherwise.

Throughout the early decades of economics as a distinct discipline, economics professors struggled to distinguish their professional role from their ethical and spiritual values. They were in a position similar to biologists faced with overwhelming evidence for evolution, but continuing to have faith in the existence of a conscious creator looking upon our species with special care. At the dawn of the twentieth century, at least some religious leaders recognized the need for the quality of life to improve in the here and now. Professor Frey refers to Rerum Novarum, the encyclical issued by Pope Leo XIII in 1891 as an important turning point. We are then introduced to Walter Rauschenbush, a Baptist minister who became an ardent supporter of Henry George during George's 1886 mayoral campaign in New York City. Another of George's supporters was the Catholic priest, Rev. Edward McGlynn (temporarily excommunicated for his political activism). After reading Rerum Novarum, Henry George took the time to write directly to Pope Leo XIII, explaining the fundamental distinctions between what he proposed and what was proposed by socialists:

"We differ from the socialists in our diagnosis of the evil and we differ from them as to remedies. We have no fear of capital, regarding it as the natural handmaiden of labor; we look on interest in itself as natural and just; we would set no limit to accumulation, nor impose on the rich any burden that is not equally placed on the poor; we see no evil in competition, but deem unrestricted competition to be as necessary to the health of the industrial and social organism as the free circulation of the blood is to the health of the bodily organism - to be the agency whereby the fullest cooperation is to be secured. We would simply take for the community what belongs to the community, the value that attaches to land by the growth of the community; leave sacredly to the individual all that belongs to the individual; and, treating necessary monopolies as functions of the state, abolish all restrictions and prohibitions save those required for public health, safety, morals and convenience."

No response came from the Vatican, although there is much more to this story than time and space permit.

A response of sorts came in 1916 from Professor Frey's next major figure to elaborate on the Social Gospel according to Catholic doctrine - John A. Ryan. Ryan, Professor Frey states, argued the case for private land ownership "only because it contributes to the average person's well-being." In his book, Distributive Justice, Ryan took on Henry George directly to prove his case. First, however, he chose to make a highly debatable moral statement. If Henry George's program of the full public collection of rent was adopted:

"Individuals would … still enjoy security of possession, the managerial use of land, and the revenue due to improvements. The income arising from the land itself, the economic rent, they would be obliged to hand over as a free gift to the State. …[T]his confiscation of rent by the State would be pure and simple robbery of the private owner."

What Ryan failed to acknowledge is the relatively long list of public goods and services provided by the State reflected very directly in the rent of land. He goes on in this work to raise a number of important concerns that required a reasoned response by proponents of Henry George's version of land reform. After a long analysis of the Single Tax and the more moderate annual taxation of land values, Ryan comes to a position he feels is both ethically consistent with Catholic doctrine and the defense of private ownership of land - John Stuart Mill's proposal to begin taxing all future increments in land value:

"Now the public appropriation of all future increments of land value would evidently be beneficial to the community as a whole. It would enable all the people to profit by gains that now go to a minority, and it would enable the landless majority to acquire land more easily and more cheaply. We have in mind, of course, only those value increases that are not due to improvements in or on the land, and we assume that these could be distinguished in practice from the increments of value that represent improvements."

For Ryan, the land question was a side issue to the major concern of guaranteeing working people a living wage. Ryan was not alone in failing to understand that increases in the income of working people would inevitably be capitalized into higher land prices or rents taken by landlords. The supply-side of the equation was much slower to respond to the increased competition for housing and other necessities.


Part 2