Teaching Basic Elements of Political Economy

Harry Pollard

[Reprinted from a Land-Cafe online discussion, 8 March 2007]

Subject to the caveat that one can come up with any concept, any definition of the concept, and any label, it seems incumbent on the creator of terminology to make each labeled, defined, concept a separate entity -- true only to itself.

Then, that entity can be compared, combined, related, and differentiated from other rigorously defined concepts. This requires that nothing that is in one entity can be found in another.

The Classicals, and magnificently George, did just that. They took the whole universe and cut it down to four bite-sized chunks -- Land, Labor, Capital, and Wealth -- The Factors of Production and their result.

Nothing that falls into one of these 'chunks' can be found in another, yet they embrace everything that God, or Nature, made. As I've said several times, Roy Harrod thought this was the most significant thing the Classical Political Economists did and "it made all progress possible". (This is perhaps the only time I have agreed with a Keynesian.)

The most noticeable thing about this discussion is the way the distinctions between the divisions have become blurred.

Both you and Fred seem to describe a situation where everything is capital - of one kind or another. You both can do this because your understanding of the subject is such that you can play fast and loose with it and still keep your metaphorical feet on the ground.

When I began the High School Program I was dealing with teachers who mostly didn't know a lot about economics. Those who did were usually confused about how it all fitted together. The worst ones were those who did know economics, which meant they could learnedly talk about the Federal Reserve and the stock market but they didn't have a clue about the gulfs between land, labor, and capital.

It was important that InterStudent would hang together without further explanation; that the lessons, while separate, would paint a complete picture that could be accepted by a reasonably intelligent teacher as a science.

We couldn't be there in the classroom to explain something that jarred, so everything had to be correct. When Brett Barker was finding his way into the study, he was positively vicious in his questioning while winkling out every inconsistency - which is a reason why InterStudent is pretty good. (This from an unbiased source.)

Teachers don't like teaching a flawed subject. They get too much of that and invariably it becomes a matter of teaching students to memorize things that can be repeated back with little understanding.

Our job was to teach the Science of Political Economy -- to provide an appreciation of how the economic world worked along with an understanding of why it didn't.

I think this is also the mission of all the Henry George Schools of Social Science.

I well understand that the tendency among Georgists is to eschew all this so they can get quickly to the good stuff -- the land value tax. Unfortunately, as I said at Bridgeport, when they push LVT they are likely to have a solution to a problem no-one knows they have. In which case they must fall back to stressing that LVT is a better way to tax than its competitors -- it’s the least bad tax as Milton said.

Yet the economic consequences of collecting Rent are far more important than the revenue to be obtained. So, that's why it's not much ado about nothing. Particularly, when [as some assert]: "Capital when owned by its end-user is still capital, with all the attributes of capital in general."

Yet, the material product of human exertion in the course of production is increasing in value (otherwise production would stop) -- whereas in the hands of the consumer it is being used or consumed with a consequent decrease in value.

Seems to me that this is a significant difference -- in fact an overwhelming difference between capital and wealth.

I'm not sure what [is meant] by [the following]: "By analogy, land when owned by its end-user is still land." I'm not sure when it ceases to become land, whether or not in the possession of the 'end-user'.

Also, the value that attaches to a location will be there, whomsoever owns it, or if it is not owned at all -- or whether or not the value is collected, and irrespective of who collects it.