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?
Many 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.