An Editorial about the State of Georgism and Land Value Taxation (because I’m on break)

A little off-topic fun because I’m out of town relaxing.

Dedicated readers might have noticed that in my less law schooly posts, I’ve recently mentioned Henry George and land value taxation (LVT) (examples here and here). This is something that caught my interest sometime late last year, and I’m slowly slogging through George’s 1879 masterwork, Progress and Poverty: An Inquiry into the Cause of Industrial Depressions and of Increase of Want with Increase of Wealth: The Remedy. So popular was this book that supposedly by the end of the 19th century Henry George was the third most famous person in the United States after Mark Twain and Thomas Edison.

The read is taking me a while because I’m a masochist for reading the original unabridged version, which the famous New York City bookstore, the Strand, didn’t carry. (Big raspberries, but this is why the Internet blesses us with free public domain books.) George is a fun writer, though his 19th century treatise-ish prose, which demands parsing numerous clauses interjected into simple sentences, a style I discourage people from emulating for the sake of reader’s sanity, a necessary consideration, can make the book a slow read. The Robert Schalkenbach Foundation, whose purpose is to promote Georgism and keep Progress and Poverty in print (to the extent it needs to), has an abridged version meant for the modern reader on the go.

Henry George’s argument is quite simple, and largely rehashes the one made by the physiocrats in 18th century France, their more famous successor Adam Smith, David Ricardo, John Stuart Mill, and a few others: poverty exists because the government’s land title system gives unearned income (due to population growth and technological progress) to land owners. Depressions occur because cheap land cannot be moved to where values are rising, and at some point cheap credit leads to a land bubble and a bust. Essentially, it argues that the “business cycle” is really a “land cycle,” much like the way that centrifugal force (the feeling of being flung outward from a rotating object) is fictitious while centripetal force (the actual force directed toward the center of a rotating object) is not. Taxing land value forces capital to move to more productive activities, creating jobs, raising wages, and inhibiting bubbles. The recent real estate bubble in the U.S. demonstrates that George was proven right once again.

From the Wikipedia: “Note that the burden of the tax is entirely on the landowner, and there is no deadweight loss.”

The question dogging my survey is why I didn’t learn about Georgism until after I had accumulated college degrees, a law degree, and a master’s degree (even my 5th grade public school social studies class discussed communism). Georgism had its heyday in the Progressive era, but I always learned of that period as one of socialists, labor unions, big strikes, plutocrats, trust busting, and of course, Marxism—nothing about the single-tax movement. I didn’t know that Cleveland mayor Tom Johnson and one of his successors, Newton Baker, were both Georgists, and the former led the city into a period of massive population growth by putting George’s theory into practice, mainly to ensure that the city’s trolley system would only cost 3¢ a ride (that’s 15-20¢ in today’s dollars; imagine that!). Baker was floated as the 1932 Democratic Party nominee until supposedly William Randolph Hearst began to enthusiastically support FDR (Note: San Simeon is the real-life Xanadu from Citizen Kane). Even so, by then, progressives like Louisiana governor Huey Long weren’t really Georgists, but were populists more in favor of taxing wealth generally.

The problem as I see it is that most contemporary economists simply don’t take George seriously since he was more of a journalist rabble-rouser than an academic (dibs on “Henry George: The First Scamblogger” or something like that). Indeed, supposedly the Chicago School of Economics was established solely to refute him. On the other hand, leftist populists see him as one of many progressive reformers during that time period. At least, that’s the impression I got from reading Howard Zinn’s half-page on Henry George in A People’s History of the United States. The other political factors, I think, are a combination of eastern European immigrants bringing Karl Marx (who never separated land from capital) with them to the U.S. and World War I.

Unfortunately, if I’d’ve known of Georgism before 2009 I would’ve been very surprised that his theory hadn’t been rediscovered by liberals. Instead, most mainstream liberal economists—if that’s sensible, but you get the idea—are more interested in reviving John Maynard Keynes, an otherwise conventional academic whose thoughts were largely buried by the stagflation of the 1970s. True, increased government spending would increase GDP and therefore put people to work, but as George would point out, a portion of the benefits would get sucked up into untaxed land values. For example, landowners near the ARC tunnel connecting New Jersey and New York would receive free money from the government for doing nothing.

Instead the only economists I do see writing about George are either sincere Georgists such as Masson Gaffney (who’s been writing about it for decades), Fred Foldvary, and Polly Cleveland (I’m sure there are others); or, for some reason, economists at George Mason University (Tyler Cowan and Bryan Caplan spring to mind) who acknowledge George yet systemically misunderstand his arguments.

This leaves the only nationally read person I know of who writes about land use: Slate‘s Matthew Yglesias, who though wrote a post titled, “Property Taxes Are A Barbarous Relic: Tax The Value of Land Instead,” and even a book The Rent Is Too Damn High, does not write about Henry George, any of the other economists before or after him who favored LVT, or the occasional successes of the single-tax movement. Your Google search may fare better than mine, but I think this omission is tragic because not only does it show a superficial treatment of the topic, but it also leaves LVT’s persuasive force on the table.

In a period of mass unemployment, global warming, and an emerging generation of Americans excluded from prosperity, there’s no better time for the American left to rediscover Henry George, for just as the theory behind tapping land value for public use is sound, so too is tapping George’s memory as a political force for reform similarly sound.

**********

For more information on the topic, here are some links:

  • http://www.wealthandwant.com/ – A massive repository on Geogist knowledge
  • [I linked above to Mason Gaffney’s Web site, but his “Progress and Poverty study guide” is helpful for those reading George’s treatise. Money quote: “Social class, and the class content of education, are the results of unequal distribution of property. For example, you might learn just as much law at Citrus Belt night school [now California Southern University Law School, non-ABA] as at Stanford Law School, the most expensive one in the USA [this was written in 2000], but the contacts and references aren’t the same.”]
  • LVTFan’s Blog
  • Systemic Fiscal Reform – A British proposal for shifting taxes onto land
  • The Henry George Institute

5 comments

  1. Nice article, Matt. Interesting to note that everyone who forecast this depression were either Georgist, or else understood the pathological role of escalating land prices within the economy. Joseph Stiglitz had written on the theory of real estate valuation.

    A shift of taxes off productivity and onto the capture of land rent is an idea whose time has come if we want to get out of this mess.

  2. Glad you’ve discovered Henry George even if it did take a while. However I’d urge you not to be quite so hard on Keynes. Keynes wasn’t quite as conventional as his followers might make you believe. The major problem is that Keynes legacy was hijacked after his death by neoclassical economists who had much more conventional ideas and wasted no time in knocking his square pegs into their round holes and calling the result “Keynesianism”.

    If you want a better idea of what Keynes was attempting to do and say, you will get one by looking at the work of the Post-Keynesian economists than by those who claim to be Keynesians or neo-Keynesians.

    1. Thanks for the comment Derek R. I don’t think I’m being hard on Keynes. Indeed, I think the math is behind him more so than other macro theories. I just think that along with Marx he squeezed out George from non-rightwing academic economic research.

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