------------ EH.NET BOOK REVIEW --------------  
Published by EH.NET (May 2006)  
  
John Laurent, editor, _Henry George's Legacy in Economic Thought_.   
Cheltenham, UK: Edward Elgar, 2005. vii + 271 pp. $110 (hardcover),   
ISBN:1-84376-885-2  
  
Reviewed for EH.NET by Donald E. Frey, Department of Economics, Wake   
Forest University.  
  
  
This book, edited by John Laurent (University of Southern Queensland,   
Australia), contains eleven essays dealing with highly diverse   
aspects of the ideas of Henry George, the nineteenth century American   
economic reformer. Several of the contributors are Australians, in   
whose country George had a significant influence on public policy.   
Although George is little known today, these essays demonstrate that   
he was significant in the history of economics and that his ideas   
have some relevance to contemporary issues. George's most famous work   
was _Progress and Poverty_ (1879), which I summarize next before   
reviewing the book at hand.  
  
Henry George's _Progress and Poverty_  
  
George tried to explain the paradox of persistent poverty amidst   
economic progress; he sought an alternative to Laissez Faire, which   
he understood to justify the inevitability of poverty. Laissez Faire,   
as theory, rested on a triple base: the wages-fund theory, Malthusian   
population theory and Ricardo's rent theory. The first held that   
wages were paid from a pool of funds set aside by employers. This   
left the worker beholden to the employer class and devoid of any   
claim to the economic output that workers themselves produced.   
Malthusian theory held that population would outrun food production,   
thus driving wages down to subsistence (i.e., the wages-fund would be   
divided among more and more workers). Finally, Ricardo's rent theory   
held that fertile land would reap higher and higher rents as farmers   
bid more and more for the right to till the better land; growing   
population would intensify the bidding for fertile land as more   
marginal land was forced into production. George emphasized that   
these theories had an ethical meaning: "poverty, want, and starvation   
are by this theory not chargeable either to individual greed or to   
social maladjustments; they are the inevitable results of universal   
laws, with which ... it were as hopeless to quarrel as with the law   
of gravitation" (George, _Progress and Poverty_, p. 99). George set   
out to show that because two of these laws were wrong, poverty was   
not inevitable; further, poverty could be ended by just laws that   
captured land rents for the public good.  
  
In his attack on the wages-fund, George argued that workers are paid   
from _current production_ -- i.e., workers had a legitimate claim on   
what they produced, and what they produced was growing, not a static   
fund. In this approach George anticipated modern income and product   
accounts, which treat wages as charges against production. In his   
attack on Malthusianism, George argued that injustice, not   
over-population, was the cause of poverty. In fact, claimed George,   
denser populations resulted in _more_ productive industry. Although   
his discussion of productivity increases is not entirely clear,   
George seemed to invoke what are now known as urbanization economies,   
which occur when economic activity is densely concentrated.   
Productivity would far outpace Malthusian population growth, he   
thought.  
  
Although productivity growth ought to have made all people richer,   
this was not occurring because landlords were reaping most of the   
gains, which were generated by the creativity of society itself.   
Without lifting a finger, land owners collected rising land rents and   
land prices as a more productive economy, needing space, drove up the   
value of good locations. In short, George generalized Ricardo's rent   
theory beyond an agricultural framework.  
  
George thus attributed poverty in the midst of _highly productive_   
societies to the inequality created by huge land rents. This could   
not be morally justified, he argued. First, poverty itself was so   
distorting of human goodness, that it should not be tolerated if a   
remedy could be had (e.g., George, p. 461). Secondly, absolute   
private-property rights to land were wrong because "no one can be   
rightfully entitled to the ownership of which is not the produce of   
his labor [i.e., land]" (George, p. 336). Land, which is not produced   
by any human, is part of the common heritage of all. He said "the   
unjust distribution of wealth" (George, p. 342) was due to the   
"fundamental wrong" of land ownership.  
  
His solution to this was a steep tax on the value of land. Set high   
enough to capture all rents for society, he thought that a land tax   
could replace other taxes; because of this, others dubbed it the   
"Single Tax." George never advocated outright expropriation of land,   
recognizing that society could capture the fruits of progress without   
government ownership. Though some considered this socialistic, it was   
decidedly non-Marxian, for capitalists were as victimized by   
landlords as were laborers.  
  
George also refuted the restatement of Laissez Faire presented by the   
Social Darwinists. He referred to the "hopeful fatalism" of popular   
Social Darwinism, in which social evils "are the impelling causes   
which drive man on, by eliminating poorer types," relying on   
"hereditary transmission" through fitter individuals who shape   
society (George, p. 480). But, he said, this argument comes face to   
face with "an enormous fact," namely that civilizations generally   
don't progress (p. 481-2): "If progress is to be the result of fixed   
laws, inevitable and eternal, which impel men forward, how shall we   
account for [retrograde civilizations] " (George, p. 482)? George   
concluded that "what has destroyed all previous civilizations has   
been the conditions produced by the growth of civilization itself"   
(George, p. 488). In nineteenth-century western nations, the obvious   
civilization-destroyer in his view would have been private   
appropriation of land rent (George, p.514).  
  
Review of _Henry George's Legacy in Economic Thought_  
  
_Henry George's Legacy_ divides into chapters devoted to George's   
connection to the ideas of his own time and chapters considering   
current issues where his ideas might be relevant. The introductory   
chapter provides a very useful outline of George's influence in   
Australia and New Zealand and a short introduction to most of the   
issues considered in later chapters.  
  
In the second chapter, Erin McLaughlin-Jenkins dissects the 1890s   
attack on Henry George by an aging Thomas Huxley, well-known defender   
of Darwinism and capitalism. Determined to blast socialism, Huxley   
chose to refute George, whom he erroneously considered a socialist;   
George was even lower in Huxley's estimation for also daring to   
question the way Darwinism had been applied to social thought.   
McLaughlin-Jenkins argues that Huxley erroneously claimed George   
followed Rousseau, misrepresented George as a leveler, advanced a   
fictitious history of property to justify vested land interests, and   
generally missed the point of George's _Progress and Poverty_. Huxley   
also used physical-science concepts mostly to obfuscate the issues   
and support the wages-fund. According to McLaughlin-Jenkins, Huxley   
-- an agnostic -- was also angered by George's temerity in noting the   
similarity between Darwinist social thought and that of "the natural   
theologians whose authority the Darwinians had undermined in the   
first half of the century" (Laurent, p. 47). In short, Huxley's   
stance on capitalism and science, which had once been progressive,   
had become reactionary by the 1890s. The essay illustrates   
beautifully how often special pleading passed as social analysis in   
the nineteenth century. Perhaps George was wrong, but not for   
Huxley's reasons.  
  
The Duke of Argyll was a class-interest reactionary, who defended the   
landed aristocracy against George. The chapter on the Duke on Argyll   
by Warren Samuels, Kirk Johnson and Marianne Johnson roams leisurely   
through the social and intellectual landscape of Argyll's writing and   
George's reactions. (Only 13 pages of a 48-page essay are expressly   
devoted to Argyll's writings; the rest sets the context of the debate   
at great length.) The essay points out Argyll's essentially feudal   
view of relations between landowners and renters, and his assertion   
that landownership itself is productive activity. Argyll also sought   
to legitimate existing patterns of land ownership, despite their   
checkered history. Again, this chapter is less about George and his   
ideas than about the reaction of vested interests to him. The chapter   
also usefully points out how elastic natural-law arguments could be:   
both Argyll and George made natural-law arguments about land rights,   
yet drew opposite conclusions.  
  
Another historical essay, by John Laurent, asks whether George was an   
evolutionary economist. Laurent, who draws from George's later   
essays, reviews the many points at which George showed familiarity   
with and interacted with evolutionary ideas, which were Malthusian in   
nature. Laurent questions why George rejected Malthusian population   
theory, given that population pressure drove the rent increases that   
were central to his own theory. Laurent notes what I consider the   
central reason, namely that George rejected Malthus for _moral_   
reasons: Malthusianism made poverty "inevitable" and so absolved   
society of ethical responsibility for poverty. Yet, despite this   
insight, Laurent still seems to think George should have appreciated   
the contribution of Malthus to his own theory. Here, I would   
disagree; George did not need Malthusian population growth to create   
land rents. My reading of George's model does not have rising rents   
resulting from rising population, per se. Rather George explained   
rising rents as the result of increasing productivity due to   
increasing population _density_ (and perhaps other causes) rather   
than due to population as such (see _Progress and Poverty_, Book IV,   
II).  
  
Laurent shows that over his life-time George had a strong grasp of   
evolutionary ideas and agreed in some places with the Social   
Darwinists. However, in making an assessment, most weight probably   
should be given to George's major work, _Progress and Poverty_, which   
is distinctly negative toward Social Darwinism. In that work, George,   
the religious humanist, objected to the materialistic and   
reductionist tendencies in Darwinism. Also, he rejected Lamarkian   
ideas held by Social Darwinists (correctly observing that a "child no   
more inherits his father's knowledge than he inherits his father's   
glass eye"). And he rejected the evolutionary implication that   
societies invariably progress (which would have portrayed   
nineteenth-century industrial economies as the apex of human   
development). In fact, he argued, most societies become static and   
decline; in his era, that decline would be due to land-ownership laws   
that divert the fruits of progress to an unproductive landlord class.  
  
A chapter by Rob Knowles demonstrates that George's ideas could be   
translated into another idiom. Knowles argues that Leo Tolstoy   
appropriated many of George's ideas to advance his own reform agenda   
for Russia. Perhaps the largest lesson of these historical chapters   
is that George was seen through the lenses that contemporary readers   
brought with them to his writings. However, the second portion of   
_Henry George's Legacy_ shows that George's ideas can also emerge in   
modern debates as well.  
  
Laurence Moss's chapter argues that the increment in land values   
caused by social progress, which George identified, may provide a way   
to fund public goods (provided they bestow most benefits on those   
located closest). Moss observes the standard economic result that   
projects with public-good characteristics may go undone in the   
absence of subsidy. However, if a proposed real-estate development   
with public-good characteristics promises to raise the value of   
surrounding locations, the developer who owned the surrounding   
properties could provide the public good and be compensated by the   
gains in surrounding property values. Moss notes that "the private   
provision of public goods ... is one of the most stunning   
accomplishments of private entrepreneurs in the post-war U.S.   
economy" (Laurent, p. 163). Indeed, planned communities (e.g.   
Columbia, MD) have been developed on this principle. Although his   
interpretation stands Henry George on his head, Moss credits him with   
identifying the phenomenon.  
  
In the first of a pair of articles, John Pullen takes a philosophical   
look at the distinction between private ownership and private   
possession of land. George believed that his tax proposal would   
effectively replace private ownership with private possession. Pullen   
argues that this way of putting it may have been a rhetorical mistake   
that alienated potential support for George's ideas; Pullen suggests   
a term such as "conditional" ownership. In his second chapter, Pullen   
reviews a series of objections to George's land-value tax; these   
range from the philosophical to the pragmatic. His conclusion is that   
the objections are formidable enough that a thorough-going Single Tax   
is still unlikely to occur.  
  
Terry Dwyer's chapter relates land-value taxation to contemporary   
trends in regulatory economics -- specifically the tendency toward   
privatization of industry with monopoly characteristics. Dwyer notes   
that bad implications for efficiency of monopoly have dropped from   
recent discourse as inefficient prices are charged to cover capital   
investment by privatized monopolies. He argues the efficiency might   
be restored -- as well as a measure of equity -- by taxing enhanced   
land values created by an infrastructure monopoly.  
  
Two concluding chapters argue that heavy taxes on land, of the sort   
inspired by George, have more relevance in the twenty-first century   
than before. The essay by Frank Stilwell and Kirrily Jordan and the   
essay by Phillip Day both argue that a land tax is compatible with   
environmentalism. As Laurent notes in his introduction, this is a   
novel interpretation, for George and his followers argued that the   
Single Tax would encourage _more intensive use of land_. Typically,   
they argued that the Single Tax would capture speculative profits   
from those who held idle land while awaiting for a price rise. A   
steep tax on land would encourage its development to earn a return to   
pay the tax. More intense development hardly seems something that   
would conserve nature. I think a case could be made (perhaps a   
general-equilibrium analysis to the effect that more intense use of   
urban land would result in denser use of less land overall). However,   
the chapter does not set out a model and convincing detail.  
  
These authors also point out that there may be new reasons for   
considering a land tax that were not relevant in George's own era. In   
our era of globalization, taxes on other factors, which have become   
increasingly mobile, may be shifted. The immobility of land may   
become a particularly important consideration for taxation policy as   
taxes on land cannot be shifted. This immobility also means that   
society suffers no efficiency penalty in taxing land.  
  
None of these authors suggests that George's recommendations could   
have radically changed social history. However, each of them shows,   
in one way or another, that George left a significant legacy in   
economic thought and policy.  
  
Reference:  
Henry George. _Progress and Poverty_ (fiftieth anniversary edition),   
New York: Schalkenbach Foundation, 1936.  
  
  
Donald Frey is completing a manuscript, _America's Economic   
Moralists_, which includes a discussion of Henry George.  
  
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