Dear all:  
  
I welcome Warren's effort to summarize and especially  
to make his points clearly. I disagree, however, that  
others and I have been talking past each other. With  
all due respect, I believe that I fully understand the  
non-ideological points he is making and that I have  
understood them from the start. The same is true of  
Roger's points. The question is whether they  
understand my points. I guess not.  
  
(I should add parenthetically that I think that I  
fully understand the difficulty of dealing with  
arguments that are so different from one's own that  
one is at wits end to explain them. I am not in the  
least offended by Warren's comments and I hope that he  
and others will not be offended by mine.)  
  
My major point is simple. Whether, in a market  
economy, a thing is a good or resource and how much it  
is worth must be determined through interactive  
entrepreneurship. Without entrepreneurship there can  
be no demand curve or supply curve of land and no  
increments in price. It follows that an economist who  
tries to logically justify a land tax policy based on  
changes in the price of land has a duty to defend the  
policy by showing how it will affect entrepreneurship.  
  
The policy recommended by Georgists requires someone  
to determine (within limits that are tolerable given  
the circumstances) not only the change in market value  
of each parcel of land but also the extent to which  
that change reflects an unearned increment. Warren and  
others believe that they (or some government official)  
can do this. In my view, this is an error and I think  
that there are two reasons why they make it. The first  
is that because they fail to comprehend the complexity  
of (entrepreneur-based) market interaction, they  
misjudge the ability to achieve the intended  
consequences by means of an (efficiently administered)  
economic policy. My way of expressing this is to say  
that they do not appreciate the entrepreneurship  
entailed in causing wants to be satisfied under market  
economy conditions. The second is that they have been  
victims of indoctrination by means of Marshallian  
microeconomics. I discuss each in turn. Then I state  
some conclusions and discuss some peripheral matters.  
  
  
Tax Assessment, Complexity, and Entrepreneurship  
  
We can start with the tax assessor's problem. The  
Georgist tax assessor's goal is to determine whether  
and to what extent a change in the price of a parcel  
of land reflects an UNEARNED INCREMENT. It is not  
merely to determine the magnitude of a change in the  
market price of a parcel of land, which is difficult  
enough. Perhaps the best way for me to describe the  
tax assessor's problem is to give an example.  
  
When the Disney corporation transformed the cheap land  
of sand and swamp outside of Orlando Florida into a  
giant theme park, people came to visit and to take  
jobs. Both the land owned by Disney and that not owned  
by them increased in price. The price increase in  
Disney-owned land presumably was earned; that of non  
Disney-owned land was partly unearned. But not  
totally. Other non-Disney entrepreneurs anticipated  
the higher land prices and the demand for other  
services that Disney had not provided. They bought  
land and either employed it in a way that enabled them  
to take earn profit by serving the expected visitors  
and new residents or sold it to those who employed it  
in this way. This buying, selling and development has  
been in continuous flux since the process began, as  
entrepreneurs have continually identified uses of the  
land parcels that were not known before.   
  
Land prices near Orlando increased. But could a tax  
assessor determine the sizes of the earned and  
unearned increments? To explain the earned increment,  
he would have to be willing and able to explain how  
the increment was earned. I cannot imagine how he  
would be able. (For willingness, one must turn to  
Public Choice.) The tax assessor is likely to have  
access to the record of the prices of past  
transactions. But without further detailed historical  
investigation, which requires knowledge of the  
entrepreneurial judgments that led to each price  
change, there is no way to know whether an increment  
in price was earned or unearned. The Georgist, so far  
as I can tell, shows no appreciation for the problem  
of further investigation. Yet without such  
investigation, a tax assessor could never find the  
elusive unearned increment.  
  
The essence of urban development over a long time is  
similar to the change that occur ed more quickly in  
the case of Disney. In a large city, such changes are  
continuous, diverse, and as complex as the sum of the  
entrepreneurial judgments that cause them. The tax  
assessor must know these judgments to determine the  
elusive unearned increment.  
  
  
Indoctrination Through Marshallian Microeconomics  
  
Marshallian economics, as it is taught in the  
textbooks, begins with the assumption that demand and  
supply conditions already exist without having to be  
discovered and communicated and without  
entrepreneurial judgments having to be made. This lack  
of realism is OK as a beginning point -- a part of a  
didactic program (which, unfortunately, is never  
completed in modern curricula). But it is not suited  
as a basis for recommending policy because the  
assumptions are not realistic. Policies based on such  
assumptions disregard the need for an incentive to  
make the discoveries, to carry out the communications,  
and to make the entrepreneurial judgments.  
  
Marshallian indoctrination seems to be the reason that  
members of the list are confused about a number of  
issues. An example is the price inelasticity of  
supply. Price inelasticity of supply refers to  
identical units of an homogeneous item that are owned  
or could be supplied by different individuals. Is it  
not obvious that, in reality, parcels of land that  
have identical physical size do not possess this  
homogeneous characteristic in the eyes of those whose  
knowledge causes them to be resources and to have  
prices? Carl Menger (Principles) seems to have been  
the first to point out that a resource cannot exist  
independently of the knowledge needed to know how it  
can be used to satisfy a want. But Marshallian  
microeconomics makes no mention of this lesson. The  
major hurdle faced by one who wants to base a policy  
on the assumption of the price inelasticity of supply  
of land is to show how to homogenize the parcels of  
the real world, which are distinctly different in the  
eyes of entrepreneurs. The knowledge needed to do this  
is similar to that needed by the tax assessor. One  
would have to conduct a special historical  
investigation -- one that would reveal the  
entrepreneurial reasoning behind each increment in  
price of each parcel of land.  
  
The proper response to someone to claims that real  
land in real economic interaction has the  
characteristics of supply inelasticity is to demand  
proof. Davenport mockingly called himself "a single  
taxer of the looser observance." He meant that he  
approved wholeheartedly of taxing the unearned  
increment. But he did not have a clue about how  
somebody could find it and did not believe that anyone  
else had. The ASSUMPTION that land is price inelastic  
in supply is not a means of finding it. It is a means  
of evading the issue.  
  
  
Talking Past  
  
I agree with Warren that we have been talking past  
each other. But I am persuaded that the reason is a  
combination of intellectual intransigence on the part  
of others and Marshallian indoctrination. Warren  
writes about having believed in the Georgian idea from  
his days as an undergraduate. I cannot say that, as an  
undergraduate, I ever bought into this idea. But I was  
certainly susceptible to it. Most of us were subject  
to the same indoctrination. We were taught wrongly to  
believe (1) that conditions that determine demand and  
supply, as well as the prices themselves, can be known  
without entrepreneurship and (2) that real world  
applications of economic theory based on assumptions  
about such conditions can be made without accounting  
for entrepreneurship.  
  
This kind of brainwashing need not be permanent. We  
can learn why we talk past others who seem to have  
similar beliefs in some respects. We can do this by  
first identifying ours and their fundamental economic  
beliefs -- the ones that we had to memorize and  
internalize to pass those first examinations --  and  
then subjecting them to critical examination. We learn  
about alternatives and compare them.   
  
  
Addenda  
  
I would like to assure Warren that I do not believe  
that one can measure consumer surplus or to tax it in  
any meaningful way. My answer to an earlier question  
in this regard was a rhetorical answer to a question  
about what tax I would suggest in lieu of the land  
tax. George's noteworthy arguments for the land tax  
are not related to the ease with which land prices can  
be taxed. They are based on the assumption that an  
unearned increment exists and can be identified. My  
answer was an effort to show the irrelevance of the  
question to the issue at hand.  
  
Warren claims that "the owner per se of oil land does  
nothing and yet reaps where he has not sown." Which  
oil land is he writing about? The focus on oil land  
gains seems to me to be a rhetorical ploy that is  
especially appealing in these days when many people  
resent gains by terrorist-sponsoring middle eastern  
oil-land owners. In any case it is a good example of  
disregarded entrepreneurship. Oil has existed for a  
longer time that human beings, yet it was not regarded  
as a resource in the modern sense until about 150  
years ago. Since that time great effort and expense  
have gone into discovering it and transforming it into  
a usable substance. Has Warren read the history of the  
oil magnates? Does it not read somewhat like the  
history of Microsoft and Disney? Does Warren think  
that it is possible to separate the earned from the  
unearned increment in the prices of different kinds of  
'oil land' located at different places, some of which  
entrepreneurs regard as valuable only if oil prices  
are high? How would he go about assessing oil land?  
  
Some readers may not recall that I started this  
discussion by criticizing Laurent's review of George.  
I did this in order to show how Herbert Davenport used  
the entrepreneur view to drive the nail into the  
coffin of the single tax idea. I published a paper on  
this about 10 years ago that nobody seems to have  
read. I have come with some sadness to form the  
opinion that some members appear to lack the tools  
necessary to comprehend my demonstration. I understand  
more as a result of this discussion why Davenport's  
revolutionary work has been neglected.  
  
Pat Gunning