To Mason and John:

It occurs to me that your main interest is not in how to interpret 
Clark. It is in Georgism. So let me deal with that, from the 
entrepreneur view of course. By doing this, I can comment on what I 
think are your real concerns while elucidating the point of view that I 
have described as present in the work of Davenport, Knight and Mises but 
which.in my opinion, has gone largely unrecognized by historians of 
economic thought as well as mainstream economists.

Surely, you both realize that, regarding a place to park money, land is 
not superior to others places. If it were, under the conditions of the 
market economy, the only sensible explanation would have to be that 
entrepreneurs had systematically undervalued land in relation to other 
things and actions. We would not expect them, once they found this out, 
to repeat their errors. It follows that to tax land in the future and to 
not tax the other things and actions whose market value increase would 
be unjust. The "parking money" argument for taxing land does not wash. 
(Is it possible that what you really have in mind is taxing inheritance 
and gifts?)

Property and actions may increase in market value for reasons that are 
not economic. But one must assume that this fact is beside the point. 
since practically everyone would agree that income earned from 
noneconomic actions is in a different category from income earned in 
helping with the supply of consumer goods. In other words, if you can 
show that an increase in the price of land is due to something other 
than entrepreneurship or luck, we must shift the argument to other 
considerations besides economics. I might well agree with whatever 
conclusions you reach about taxing an increase in the price due to 
noneconomic considerations.

One of Mason's concerns, as I interpret him, is with speculative gain. 
He thinks that speculative gains should be treated differently from 
income earned from other economic sources. To the extent that 
speculative gains are due to luck, I would agree. And, no doubt, more of 
such gains are due to luck than earnings from other activities. But 
speculative gains are not entirely due to luck. To the extent that they 
are due to the making of more accurate appraisals than others, I 
disagree. A person who makes a more accurate appraisal of property may 
also divert it to a different use. Thus an entrepreneur who anticipates 
that farmland is more valuable as living space can dissuade investment 
in irrigation or fertilization by bidding the land away from those who 
would improve on its use in order to farm it. Since it is not practical 
to distinguish entrepreneurs who plan to divert property to a different 
use from those who do not, an effort to tax the latter will almost 
certainly dampen the incentives of the former. Also, to tax speculative 
gains would not only reduce speculation, it would reduce hedging. In 
short, speculation performs an economic function.

Finally, regarding luck. If it were practical to distinguish increases 
in market value due to luck from those due to entrepreneurship, I would 
agree to allowing lucky increases to be taxed. Lucky increments in 
wealth are unearned. However, I do not know a way to do this. Do you? Of 
course, governments impose heavy taxes on people who play the lottery. 
One might argue that this is a tax on lucky increases. On the other 
hand, one might argue that it is a tax on play. Whatever one calls it, 
it is a game run by the government and not a market economy phenomenon. 
So it is not directly relevant to the issue. The issue is whether a 
government can, practically speaking, tax gains in market interaction 
that are due to luck without causing consequences that are worse than 
the money benefits coming from the taxes.

Best wishes,

Pat Gunning