Roger Sandilands has reproduced from Henry George, what I had already noted as an elementary distinction between capital and land. Alas, he fails to point out, if he's recognized it, the error into which George is led by his firm association of capital with only produced goods to be used in further production. This is the source from which George thinks that the classical explanation of wages as being paid out of previously accumulated capital to be just plain nonsense. Instead, George insists that wages are paid out of current production for which labor is currently hired. In short, George failed to recognize the difference between capital as capital goods from capital as funds, a problem that has afflicted several other notable analysts in the past. Thus George quotes Adam Smith's listing of the constituents of capital, which include "money," and couldn't appreciate money's rightful place in the definition. This is how George could feel confident in declaring the classical wages-fund explanation of wage rates as being erroneous. George's muddled understanding of the distinction between capital as funds and capital goods, the latter being a subset of the former, also shows up clearly in his dispute with classical analysis in chapter 1 of his famous book. Thus, when it is explained that higher wage rates may be paid if a larger share of capital were devoted to the wages fund than if a larger share were devoted to capital goods -- "machinery and material" -- George considers the explanation a "fundamental error." That failure on the part of George also prevents him from recognizing that there is no necessary connection between wage rates and the level of interest rates. Correctly understood, interest rates are determined by the supply and demand for capital or savings (funds) while wage rates are determined by the supply and demand for labor, the wages fund constituting the demand for labor. It seems incredible to me that George bases much of his argument for the single-tax proposal on such a fundamental error, besides the argument that no one should own land since it is given by nature. Donald Frey restates this claim by George but without criticism: "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." How is it that anyone can fail to recognize that most producers borrow funds (capital) out of which they purchase capital goods, including raw materials, and rent the services of land and labor (from the wages fund) before attaining revenue from production? And that such funds had to have been saved out of previously earned income to be offered on loan? Otherwise, they have to come up with their own savings or capital (funds). Indeed, the more I read of George's "Progress and Poverty," the more faults I find in his work. I get the same incredulous feeling I got in the summer of 1985 when I stumbled upon the fact that the reason J.M. Keynes thought that he had found the missing link in classical macroeconomics was that they didn't have a valid theory of interest. And in attempting to prove that point in the first footnote to chapter 14 of the General Theory, it is quite clear that Keynes could not recognize capital in the classical theory of interest as funds. He then proceeded to declare Marshall restatements of the classical theory of interest as "nonsensical" and "absurd." Henry George does about the same thing in chapters 1 and 2 of his book. I'm almost tempted to do for George what I've been trying to do for Keynes in macroeconomics. Just as I felt in the case of Keynes, I can't now believe that the fundamental sources of George's errors have not yet been published. Besides, I doubt that there is much interest in economics for explaining how George got it wrong. Just as George correctly recognizes that the value of land increases as the need to use it (demand) increases with industrial progress, I would need to know that there is much demand for such an effort to take up documenting the sources of George's errors. Perhaps Roger and Warren might help me in that regard. James Ahiakpor