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