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cyc http://www.schalkenbach.org/library/SaratogaBatt.pdf The
Compatibility of Georgist Economics
and Ecological Economics by H. William Batt, Ph.D.
Executive Director, Central Research Group, Inc. PO Box 4112, Patroon Station Albany, New York 12204 tel: 518-462-5068 hwbatt@yahoo.com Revision of Earlier Paper done April, 2000 For Presentation at the United States Society for Ecological Economics May 22-24, 2003 Saratoga Springs, New York INTRODUCTION There are many indications that the paradigm that has dominated orthodox economic theory for the past century, what has come to be called neoclassical economics, is disintegrating.1 This has led many economics students, as well as others interested in the power and promise this discipline holds, to look once more at the genesis of its theory and to attempt reformulations of its basic premises. Marxism has also ceased to be a viable alternative, perhaps more due to the failure of its institutional applications than to the failings of the theory itself. Only one other longstanding economics tradition has survived continuing scrutiny and remains a recognizable and venerable legacy to the present time. This is the tradition that has come to be known as Georgism. The Georgist tradition has seen a profound revival during the past decade and warrants a comparison with other upstart economics frameworks that have reached the level of separate identity.2 1“The Puzzling Failure of
Economics,” Cover article and
Editorial, The Economist, August 25, 1997; and William Pfaff, “Seeking
a Broader Vision of Economic Society,” International Herald Tribune,
Saturday/Sunday, February 3-4, 1996.
The Georgist school of thought takes its identity from the work and
insights of 19th century journalist, economist, and political leader
Henry George, who died in 1897 at the young age of 57. In his short
life, however, he managed to spawn a school of economics of lasting
impact, based on his prolific writing and speaking as well as his
dedicated pursuit of economic justice and political change. George’s
most famous book, Progress and Poverty, has been
in print ever since
its initial publication in 1879. It had by 1906 sold more copies than
any book ever published except the Bible. Not only did he travel
internationally throughout the English-speaking world, strongly
influencing policy in Australia, Canada, New Zealand, South Africa, and
the United Kingdom, he was the candidate for the mayor of the city of
New York on two occasions, elections that he might have won had it not
been for Tammany Hall corruption in the first instance and his death
four days before the polls opened in the second. Current mainstream
textbooks have reduced his program to advocacy of the “single tax,”
often dismissing him as a crank, but his views were in fact far more
complex. They constituted a total world view synthesized from several
streams of thought current during the nineteenth century. The influence
of his thinking in United States is manifest in the language of many
state and local laws, even though only in the state of Pennsylvania
have his ideas been put into practice in any concerted way.32As an example of the array of new approaches, see Fred Foldvary (Editor), Beyond Neoclassical Economics: Heterodox Approaches to Economic Theory, Edward Elgar, Publishers, 1996. 3Alanna Hartzok, “Pennsylvania’s
Success with Local Property Tax Reform: The Split Rate Tax,” The
American Journal of Economics and Sociology, Vol 56, No.2 (April,
1997), pp. 205-214; Andelson, Robert V.(ed.) , (1998), Land-Value
Taxation Around the World: Reports on Current and Historical Efforts to
Apply the Principle of Collecting the Community-Created Value of Many
Land for Community Benefit, New York: Robert Schalkenbach Foundation;
Peddle, Francis K. (1994) Cities and Greed: Taxes, Inflation and Land
Speculation, Ottawa: Canadian Research Committee on Taxation; and other
studies available
particularly from the Lincoln Institute of Land Policy, The Robert
Schalkenbach Foundation, and the Center for the Study of Economics.
This paper constitutes an effort to compare, and if possible to integrate, the emerging discipline of ecological economics with Georgist economics. Ecological economics has the current distinction of having established, to its credit, a collegial, cross-disciplinary organization,4 a professional journal,5 and at least one graduate program authorized to grant doctorates in this subject.6 It has established itself sufficiently to have had annual international conferences for a decade and a half, and seen its works cited in several other scholarly disciplines. Georgist economics, while having no established doctoral program so distinctively tailored, has among its fold many economists of established pedigree,7 and many others outside the academy who contribute significantly to its discourse. There have been Henry George Schools in major cities around the world for decades, a network of organizations, frequent conferences, and at least thirty websites that exist to explicate and purvey the Georgist outlook.8 4This, the International Society
for Ecological Economics,
founded in 1988 with a current membership of 1500 in over 60 nations,
has an international office on the campus of the University of
Maryland, College Park.
The organization of this paper has the following outline. It first
looks at the basic economic premises underlying Georgist economics as
they have evolved and been refined over the past century. It then
continues with an examination of the moral dimensions of Georgism,
contrasting it with neoclassical economics which claims to be value
neutral. Thirdly it explores both its research and political agenda and
goals to the extent that they can be identified as a cohesive approach.
The same examination then follows for the new discipline of ecological
economics. The paper concludes with an exploration of how the two
approaches can be synthesized so as to create a stronger and more
far-reaching interdisciplinary study of economics. Because the paper is
a revision of an earlier attempt written in the year 2000, and because
it is now being prepared for presentation to an audience of ecological
economists, more attention is given to the explication of Georgist than
to ecological economics. The author is also on firmer ground in
discussion of Georgism, and comes only recently to his discovery of the
ecological economics school of thought. Comments from the latter
perspective are therefore especially invited.5Ecological Economics, a quarterly journal currently in its eleventh year of publication. 6This is at Rensselaer Polytechnic Institute; see http://www.rpi.edu/dept/economics/www/ecologic.html. 7See note 37 below. The most distinguished and vocal adherent was the late Professor William Vickrey of Columbia University, a winner of the Nobel Prize in Economics in 1996. One anthology containing most of Vickrey’s Georgist writing has recently been published. See Kenneth Wenzer (ed.), Land-Value Taxation: The Equitable and Efficient Source of Public Finance, New York: M.E. Sharpe, 1998. 8Most of these websites can be accessed through http://www.crctaxation.org/papers.htm. There one can access a site map of the other Georgist sites throughout the world. In the United States, the major ones are the Henry George Foundation and the Center for the Study of Economics at http://www.crctaxation.org/papers.htm; The Progress Report at http://www.progress.org/; The Henry George Institute at http://www.henrygeorge.org/; and The Robert Schalkenbach Foundation, at http://www.schalkenbach.org/. GEORGIST
ECONOMICS
Georgist Economics: Basic Premises9 9This framework of presentation
can be found in more elaborate form at
one of the Georgist websites where a self-instruction course is
offered. It is at http://www.henrygeorge.org/.
The starting point of the Georgist framework is rigorous definition of the three factors of production — land, labor, and capital, as in classical economics. It should be further pointed out that these factors are mutually exclusive and jointly exhaustive of all things of economic value. Something must necessarily be in one category or another; there is nothing outside this total classification. Understanding of what constitutes labor differs little from definitions given elsewhere, regardless of which theory is used. But definitions of land and capital differ somewhat from common practice as well as sometimes in theory. Therefore, it is helpful to spend time explicating the definitions of each as they are used in Georgism, and to point out where these definitions diverge from those most often employed in neoclassical economics applications. Many contemporary economics texts begin by taking note of the land-labor-capital distinction, but then make little use of it later. These distinctions will make apparent why Georgist economics leads to very different explanations of economic phenomena as well as to different policy solutions. Critical to an understanding of Georgist economics is its recognition of land as a special and unique factor of production. “Land,” to Georgists, as true for classical economists throughout the 19th century, is taken to mean not just the surface of the earth and locational space; it means also any and all those natural resources and non-human works that today can exact a market price. It includes the wealth of the earth in all its natural forms, the air and water as well as material elements. It includes phenomena of value like the electromagnetic spectrum used to transmit communications signals, and landing time slots such as have value at airports. As the world economies enter a new age of high technology, these radio spectrums and time allotments have gained ever increasing value. So also with geosychronous satellite orbits and most recently the genetic codes of all the biota on earth.10 10See the works of Vandana
Shiva: Biopiracy, Stolen Harvest, Water Wars, and, most recently,
Protect or Plunder? The most recent discussion of the extensive
elements of this commons, or land, is David Bollier’s Silent Theft: The
Private Plunder of Our Common Wealth, Routledge, 2002, reviewed by this
writer at www.progress.org/revboll.htm.
Sites have value relative to their location, and this is largely a function of where people choose to congregate. The highest value lands, in urban areas and in developed nations, have market worth many times that of sites even short distances away. Remote land sites sometimes have no market value whatsoever, and they are typically not “owned” by private individuals or corporations because they are not attractive for economic use. In New York City, for example, the ownership of one small parcel of less than an acre in Times Square was transferred from Prudential Life Insurance Company to the Disney Corporation in 1998 for an estimated $240 million.11 This is more market value than all the land and buildings together in the region north of the Mohawk River/Erie Canal in New York State. More recently, a nine-acre parcel just south of the United Nations complex, also available for development in New York City, was estimated to have a site value of $750 million.12 In both these cases, the cost of razing the existing obsolete buildings was included in these prices, a factor which suggests that the market value of the land would have been still higher were it not for this condition.13 In contrast there are land areas in Northern Canada and in the polar regions for which there are no private bidders at all. 11New York Times, March 7, 1998.
It is equally important to distinguish those factors that are not land
in the classical sense of its economic use. Natural resources such as
coal, oil, and minerals, once removed from their natural state are no
longer regarded as land. A diamond lodged in the deep earth is
land; that same diamond discovered by a prospector and then cut and
polished by a jeweler, is no longer land but capital. Likewise, fish in
the ocean are land, but fish once caught and in a boat are capital.
This is why, in any courses taught on Georgist economics, considerable
time is devoted to basic definitions. To carry the distinction just one
step further, land in the Georgist lexicon, is not wealth, whereas in
neoclassical economics it is. In the course of later discussion of the
Georgist view relative to the ecological economics approach, this will
emerge as a critical distinction, as it helps to demarcate the
boundaries of what activities fall within the realm of economic
behavior and what activities remain marginal.12Charles V. Bagli, “Winning Bid to Develop 9 Acres Near U.N.,” New York Times, January 2, 1999. 13There was a time, until the recent crash of the Japanese economy in the early 90s, when the land under the Emperor’s Palace in Tokyo was estimated to have a value higher than all of California. This separate and identifiable recognition of land has significant importance for the definition of capital too, because capital, then, cannot be land. Capital, rather, is the product of labor and land (and perhaps other past capital) to add to the increased store of capital of individuals or of the community. Capital can be of many types, ranging from monetary wealth to technical knowledge. The store of capital applied to land and labor results in the further production of capital wealth. Capital allows labor to be employed with greater efficiency and productivity, through the use of technology and instruments and with increased human skill and knowledge. The next important step in understanding Georgist economics is recognition that each factor of production has its economic price: the price of labor is wages, the price of capital is interest, and the price of land is rent. When any of these prices are unpaid, distortions result in the economic equilibrium and problems become manifest in other realms of nature and society. In neoclassical economics compensation for the use of labor and capital continue to be important in the formulas and calculations employed to explain the economy. But for neoclassical economics, David Ricardo’s “law of rent” is essentially ignored and has be come for all practical purposes an artifact in the history of economics. Rent continues to exist of course; it is simply uncollected, left in the hands of those who maintain monopoly control of certain services of nature, adding to their market value in ways that distort the balance of markets. Failure to recognize the importance of land rent (sometimes called economic rent) is for Georgists critical to an understanding of the problems of contemporary economies and economic analysis.14 14The phenomenon of rent
and
rent-seeking is a proper consideration not just in economics but also
particularly for the study of politics. A recent paper originally
published in Political Studies /Vol. 45 (September, 1997), pp. 639-658,
makes this clear: Paul Hutchcroft, “The Politics of Privilege:
Assessing the Impact of Rents, Corruption, and Clientelism on Third
World Development,” also at http://www.coc.ceu.hu/hutchcroft.html.
Hence it becomes important, critically important, to understand the meaning of “ownership” and “property” in the Georgist lexicon. But it is not difficult, for they continue to have their classical meanings, just as for John Locke, Adam Smith, and all the major forerunners and thinkers of classical economics until the advent of neoclassical economics. What was the meaning of ownership and property in their classical sense? Property was the product of human labor and capital, and that alone. Items of property were household goods, personal attire, armaments, and similar such goods. Property belonged in the category of capital. Land was not part of property, but rather was its own category. Land, broadly defined, belonged to everyone and was the common heritage of all humanity.15 One could no more “own” land than one could own water, air, or other parts of nature, at least in the sense of ownership that people often use today. Much like the native-American concept of ownership, it was part of what was classically called “ the commons.” 16 “What is this you call property?” Massasoit, a leader of the Wampanoag, asked the Plymouth colonists whom he had befriended in the 1620s. “It cannot be the earth, for the land is our mother, nourishing all her children, beasts, birds, fish, and all men. The woods, the streams, everything on it belongs to everybody and is for the use of all. How can one man say it belongs to him?” 17 Indeed Georgists see a moral equivalency between monopoly ownership of land and nature and the ownership of slaves! 15Two Georgist websites in fact
celebrate that principle: http://www.enviroweb.org/earthrights/index.html,
Georgists' assumptions about property ownership rest upon premises
profoundly different from their conventional use in western society —
indeed increasingly in world society. In the discourse of legal
philosophy, the notion of property and ownership are better understood
as a collection of legal rights and responsibilities among people; for
example, the right to possess, to use, to capitalize, to manage, and to
retain the income from such.18 If
one disaggregates these rights, one has a far clearer understanding of
the potential array of socio-economic arrangements that are possible.
The primary distinction to Georgists is that between ownership for use
and ownership for gain. More will be said about the merit of this
division at a later point, but it should be noted even here that the
distinction is ancient,19 and
has had expression at various times in human history long before the
appearance of Henry George. Two sets of contrasting terms are often
employed to distinguish the separate notions of ownership:
http://www.earthshare.org/, and a third in Australia at: http://home.vicnet.net.au/~earthshr/. 16See Susan J. Buck, The Global Commons: An Introduction, Washington: Island Press, 1998. In the contemporary context, the commons could be extended to our genetic heritage, threatened as it is by pharmaceutical and agribusiness corporations that are patenting genes for private profit. See, Vandana Shiva, Biopiracy: The Plunder of Nature and Knowledge, Boston: South End Press, 1997, and her more recent works cited below. The story is frequently told that when Dr. Jonas Salk was asked whether he was going to patent the polio vaccine he developed, he reacted with bewilderment. “Can one patent the sun?” he asked. 17Quoted in Andro Linklater, Measuring America: How an Untamed Wilderness Shaped the United States and Fulfilled the Promise of Democracy, New York: Walker & Company, 2002, p. 44, taken from D.W. Meinig, The Shaping of America: A Geographical Perspective on 500 Years of History, New Haven: Yale University Press, 1986, 1993, 1998.
18This list, one among
many, is
that of A.M.A. Honoré, a well-known legal scholar, noted in John
Christman, The Myth of Property, Oxford University Press, 1994, p. 19.
Another writer lists nine: possession, use, alienation (the power to
give away), consumption, modification, destruction, management,
exchange, and profit taking. Donald A. Krueckeberg, "The Difficult
Character of Property: To Whom Do Things Belong?" Journal of the
American Planning Association, Vol. 61, No. 3, Summer, 1995.
In fact compensation for land held in usufruct was far more often in kind than it was in money. Typically, in Middle Eastern as well as in Asian societies, a percentage of a crop or of other products gained from the land were accepted as just payment for its use, paid usually to a king or nobleman in exchange for services which they in turn were expected to provide. This usually meant the protection against ravaging bands, arbitration of disputes, provision of sustenance in times of emergency, and so on. The pattern of leasehold ownership with either in-kind services, goods, or later fees paid to lords and kings is the hallmark feature of feudalism, widely known not only in the European past but throughout Asia and prehistoric Central American civilizations. In the Georgist context a titleholder has the right to ownership of land in usufruct, but not in fee simple. As long as an owner uses land and other elements of nature in accord with the rules and laws of society, one retains a possessory interest. That interest extends to the privilege to use land for all purposes consistent with its proper maintenance and care. It extends even in some cases to the right to preclude others from any trespass at all. But what it typically does not include is the right to any speculative gain that would follow from title in freehold, or the right to use land beyond what it is capable of sustaining. Use implies that its quality is not diminished for the future availability of others, and that there is an obligation for the user to pay to society a just price in exchange for such use. One had no right, for example, to strip a forest of its trees. Enough is known now about the arrangements of land ownership and use in comparative perspective to assert with confidence that the historical practice of title in fee simple or freehold has been far more the exception than rule.20 Taking the long view of history, title in usufruct has been by far the more common pattern of ownership of natural resources, except where Roman jurisprudence and its offspring have spread throughout the world and come to dominate. 19See, for example, the recent
collection of essays edited by Michael
Hudson and Baruch Levine, Privatization in the Ancient Near East
and
Classical World, and Urbanization and Land Ownership in the Ancient
Near East, both published by Harvard University’s Peabody Museum of
Archaeology and Ethnology, 1999.
20E. Adamson Hoebel, The
Law of
Primitive Man, Cambridge: Harvard
University Press, 1954, p. 56; and Leopold Pospisil, Anthropology of
Law: A Comparative Perspective, New York: Harper & Row, 1971, pp.
273 ff. For American Indians, see Wendell H. Oswalt, This Land was
Theirs, 6th Edition, Mayfield Publishing Co., 1998.
In the United States, the definition of real property as explicated in the legal Commentaries of Sir William Blackstone may have been pivotal in the adoption of freehold interpretations of ownership over leasehold.21 For several years after this nation was founded which system of title would prevail hung in the balance.22 Thomas Paine was certainly an advocate of the latter,23 as was Jefferson.24 Hamilton, on the other hand, was a defender of propertied interests and titles in fee simple, and especially to his in-laws, the landowning families of upstate New York known as the Patroons.25 Leaseholds were used in several of the colonies, with the fees paid to governors.26 21Yet, despite the evolutionary
application of Blackstone’s law in the Ame rican context, he wrote that
“the earth. . . is the general property of all mankind, from the
immediate gift of the Creator.”
22For a detailed exposition of how American concepts of real property ownership changed in the early years, see Peter Charles Hoffer, Law and People in Colonial America, Baltimore: Johns Hopkins University Press, 1992 and Revised, 1998. 23See Agrarian Justice, http://www.geocities.com/Athens/Acropolis/5148/paine_agrarianjustice_01.html. 24“Jefferson and the Land Question,” by Henry George, Jr., at www.cooperativeindividualism.org/george_jr_jefferson_and_land.html. 25See Henry Christman, Tin Horns and Calico, New York: Henry Holt Press, 1945; reprinted in 1961, 1975 and 1978 by Hope Farm Press in Cornwallville, New York; Sung Bok Kim, Landlord and Tenant in Colonial New York: Manorial Society, 1664-1775, Chapel Hill: University of North Carolina Press, 1978; David Maldwyn Ellis, Landlords and Farmers in the Hudson Mohawk Region, 1790-1850, Ithaca: Cornell University Press, 1946; Reeve Huston, Land and Freedom: Rural Society, Popular Protest, and Party Politics in Antebellum New York: Oxford University Press, 2000; and Charles W. McCurdy, The Anti-Rent Era in New York Law and Politics: 1839-1865, Chapel Hill: University of North Carolina Press, 2001. 26William B. Scott, In Pursuit of Happiness: American Conceptions of Property from the Seventeenth to the Twentieth Century, Bloomington: Indiana University Press, 1977. Rent becomes critically important in Georgist economics, because rent is the increment of market gain that accrues to choice land parcels. This insight arose originally in the context of agricultural societies, where differential qualities of land were recognized by varied payment in rent. An individual’s return on investment was represented by his labor — that was his and his alone to keep. So also were whatever capital goods he acquired through the efforts of his past labor. On the other hand, whenever land offered a higher yield separate from whatever the individual’s labor investment might represent, this constituted a windfall gain above and beyond what might be minimally expected. This is land rent, and it exists even if it isn’t collected. Today, as earlier noted, the greatest land rents derive from their location, grown out of nearby social investment. The concept of rent needs further explication precisely because it is so foreign to 20th century students, even those who have been schooled in economics at it is currently taught. Land rent has no relationship to the word rent as it is used in contemporary vernacular, that is, when one rents a car or an apartment. Rather, rent is a surplus, defined as the return on investment above and beyond what is minimally required to bring a service into production. To take just an elementary example, consider that there are three parcels of land available for farming and three farmers of equal ability and enterprise. But suppose the parcels differ in their productive capacity, due perhaps to their fertility, access to water, and so on. If planted with similar quality seed, the three parcels will yield different quantities of harvest, the one with the highest quality land having the best return. The one with the lowest quality land would in like fashion have the lowest return. Economic rent is defined as the amount of surplus harvest qualitatively measured by the difference between the parcel with the highest return and that with the lowest return. Even though its originator, David Ricardo, had in mind the differential return from agricultural lands, the concept of rent applies to other natural services as well. Consider what happens in the case of urban communities, using the simplest comparison with a tic-tac-toe board. When the lattice is completely undeveloped and consists only of vacant land squares, the locational sites have inconsequential value. But let us suppose that each square is then settled — the first by a hotel, the second by a department store, the third by a restaurant and so on — and supposing that the owner of the center square is reticent to build at all. Reserving his prerogative as titleholder he may intend ultimately to sell. Given the rules of economics as they apply today he may be wise to do so, keeping his money for other uses, as his square will have increased in market value more than all the others despite his having done nothing to improve it. It was this that prompted John Stuart Mill to observe that “Landlords grow richer in their sleep without working, risking or economizing. The increase in the value of land, aris[es] from the efforts of an entire community.. . .” 27 As will be discussed later below, the single greatest factor in determining the economic rental value of land today results not from nutrients or access to water but rather due to site value determined by location. And that can be priced and collected easily. 27John Stuart Mill, Principles
of Political Economy, Book 5, ch 2, Sec.5.
Lastly, one must appreciate that the market value of “land” of every sort is entirely rent, as there is no human factor of labor that accounts for its origination. Services of nature have no prior cost to bring them into production existence — the electromagnetic spectrum, for example, exists regardless of human presence on earth and so presumably does time. Ocean fish, fossil fuels, and heavy metals are all found in nature, not the result of human creation. They are, in 19th century classical economics, the fruits not of man’s labor but of God’s. And it is to God, or at least to God’s representative on earth — the lords and kings — that rent was owed, just as much as it was their role to provide reciprocal services to the tenants of the land. That bargain, so well refined in feudal economic arrangements, was an equilibrium balance, disrupted, one might say, by the annulment of rent collection and the exploitation of land without recognition of its price. The practice effectively ended with what in Britain is known as the “enclosure movement” of the early Tudor reign, driving the peasants off the land into cities to provide cheap labor for the early English industrialists.28 But the theory continued long afterwards. Georgists today argue that land rent should be collected from titleholders so that it is not left to render economic distortions. This in turn affects the price of labor and the price of money. Government’s role, whatever else it does, is at the very least responsible for defending the commons, to ascertain titles and to collect rent. Although there are many differences about the proper role, scope and domain of government among Georgist adherents, the collection of rent and the supervision of open markets is central to its tenets. 28Karl Polanyi, The Great
Transformation: The Political and Economic Origins of Our Time (Boston:
Beacon Press), 1957, 1963.
Despite assiduous efforts to make clear the extent and the limits of the economic rent as a concept — known as well as land rent, Ricardian rent, and ground rent, even the best of contemporary neoclassical economists disagree. Some texts argue that certain athletes or other star performers with great natural ability reap returns for their efforts far above what is in fact necessary to “bring them into productive use.” The difference between what it would minimally take to entice them to perform and the price they are actually paid is all economic rent. Babe Ruth, Michael Jordan, Britney Spears, and the Beatles have all been compensated with impressive amounts of economic rent.29 Georgists and classical economists are of mixed minds, arguing sometimes that such payments are either wages or else are simply transfers that in no way reflect productivity.30 29See, for example, “What
Determines John Elway’s Salary?” in
William J. Baumol and Alan S. Blinder, Economics: Principles and
Policy, Fifth edition, (New York: Harcourt, Brace & Jovanovich,
1991, pp. 752-754.
30Personal communication with Professors Mason Gaffney, Nic Tideman and others. As with all nineteenth century moral philosophers, Henry George subscribed to a belief in natural law. The natural order of things as he saw it required that land be held in usufruct and that rent from such should be returned to society. The theory was inspired by his deeply religious roots and grounded in his reading of the prominent thinkers that predated him. The natural order was also a moral order, and the failure to comply with the order of nature and society as he saw it was a perversion of justice. The fruits of the land belonged to everyone, just as the fruits of one’s own labor were uniquely one’s own. Since one owned one’s body, one was entitled to keep the product of one’s physical efforts. Society had no more right to confiscate the earnings of one’s sweat and brow than it ought to leave in the hands of rich landowners the rent that was everyone’s inherent birthright to be shared. There were just and unjust taxes, and the only just tax was that which grew out of rent, of the unearned increment that visited certain land sites as windfall gains because of the efforts and investments by the community. Income and excise taxes were unjust and confiscatory— even theft, as especially were tariffs. Taxing or collecting land rent alone was the means of ending poverty and restoring progress. Indeed many Georgists reject use of the word tax entirely, preferring instead to talk instead about rent collection. There is even a lapel button Georgists use that says “Abolish all taxes; collect ground rent instead.” Georgist Economics: Moral Premises What distinguished Henry George’s views from those of his adversaries in the last decade of his life was his assertion that economics was necessarily a moral science. Unlike those who became the founders of the American Economics Association in 1885, most of whom were transitional figures to what would become neoclassical economics, the primary focus of George and his disciplines was economic justice. This is not to say that explanation was cast aside; indeed the subtitle of his magnum opus, Progress and Poverty, was An Inquiry into the Cause of Industrial Depressions and of Increase of Want with Increase of Wealth . . . The Remedy. Why, he asked, in the midst of such boundless plenty is there such abject poverty? He would dedicate his book, first published in 1879, “to those who, seeing the vice and misery that spring from the unequal distribution of wealth and privilege, feel the possibility of a higher social state and would strive for its attainment.” He had known poverty first hand when he was struggling to support his young family and establish himself as a printer, a journalist and a publisher. He could also see before him the fruits of land and nature easily available to be harvested but for its legal capture by monopoly titleholders. He wrote of all this in some six books and countless other essays, the focus always on the theme of economic justice. Along with Robert Ingersoll, he was likely the most stimulating orator of his age, a fiery moralist at a time during which there were many others who might claim such a title. He traveled widely, was a champion of labor, the landless, and the urban poor, particularly influential in the struggle over the Irish land question and in the positions of the Liberal party in the early 20th century. His admirers among the great of the time were myriad: Sun Yat Sen, Leo Tolstoi, Winston Churchill, Theodore Roosevelt, Charles Beard, Samuel Clemens, Robert Maynard Hutchins, and John Dewey to name a few. Forewarned in 1897 that running for mayor of New York a second time and trying at the same time to finish another authoritative statement of his philosophy would kill him, the prophesy was fulfilled nonetheless with his death four days before election day. In 1886 he lost a rigged election31 when matched against a scion of banking wealth Abram S. Hewitt, who was recruited by Seth Low, President of Columbia University, but he beat the third place finisher, Teddy Roosevelt. His funeral on the streets of New York drew the largest crowd of mourners ever assembled until that time, and until much later. No one doubted Henry George’s passionate commitment to justice. 31See “Capitalism by Fraud,” in
Gustavus Myers, History of Great
American Fortunes, New York: Random House Modern Library Edition, 1936,
pp. 356-358, as well as biographies of George.
The heart of George’s economics was, in a way, Biblical. As the son of a religious book publisher born in Philadelphia, he had adequate opportunity to witness the early growth of the American republic in a unique way. On his own in San Francisco and responsible for a wife and child at a young age, his first effort at resolving the puzzles of injustice were a manuscript printed in 1871. But only after additional exposure to Ricardian rent theory was he able to refine his ideas such that they could form the basis of his Progress and Poverty eight years later. His Christian roots led him to a deep commitment to the basic moral equality of all people; his challenge was to find a way to ensure that this equality was manifest in economic fairness. As noted earlier, the starting point of Georgist philosophy is that nature belongs to owners only in usufruct and not in freehold. Because any monetary wealth that accrued to that nature stemmed directly from the physical presence of people and was therefore social in character, the resulting added increment of value that constituted rent belonged in turn to the community that created it. Nature would have no economic price without people. Hence rent was the community’s entitlement and not that of individuals, and the land rent that accrued to parcels as a result of social investment should be returned to — recaptured by — the community. It was obvious to George that the wealthiest people in the nation usually owed their fortune not to the sweat of their brow or the inventiveness of their minds. Rather their position was due to their success as land speculators, to an increase in rent on land they had captured title to, land rightfully belonging to all. The earth and all its product, he argued, was the common heritage of humanity, a birthright of all people. Any failure to pay back that increment to society, or of government to recapture it in the form of taxes, constituted not only an injustice to the poor but a distortion of economic equilibrium. He witnessed first hand the perverted configurations of land use that today we know as sprawl development — even in his time it was apparent that urban, high value land parcels were being held off the market for speculative gain by meretricious interests. He witnessed also the boom and bust cycles of the land markets on account of such speculation, effects which spread far wider than just land prices. These inevitable cycles would dislocate labor and capital supply, giving impetus to the impoverishment and suffering which he himself had experienced. He understood that holding the most strategically valuable landsites out of circulation constituted a burden on the economy. He understood that financial resources spent to pay exorbitant land prices had a depressing effect on capital and labor. And because government was taxing labor and capital instead of recovering land rent, it was further restricting the job market and the growth of capital. He realized that people who captured monopoly control of strategically valuable landsites could do so because they were privy to information prior to its public release. It was not by any means his insight alone; it was captured also by George Washington Plunkett writing at the same time: There’s
an honest graft, and I’m an example of how it works. I might sum up the
whole thing by sayin’: “I seen my opportunities and I took ‘em.”
Just let me explain by examples. My party’s in power in the city, and it’s goin’ to undertake a lot of public improvements. Well, I’m tipped off, say, that they’re going to lay out a new park in a certain place. I see my opportunity and I take it. I go to that place and I buy up all the land I can in the neighborhood. Then the board of this or that makes its plan public, and there is a rush to get my land, which nobody cared particularly for before. Ain’t it perfectly honest to charge a good price and make a profit on my investment and foresight? Of course, it is. Well, that’s honest graft. 32 32William L. Riordan, Plunkett
of Tammany Hall. New York: Dutton, 1963, p. 3.
All society needed to do was to collect the economic rent from landholders as its rightful due, a solution that became part of the subtitle of his book, “the remedy.” Taxing the land (or, alternatively, collecting the economic rent) was something common citizens could understand. They knew well the enormous disparity in fortune between the landed and the landless. They knew also that there was in fact land enough for all, except for a system of ownership that made no distinction between the right of land use and the right of land gain. George had no doubt read Frenchman P. J. Proudhon’s more strident pamphlet that “property is theft.” 33 He knew that there was a long tradition of land taxation, well articulated by a French school of philosophers known as the Physiocrats. It was a natural and comprehensible solution for him to advocate the adoption of the “single tax” on land, according to its market value, to collect the economic rent. 33Pierre-Joseph Proudhon
(1809-1865), What is Property? (orig. 1840) New York: Cambridge
University Press, 1994.
There was another dimension to George’s economic views as well. As Locke and later classical economists argued, one owned the items with which one “mixed his labor.” By extension one also owned items which one purchased in trade from others who had similarly created their wealth. Hence it was unjust and immoral for society to claim any parts of the fruits of one’s own efforts in the form of tariffs, sales taxes, and especially the income tax. Of course, except for a short period during the American Civil War, the American government had never implemented an income tax. But Britain had, and there was much discussion of a need for an income tax in the United States; it was again instituted in this country in 1913. During the late 19th century, the burden of various direct taxes was not so large that many common people felt their acute impact. It was, however, a time of extreme disparities between the poor and the wealthy, and the single tax was a means by which to redress some of those disparities. It would also foster the availability of employment by making labor more attractive relative to land and capital investment. In a word, people would more likely have to earn their money. The fruits of land wealth, distributed among people equally in the form of government services, would go far toward both enhancing economic opportunity and correcting inequality. Georgists today adhere to much the same points of view, although there are some significant differences. George himself was an ardent free trader, mainly because he believed that the single tax should supplant tariffs. After Ricardo, he accepted the idea of comparative advantage that arose from trade, but only after land (resource) rents were collected so as to preclude the raping of the natural environments of countries rich in such resources. He also believed that population growth was good — the more the better, and took special pains to refute Malthus. But one should also recall that he was living at a time when the expanse of the American continent was still open to any homesteader who chose to do so. Population growth was not a problem at that time. These elements of George’s thought are inconsequential to his followers today. Yet it is important to note that Georgists are not socialists; they do not subscribe to the view that society should own the means of production. These should remain privately owned by and large (except perhaps as today’s economic theory would call for, i.e., natural monopolies, public goods, and other government instruments). They are, rather, free-marketers in the full sense of the world, even more ardently than many contemporary American conservatives. He believed that removing the accretion of economic rent from landsites would restore self-regulating equilibrium of the marketplace, thus obviating the need for the heavy hand of government controls. Restoring land sites to the arena and influence of market forces by collecting land rents eliminates the incentive to hold them for speculative investment and thus expands the reach of the free market. As much as that term has been now overused, Georgism constitutes a “third way.” It is the distinction between the right of real property ownership for use versus real property ownership for gain that sets Georgists apart from other free market capitalists.34 34John Christman, The Myth of
Property, note 16, builds on this thesis.
Economic justice was and is the primary concern of Georgist economics, but not the only one. Land ownership is far more concentrated than other forms of income or of wealth;36 as a rough rule of thumb, approximately one third of the households in the United States own no land at all. Because a tax on land cannot be passed forward, these households therefore pay no taxes at all.37 The taxes come instead roughly equally from residential and non-residential parcel owners alike. Farmers and foresters, who typically own land of very low market value on account of its remote location, pay a negligible amount of taxes. This means, of course that most of the non-residential tax burden falls upon commercial parcels, but the burden on tenants represents no change from the going rate of floor space whatsoever. George himself had given considerable attention to the virtues of land taxation. Measured against the current principles of sound tax theory typically enumerated by schools of economics and public administration, contemporary advocates give the tax high marks. It is no accident, for example that a total of eight Nobel-Prize-winning economists have endorsed the principles of land taxation.38 The criteria typically used by experts in tax policy besides equity are variously defined to include neutrality, efficiency, simplicity, administrability, and stability. Because taxation inevitably has a moral dimension, the way in which taxes are designed and administered is also therefore profoundly moral in its content. 36For example, 95% of the USA is
owned by the richest 3% of Americans; 60% of El Salvador is owned by
the richest 2% of El Salvadorans; 86% of South Africa is owned by the
white minority; 74% of United Kingdom is owned by the richest 2% of
Britons; and 84% of Scotland is owned by the richest 7% of Scots. This
probably understates the concentration, because it measures ownership
not by land value but by land area. See
http://www.geocities.com/RainForest/3046/. Also Frank Ackerman, The
Political Economy of Inequality, Washington: Island Press, 2000, and
http://www.islandpress.org/ecocompass/changingnatow/inequality.html.
A tax that is neutral is one that in no way alters the behavior
of the markets by its imposition; that is people perform and make
choices in the same way as if there was no tax at all.39
Because a tax on “land” broadly defined is inelastic, i.e., has a fixed
supply, any tax on this base is completely capitalized in the market
price of the land itself. It is, in effect, a tax on the land rent, or
a recapture of the land rent by government in the name of society, just
as the rent is a creation of that society.37For a further explication of the economic dimensions of collecting land rent, see the author’s “The Merit of Site Value Taxation,” presented at a symposium of the Global Institute for Taxation of St. John’s University, Staten Island at The World Trade Center on October 1-2, 1999. 38 Eight Nobel Prize-winning Economists have Endorsed Land Value Taxation: Milton Friedman: “I share your view that taxes would be best placed on the land, and not on improvements,” and “In my opinion, the least bad tax is the property tax on the unimproved value of land, the Henry George argument of many, many years ago.” Herbert Simon: “Assuming that a tax increase is necessary, it is clearly preferable to impose the additional cost on land by increasing the land tax, rather than to increase the wage tax— the two alternatives open to the City (of Pittsburgh). It is the use and occupancy of property that creates the need for the municipal services that appear as the largest item in the budget— fire and police protection, waste removal, and public works. The average increase in tax bills of city residents will be about twice as great with wage tax increase than with a land tax increase.” Paul Samuelson: “Pure land rent is in the nature of a ‘surplus’ which can be taxed heavily without distorting production incentives or efficiency.” A land value tax can be called “the useful tax on measured land surplus.” James Tobin: “I think in principle it’s a good idea to tax unimproved land, and particularly capital gains (windfalls) on it. Theory says we should try to tax items with zero or low elasticity, and those include sites.” James Buchanan: “The landowner who withdraws land from productive use to a purely private use should be required to pay higher, not lower, taxes.” Franco Modigliani: “It is important that the rent of land be retained as a source of government revenue. Some persons who could make excellent use of land would be unable to raise money for the purchase price. Collecting rent annually provides access to land for persons with limited access to credit.” Robert Solow: “Users of land should not be allowed to acquire rights of indefinite duration for single payments. For efficiency, for adequate revenue and for justice, every user of land should be required to make an annual payment to the local government equal to the current rental value of the land that he or she prevents others from using. William Vickrey: “It (land value taxation) guarantees that no one dispossess fellow citizens by obtaining a disproportionate share of what nature provides for humanity.” The endorsements from the last four economists named above were taken from a letter dated November 7, 1990 to Mikhail Gorbachev signed by 30 prominent U.S. economists. That letter is reprinted in Richard Noyes (ed.), Now the Synthesis: Capitalism, Socialism, & the New Social Contract. London: Shepheard-Walwyn, 1991, pp. 225-230. The second Friedman quotation is from Human Events, November 18, 1978, p. 14; quoted also in the Fortune Encyclopedia of Economics, New York: Warner Books, 1993. 39"The striking result is that a
tax on rent will lead to no
distortions or economic inefficiencies. Why not? Because a tax on
pure
economic rent does not change anyone's economic behavior. Demanders are
unaffected because their price is unchanged. The behavior of suppliers
is unaffected because the supply of land is fixed and cannot react.
Hence, the economy operates after the tax exactly as it did before the
tax--with no distortions or inefficiencies arising as a result of the
land tax." P. Samuelson and W. D. Nordhaus, Economics, 16th ed., p. 250.
A land tax is efficient because there is no economic distortion of market choices as a consequence of its neutrality. This means that there is no wasted economic behavior in the form of excess burden or deadweight loss typically associated with other tax designs. As an example of the inefficiencies of other taxes, for example, one might consider the altered behavior that occurs in consequence of the presence of the income tax or the sales tax. This deadweight loss in American and British economies has been estimated to be roughly 20% of the national domestic product in each nation. Put differently, were there no deadweight loss as a result of the tax structure, the society would essentially be 20% more productive — and 20% richer in the aggregate.40 40Fred Harrison (Ed.),
The
Losses of Nations: Deadweight Politics versus Public Rent Dividends,
London: Othila, 1998, and Dale Jorgenson and Kun-Young Yun, “The Excess
Burden of Taxation in the United States,” Journal of Accounting,
Auditing, and Finance, fall, 1991. Harrison, et al. calculate that the
deadweight loss of the current tax system of United States is a
trillion dollars annually. Nicolaus Tideman et al. have modeled “The
Avoidable Excess Burden of U.S. Broadbased Taxes,” in Public Finance
Review (September, 2002), showing a “net gain of about $10,000 per
worker (16% of NDP) in the first year, rising to $17,800 (23.7% of NDP)
after 20 years for the most productive tax reform, which involves
collecting 90% of the rent of land and using the income tax as a
residual tax. When the sales tax is used as the residual tax, the gain
per worker is about $3,300 less.” This and other work is summarized in
“The Gains from Taxing Land,” in Geophilos, No.03(1) (Spring, 2003),
pp. 56-60. See also Alan Durning notes that “Complying [with the
personal income tax alone] takes Americans 5 billion hours each year.
For every dollar raised, U.S. taxpayers spend nine cents obeying the
law. Cheating is widespread; roughly one-fifth of income goes
unreported.” Alan Durning and Yoram Bauman, Tax Shift: How to Help the
Economy, Improve the Environment, and Get the Tax Man Off Our Backs,
Seattle: Northwest Environment Watch, April, 1998. p. 17. This is
further corroborated in Donald L. Barlett & James B. Steele, The
Great American Tax Dodge (Boston: Little, Brown & Co., 2000), where
the authors note (p. 23) that the proportion of U.S. taxpayers
deliberately engaged in cheating on their income taxes now approaches
“between one -third and one-half of the tax-paying population.”
Because a tax on land is essentially a flat rate percent levied on a base of assessed full market value, it is simple and easy for people to understand. On account of that attribute, a tax on land value is easily visible and is perceived by the public to be fair. Finally, now that applied computer technology can be used to accurately assess the value of land whether or not it is improved, one of the last traditional objections to the administrative feasibility to land value taxation has been allayed. All this enhances the legitimacy of government. The tax is therefore not simply efficient from the narrow measure of tax efficiency as described above. It is efficient also in the broader sense, by its ability to foster sounder government performance, better community relations, more livable community configurations, and enhanced social productivity. It is not just from the standpoint of tax theory alone that a tax on land should be evaluated. The most compelling arguments to many supporters stem from its environmental consequences. A tax on land sites is the most powerful instrument available to neutralize and reverse the centrifugal forces of urban sprawl. This is because incentives are present — the higher the tax the more power it has — to improve the high-value sites to the full extent that their market value warrants. Titleholders are induced to build on their parcels in order to recover the carrying costs of their increased taxes. The inelastic supply of land sites means that taxes are shouldered fully by owners, without being passed on to tenants. (Of course a tenant’s charges can be raised anytime.) Hence urban areas tend to be improved and peripheral areas become less attractive to sprawl development. George saw a strong moral argument for shifting from the conventional property tax levied on both land and improvements to one based on land alone. The argument was quite simple: the tax as it stood penalized people who improved their property and rewarded people who held vacant parcels for speculative gain. It rewarded those owners who let their holdings go to wrack and ruin, often those who bought up parcels to use as rental property without investing in the maintenance to ensure that they would continue to be attractive and livable — slumlords. The Georgist approach to taxation had many names: his contemporary Thomas Shearman wrote two books calling it the “natural tax,” 41 and more recently it has been referred to as the “incentive tax” 42 and ground rent.43 It should be noted once more that, by whatever name, the “land tax,” “site value tax,” or “single tax” to George covered a far wider scope than simply locational sites, even though today this is the base that is given the most attention. It covered any natural factor element that humanity chose to put into service. Today, some of these parts of nature which have come to be “owned” by private corporations (at least insofar as their license to such use have become entitlements) are worth millions. The electromagnetic spectrum that has been parceled out to the communications industry has sometimes been “auctioned” for one-shot revenue gains, is now for all practical purposes a freehold title in the hands of those industries.44 Were those spectrum bands retained by governments and “rented,” the revenue would likely be far greater. Whatever increased value now results accrues to these private owners instead of to society. 41Thomas G. Shearman, Natural
Taxation; an Inquiry into the Practicability, Justice and Effects of a
Scientific and Natural Method of Taxation, 2nd Edition, Garden City:
Doubleday, 1911.
42Incentive Taxation is the name of a newsletter published by the Center for the Study of Economics, a Georgist research organization based in Columbia, MD. 43See, for example, John C. Lincoln, Ground Rent, Not Taxes: The Natural Source of Revenue for the Government, New York: Exposition Press, 1957. John C. Lincoln was the founder of Lincoln Electric Co., and the benefactor of the Lincoln Foundation and the Lincoln Institute of Land Policy, based in Boston, MA. 44Despite the fact that
one
often hears it said that the public owns the airwaves, their auction
prices demonstrate that they have for all practical purposes been
captured by private interests. See “Digital Christmas,” by Jennifer
Nix, Salon Online Magazine at
http://www.salon.com/april97/media/media2970404.html; and “FCC Moves on
Digital Radio; Two Companies win Spectrum Auctions,” by Joseph
Palenchar, April, 1997, Community etown News at
http://community.etown.com/news/articles/dar040797jpt.html: “American Mobile Radio (AMR) and CD Radio emerged as the winners in FCC auctions for [the] S-band spectrum set aside for satellite-based digital audio radio (DAR) service with respective bids of $89.9 million and $83.3 million.” The New York Academy of Science together with the Robert Schalkenbach Foundation sponsored a conference on “3G Wireless Cellular Telecommunications and Spectrum Panel” on April 24, 2003 the summary of which is available from the foundation. It showed that there are significant gains in efficiency and productivity by government rental of the spectrum rather than by its sale, apart from the argument that the public is the rightful owner of this asset. For a discussion of how this component of “land” could finance world government, see Alanna Hartzok, Financing Planet Management: Sovereignty, World Order and the Earth Rights Imperative, January, 1994, 2nd Edition Printing - January 1995, at http://www.enviroweb.org/earthrights/docs/fpm.html. So also in the case of the auctioning of “pollution credits” or tradeable permits, what in fact constitute the right of power industries to treat the air as a dump to the full extent which environmental tolerances allow.45 These “credits” are now “owned” by the private sector and traded back and forth among corporations, even though all people experience the consequences of its treatment. Airport landing slots, “prime time” broadcasting, and many other time-sensitive dimensions have all been handed over to the private sector with nominal benefit to the public. London Mayor Ken Livingstone has been a strong supporter of renting the landing slots at Heathrow and Gatwick Airports, and is at this very time exploring a rent recovery scheme to pay for the upgrade of components of the Jubilee tube line.46 45Peter Barnes, “The Pollution
Dividend,” The American Prospect, No. 44
(May-June, 1999), pp. 61-67; and his subsequent Who Owns the Sky?: Our
Common Assets and the Future of Capitalism, Washington: Island Press,
2001.
In the Georgist view, this economic rent is the public’s birthright,47 and
the failure to collect it and to use it to pay for the general costs of
government services is a moral as well as a public policy lapse.
Georgists regard the private confiscation of public wealth as mistaken
policy if not actually an immoral transgression — in a word, theft! He
himself was an advocate of the public owning and protecting “the
commons” and what is today often called “natural capital.” Studies have
shown that if economic rent were collected in full as well as other
appropriate revenues such as user fees and green taxes, the total
income would likely be enough to pay not only the costs of all
government services but provide a citizens’ dividend of significant
amounts as well.48 Statistical
data is difficult to compile, but what studies have been attempted to
date indicate that economic rent in all its forms and from all its
sources
comprises approximately a third of the economy as it is currently
calculated.49
Arrangements such as these are to the followers of Henry
George a far more efficient and moral system of public finance.46Several articles on the subject are printed recently in Land & Liberty, the publication of the Henry George Foundation of United Kingdom, www.henrygeorgefoundation.org. 47Earth Rights Website at
http://www.enviroweb.org/earthrights/; Bearthright: The Economics of
Freedom, at http://www.geocities.com/RainForest/3046/; Earth Sharing:
Geonomics for Newcomers, at
http://www.earthsharing.org.au/geonomic.html; An International
Declaration on Individual and Common Rights to Earth, at
http://www.enviroweb.org/earthrights/docs/declaration.html.
48This is an area of significant
research at the moment, and it is being done by macro-economists of
Georgist
persuasion in several nations. Some of the most significant work is that of Michael Hudson, and his work will be published shortly. Provisionally, see “How Rent Gets Buried in the National Income Accounts,” Presented at the Council of Georgist Organizations, Evanston, IL, (1995); “Where Did All the Land Go? The Fed’s New Balance Sheet Calculations,” unpublished manuscript (1997), New York: Robert Schalkenbach Foundation; with Kris Feder, “Real Estate and the Capital Gains Debate, Working Paper No. 187 (1997), Annandale -on-Hudson, New York: The Jerome Levy Economics Institute, Bard College. See also, Ronald Banks (ed.), Costing the Earth, London:Shepheard-Walwyn, 1989, and Robert R. Schultz, The $30,000 Solution: A Guaranteed Annual Income for Every American, Santa Barbara; Fithian Press, 1996. 49"How Much Revenue Would a Full Land Value Tax Yield?" by Steven Cord, American Journal of Economics and Sociology, Vol. 44, No. 3 (July, 1985), pp. 279-293. Georgist Economics: Agendas The Georgist main agenda, as earlier noted, is economic justice. If one searches the term “economic justice” online, the first site that will appear is the Georgist website, progress.org. The starting point is that people are entitled to what they earn, but only to what they earn.50 The fruits of the commons generated in rent might also be distributed to citizens equally if not used to finance the general services of government. In practice this means the abolition of those taxes that represent an unjust capture of one’s personal property — taxes such as income, sales, and other nuisance taxes. It accepts, to be sure, the need to collect user fees, Pigouvian taxes, and perhaps sumptuary (sin) taxes. It argues aggressively for the collection of economic rent in support of government and, for any remaining surplus, its distribution as a citizens’ dividend. The justification for the collection of rent has several grounds:
50People would still,
however,
be entitled to unearned income insofar
as it did not derive from economic rent — from the stock market, for
example, or from inheritance beneficences.
The collection of land rent has other consequences for the smooth and
effective functioning of the economy as well. With respect to the
configurations of land use in urban areas, the collect of land rent
neutralizes, and even reverses, the centrifugal forces which the
current real property tax (i.e. that on both land and improvements)
exerts on the values of locational sites. In fact one eminent economist
argues that a tax on land sites is “better than neutral,” because it
fosters activity in the highest value areas and removes the factor of
adverse timing that often stalls economic investment.51 This
all leads to the economic vitality of high-land-value cities, simply by
virtue of concentrating activity in central areas instead of peripheral
and remote regions. It discourages the extravagant and careless
development of land sites,
thereby also fostering development densities conducive to community
welfare and to the success of public transit services.52
Experts agree that the minimum density necessary to make public transit
services economically viable is 10 to 12 households per acre; without
this, there is little prospect of altering private automobile
dependency.53
And given the widespread environmentally and socially destructive
consequences of motor vehicle dependency, collecting rent is half the
answer toward the goal of engendering livable urban areas. (The other
half — see below — is pricing motor vehicle use at its true marginal
cost to society.)51T. Nicolaus
Tideman, “Taxing
Land is Better than Neutral: Land Taxes, Land Speculation, and the
Timing of Development,” in Kenneth C. Wenzer (ed.), Land Value
Taxation: The Equitable and Efficient Source of Public Finance, New
York: M.E.Sharpe, 1999, pp. 109-133.
52See the author’s "Value
Capture as a Tool in Transportation: An Explanation in Public Finance," AmericanJournal
of Economics and Sociology, Vol.60, No.1 (January,
2001),
pp.195-229; and Laurence S. Moss (ed.). City and Country (Malden, MA:
Blackwell Publishers, 2001) online at
www.urbantools.net/pdf/ValueCaptureAsAPublicFinanceTool-BillBatt.pdf; “Stemming
Sprawl: The Fiscal Approach,” in Suburban Sprawl: Culture, Ecology and Politics,
Hugh
Bartling and Matthew Lindstrom (eds.) New York: Rowman and Littlefield,
September,2003; and “Modeling Land Rent and Transportation Costs in the
United States,” presented at the Third Annual Global Conference on
Environmental Taxation, Woodstock, VT, April, 2002; and printed in
Larry Kreiser and Janet Milne (eds.), Readings in International
Environmental Taxation, May, 2003.
53Transit and Urban Form, Report 16, Portland: Parsons Brinkerhoff, National Academy Press (sponsored by the National Research Council’s Transportation Research Board), 1996. The more cohesive the development of communities is, the greater the synergy exists among its members. Sprawl development not only increases the cost of transportation and other infrastructure needed to service these sites, it also reduces the extent to which people are accessible to one another. There is considerable indication that American society is losing this elusive quality of community. When Harvard professor Robert Putnam published his celebrated article Bowling Alone in January, 1995, it was remarkable as much for the resonance that it generated throughout the nation as for the message itself. David Broder of the Washington Post pronounced Bowling Alone the most important academic article that year. Putnam argued that our communal relationships are declining, and that an ever smaller proportion of the population is involved in social activities of a cooperative and communal nature.54 We used to be a nation of joiners; increasingly now we’re a nation of loners. As Tocqueville noted 150 years ago, affiliative groups used to be the unique strength of American society.55 Several hypotheses were offered in this and subsequent studies to explain the decline in the civic engagement of Americans — various demographic changes, technological innovations such as television, the changing role of government, the cultural revolution, and so on. The land-use and transportation patterns that have evolved in the post-war period are a factor as well. The concepts of neighborhood and community today no longer mean the same thing as they did in the past. 54Robert D. Putnam, “Bowling
Alone: America's Declining Social Capital,” Journal of Democracy, Vol.
6 (January, 1995), pp. 65-78. His argument has just been published as a
book: Bowling Alone: The Collapse and Revival of American Community,
New York: Simon & Schuster, 2000.
55 See, for example, the suggestive articles of Charles Leroux and Ron Grossman, “[Low Turnout] Numbers Reflect Growing Loss of Community,” Chicago Tribune, November 17, 1996; Ellen Goodman, “Lack of Civility, Backbone Plagues America,” Boston Globe, September 8, 1996; and Fox Butterfield, “Values Guard Against Violence, Study Finds,” New York Times, August 17, 1997. Saying hello to your neighbors today, if indeed you know them, means tooting your horn as you meet them coming and going.56 Urban areas need instead to be designed to engender healthy community life. Restoring the balance between accessibility and mobility so that human exchanges— of all sorts— can occur efficiently and simply is a central element of Georgism. As author Kirkpatrick Sale has said, we need to restore Human Scale.57 56Studies show that there
is an
inverse correlation between the
ability of a street to move — and to park — cars and trucks, and
the
amount of social interaction between neighbors on that street. One such
study compared three similar residential streets, with different levels
of traffic volumes, in San Francisco. Residents on the different
streets were asked to indicate on the base maps of their streets where
friends and acquaintances lived. Those living on streets with the least
traffic volume had three times as many friends and twice as many
acquaintances as those living on the streets with heavy traffic
volumes. Donald Appleyard, Livable Streets, Berkeley: University of
California Press, 1981.
57Kirkpatrick Sale, Human Scale. New York: Coward, McCann & Geoghegan, 1980. Much of the loss of scale communities is due to the fact that transportation planners have reconfigured the urban areas of the country to serve the automobile.58 It stems from a fundamental confusion between what geographers call accessibility and mobility. This distinction is explained particularly well in a recent text, The Geography of Urban Transportation: Accessibility refers to the number of
opportunities, also called activity sites, available within a certain
distance or travel time. Mobility refers to the ability to move between
different activity sites (e.g., from home to a grocery store).59
58See F. Kaid Benfield,
Donald
D. T. Chen, and Matthew Raini,
Once There Were Greenfields: How Urban Sprawl is Undermining America’s
Environment, Economy, and Social Fabric, New York: Natural Resources
Defense Council, 1999.
59Susan Hanson, Editor, The Geography of Urban Transportation, Second Edition. New York: Guilford Press, 1995, p. 5. See also K.H. Schaeffer and Elliott Sclar, Access for All: Transportation and Urban Growth, Baltimore: Penguin Books, 1975. Recent days have witnessed a profound and growing awareness of the problems due to sprawl development. In fact one opinion poll marked sprawl as the highest current concern among American voters.60 The answers being offered, however, don’t address the root causes of the problem. The most talked about panacea is the institution of urban growth boundaries, but these have failed to be demonstrably successful even in the two communities most often cited (Portland and Boulder) where they were instituted over twenty years ago.61 Solutions such as these reflect the penchant of policy makers to rely upon so-called “command-and-control” (CAC) approaches to government rather than “pricing” approaches. The extension of government reach and weight to impose policies deemed appropriate is burdensome, expensive, and inefficient. 60Brad Knickerbocker, “Forget
Crime — But Please Fix the Traffic,” C. S. Monitor, February 16,
2000.
61H. William Batt, “Solving the Problem of Urban Sprawl,” Presented at the Conference of Georgist Organizations, Portland, OR, July 29-August 2, 1998. Such means reflect a lack of understanding and imagination according to authors David Osborne and Ted Gaebler, who urge adoption policies of “steering rather than rowing.” 62 As long as drivers personally are able to pass off to others the true costs of their travel, it guarantees, along with the failure to collect land rent, that sprawl development will continue. One 1993 study concluded that "when the full range of costs of transportation are tallied, passenger ground transportation costs the American public a total of $1.2 to $1.6 trillion each year. This is equal to about one-quarter of the annual GNP and is greater than our total national annual expenditure on either education or health."63 Japan, by way of comparison, spends an estimated 10.4% to satisfy all its transportation requirements, although the figure might be a bit low because not all externalities are included in the calculation.64 One reason we are spending so much on motor vehicle transportation is that our public policies encourage it. Road user fees represented about $33 billion in 1991 but the true costs to society were ten times that;65 put another way, drivers pay only 10% of the true costs of their motor vehicle use.66 62David Osborne and Ted
Gaebler,
Reinventing Government: How The Entrepreneurial Spirit is Transforming
the Public Sector, Reading MA: Addison Wesley, 1992; See Ch. 1, “Steering
Rather than Rowing.”
63 Peter Miller and John Moffet, The Price of Mobility: Uncovering the Hidden Costs of Transportation. New York: Natural Resources Defense Council, October, 1993. This is somewhat more than the US Department of Transportation's own calculation. The latter uses only direct measurable pecuniary costs, and estimates the figure was in the neighborhood of $1 trillion for the year 1992, about 17 percent of GNP----- -converted to GDP would make it somewhat higher. Since it fails to include externalities such as pollution, accidents, and other associated costs, it seems a reasonable estimate. See Transportation Statistics, 1994, U.S. Department of Transportation, Bureau of Transportation Statistics, pp.4-5. 64 Walter Hook, Counting on Cars, Counting out People. New York: Institute for Transportation Development Policy Paper, Winter, 1994, p. 28. Another author puts the figure at 9.2% of personal expenditure in Japan versus 22% in the United States. Michael Replogle, "Improving Access for the Poor in Urban Areas," Appropriate Technology, Vol. 20, No. 1 (1993), pp. 21-23. 65 James J. MacKenzie, et. al., The Going Rate: What It Really Costs to Drive, Washington: World Resources Institute, 1992. Just the costs resulting from automobile crashes alone represents a figure equal to 8 percent of the American GDP. In 1988, a study by the Urban Institute calculated that $71 billion were borne in out-of-pocket costs, another $46 billion in lost wages and household production, and $217 billion in pain, suffering and lost quality of life. Translated into vernacular, the total of $334 billion in lost property, worktime, and injuries and deaths. T. Miller, et al, The Costs of Highway Crashes. The Urban Institute, Washington, D.C., October, 1991. It is important to realize that, in the 100 years since the first automobile death in New York City, five million Americans have died in automobile crashes. “One Hundred Years of Car -nage,” Auto-Free Times, #17 (Spring, 2000), p. 14, and www.rememberbliss.org and www.lesscars.org. 66 Road Kill: How Solo Driving Runs Down the Economy. Boston: The Conservation Law Foundation (May, 1994), p. 7. This study is a summary of a larger study done by Apogee Research, Inc., funded by the Joyce Foundation. The most recent work compiling the American costs of driving is by Richard C. Porter, Economics at the Wheel: The Costs of Cars and Drivers, Academic Press, 1999. Failure to collect land rent leads to speculation and the resulting boom-bust economic cycles that are so destructive to the general economy.67 Henry George in Progress and Poverty (Bk V, Ch1) identified the "speculative advance of land values" as the "great initiatory cause of industrial depressions." Economic cycles can be linked to just about every downturn over the course of two centuries, the more so as the economy has come to be monetized. Frederick Lewis Allen, the great journalist gives a compelling account of how the Florida land boom (and later bust) antedated the Great Depression.68 More recently a similar speculative bubble explains the Asian economic crash, particularly in Thailand.69 When the Japanese economy was at its peak, the value of land in Tokyo alone exceeded that of the entire United States, and the appraised land value under the Imperial Palace was as great as all the real estate in California.70 The most convincing study of the relationship between land value cycles and more general economic cycles is one done for Australia by a contemporary Georgist economist.71 There are some students of the American economy that believe that we are the cusp of a crash in land values that have been bid up over decades, and that this could well precipitate a market downturn that could be long-enduring. 72 67See “Economic Booms and
Slumps: Their Cause and Cure,” downloadable from the Henry George Foundation
of Great Britain, at
http://users.charity.vfree.com/h/henrygeorge/publications/flysheets/index.htm.
68Frederick Lewis Allen, Only Yesterday: An Informal History of the 1920s, New York: Harper & Brothers, 1931, Ch. XI, available at http://www.geocities.com/Athens/Acropolis/5148/allen_only_yesterday.html; and William J. Frazer, The Florida Land Boom: Speculation, money and the banks, Westport CT: Quorum Books, 1995. 69“Why are We in this Mess?” report of the J. Douglas Gibson Lecture delivered at Queens University, Ontario by Dr.Ammar Siamwalla of the Thailand Development Research Institute Bangkok Post, November 12, 1997; at www.bkkpost.samat.co.th. See also Walden Bello, A Siamese Tragedy: Development and Disintegration in Modern Thailand, London: Zed Books, 1999, and 70“Tokyo” at www.richard -seaman.com/Travel/Japan/Tokyo/; and Ch 6, The Sun Also Sets: The Limits to Japan’s Economic Power, by Bill Emmott, 1989, excerpted at www.ac.wwu.edu/~patrick/geo324/Chap6-EM.htm. 71Bryan Kavanagh, The Recovery Myth, Melbourne: Land Values Research Group, 1994; and “Land Speculation: Cause of Industrial Depressions and theatre of political and economic ‘activity,”’ http://www.zip.com.au/~hgnsw/issues/landspec.html 72See, for example, the recent column of Dr. Dean Baker, Research Associate at the Center for Economic Policy and Research, and widely syndicated columnist, on May 9, 2003, “Bursting Bubbles: Why the Economy will go from Bad to Worse,” and other columns accessible at www.epinet.org. See also the writing of Professor Fred Foldvary, “The New Economic Realities,” at.www.progress.org/archive/fold214.htm. This prospect is not beyond possibility; see, for example, “Life in the Upside-down World of Deflation: After Fed Warning, Economists Reexamine Certain Assumptions,” by Peter Gosselin, Los Angeles Times, May 18, 2003. A Georgist agenda also calls for the regular auctioning of mineral extraction rights, fishing rights, and other access to natural resources in a way that their rent is returned fully and fairly to the public weal.73 Competitively assessed royalties especially on the extraction of mineral capital could yield billions of dollars. Alanna Hartzok has offered compelling arguments why rent from locational sites should be reserved to finance the services of local governments, rent from natural resources identifiable within a nation’s boundaries should be captured to finance national governments, and rents of those resources beyond national borders should be used to finance world governments.74 73The Georgist economist who has
worked most on this subject is Professor Mason Gaffney, of the
University of California Riverside. In addition to
being the primary source of the Alaska oil dividend system, one which
automatically pays to each citizen of that state over $1,000 every
year, he has written extensively for many years on design of water
rights, forestry and mineral rights, and other natural resource
charges. See Professor Gaffney’s bibliography (until 1995) at
http://www.enviroweb.org/earthrights/associates/gaffney_bib.html.
Pricing resources of nature at their marginal rates is a clearly
understood economic principle. To do otherwise fosters extravagant and
wasteful use of such, or leads to inefficient use of their locations.
Hence both a moral reason — the unjust windfall gain that otherwise
befalls such monopoly titles — and an economic reason — efficiency —
call for such practices. It is the compelling impetus of politics and
not economic rationality that frustrates the implementation of such
designs. With the advent of greater and more accurate data, as well as
the increased power of computer analysis, there is every reason to
argue for and anticipate the collection of economic rent from every
source where it arises.74 A. Hartzok, Financing Planet Management: Sovereignty, World Order and the Earth Rights Imperative, January, 1994, 2nd Edition Printing - January 1995, and at http://www.enviroweb.org/earthrights/docs/fpm.html. ECOLOGICAL
ECONOMICS
Ecological Economics: Basic PremisesIt is far easier to outline the basic premises of Georgist economics than it is to do so for the emerging field of ecological economics. Georgism is a tradition that grew out of a clearly formed tradition of 19th century classical economics and has been refined further for the past century. It was neoclassical economics that diverged from the reigning orthodoxy. The differences between the classical tradition as represented and defended by Henry George and the emerging neoclassical school were vividly portrayed from their earliest divergence, even to the staging of formal debates between George and the new orthodoxy’s adherents. 75 In contrast, ecological economics along with other emerging heterodox schools is itself very much a reaction to the neoclassical tradition’s insensitivities and failures. The differences between ecological economics and the floundering discipline of neoclassical economics are as much by way of the former’s criticism of the latter as they are an enunciation of clear starting points. To be sure, neoclassical economics emerged gradually over a period of some fifty years, and only reached its heyday, one might argue, with the arrival of Paul Samuelson. Samuelson, the MIT economist whose text has gone through some 16 editions and has outsold all other text combined once said, “I don’t care who writes a nation’s laws . . . if I can write its economics textbooks.” 76 The neoclassical position developed ever greater abstract mathematical applications, with models ever more detached from “real world” market forces. This system of analysis now has reached a point of questionable utility due to its hermetic and Newtonian emulations.77 Little by little, one premise and formula after another have been cast aside, to a point now that there is a broad recognition among economic theorists at least that the discipline faces an intellectual crisis.78 75This history is well
chronicled in Mason Gaffney, The Corruption of Economics, London:
Shepheard-Walwyn, 1994, as well as in several biographies of Henry
George’s life.
76Originally in New York Times, October 12, 1986, sec. 3; quoted more recently in “The Puzzling Failure of Economics,” The Economist, August 25, 1997. 77This is the criticism
brought to bear on neoclassical economics by E.O. Wilson in Consilience:
The
Unity of Knowledge, New York: Knopf, 1998.
78Economist Albert O. Hirschman of the Princeton Institute for Advanced Study begins one book, Essays on Trespassing (New York: Cambridge University Press, 1981,) page v, with a quote from the Russell Sage Foundation’s current view: . . . the discipline[of
economics]
became progressively more narrow at precisely the moment when the
problems demanded broader, more political, and social insights. (From
Russell Sage Foundation, Annual Report, 1979, New York, 1980, p. 12.)
Without enumerating further criticisms that have been levied against neoclassical economic thinking, something that has been done far better elsewhere than is possible here, suffice it to say that some of the most compelling charges have been made by the ecological economists.79 The most trenchant one as explicated by economist Nicholas Georgescu-Roegen is its violation of the basic laws of physics.80 It assumes a continuing draw-down of the earth’s store of energy, of which there is, of course, only a finite amount. If the economy continues to expand to include all elements of the earth, it will consume so many resources, particularly energy resources, that ultimately life itself is destroyed. One study calculated that if everyone in the world lived at the level of the average American, three “earths” would be necessary to accommodate us all. 81 The challenge, argue the ecological economists, is to structure economic analysis and the economy itself in such a way that markets are contained and that existence outside economic reach is respected and preserved. Whereas other studies of the environment within the framework of conventional neoclassical economics attempt to price nature in a way that its value is assured, ecological economists work from the conviction that such an approach is questionable if not futile, as it can never achieve any accurate and reliable market values for such existence.82 79See, for example, Herman
E.
Daly, Beyond Growth: The Economics
of Sustainable Development, Boston: Beacon Press, 1996; John Gowdy and
Sabina O’Hara, Economic Theory for Environmentalists, Boca Raton: St.
Lucie Press, 1995; and Charles S. Hall et al, (ed.) Quantifying
Sustainable Development: The Future of Tropical Economies, New York:
Academic Press, 2000. An extentive treatment of the assumptions of the
discipline of mainstream economics is to be found in the work of Robert
H. Nelson, Reaching for Heaven on Earth: the Theological Meaning of
Economics, Boston: Rowman & Littlefield, 1991, which is excerpted
in places on the extensive website of Professor Jay Hanson at
www.dieoff.org.
80Nicholas Georgescu-Roegen, The Entropy Law and the Economic Process, iUniverse.com, 1999. 81Mathis Wackernagel and William Rees, Our Ecological Footprint, New Society Publishers, 1995. 82Benardo Aguilar, “The Implications of Ecological Economic Theories of Value to Cost Benefit Analysis: Importance of Alternative Valuation for Developing Nations With Special Emphasis on Central America,” Indian Journal of Applied Economics, Vol.7, No. 3 (1998), pp. 367-420. A central premise of ecological economics is a recognition that market prices do not reflect the value of commodities, particularly the resources and services of nature. Oscar Wilde first noted that a cynic was “a man who knows the price of everything and the value of nothing.” 83 But it is clearly not only cynics who hold such ideas today. The growing “commodification” of all things — the consequence of a gradual and inexorable privatization of the whole world and the ever expanding attempts to include everything which humans touch in a market economy, where objects and services which lack a market price are thus treated as free goods — means either that ultimately everything must be priced or else that other means must be found by which to identify value. The subfield of environmental economics is based on just this view — that everything must be priced. To be sure, we cannot live without the natural environment, yet treatment of natural goods and services as free under the neoclassical economics framework leads inevitably to their total consumption and destruction.84 The looming exhaustion of natural resources compels us to recognize that market prices have limited worth in signaling true value, whether those resources be the biota of the world upon which human beings also depend for their existence or mineral wealth in the form of fossil fuel energy which drives modern economies. If we do try in any way to price the goods and services provided by the environment, they are so far beyond counting that it becomes self-evident that our economic approach must change.85 83Oxford Dictionary of
Quotations, Third Edition, p 573, #13;
and “The Wit and Wisdom of Oscar Wilde,” BBC Online Network,
http://news.bbc.co.uk/hi/english/uk/newsid_224000/224644.stm.
84This is expressed well in a new book by Eric Davidson and George Woodwell, You Can’t Eat GNP: Economics as though Ecology Mattered,Perseus Press, 2000. Ecological economist Herman Daly quotes two neoclassical economists to point up their trivialization of nature as a factor of production George Gilder, for one, wrote “The United States must overcome the materialistic fallacy: the illusion that resources and capital are essentially things, which can run out, rather than products of the human will and imagination which in freedom are inexhaustible,” further adding that “Because economies are governed by thoughts, they reflect not the laws of matter but the laws of mind.” Julian Simon is then quoted as saying that “in the end, copper and oil come out of our minds. That’s really where they are.” Herman E. Daly and John B. Cobb, Jr., For the Common Good: Redirecting the Economy Toward Community, the Environment, and a Sustainable Future, Updated and Expanded, Boston: Beacon Press, 1989, 1994, p. 109. See also Brian Czech, Shoveling Fuel for a Runaway Train: Errant Economists, Shameful Spenders and a Plan to Stop Them All, Berkeley: University of California Press, 2000. 85One widely quoted paper calculated that “the total value of 17 global ecosystem services and natural capital . . . at an average of thirty-three trillion US Dollars per year, which amounts to almost twice the global GDP.” Robert Costanza et al., “The Value of the World’s Ecosystem Services and Natural Capital,” Ecological Economics, April, 1998, pp. 3-15. If land and land rent are the strongest determinants to Georgists, energy is its closest counterpart to ecological economists. Just as land rent can be measured fully in terms the relative surplus it produces in any given socio-economic context, energy can be traced and calculated in calories, BTU’s or joules. Land rent is completely a human product — there is no rent where there are no people, as land has no market value. On the other hand, energy exists regardless whether people are present or not, as it is a component of nature itself. But not all energy is now recognized as relevant in economics; only that energy which is employed in the human economy, and we assume that the human economy is necessarily bounded. Wind, sunlight and lightening are as yet unpriced and are peripheral today even in ecological economics. Attention is given more to those natural resources potentially procurable or otherwise relevant to human dependency, and energy certainly is primary. So rather than regard energy as a free good and largely outside the economy as neoclassical economics assumes, energy will likely continue to be central — even the driving force — in ecological economics. Indeed just about all other factors of production are essentially convertible from energy. Besides that used in households, industry, and transportation sectors, agriculture — at least linked to developed economies — is essentially energy driven. As Martinez-Alier has shown,86 modern agriculture is essentially unfeasible without reliance upon applied energy forms, and the diets of modern societies are heavily reliant upon energy in the forms of intensive fertilizer use, intensive application of machinery, and animal protein-fed farmers. By way of contrast, in pre-modern agricultural societies one could argue that human and animal energy account for all the foodstuffs produced, and were used in turn to assure the continuance of the agricultural cycle. Unlike modern societies they are in energy equilibrium. Hall87 argues that energy is the determining factor in the development success of all economies, posing momentous challenges for the future as projected shortages of fossil fuel sources loom on the horizon. 86Joan Martinez-Alier,
Ecological Economics: Energy, Environment
and Society, London & New York: Basil Blackwell, Ltd., 1987.
87Charles A. Hall, Cutler Cleveland and Robert Kaufman, Energy and Resources Quality: the Ecology of the Economic Process, New York: Wiley, 1986. For further discussion of this line of thinking, see the website http://dieoff.org/, and the archived listserves at http://www.egroups.com/community/energyresources and http://www.egroups.com/group/RunningOnEmpty. The regard for steady-state socio-economic dependence upon the natural environment raises profound questions about the extent to which human activity is possible without continuing depletion of the earth’s energy resources, mainly fossil fuels. On the one hand are those that believe that contemporary society’s reliance upon intensive energy has become so embedded that continued sustainable life is impossible.88 Among these are noted ecologist writers such as Paul and Ann Ehrlich who envision the continued boom and ultimate collapse of all civilized nations.89 The other view includes the majority of ecological economists who hold out hope that it might be possible to shift in time to renewable energy sources before damage to the ecosystem is irreversible. This view is exemplified by those who could be called the “steady-staters,” and who believe that there is still time to bring economic practices into an equilibrium state and avoid the doomsday scenario. Among the latter are Herman Daly, one of whose books is entitled Steady State Economics.90 An interesting discourse is unfolding among this community, perhaps as reflective of personal temperament as much as it is due to research interest and disciplinary background. At the moment it is a focus of intensive and increasing research and interest.91 88This camp includes ecological
economists such as Cutler Cleveland and Charles Hall. For Cleveland, see
http://webct.rpi.edu:8900/SCRIPT/84065/scripts/student/serve_page?882560079+Bios/Cleveland.htm. For Hall, et al., Quantifying Sustainable Development: The Future of Tropical Economies, note 66; and http://webct.rpi.edu:8900/SCRIPT/84065/scripts/student/serve_page?882560079+Bios/Hall.htm. 89Ehrlich, Paul R., and Ann H. Ehrlich, Betrayal of Science and Reason: How Anti-Environmental Rhetoric Threatens Our Future, Washington: Island Press, 1998. 90Washington: Island Press, 1991. The heart of ecological economics is ecological carrying capacity and the premise of economic sustainability. Although this term has to some extent become a mantra and widely abused, its most popular definition remains that first enunciated by the 1987 Brundtland Commission Report: "development that meets the needs of the present without compromising the ability of future generations to meet their own needs."92 Principle 3 of the 1992 UNCED Rio Declaration: "The right to development must be fulfilled so as to equitably meet developmental and environmental needs of present and future generations."93 At various times scholars have sought to improve upon this definition; one offered by adherents of the ecological economics school reads as follows: 1. For renewable resources (fish,
trees, etc.), the rate of harvest should not exceed the rate of
regeneration.
2. The rate at which we allow economic
activity to generate wastes that must be passed into the environment
should not be allowed to exceed the environment’s ability to absorb
them.
3. The depletion of nonrenewable
resources (oil, coal, etc.) should not be offset by investment in and
development of renewable substitutes for them.94
91Several articles reflecting a
pessimistic view are to be found
at http://dieoff.org, and in a listserve initiated February 10, 2000
and catalogued at http://www.egroups.com/community/energyresources. A
closely-related site on March 3, 2000 is catalogued at
http://www.egroups.com/group/RunningOnEmpty.
92World Commission on Environment and Development (commonly referred to as the Brundtland Report), Our Common Future, New York: Oxford University Press, 1987, p. 43. 93"Earth Summit Approves Agenda 21," UN Chronicle 29.3 (Sept. 1992) 66. 94Thomas Prugh, et al., Natural Capital and Human Economic Survival, Solomons, MD: ISEE Press, 1995, p. 47. Implicit in all this is the argument that manufactured capital (i.e., that created by human beings), and natural capital (those resources provided by nature) are not substitutable, as well as the belief that current practices portend irreversible consequences for the earth’s environmental stability. Nor can the various components of natural capital alone be regarded as interchangeable goods. Natural gas might in some instances be a substitute energy source for coal, and chicken an alternative protein source to beef. But fundamentally each element is to a significant extent unique in nature — fulfilling its own special niche in what ecologists call lexicographic uniqueness. Conventional thinkers argue that these two classes of natural and man-made capital are mostly substitutable, in what ecological economists have called “weak sustainability.” But the contrary, “strong sustainability,” is at the heart of ecological economics, going even further than many authors of the Brundtland Commission Report would have accepted by recognizing the lexicographic character and place of each and every element of the biota.95 There is no definitional consensus, however. The Clinton-Gore administration, for example, established a President’s Council on Sustainable Development on June 15, 1993, and adopted the Brundtland Commission’s language. But it carefully avoided any detailed definition of what was meant by sustainability.96 Subsequent executive orders and press releases have been equally vague as to what definition of sustainability is being used,97 and to this day the matter remains unsettled. 95This
premise forms the basis of what has come to be known as
the Gaia hypothesis, originally put forward by British writer Sir James
Lovelock, who is now the principal leader of the London-based GAIA
Society, at http://ibc.uel.ac.uk/gaia/, after writing Gaia: A New Look
at Life on Earth, Oxford University Press, 1987.
96http://www.pub.whitehouse.gov/uri-res/I2R?urn:pdi://oma.eop.gov.us/1993/6/15/2.text.2
97http://www.pub.whitehouse.gov/uri-res/I2R?urn:pdi://oma.eop.gov.us/1999/5/4/37.text.1 Ecological Economics: Moral Premises If Georgist economics takes a moral stance primarily focused on justice, ecological economics makes a much wider sweep. From its standpoint the very survival of the world is at stake, so that matters of distributive justice, so central to Georgists, tend to get lost in debate. Many ecological economists and environmental economists would claim that theirs is not a moral stance at all; rather it is a simple empirical reality. One philosopher writing in the journal Environmental Ethics sets forth a view reflective of many: I do wish to point out that this
‘holistic’ view of the Earth’s ecological systems [i.e., the natural
world as an organism] does not itself constitute a moral norm. It is a
factual aspect of biological reality, to be understood as a set of
causal connections in ordinary empirical terms.98
98Paul W. Taylor, “The Ethics of
Respect for Nature,” in
Environmental Ethics, Vol. 3, No. 3.(Fall, 1981), pp. 197-218);
reprinted in Michael E. Zimmerman, et al (ed.), Environmental
Philosophy, Englewood Cliffs: Prentice Hall, 1998, p. 77.
Living within the laws of nature would seem to be axiomatic in the
development of any ethical system, and it is a mark of degree that our
ethics have so ignored such realities that a corrective is called for.
Only in 1967 Professor Lynn White noted in a now famous article how
much the Judeo-Christian tradition has been used to explain and justify
practices of exploitation and domination of our natural environment.99
Mistaken or not, this view of man’s place in nature is generally
accepted as conventional wisdom throughout western culture. The ecology
movement constitutes a revolutionary and very unsettling outlook to
this prevailing view, a radical shift in thinking from even mainstream
environmentalism and conservation ethics half a century ago. In this
view other species, both plants and animals, are as much entitled
to life and well being as is homo sapiens. Theodore Roosevelt a century
ago could never have subscribed to the views of contemporary
environmental ethicists, as much of a conservationist as he was. The
earliest clear manifestation of modern thinking at least in western
thought appears to be Aldo Leopold’s Sand
County Almanac, a work only
published in 1949!100
Ecological economists
accept this so much as given — that human beings are of the earth and
its bio-system rather than on the earth to dominate it — that further
refinement of this basic orientation is almost beside the point. This
was simply prudent care and planning to Leopold; he fully recognized
our total dependence upon nature.99Lynn White, Jr., “The
Historical Roots of Our Ecological Crisis,” Science, Vol. 155, No. 3767
(March, 1967), pp. 1203-1207.
100Aldo Leopold, A Sand County Almanac: And Sketches Here and There, New York: Oxford University Press, 1977 (orig., 1949). Not only are human beings co-equal with other living beings of the earth, so also are beings yet born entitled to an existence. The Iroquois Indians of New York State are often quoted to the effect that “In our every deliberation, we should consider the impact of our decisions on the next seven generations.” 101 Several contemporary environmental organizations have adopted the Iroquois “Great Law of Peace” so that it has become the vernacular equivalent of the Brundtland Report’s definition of sustainability. Sustainable economics, or 7th generation planning, also requires Daly’s “steady state” economy, 102 where (as if natural resources constitute “capital”) one lives only on interest and not principle. Daly contrasts two notions of economic practice: growth and development. The former may momentarily increase economic productivity and wealth, but is in the long term a fatal course of policy. It increases quantity but not quality. Development, rather, is what should be aspired to, an increase in quality, efficiency, and fulfillment through minimal uses of energy and material resources. For development, the value-added dimension comes from treading lightly on the earth, from the use of mental capital rather than physical capital.103 Daly in still another article talks about three parameters of sustainability: “allocation, distribution, and scale,” which will lead to an economy which is “efficient, just and sustainable.” 104 |