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cychttp://www.schalkenbach.org/library/SaratogaBatt.pdf TheCompatibility of Georgist Economics and Ecological Economics by H. William Batt, Ph.D. INTRODUCTION There are many indications that the paradigm that has dominatedorthodox economic theory for the past century, what has come to becalled neoclassical economics, is disintegrating.1Thishas led many economics students, as well as others interested in thepower and promise this discipline holds, to look once more at thegenesis of its theory and to attempt reformulations of its basicpremises. Marxism has also ceased to be a viable alternative, perhapsmore due to the failure of its institutional applications than to thefailings of the theory itself. Only one other longstanding economicstradition has survived continuing scrutiny and remains a recognizableand venerable legacy to the present time. This is the tradition thathas come to be known as Georgism. The Georgist tradition has seen aprofound revival during the past decade and warrants a comparison withother upstart economics frameworks that have reached the level ofseparate identity.2 This paper constitutes an effort to compare, and if possible tointegrate, the emerging discipline of ecological economics withGeorgist economics. Ecological economics has the current distinction ofhaving established, to its credit, a collegial, cross-disciplinaryorganization,4a professional journal,5andat least one graduate program authorized to grant doctorates in thissubject.6Ithas established itself sufficiently to have had annual internationalconferences for a decade and a half, and seen its works cited inseveral other scholarly disciplines. Georgist economics, while havingno established doctoral program so distinctively tailored, has amongits fold many economists of established pedigree,7 andmany others outside the academy who contribute significantly to itsdiscourse. There have been Henry George Schools in major cities aroundthe world for decades, a network of organizations, frequentconferences, and at least thirty websites that exist to explicate andpurvey the Georgist outlook.8 GEORGISTECONOMICS Georgist Economics: Basic Premises9 The starting point of the Georgist framework is rigorous definition ofthe three factors of production — land, labor, and capital, as inclassical economics. It should be further pointed out that thesefactors are mutually exclusive and jointly exhaustive of all things ofeconomic value. Something must necessarily be in one category oranother; there is nothingoutsidethistotal classification. Understanding of what constitutes labor differslittle from definitions given elsewhere, regardless of which theory isused. But definitions of land and capital differ somewhat from commonpractice as well as sometimes in theory. Therefore, it is helpful tospend time explicating the definitions of each as they are used inGeorgism, and to point out where these definitions diverge from thosemost often employed in neoclassical economics applications. Manycontemporary economics texts begin by taking note of theland-labor-capital distinction, but then make little use of it later.These distinctions will make apparent why Georgist economics leads tovery different explanations of economic phenomena as well as todifferent policy solutions. Critical to an understanding of Georgist economics is its recognitionof land as a special and unique factor of production. “Land,” toGeorgists, as true for classical economists throughout the 19thcentury, is taken to mean not just the surface of the earth andlocational space; it means also any and all those natural resources andnon-human works that today can exact a market price. It includes thewealth of the earth in all its natural forms, the air and water as wellas material elements. It includes phenomena of value like theelectromagnetic spectrum used to transmit communications signals, andlanding time slots such as have value at airports. As the worldeconomies enter a new age of high technology, these radio spectrums andtime allotments have gained ever increasing value. So also withgeosychronous satelliteorbits and most recently the genetic codes of all the biota on earth.10 Sites have value relative to their location, and this is largely afunction of where people choose to congregate. The highest value lands,in urban areas and in developed nations, have market worth many timesthat of sites even short distances away. Remote land sites sometimeshave no market value whatsoever, and they are typically not “owned” byprivate individuals or corporations because they are not attractive foreconomic use. In New York City, for example, the ownership of one smallparcel of less than an acre in Times Square was transferred fromPrudential Life Insurance Company to the Disney Corporation in 1998 foran estimated $240 million.11 Thisis more market value than all the land and buildings together in theregion north of the Mohawk River/Erie Canal in New York State.Morerecently, a nine-acre parcel just south of the United Nations complex,also available for development in New York City, wasestimated to have a site value of $750 million.12In both these cases, the cost of razing the existing obsolete buildingswas included in these prices, a factor which suggests that the marketvalue of the land would have been still higher were it not for thiscondition.13In contrast there are land areas in Northern Canada and in the polarregions for which there are no private bidders at all. It is equally important to distinguish those factors that are not landin the classical sense of its economic use. Natural resources such ascoal, oil, and minerals, once removed from their natural state are nolonger regarded as land.A diamond lodged in the deep earth island; that same diamond discovered by a prospector and then cut andpolished by a jeweler, is no longer land but capital. Likewise, fish inthe ocean are land, but fish once caught and in a boat are capital.This is why, in any courses taught on Georgist economics, considerabletime is devoted to basic definitions. To carry the distinction just onestep further, land in the Georgist lexicon, is not wealth, whereas inneoclassical economics it is. In the course of later discussion of theGeorgist view relative to the ecological economics approach, this willemerge as a critical distinction, as it helps to demarcate theboundaries of what activities fall within the realm of economicbehavior and what activities remain marginal. This separate and identifiable recognition of land has significantimportance for the definition ofcapitaltoo, because capital, then,cannot be land. Capital, rather, is the product of labor and land (andperhaps other past capital) to add to the increased store of capital ofindividuals or of the community. Capital can be of many types, rangingfrom monetary wealth to technical knowledge. The store of capitalapplied to land and labor results in the further production of capitalwealth. Capital allows labor to be employed with greater efficiency andproductivity, through the use of technology and instruments and withincreased human skill and knowledge. The next important step inunderstanding Georgist economics isrecognition that each factor of production has its economic price: theprice of labor is wages, the price of capital is interest, and theprice of land is rent. When any of these prices are unpaid,distortionsresult in the economic equilibrium and problems become manifest inother realms of nature and society. In neoclassical economicscompensation for the use of labor and capital continue to be importantin the formulas and calculations employed to explain the economy. Butfor neoclassical economics, David Ricardo’s “law of rent” isessentially ignored and has be come for all practical purposes anartifact in the history of economics. Rent continues to exist ofcourse; it is simply uncollected, left in the hands of those whomaintain monopoly control of certain services of nature, adding totheir market value in ways that distort the balance of markets. Failureto recognize the importance of land rent (sometimes called economicrent) is for Georgists critical to an understanding of the problems ofcontemporary economies and economic analysis.14 Hence it becomes important, critically important, to understand themeaning of “ownership” and “property” in the Georgist lexicon. But itis not difficult, for they continue to have their classical meanings,just as for John Locke, Adam Smith, and all the major forerunners andthinkers of classical economics until the advent of neoclassicaleconomics. What was the meaning of ownership and property in theirclassical sense? Property was the product of human labor and capital,and that alone. Items of property were household goods, personalattire, armaments, and similar such goods. Property belonged in thecategory of capital. Land was not part of property, but rather was itsown category.Land, broadly defined,belonged to everyone and was the common heritage of all humanity.15 One could no more “own” land than onecould own water, air, or other parts of nature, at least in the senseof ownership that people often use today. Much like thenative-American concept of ownership, it was part of what wasclassically called “ the commons.”16 “Whatis this you call property?” Massasoit, a leader of the Wampanoag, askedthe Plymouth colonists whom he had befriended in the 1620s. “It cannotbe the earth, for the land is our mother, nourishing all her children,beasts, birds, fish, and all men. The woods, the streams, everything onit belongs to everybody and is for the use of all. How can one man sayit belongs to him?”17Indeed Georgists see a moral equivalency between monopoly ownership ofland and nature and the ownership of slaves!
In fact compensation for land held in usufruct was far more often inkind than it was in money. Typically, in Middle Eastern as well as inAsian societies, a percentage of a crop or of other products gainedfrom the land were accepted as just payment for its use, paid usuallyto a king or nobleman in exchange for services which they in turn wereexpected to provide. This usually meant the protection against ravagingbands, arbitration of disputes, provision of sustenance in times ofemergency, and so on. The pattern of leasehold ownership with eitherin-kind services, goods, or later fees paid to lords and kings is thehallmark feature of feudalism, widely known not only in the Europeanpast but throughout Asia and prehistoric Central Americancivilizations. In the Georgist context a titleholderhas 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 accordwith the rules and laws of society, one retains a possessory interest.Thatinterest extends to the privilege to use land for all purposesconsistent with its proper maintenance and care. It extends even insome cases to the right to preclude others from any trespass at all.But what it typically does not include isthe right to any speculative gain that would follow from title infreehold, or the right to use land beyond what it is capable ofsustaining. Use implies that its quality is not diminished forthe future availability of others, and that there is an obligation forthe user to pay to society a just price in exchange for such use. Onehad no right, for example, to strip a forest of its trees. Enough isknown now about the arrangements of land ownership and use incomparative perspective to assert with confidence that the historicalpractice of title in fee simple or freehold has been far more theexception than rule.20Taking the long view of history, title in usufruct has been by far themore common pattern of ownership of natural resources, except whereRoman jurisprudence and its offspring have spread throughout the worldand come to dominate. In the United States, the definition of real property as explicated inthe legal Commentaries of Sir William Blackstone may have been pivotalin the adoption of freehold interpretations of ownership over leasehold.21 Forseveral years after this nation was founded which system of title wouldprevail hung in the balance.22Thomas Paine was certainly an advocate of the latter,23 aswas Jefferson.24Hamilton, on the other hand, was a defender of propertied interests andtitles in fee simple, and especially to his in-laws, the landowningfamilies of upstate New York known as the Patroons.25Leaseholds were used in several of the colonies, with the fees paid togovernors.26 Rent becomes critically important in Georgist economics,because rent is the increment of market gain that accrues to choiceland parcels. This insight arose originally in the context ofagricultural societies, where differential qualities of land wererecognized by varied payment in rent. An individual’s return oninvestment was represented by his labor — that was his and his alone tokeep. So also were whatever capital goods he acquired through theefforts of his past labor. On the other hand, whenever land offered ahigher yield separate from whatever the individual’s labor investmentmight represent, this constituted a windfall gain above and beyond whatmight be minimally expected. This is land rent, and it exists even ifit isn’t collected. Today, as earlier noted, the greatest land rentsderive from their location, grown out of nearby social investment. The concept of rent needs further explication precisely because it isso foreign to 20th century students, even those who have been schooledin economics at it is currently taught. Land rent has no relationshipto 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 minimallyrequired to bring a service into production.To take just an elementary example,consider that there are three parcels of land available for farming andthree farmers of equal ability and enterprise. But suppose theparcels differ in their productive capacity, due perhaps to theirfertility, access to water, and so on. If planted with similar qualityseed, the three parcels will yield different quantities of harvest, theone with the highest quality land having the best return. The one withthe lowest quality land would in like fashion have the lowestreturn. Economic rent is defined as the amount of surplus harvestqualitatively measured by the difference between the parcel with thehighest return and that with the lowest return. Even though its originator, David Ricardo, had in mind the differentialreturn from agricultural lands, the concept of rent applies to othernatural services as well. Consider what happens in the case of urbancommunities, using the simplest comparison with a tic-tac-toe board.When the lattice is completely undeveloped and consists only of vacantland squares, the locational sites have inconsequential value. But letus suppose that each square is then settled — the first by a hotel, thesecond by a department store, the third by a restaurant and so on — andsupposing that the owner of the center square is reticent to build atall. Reserving his prerogative as titleholder he may intend ultimatelyto sell. Given the rules of economics as they apply today he may bewise to do so, keeping his money for other uses, as his square willhave increased in market value more than all the others despite hishaving done nothing to improve it. It was this that prompted JohnStuart Mill to observe that “Landlords grow richer in their sleepwithout working, risking or economizing. The increase in the value ofland, aris[es] from the efforts of an entire community.. . .”27 Aswill be discussed later below, the single greatest factor indetermining the economic rental value of land today results not fromnutrients or access to water but rather due to site value determined bylocation. And that can be priced and collected easily. Lastly, one must appreciate that the market value of “land” of everysort is entirely rent, as there is no human factor of labor thataccounts for its origination. Services of nature have no prior cost tobring them into production existence — the electromagnetic spectrum,for example, exists regardless of human presence on earth and sopresumably does time. Ocean fish, fossil fuels, and heavy metals areall found in nature, not the result of human creation. They are, in19th century classical economics, the fruits not of man’s labor but ofGod’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 theirrole to provide reciprocal services to the tenants of the land. Thatbargain, so well refined in feudal economic arrangements, was anequilibrium balance, disrupted, one might say, by the annulment of rentcollection and the exploitation of land withoutrecognition of its price. The practice effectively ended with what inBritain is known as the “enclosure movement” of the early Tudor reign,driving the peasants off the land into cities to provide cheap laborfor the early English industrialists.28 Butthe theory continued long afterwards. Georgists today argue that landrent should be collected from titleholders so that it is not left torender economic distortions. This in turn affects the price of laborand the price of money. Government’s role, whatever else it does, is atthe very least responsible for defending the commons, to ascertaintitles and to collect rent. Although there are many differences aboutthe proper role, scope and domain of government among Georgistadherents, the collection of rent and the supervision of open marketsis central to its tenets. Despite assiduous efforts to make clear the extent and the limits ofthe economic rent as a concept — known as well as land rent, Ricardianrent, and ground rent, even the best of contemporary neoclassicaleconomists disagree. Some texts argue that certain athletes or otherstar performers with great natural ability reap returns for theirefforts far above what is in fact necessary to “bring them intoproductive use.” The difference between what it would minimally take toentice them to perform and the price they are actually paid is alleconomic rent. Babe Ruth, Michael Jordan, Britney Spears, and theBeatles have all been compensated with impressive amounts of economicrent.29Georgists and classical economists are of mixed minds, arguingsometimes that such payments are either wages or else are simplytransfers that in no way reflect productivity.30 As with all nineteenth century moral philosophers, Henry Georgesubscribed to a belief in natural law. The natural order of things ashe saw it required that land be held in usufruct and that rent fromsuch should be returned to society. The theory was inspired by hisdeeply religious roots and grounded in his reading of the prominentthinkers that predated him. The natural order was also a moral order,and the failure to comply with the order of nature and society as hesaw it was a perversion of justice. The fruits of the land belonged toeveryone, just as the fruits of one’s own labor were uniquely one’sown. Since one owned one’s body, one was entitled to keep the productof one’s physical efforts. Society had no more right to confiscate theearnings of one’s sweat and brow than it ought to leave in the hands ofrich landowners the rent that was everyone’s inherent birthright to beshared. There were just and unjusttaxes, and the only just tax was that which grew out of rent, of theunearned increment that visited certain land sites as windfall gainsbecause of the efforts and investments by the community. Income andexcise taxes were unjust and confiscatory— even theft, as especiallywere tariffs. Taxing or collecting land rent alone was the means ofending poverty and restoring progress. Indeed many Georgists reject useof the word tax entirely, preferring instead to talk instead about rentcollection. 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 hisadversaries in the last decade of his life was his assertion thateconomics was necessarily a moral science. Unlike those who became thefounders of the American Economics Association in 1885, most of whomwere 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 subtitleof his magnum opus,Progress and Poverty,wasAn Inquiryinto the Cause of Industrial Depressions and of Increase of Want withIncrease of Wealth . . . The Remedy. Why, he asked, in the midstof such boundless plenty is there such abject poverty? He woulddedicate his book, first published in 1879,“to those who, seeing the vice andmisery that spring from the unequal distribution of wealth andprivilege, feel the possibility of a higher social state and wouldstrive for its attainment.” He had known poverty first hand whenhe was struggling to support his young family and establish himself asa printer, a journalist and a publisher. He could also see before himthe fruits of land and nature easily available to be harvested but forits legal capture by monopoly titleholders. He wrote of all this insome six books and countless other essays, the focus always on thetheme of economic justice. Along with Robert Ingersoll, he was likely the most stimulatingoratorof his age, a fiery moralist at a time during which there were manyothers who might claim such a title. He traveled widely, was a championof labor, the landless, and the urban poor, particularly influential inthe struggle over the Irish land question and in the positions of theLiberal party in the early 20th century. His admirers among the greatof the time were myriad: Sun Yat Sen, Leo Tolstoi, Winston Churchill,Theodore Roosevelt, Charles Beard, Samuel Clemens, Robert MaynardHutchins, and John Dewey to name a few. Forewarned in 1897 that runningfor mayor of New York a second time and trying at the same time tofinish another authoritative statement of his philosophy would killhim, the prophesy was fulfilled nonetheless with his death four daysbefore election day. In 1886 he lost a rigged election31whenmatched against a scion of banking wealth Abram S. Hewitt, who wasrecruited by Seth Low, President of Columbia University, but he beatthe third place finisher, Teddy Roosevelt. His funeral on the streetsof New York drew the largest crowd of mourners ever assembled untilthat time, and until much later. No one doubted Henry George’spassionate commitment to justice. The heart of George’s economics was, in a way, Biblical. As the son ofa religious book publisher born in Philadelphia, he had adequateopportunity to witness the early growth of the American republic in aunique way. On his own in San Francisco and responsible for a wife andchild at a young age, his first effort at resolving the puzzles ofinjustice were a manuscript printed in 1871. But only after additionalexposure to Ricardian rent theory was he able to refine his ideas suchthat they could form the basis of hisProgressand Poverty eight yearslater. His Christian roots led him to a deep commitment to the basicmoral equality of all people; his challenge was to find a way to ensurethat this equality was manifest in economic fairness. As noted earlier, the starting point of Georgist philosophy is thatnature belongs to owners only in usufruct and not in freehold. Becauseany monetary wealth that accrued to that nature stemmed directly fromthe physical presence of people and was therefore social in character,the resulting added increment of value that constituted rent belongedin turn to the community that created it. Nature would have no economicprice without people. Hence rent was the community’s entitlement andnot that of individuals, and the land rent that accrued to parcels as aresult of social investment should be returned to — recaptured by — thecommunity.It was obvious to Georgethat the wealthiest people in the nation usually owed their fortune notto the sweat of their brow or the inventiveness of their minds. Rathertheir position was due to their success as land speculators, to anincrease in rent on land they had captured title to, land rightfullybelonging to all.The earth and all its product, he argued, wasthe common heritage of humanity, a birthright of all people. Any failure to pay back that increment to society, or of government torecapture it in the form of taxes, constituted not only an injustice tothe poor but a distortion of economic equilibrium. He witnessed firsthand the perverted configurations of land use that today we know assprawldevelopment — even in histime it was apparent that urban, high value land parcels were beingheld off the market for speculative gain by meretricious interests. Hewitnessed also the boom and bust cycles of the land markets on accountof such speculation, effects which spread far wider than just landprices. These inevitable cycles would dislocate labor and capitalsupply, giving impetus to the impoverishment and suffering which hehimself had experienced. He understood that holding the moststrategically valuable landsites out of circulation constituted aburden on the economy. He understood that financial resources spent topay exorbitant land prices had a depressing effect on capital andlabor. And because government was taxing labor and capital instead ofrecovering land rent, it was further restricting the job market and thegrowth of capital. He realized that people who captured monopolycontrol of strategically valuable landsites could do so because theywere privy to information prior to its public release. It was not byany means his insight alone; it was captured also by George WashingtonPlunkett writing at the same time: There’san honest graft, and I’m an example of how it works. I might sum up thewhole thing by sayin’: “I seen my opportunities and I took ‘em.” Just let me explain byexamples. My party’s in power in the city, and it’s goin’ to undertakea lot of public improvements. Well, I’m tipped off, say, that they’regoing 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 allthe land I can in the neighborhood. Then the board of this or thatmakes its plan public, and there is a rush to get my land, which nobodycared particularly for before. Ain’t it perfectly honest to charge a good price and make a profit onmy investment and foresight? Of course, it is. Well, that’s honestgraft.32 All society needed to do was to collect the economic rent fromlandholders as its rightful due, a solution that became part of thesubtitle of his book, “the remedy.” Taxing the land (or, alternatively,collecting the economic rent) was something common citizens couldunderstand. They knew well the enormous disparity in fortune between the landed andthe landless. They knew also that there was in fact land enough forall, except for a system of ownership that made no distinction betweenthe right of land use and the right of land gain. George had no doubtread Frenchman P. J. Proudhon’s more strident pamphlet that “propertyis theft.”33He knew that there was a long tradition of land taxation, wellarticulated by a French school of philosophers known as thePhysiocrats. It was a natural and comprehensible solution for him toadvocate the adoption of the “single tax” on land, according to itsmarket value, to collect the economic rent. There was another dimension to George’s economic views as well. AsLocke and later classical economists argued, one owned the items withwhich one “mixed his labor.” By extension one also owned items whichone purchased in trade from others who had similarly created theirwealth. Hence it was unjust and immoral for society to claim any partsof 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 periodduring the American Civil War, the American government had neverimplemented an income tax. But Britain had, and there was muchdiscussion of a need for an income tax in the United States; it wasagain instituted in this country in 1913. During the late 19th century, the burden of various direct taxes wasnot so large that many common people felt their acute impact. It was,however, a time of extreme disparities between the poor and thewealthy, and the single tax was a means by which to redress some ofthose disparities. It would also foster the availability of employmentby making labor more attractive relative to land and capitalinvestment. In a word, people would more likely have to earn theirmoney. The fruits of land wealth, distributed among people equally inthe form of government services, would go far toward both enhancingeconomic opportunity and correcting inequality. Georgists today adhere to much the same points of view, although thereare some significant differences. George himself was an ardent freetrader, mainly because he believed that the single tax should supplanttariffs. After Ricardo, he accepted the idea of comparative advantagethat arose from trade, but only after land (resource) rents werecollected so as to preclude the raping of the natural environments ofcountries rich in such resources. He also believed that populationgrowth was good — the more the better, and took special pains to refuteMalthus. But one should also recall that he was living at a time whenthe expanse of the American continent was still open to any homesteaderwho chose to do so. Population growth was not a problem at that time.These elements of George’s thought are inconsequential to hisfollowers today.Yet it is importantto note that Georgists are not socialists; they do notsubscribe to the view that society should own the means of production.These should remain privately owned by and large (except perhaps astoday’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 thanmany contemporary American conservatives. He believed thatremoving theaccretion of economic rent from landsites would restore self-regulatingequilibrium of the marketplace, thus obviating the need for the heavyhand of government controls. Restoring land sites to the arena and influence of market forces bycollecting land rents eliminates the incentive to hold them forspeculative 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 propertyownership for use versus real property ownership for gain that setsGeorgists apart from other free market capitalists.34
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.37The 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. A land tax is efficient because there is no economic distortion ofmarket choices as a consequence of its neutrality. This means thatthere is no wasted economic behavior in the form of excess burden ordeadweight loss typically associated with other tax designs. As anexample of the inefficiencies of other taxes, for example, one mightconsider the altered behavior that occurs in consequence of thepresence of the income tax or the sales tax. This deadweight loss inAmerican and British economies has been estimated to be roughly 20% ofthe national domestic product in each nation. Put differently, werethere no deadweight loss as a result of the tax structure, the societywould essentially be 20% more productive — and 20% richer in theaggregate.40 Because a tax on land is essentially a flat rate percent levied on abase of assessed full market value, it is simple and easy for people tounderstand. On account of that attribute, a tax on land value is easilyvisible and is perceived by the public to be fair. Finally, now thatapplied computer technology can be used to accurately assess the valueof land whether or not it is improved, one of the last traditionalobjections to the administrative feasibility to land value taxation hasbeen allayed. All this enhances the legitimacy of government. The taxis therefore not simply efficient from the narrow measure of taxefficiency as described above. It is efficient also in the broadersense, by its ability to foster sounder government performance, bettercommunity relations, more livable community configurations, andenhanced social productivity. It is not just from the standpointof tax theory alone that a tax on land should be evaluated. The most compelling arguments to many supporters stem from itsenvironmental consequences. A tax on land sites is the most powerfulinstrument available to neutralize and reverse the centrifugal forcesof urban sprawl. This is because incentives are present — the higherthe tax the more power it has — to improve the high-value sites to thefull extent that their market value warrants. Titleholders are inducedto build on their parcels in order to recover the carrying costs oftheir increased taxes. The inelastic supply of land sites means thattaxes are shouldered fully by owners, without being passed on totenants. (Of course a tenant’s charges can be raised anytime.) Henceurban areas tend to be improved and peripheral areas become lessattractive to sprawl development. George saw a strong moral argumentfor shifting from the conventional property tax levied on both land andimprovements to one based on land alone. The argument was quite simple:the tax as it stood penalized people who improved their property andrewarded people who held vacant parcels for speculative gain. Itrewarded those owners who let their holdings go to wrack and ruin,often those who bought up parcels to use as rental property withoutinvesting in the maintenance to ensure that they would continue to beattractive and livable — slumlords. The Georgist approach to taxation had many names: his contemporaryThomas Shearman wrote two books calling it the “natural tax,”41andmore recently it has been referred to as the “incentive tax”42 andground rent.43It should be noted once more that, by whatever name, the “land tax,”“site value tax,” or “single tax” to George covered a far wider scopethan simply locational sites, even though today this is the base thatis given the most attention. It covered any natural factor element thathumanity chose to put into service. Today, some of these parts ofnature which have come to be “owned” by private corporations (at leastinsofar as their license to such use have become entitlements) areworth millions. The electromagnetic spectrum that has been parceled outto the communications industry has sometimes been “auctioned” forone-shot revenue gains, is now for all practical purposes a freeholdtitlein the hands of those industries.44 Werethose spectrum bands retained by governments and “rented,” the revenuewould likely be far greater. Whatever increased value now resultsaccrues to these private owners instead of to society. So also in the case of the auctioning of “pollution credits” ortradeable permits, what in fact constitute the right of powerindustries to treat the air as a dump to the full extent whichenvironmental tolerances allow.45 These“credits” are now “owned” by the private sector and traded back andforth among corporations, even though all people experience theconsequences of its treatment. Airport landing slots, “prime time”broadcasting, and many other time-sensitive dimensions have all beenhanded over to the private sector with nominal benefit to the public.London Mayor Ken Livingstone has been a strong supporter of renting thelanding slots at Heathrow and Gatwick Airports, and is at this verytime exploring a rent recovery scheme to pay for the upgrade ofcomponents of the Jubilee tube line.46 Georgist Economics: Agendas The Georgist main agenda, as earlier noted, is economic justice.If one searches the term “economic justice” online, the first site thatwill appear is the Georgist website,progress.org.The starting pointis that people are entitled to what they earn, but only to what theyearn.50The fruits of the commons generated in rent might also be distributedto citizens equally if not used to finance the general services ofgovernment. In practice this means the abolition of those taxes thatrepresent an unjust capture of one’s personal property — taxes such asincome, sales, and other nuisance taxes. It accepts, to be sure, theneed to collect user fees, Pigouvian taxes, and perhaps sumptuary (sin)taxes. It argues aggressively for the collection of economic rent insupport of government and, for any remaining surplus, its distributionas a citizens’ dividend. The justification for the collection ofrent has several grounds:
The more cohesive the development of communities is, the greater thesynergy exists among its members. Sprawl development not only increasesthe cost of transportation and other infrastructure needed to servicethese sites, it also reduces the extent to which people are accessibleto one another. There is considerable indication that American societyis losing this elusive quality of community. When Harvard professorRobert Putnam published his celebrated articleBowling Alone in January, 1995, itwas remarkable as much for the resonance that it generated throughoutthe nation as for the message itself. David Broder of the WashingtonPost pronouncedBowling Alonethe most important academic article that year. Putnam argued that ourcommunal relationships are declining, and that an ever smallerproportion of the population is involved in social activities of acooperative and communal nature.54 Weused to be a nation of joiners; increasingly now we’re a nation ofloners. As Tocqueville noted 150 years ago, affiliative groups used tobe the unique strength of American society.55Several hypotheses were offered in this and subsequent studies toexplain the decline in the civic engagement of Americans — variousdemographic changes, technological innovations such as television, thechanging role of government, the cultural revolution, and so on. Theland-use and transportation patterns that have evolved in the post-warperiod are a factor as well. The concepts of neighborhood and communitytoday no longer mean the same thing as theydid in the past. Saying hello to your neighbors today, if indeed you know them, meanstooting your horn as you meet them coming and going.56Urbanareas need instead to be designed to engender healthy community life.Restoring the balance between accessibility and mobility so that humanexchanges— of all sorts— can occur efficiently and simply is a centralelement of Georgism. As author Kirkpatrick Sale has said, we need torestoreHuman Scale.57 Much of the loss of scale communities is due to the factthat transportation planners have reconfigured the urban areas of thecountry to serve the automobile.58 Itstems from a fundamental confusion between what geographers callaccessibility and mobility. This distinction is explained particularlywell in a recent text,The Geographyof UrbanTransportation: Accessibility refers to the number ofopportunities, also called activity sites, available within a certaindistance or travel time. Mobility refers to the ability to move betweendifferent activity sites (e.g., from home to a grocery store).59 Recent days have witnessed a profound and growing awareness of theproblems due to sprawl development. In fact one opinion poll markedsprawl as the highest current concern among American voters.60 Theanswers being offered, however, don’t address the root causes of theproblem. The most talked about panacea is the institution of urbangrowth boundaries, but these have failed to be demonstrably successfuleven in the two communities most often cited (Portland and Boulder)where they were instituted over twenty years ago.61Solutions such as these reflect the penchant of policy makers to relyupon so-called “command-and-control” (CAC) approaches to governmentrather than “pricing” approaches. The extension of government reach andweight to impose policies deemed appropriate is burdensome, expensive,and inefficient. Such means reflect a lack of understanding and imagination according toauthors David Osborne and Ted Gaebler, who urge adoption policies of“steering rather than rowing.”62 Aslong as drivers personally are able to pass off to others the truecosts of their travel, it guarantees, along with the failure to collectland rent, that sprawl development will continue. One 1993 studyconcluded that "when the full range of costs of transportation aretallied, passenger ground transportation costs the American public atotal of $1.2 to $1.6 trillion each year. This is equal to aboutone-quarter of the annual GNP and is greater than our total nationalannual expenditure on either education or health."63Japan, by way of comparison, spends an estimated 10.4% to satisfy allits transportation requirements, although the figure might be a bit lowbecause not all externalities are included in the calculation.64 Onereason we are spending so much on motor vehicle transportation is thatour public policies encourage it. Road user fees represented about $33billion in 1991 but the true costs to society were ten times that;65 putanother way, drivers pay only 10% of the true costs of their motorvehicle use.66 Failure to collect land rent leads to speculation and the resultingboom-bust economic cycles that are so destructive to the generaleconomy.67Henry George inProgress and Poverty(Bk V, Ch1) identified the"speculative advance of land values" as the "great initiatory cause ofindustrial depressions." Economic cycles can be linked to just aboutevery downturn over the course of two centuries, the more so as theeconomy has come to be monetized. Frederick Lewis Allen, the greatjournalist gives a compelling account of how the Florida land boom (andlater bust) antedated the Great Depression.68 Morerecently a similar speculative bubble explains the Asian economiccrash, particularly in Thailand.69 Whenthe Japanese economy was at its peak, the value of land in Tokyo aloneexceeded that of the entire United States, and the appraised land valueunder the Imperial Palace was as great as all the real estate inCalifornia.70The most convincing study of the relationship between land value cyclesand more general economic cycles is one done for Australia by acontemporary Georgist economist.71Thereare some students of the American economy that believe that we are thecusp of a crash in land values that have been bid up over decades, andthat this could well precipitate a market downturn that could belong-enduring.72 A Georgist agenda also calls for the regular auctioningof mineral extraction rights, fishing rights, and other access tonatural resources in a way that their rent is returned fully and fairlyto the public weal.73Competitively assessed royalties especially on the extraction ofmineral capital could yield billions of dollars.Alanna Hartzok hasoffered compellingarguments why rent from locational sites should be reserved to financethe services of local governments, rent from natural resourcesidentifiable within a nation’s boundaries should be captured to financenational governments, and rents of those resources beyond nationalborders should be used to finance world governments.74 ECOLOGICALECONOMICS Ecological Economics: Basic PremisesIt is far easier to outline the basic premises of Georgist economicsthan it is to do so for the emerging field of ecological economics.Georgism is a tradition that grew out of a clearly formed tradition of19th century classical economics and has been refined further for thepast century. It was neoclassical economics that diverged from thereigning orthodoxy. The differences between the classical tradition asrepresented and defended by Henry George and the emerging neoclassicalschool were vividly portrayed from their earliest divergence, even tothe staging of formal debates between George and the new orthodoxy’sadherents.75In contrast, ecological economics along with other emerging heterodoxschools is itself very much a reaction to the neoclassical tradition’sinsensitivities and failures. The differences between ecologicaleconomics and the floundering discipline of neoclassical economics areas much by way of the former’s criticism of the latter as they are anenunciation of clear starting points. To be sure, neoclassical economics emerged gradually over a period ofsome fifty years, and only reached its heyday, one might argue, withthe arrival of Paul Samuelson.Samuelson, theMIT economist whose text has gone through some 16 editions and hasoutsold all other text combined once said, “I don’t care who writes anation’s laws . . . if I can write its economics textbooks.”76 Theneoclassical position developed ever greater abstract mathematicalapplications, with models ever more detached from “real world” marketforces. This system of analysis now has reached a point of questionableutility due to its hermetic and Newtonian emulations.77Littleby little, one premise and formula after another have been cast aside,to a point now that there is a broad recognition among economictheorists at least that the discipline faces an intellectual crisis.78 Without enumerating further criticisms that have beenlevied against neoclassical economic thinking, something that has beendone far better elsewhere than is possible here, suffice it to say thatsome of the most compelling charges have been made by the ecologicaleconomists.79The most trenchant one as explicated by economist NicholasGeorgescu-Roegen is its violation of the basic laws of physics.80Itassumes a continuing draw-down of the earth’s store of energy, of whichthere is, of course, only a finite amount. If the economy continues toexpand to include all elements of the earth, it will consume so manyresources, particularly energy resources, that ultimately life itselfis destroyed. One study calculated that if everyone in the world livedat the level of the average American, three “earths” would be necessaryto accommodate us all.81 Thechallenge, argue the ecological economists, is to structure economicanalysis and the economy itself in such a way that markets arecontained and that existence outside economic reach is respected andpreserved. Whereas other studies of the environment within theframework of conventional neoclassical economics attempt to pricenature in a way that its value is assured, ecological economists workfrom the conviction that such an approach is questionable if notfutile, as it can never achieve any accurate and reliable market valuesfor such existence.82 A central premise of ecological economics is a recognition that marketprices do not reflect the value of commodities, particularly theresources and services of nature. Oscar Wilde first noted thata cynic was “a man who knows the price of everything and the value ofnothing.”83But it is clearly not only cynics who hold such ideas today. Thegrowing “commodification” of all things — the consequence of a gradualand inexorable privatization of the whole world and the ever expandingattempts to include everything which humans touch in a market economy,where objects and services which lack a market price are thus treatedas free goods — means either that ultimately everything must be pricedor else that other means must be found by which to identify value. Thesubfield of environmental economics is based on just this view — thateverything must be priced. To be sure, we cannot live without thenatural environment, yet treatment of natural goods and services asfree under the neoclassical economicsframework leads inevitably to their total consumption and destruction.84 Thelooming exhaustion of natural resources compels us to recognize thatmarket prices have limited worth in signaling true value, whether thoseresources be the biota of the world upon which human beings also dependfor their existence or mineral wealth in the form of fossil fuel energywhich drives modern economies. If we do try in any way to price thegoods and services provided by the environment, they are so far beyondcounting that it becomes self-evident that our economic approach mustchange.85 If land and land rent are the strongest determinants to Georgists,energy is its closest counterpart to ecological economists. Just asland rent can be measured fully in terms the relative surplus itproduces in any given socio-economic context, energy can be traced andcalculated in calories, BTU’s or joules. Land rent is completely ahuman product — there is no rent where there are no people, as land hasno market value. On the other hand, energy exists regardless whetherpeople are present or not, as it is a component of nature itself. Butnot all energy is now recognized as relevant in economics; only thatenergy which is employed in the human economy, and we assume that thehuman economy is necessarily bounded. Wind, sunlight and lightening areas yet unpriced and are peripheral today even in ecological economics.Attention is given more to those natural resources potentiallyprocurable or otherwise relevant to human dependency, and energycertainly is primary. So rather than regard energy as a free good andlargely outside the economy as neoclassicaleconomics assumes, energy will likely continue to be central — even thedriving force — in ecological economics. Indeed just about all other factors of production are essentiallyconvertible from energy. Besides that used in households, industry, andtransportation sectors, agriculture — at least linked to developedeconomies — is essentially energy driven. As Martinez-Alier has shown,86modern agriculture is essentially unfeasible without reliance uponapplied energy forms, and the diets of modern societies are heavilyreliant upon energy in the forms of intensive fertilizer use, intensiveapplication of machinery, and animal protein-fed farmers. By way ofcontrast, in pre-modern agricultural societies one could argue thathuman and animal energy account for all the foodstuffs produced, andwere used in turn to assure the continuance of the agricultural cycle.Unlike modern societies they are in energy equilibrium. Hall87argues that energy is the determining factor in the development successof all economies, posing momentous challenges for the future asprojected shortages of fossil fuel sources loom on the horizon. The regard for steady-state socio-economic dependence upon the naturalenvironment raises profound questions about the extent to which humanactivity is possible without continuing depletion of the earth’s energyresources, mainly fossil fuels. On the one hand are those that believethat contemporary society’s reliance upon intensive energy has becomeso embedded that continued sustainable life is impossible.88 Amongthese are noted ecologist writers such as Paul and Ann Ehrlich whoenvision the continued boom and ultimate collapse of all civilizednations.89The other view includes the majority of ecological economists who holdout hope that it might be possible to shift in time to renewable energysources before damage to the ecosystem is irreversible. This view isexemplified by those who could be called the “steady-staters,” and whobelieve that there is still time to bring economic practices intoan equilibrium state and avoid the doomsday scenario. Among the latterare Herman Daly, one of whose books is entitled Steady State Economics.90 Aninteresting discourse is unfolding among this community, perhaps asreflective of personal temperament as much as it is due to researchinterest and disciplinary background. At the moment it is a focus ofintensive and increasing research and interest.91 Theheart of ecological economics is ecological carrying capacity andthe premise of economic sustainability. Although this term has to someextent become a mantra and widely abused, its most popular definitionremains that first enunciated by the 1987 Brundtland Commission Report: "development that meets the needs of thepresent without compromising the ability of future generations to meettheir own needs."92Principle 3 of the 1992 UNCED Rio Declaration:"The right to development must befulfilled so as to equitably meet developmental and environmental needsof present and future generations."93 Atvarious times scholars have sought to improve upon this definition; oneoffered by adherents of the ecological economics school reads asfollows: 1. For renewable resources (fish,trees, etc.), the rate of harvest should not exceed the rate ofregeneration. 2. The rate at which we allow economicactivity to generate wastes that must be passed into the environmentshould not be allowed to exceed the environment’s ability to absorbthem. 3. The depletion of nonrenewableresources (oil, coal, etc.) should not be offset by investment in anddevelopment of renewable substitutes for them.94 Implicit in all this is the argument that manufactured capital (i.e.,that created by human beings), and natural capital (those resourcesprovided by nature) are not substitutable, as well as the belief thatcurrent practices portend irreversible consequences for the earth’senvironmental stability. Nor can the various components of naturalcapital alone be regarded as interchangeable goods. Natural gas mightin some instances be a substitute energy source for coal, and chickenan alternative protein source to beef. But fundamentally each elementis to a significant extent unique in nature — fulfilling its ownspecial niche in what ecologists call lexicographic uniqueness. Conventional thinkers argue that these two classes of natural andman-made capital are mostly substitutable, in what ecologicaleconomists have called “weak sustainability.” But the contrary, “strongsustainability,” is at the heart of ecological economics, going evenfurther than many authors of the Brundtland Commission Report wouldhave accepted by recognizing the lexicographiccharacter and place of each and every element of the biota.95 Thereis no definitional consensus, however. The Clinton-Gore administration,for example, established a President’s Council on SustainableDevelopment on June 15, 1993, and adopted the Brundtland Commission’slanguage. But it carefully avoided any detailed definition of what wasmeant by sustainability.96Subsequent executive orders and press releases have been equally vagueas to what definition of sustainability is being used,97andto this day the matter remains unsettled. Ecological Economics: Moral Premises If Georgist economics takes a moral stance primarily focused onjustice, ecological economics makes a much wider sweep. From itsstandpoint the very survival of the world is at stake, so that mattersof distributive justice, so central to Georgists, tend to get lost indebate. Many ecological economists and environmental economists wouldclaim that theirs is not a moral stance at all; rather it is a simpleempirical reality. One philosopher writing in the journal EnvironmentalEthics 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 naturalworld as an organism] does not itself constitute a moral norm. It is afactual aspect of biological reality, to be understood as a set ofcausal connections in ordinary empirical terms.98 Living within the laws of nature would seem to be axiomatic in thedevelopment of any ethical system, and it is a mark of degree that ourethics have so ignored such realities that a corrective is called for.Only in 1967 Professor Lynn White noted in a now famous article howmuch the Judeo-Christian tradition has been used to explain and justifypractices of exploitation and domination of our natural environment.99Mistaken or not, this view of man’s place in nature is generallyaccepted as conventional wisdom throughout western culture. The ecologymovement constitutes a revolutionary and very unsettling outlook tothis prevailing view, a radical shift in thinking from even mainstreamenvironmentalism and conservation ethics half a century ago. In thisview other species, both plants and animals, are as much entitledto life and well being as is homo sapiens. Theodore Roosevelt a centuryago could never have subscribed to the views of contemporaryenvironmental ethicists, as much of a conservationist as he was. Theearliest clear manifestation of modern thinking at least in westernthought appears to be Aldo Leopold’sSandCounty Almanac, a work onlypublished in 1949!100Ecological economistsaccept this so much as given — that human beings are of the earth andits bio-system rather than on the earth to dominate it — that furtherrefinement of this basic orientation is almost beside the point. Thiswas simply prudent care and planning to Leopold; he fully recognizedour total dependence upon nature.Not only are human beings co-equal with other living beings of theearth, so also are beings yet born entitled to an existence. TheIroquois Indians of New York State are often quoted to the effect that“In our every deliberation, we should consider the impact of ourdecisions on the next seven generations.”101Several contemporary environmental organizations have adopted theIroquois “Great Law of Peace” so that it has become the vernacularequivalent of the Brundtland Report’s definition of sustainability.Sustainable economics, or 7th generation planning, also requires Daly’s“steady state” economy,102where (as if natural resources constitute “capital”) one lives only oninterest and not principle. Daly contrasts two notions of economicpractice: growth and development. The former may momentarily increaseeconomic productivity and wealth, but is in the long term a fatalcourse 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 materialresources. For development, the value-added dimension comes fromtreading lightly on the earth, from the use of mental capital ratherthan physical capital.103 Dalyin still another article talks about three parameters ofsustainability: “allocation, distribution, and scale,” which will leadto an economy which is “efficient, just and sustainable.”104 One exponent of ecological economics suggests five axioms to measurethe degree of “ecosystem health:”105
1) there is no biologically coherentnotion of “community” robust enough to ground either contemporaryscientific theory incommunity ecology or environmental ethics; 2) it is not possible to safeguard the “rights” of biologicalcommunities; 3) in relying on natural-selection mechanisms to deliver it fromrelativism [its defenders’] evolutionary ethics has lost its normativedimension; and 4) [this] version of ethical holism appears to sanction what [iselsewhere called] “environmental fascism.”108 In a series of articles in one edited volume, ecosystem healthis defined by the extent to which there is diversity, hierarchy,complexity, resiliency, and both dynamism and homeostasis. All of theseattributes taken together reflect a holistic view, and possess anintegrity, it is argued, which has utilitarian, aesthetic and moraldimensions.109Ecosystem health has elsewhere been portrayed in terms of a capacityfor unfolding openness to greater diversity and complexity — anevolution if you will — that fosters both further integration andhierarchy as well as richness and resiliency.110Attempts in later chapters to operationalize these terms further— so asto better facilitate environmental management— ran head on intomethodological and philosophical difficulties. This was partially dueto the fact that benchmark measures for each dimension was less easilyidentified. Yet only six years afterward a second collection of essaysincludes a number of studies that show the relative condition of waterresources, forests, and fisheries, as well as indicators of how theburden of human enterprises and their over-extension translates intoenvironmental despoliation.111All this has led to discussion of natural resource management whichmeans in most instances managing not nature so much as socio-economicbehavior in order to maintain and ensure the viability and integrity ofecosystems.112 This leads to still a third important dimension of ecologicaleconomics: the belief that human fulfillment in the final analysiscomes not from consumption and exploitation of natural resources andmaterial goods. Because the concept of an ecological footprint is soimportant, retreating to a less imposing and more respectfulrelationship with the earth leads to an interest in a lifestyle thathas come to be known as “voluntary simplicity.”113 Itgrows from greater compatibility and appreciation of nature, an abilityto live in harmony with it, and a capacity to enjoy community with theenvironment and its natural beauty. Higher levels of human realizationand actualization arise from communal interaction, and from the pursuitof wisdom and relationships. It is no accident that ecologicaleconomics has made frequent reference to still another emergenttradition of economic philosophy now known as humanistic economics.This latter builds on the thinking of Abraham Maslow and the humanpotential movement born of the 1970s.114 Inthat framework, material needs are gradually supplanted by social needswhich are ultimately surpassed by moral needs and spiritual awareness.115 Ecological Economics: Agendas There are now several books and essays offering policy outlinesto address ecological challenges worldwide. Many are collaborativeefforts as befits a newly emerging field of study. Two books serveparticularly well as references for the agenda of ecological economicsas the field is presently defined. Both are authored primarily byHerman Daly, a founder of the ecol-econ discipline. The first,For the Common Good, was firstwritten in 1989, and has been republished in a second edition in 1994.116 Itwas awarded the New Options prize for being the “Best Political Book of1989.” The second book is a collaborative effort of several adherentsof the ecological economics approach,NaturalCapital and Human Economic Survival, published in 1995.117These two books reflect an explicit and comprehensive political agendaof concern to ecological economists. Significantly also several of theideas expressed in these volumes have already crept into mainstreamenvironmental policy discourse.118 Daly and Cobb outline eight issues relating to the ecological economicsperspective which call for clear public policy changes in their view.All relate to the American context: economic globalization, population,land use, agriculture, industry, labor, income policies and taxes, andnational security policy. Put differently, there is no realm of policyoutside of the reach of ecological economics; this is what makes ittruly interdisciplinary. The second book focuses more directly on meansby which to preserve natural capital, using what means governments haveat their disposal. After first distinguishing between“command-and-control” (CAC) andincentive pricing systems, the authors continue by exploring thevarious ways that the latter, fiscal measures, can be engaged to alterthe course of current economic practices in favor of more sound andenvironmentally sensitive ones. No short treatment can do justice toeach class of proposals, but a quick summary indicates their generaldirection. Underlying the whole agenda is a commitment beyond simple descriptionto sustainable development economics and to Daly’s “steady state”economics. This entails the institution of environmental safeguards,protection of cultural and biological diversity, minimal resource use,and recycling. It further means protection of small countries andlocalities — of both ecosystems and populations — againstall-encompassing economic units that preclude the possibility of theirbeing able to survive independently. It presumes also that not justhumans alive today have entitlements, especially privileged elements ofwealthy countries; it recognizes rather the justice and moral claims ofpeople and natural ecosystems yet to live to survive as intact andintegral units. It recognizes that governments must take a hand in thepreservation of such ecosystems, as markets forcesleft to themselves will wreak destruction on the most vulnerable partsof the earth and ultimately upon the earth itself. It accepts the factthat the carrying capacity of the earth is limited, and that weappear to have already exceeded that carrying capacity in our ignorance.119 The distinction between CAC approaches to environmental challenges ascompared with pricing approaches is central to all this analysis.Daly’s shows a strong preference for the latter. In what he calls“graded ecozoning,” for example, potential atmospheric impacts aredivided into three areas.
The authors would further impose the full costs, in the form of taxes,on the depletion of natural capital resources. This in turn would bothdiscourage the improvident use of such materials and encourage theirre-use and recycling beyond what economic arrangements now provide for.They also argue strongly for tariffs and trade barriers that wouldfoster linkages between existing local community enterprises, sincethey view economic globalization as a “race to the bottom” with respectto the exploitation of both resources (land) and labor. These tariffswould apply not only to protect the viability of certain social andpolitical units but to ecological systems generally, so that theirprotection would be better guaranteed against the ravages of marketexploitation. With respect to arrangement of property rights, their classificationsfollow more conventional thinking, distinguishing ownership accordingthe degree of access and by the extent of public protection warranted.Here they fall back more on legal and regulatory approaches than uponpricing. They see a continuum that runs from individual property rightsto common ownership, ignoring the fact that any title to propertyconstitutes a “bundle of rights” which can in principle bedisaggregated and charged for in various ways. The theme of economic justice runs throughout Daly’s work, evident ofcourse in the titleFor the CommonGood.122Butthe formulations of justice are not explicit. One looks in vain for astatement of what if any entitlements people should possess by virtueof being human, or what nature or posterity is due in turn. Absent isanything that Harvard Law professor Mary Ann Glendon calls “rightstalk.”123But it is clear that the ecological economists arestruggling mightily with these questions. They are boldly posedelsewhere in the writing of Joan Martinez-Alier, a Spanish scholar whois widely known in the movement not just by his own writing but aseditor of the journalEcologicalPolitica. In one article, he sees anever-widening standing for environmental claims, as the environmentalmovement evolves from one based on the efficient and sustainable use ofnatural resources (the “gospel of eco-efficiency,” in the tradition ofGifford Pinchot), later to the “cult of wilderness” (in the traditionof John Muir and Aldo Leopold).”124 Theyare evident also in the work of Bernardo Aguilar, particularly withreference to north-south trade arrangements which essentially exchangenatural resources for developed nations’ currencies.125 Aspeople come to understand their relationship and dependence upon theirnatural environment, he envisions an unfolding pattern of litigation topreserve the sanctity and protection of peoples dependent upon it.Distant corporate interests will be blocked from exploiting the landsof local populations who are otherwise left withthe liabilities of their repair. POINTS OF SYNTHESIS OF GEORGIST ANDECOLOGICAL ECONOMICS The commonalities of Georgist economics and ecological economics appearto be organizable into six general points: 1) preservation of the commons, Implicit in all these points is the view that market activity needs tobe circumscribed and juxtaposed to the non-human, biological realm. Itappears that there is lots to be gained by some synthesis of the twofields of discourse.2) sustainable development, 3) appropriate valuation of natural capital, 4) ensuring social and biological community, 5) fostering individual self-realization, and 6) securing economic justice. Ecological economists worry about the encroachment, and even theelimination, of those elements of nature to which private propertytitle has not been granted. In their concern about the need to protectthe “commons,” they are torn between the view that only throughprivatization can all the world’s assets be preserved and thealternative view that any private appropriation of the commonsconstitutes a moral compromise. They fear a repeat of Garrett Hardin’s“tragedy of the commons.” Their argument often proposed is rathercomplex to explicate: it assumes that private property titles mayperhaps provide the best incentive not to exploit the fruits of theearth and the earth itself.126 ToGeorgists, on the other hand, the earth and all its resources arealready in fact the birthright of all humanity; individuals areentitled to its use in return for the payment of rents. Furtherprivatization is anathema. The key rather is in distinguishing thevarious components of ownership and getting prices right — mainly inthecollection of economic rents. One must ask then whether there is some such means by which toaccomplish the goal of environmental preservation — through either ofthe means by which government has at its disposal: command-and-control(CAC) approaches or pricing approaches. It has already been noted howdifficult CAC approaches are to enforce, and how expensive they areboth in terms of administration and economic inefficiencies. Pricing onthe other hand suffers from the difficult challenge of getting it“right,” som ething which typically must be resolved through formalpublic decisions, especially when and insofar as they involve publicgoods or common property. And yet, for pricing to work at all, there must be both supply anddemand; the lack of either results in there being no market price atall. Is it possible, perhaps, that policies might be developed wheredemand for certain resources are reduced to zero — and hence no price?To some extent this is how the Georgist economics approach works. Itleaves certain realms of the commons unthreatened by exploitation forthe reason that the attention of the market is focused elsewhere. Bythe collection of economic rent the prices of resources are effectivelyshifted, so much so that the market arena is profoundly altered.Resource prices are shifted in such a way that their use is curtailedand their consumption concentrated. It was noted earlier, for example,that collection of land rent tends to reverse the centrifugal forces ofsprawl, actualizing demand at the core of urban areas and leavingremote regions uninhabited andintact. Economic rent accrues to sites that have high demand andfrequent use; collecting that economic rent tends to concentrate theiruse in ways that discourages speculative practices, allocate their useto those who can best maximize their utility, and leave other sites andcommodities in remote areas less affected by human activity. So alsowith charges for other public resources such as radio frequencies andairport landing slots. Pricing incentives are established in such a waythat economic activity is intensified, concentrated, and integratedwithout the need of artificial CAC instruments such as zoning, urbangrowth boundaries, community land trusts, and other devices which areexpensive to implement and have notable records of failure.127 On the other hand, collection of economic rent, whether it be from theuse of land sites, fossil fuels, fishing grounds, solar and wind energysettings, electromagnetic spectrum frequencies, airport landingtimeslots, and or even air sinks facilitates their highest and best usewhile leaving less attractive settings unaffected. Where there existsthe possibility that environmentally sensitive sites or resources mightotherwise be exploited, then is the appropriate time to institutefocused CAC approaches, and with more attentive and efficientadministration for all involved. The practice of concentrating economicactivity in the more limited footprint that pricing creates isconsistent with approaches taken in ecological economics. This isbecause the economy is recognized as only one component of humanexperience and the world system, not coterminous with it. Daly, forinstance, draws concentric circles to illustrate the proper setting ofthe economic system — inside the social and cultural system whichitself exists in a greater ecosystem. Collection of economic rent has acentrifugal and concentrating effect on human activity and hence uponthe ecosystem itself. It has a benign effect on ecosystems insofar asit effectuates a steep and identifiable market gradient between areasof heavy socio-economic activity and those that bring no price at all.And yet by facilitating closer contact between members of the humancommunity, it also fosters exchanges of a naturethat are outside the market economy — family relationships andneighborhood activity. The consequences of collecting economic rent are to increase prospectsfor achieving sustainable development. This is because fiscalinstruments constrain the use of natural resources more than do eitherCAC approaches or fiscal measures inspired by neoclassical approaches.Collecting full royalties by competitive auction for nature’s harvestsreverses the exploitation of nature that presently obtains.Establishing proper prices for such materials and services would likelyreduce their appropriation. All this enhances efficiency andproductivity in ways that are consistent with sustainable economics,and gives recognition and space to elements of the ecosystem so that itis less threatened with extinction and exhaustion. Site value taxationworks to circumscribe the domain of economics relative to the naturalworld. Its greatest impact, presently evident in the consumption ofenergy and land area, is turned inward on itself. Space, time, energy,and nature are thereby conserved and spared insofar as their economiccosts become dearer. The centripetal forces encouraged by theimposition of land value taxation and which induce the proximity ofland use configurations have a salutary effect on thehealth and vitality of social community. Using Daly’s language again,128instead of mindless growth one encourages development, quality overquantity. Ecological economists have been in the vanguard of opposingthe globalization of the economy, believing that its disruptive effectson local communities outweigh any gains in potential diversity,economies of scale, and competitive advantages that might obtain. HenryGeorge himself was an ardent free trader a century ago, but this, asDaly points out, was before capital had the mobility that it doestoday. In Ricardo’s time, capital remained largely within a nation’sborders, not true today. Whatever competitive advantages localitiesmight have had during the early industrial revolution are vitiatedtoday by the speed with which money can be transferred in seconds fromone nation to another. Notably, the late E.F. Schumacher was a strongsupporter of both Georgist economics and of local currencies.129 Greater proximity in development can lead to greater guarantees for thepreservation of unsettled areas, leaving tracts of nature undisturbedby the inroads of human presence. This too may have the ironic effectof fostering greater community with nature. Certainly millions ofbackyards with gas grills and lawns to mow are a poor substitute forpastoral lifestyles. Ecological economics makes clear to people theinterdependency between urban and rural, past and future, life andlore, far better than the conspicuous consumption fostered byconventional economic pursuits. Daly himself writes approvingly of landvalue taxation, even though he has little to say about Henry George orabout collecting economic rent.131Ecological economics hunts for a continuum between economic value andnon-pecuniary value, without finding a clear boundary for either.Georgism, in contrast, encourages a precipitous fall-off in economicprices at the periphery of human presence, simply on account of thefact that rent recovery reverses the centrifugal impetus ofconventional market forces. The continuum asserts itself. The grant of land sites and other natural resources to individuals andcorporations in leasehold rather than freehold has an additionaladvantage beyond the revenue collected in rent to support the generalpurposes of government. This is the restoration of ownership of theearth to all people: what in Georgist terms and in classical philosophyis their birthright. Acknowledgment that the earthbelongs to us all, and is both our entitlement and our responsibility,has the effect of enfranchising the people of the earth everywhere,perhaps ennobling them as well. At a time in human history when theincomes of the world’s people are increasingly disparate, and wherewealth is even more unequally distributed, it must be recognized thattitles to the resources of the earth are the most unequally, andunjustly, distributed of all.132Recognition of this truth may come as a revelation; indeed it may wellbe revolutionary in somecircles. But restoration of birthrights to which all people have a justand proper claim may be the single most important and effective meansby which to facilitate and ensure sustainable economic policiesworldwide. All this leads to the likelihood also that personal growth can also beenhanced by the forgoing factors: greater community facility, greateridentification with “the commons,” and greater access to nature allenrich human experience. Georgists argue that more intensive use ofland sites, more efficient use of (and hence reduced consumption of)material resources, and greater regard for the value of time will addcharacter to human life by encouraging mental capital more than byphysical capital. Enjoyment from reading books or exploring theinternet may finally trump snowmobiles and stock car racing. Thisvalue-added dimension of human awareness comports with theenvironmentalist argument that it is the lack of access to nature thatfrequently makes people regard it as an instrument. The focus of Henry George’s inquiry, and of his disciples, is thepursuit of justice. Economic justice is an agenda which ecologicaleconomists also subscribe to, even though their immediate focus isconcern about the earth’s survival at all, let alone the distributionof its fruits. Here, however, is where the Georgist tradition is ableto contribute most to the environmental justice program. There is abroad appreciation, particularly among ecological economists that haveworked in poorer nations, that natural resources are endangered everybit as much by the scarcity of basic necessities as by overpopulation.Urban elites usurp high value lands and retain land rents growing outof their production; poor people are marginalized and left to fend forthemselves. They often survive by taking what little environmentalresources are left on ravaged land sites, further reducing theresiliency of these local ecologies. Collection and redistribution ofland rents, either in the form of public services or in the form of acitizens’ dividends, offers a way to restore equity withoutredistribution of land titles and without all the dislocations thismight entail. Many third world leaders at the present time seesolutions to poverty and economic inequality in the redistribution ofland titles. Georgists argue that this is not necessary; all that isnecessary is to recover the land rent and assure its equitabledistribution to rightful claimants. There is currently a renewed and worldwide interest in Georgistapproaches, especially among former nations of the eastern block and inCuba where Georgist scholars and advocates have been invited to visitseveral times.133Herman Daly appears by one of his most recent papers134 tobe ever more closely drawn to the Georgist position that the “fromthe point of view of equity it matters a great deal who receives theprize for nature’s increasingly scarce services. Such payment is theideal source of funds with which to fight poverty and finance publicgoods.” Professor Daly goes on to say that Value added belongs to whoever addedit. But the original value of that to which further value is added bylabor and capital should belong to everyone. Scarcity rents to naturalservices, nature's value added, should be the focus of redistributiveefforts. Rent is by definition a payment in excess of necessary supplyprice, and from the point of market efficiency is the least distortingsource of public revenue. Appeals to the generosity of those whohave added much value by their labor and capital are more legitimate asprivate charity than as a foundation for fairness in public policy.Taxation of value added by labor and capital is certainly legitimate.But it is both more legitimate and less necessary after we have, asmuch as possible, captured natural resource rents for public revenue. The above reasoning reflects the basic insight of Henry George,extending it from land to natural resources in general. Neoclassicaleconomists have greatly obfuscated this simple insight by their refusalto recognize the productive contribution of nature in providing "thatto which value is added". In their defense it could be argued that thiswas so because in the past economists considered nature to benon-scarce, but now they are beginning to reckon the scarcity of natureand enclose it in the market. Let us be glad of this, and encourage itfurther. I am not advocating revolutionaryexpropriation of all private property in land and resources. If wecould start from a blank slate I would be tempted to keep land andminerals as public property. But for many environmental goods,previously free but increasingly scarce, we still do have a blank slateas far as ownership is concerned. We must bring increasingly scarce yetunowned environmental services under the discipline of the pricesystem, because these are truly rival goods the use of which by oneperson imposes opportunity costs on others[2]. But for efficiency itmatters only that a price be charged for the resource, not who gets theprice. The necessary price or scarcity rent that we collect on newlyscarce environmental public goods (e.g. atmospheric absorptioncapacity, the electromagnetic spectrum) should be used to alleviatepoverty and finance the provision of other public goods. The modern form of the Georgist insightis to tax the resources and services of nature (those scarce thingsleft out of both the production function and GDP accounts) -- and touse these funds for fighting poverty and for financing public goods. Orwe could simply disburse to the general public the earnings from atrust fund created by these rents, as in the Alaska Permanent Fund,which is perhaps the best existing institutionalization of the Georgistprinciple. Taking away by taxation the value added by individuals fromapplying their own labor and capital creates resentment. Taxing awayvalue that no one added, scarcity rents on nature's contribution, doesnot create resentment. In fact, failing to tax away the scarcity rentsto nature and letting them accrue as unearned income to favoredindividuals has long been a primary source of resentment and socialconflict. The justice in the Georgist tradition grows out of the premise that oneis entitled to what one makes with one’s own hands or mind, but one isnot personally entitled to the gains that grow out of communal efforts.Those are owed to and should be returned to the community. The justiceinherent in ecological economics, to the extent that it has solidified,involves a recognition that preservation of natural capital is in theinterest of everyone. Both recognize and value the preservation of aworld commons in nature. Both appreciate the diversity preserved inlocal community institutions and cultures. Both accept models based onself-regulating assumptions — in one case using the phrase “steadystate” economics, in the other case the recovery of land rent in thepursuit of open and stable markets over monopoly control. There isgreat promise in the confluence of the two perspectives: they offer asolution to the age-old challenge of resolving what in the world oughtto be public and common, and what else ought to be individual andprivate. It remains now for proponents of each perspective to continueexploring commonalities.Alternatives that have been tried in the past, both classic capitalismand socialism, suggest that neither has served the interests ofhumanity well in the long term. Ecological economics has no theory ofproperty as such, and Georgism here offers a proven course ofapplication. To Georgists, ownership is linked to use and not tofreehold title. Holding individual property under license of thecommunity, and under terms which the community stipulates, is an ideawith a long tradition, well accepted, and needing only to be revived incontemporary political, legal and economic discourse. Combined with thepricing device of collecting land rent, ecological economics will havea tool by which to circumscribe and even reverse the centrifugal forcesof a new economic imperialism. This is truly the beginning of a “ThirdWay” when other theories seem to be moribund. H. William Batt, Ph.D., is apolitical scientist based in Albany, New York. Bill is a retireduniversity professor and former staff researcher to the New York StateLegislature. He is now consultant to governments on property taxes,transportation finance, and land use. He is also Executive Director ofThe Central Research Group, Inc., a non-profit grant-funded researchorganization specializing in public budgeting and finance in accordwith sound tax theory and sustainable development principles. |