Georgism

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Georgism or geoism is a political philosophy developed by American 19th century economist Henry George, the primary focus of which is the "Single Tax" on land values, also known as the Land Value Tax. There are many variations on this philosophy, but most would agree with the following central tenet:

  • Land was not created by humans and thus nobody can claim greater access rights than anyone else. Thus land of any kind should be treated as common property via a tax on the unimproved value of land, to prevent the kind of natural monopoly that comes with land ownership. Georgists advocate recapturing as close to the full rental value as possible.

This system is widely recognized to have the distinct advantage of eliminating all "dead-weight loss" that all other taxes create. Only land that has value is taxed, and taxed according to that value. It avoids the disincentives towards productive activity by untaxing improvements to land. However, the "unimproved land value" necessary for the tax is a contentious point indeed. The market value of a commodity which is taxed near 100% would most certainly collapse, so it is difficult to ascertain what its "real value" is, and separating the "improved land value" from the "unimproved land value" may be difficult.

It has been recognized since Adam Smith and David Ricardo that a tax on land value itself cannot be passed on to tenants, but instead would be paid for by the owners of the land:

"A tax upon ground-rents would not raise the rents of houses. It would fall altogether upon the owner of the ground-rent, who acts always as a monopolist, and exacts the greatest rent which can be got for the use of his ground."
- Adam Smith, Wealth of Nations
"A tax on rent would affect rent only; it would fall wholly on landlords, and could not be shifted to any class of consumers. The landlord could not raise his rent, because he would leave unaltered the difference between the produce obtained from the least productive land in cultivation, and that obtained from land of every quality."
- David Ricardo, On the Principles of Political Economy and Taxation

While some might wish to re-interpret the notion that all have an equal right to land in communistic terms, this would run rather antithetically to the firm free-market beliefs of Henry George himself. This confusion has existed since George's time, and he carried on public disagreements with Karl Marx.

[edit] Influence

Georgism has influenced a number of individuals, among whom included Chinese leader Sun Yat-sen and American industrialist Henry Ford.[1] He has also been cited in observations by many winners of the Nobel Prize in Economics, such as Milton Friedman, James Tobin, Joseph Stiglitz, William Vickrey, James Buchanan, and others.[2] There have also been a few political movements and parties in the last century aiming to implement a single-tax regime, and there still are a few crazy people who live in Georgist communities.[3]

Georgism proved to be an entry point for some into either Progressivism or Libertarianism, as many founders of both movements got their start as political activists as Georgists. George's views on land were egalitarian and appealed to those with a desire to alleviate the squalor of the working classes during the early Industrial Revolution, while his views on other matters were laissez-faire and free market oriented on the assumption that his land tax was all the government necessary; depending on which of George's views one took the ball and ran with, Georgism could be an entry point in either direction. Examples include John Dewey, one of the founders of the Progressive movement; and on the other hand, Albert Jay Nock, Frank Chodorov, and others associated with The Freeman magazine of the 1920s, which began as a Georgist publication but with some writers who later became known as libertarian icons.

Modern economic views on Georgism are almost non-existent. As Henry George developed a policy idea and did not contribute to the actual development of economic theory, he isn't considered incredibly important by economic theorists. Also, since his policy suggestions would actually be kind of impossible to implement, he isn't considered incredibly important by economic policymakers. However, there is still a small percentage of determined economics undergraduates searching for a silver-bullet economic policy who turn to Henry George, and indeed they will probably have edited this very paragraph by the time you read it.

[edit] Footnotes

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