“Pop Quiz” Results and Analysis

popquizby Lindy Davies

The following quiz was handed out to participants at the Detroit conference We received 29 completed quizzes — not a bad turnout for such a heady exercise. The number of respondents who chose each answer is shown at left. Of course, reasonable people can — and do! — disagree, but I announced at the time that in my mind, at least, each question had a correct answer. I attempt to explain my thinking on that, below.

1. The Georgist paradigm languishes in obscurity because

(2) — most people are lazy, greedy and selfish.
(5) — it unpuzzles pervasive posers that powerful people would prefer us to ponder piecemeal.
(0) — Georgists have wasted resources on fruitless popular-education efforts.
(4) — Georgists refuse to make common cause with other reformers.
(11) — I reject the premise of this question! It is not obscure at all; it’s coming into its own.

This may seem just a matter of opinion, but I believe that the second reason is clearly the best explanation — and that offers us a hopeful insight for designing outreach strategies. One reason why it is difficult to find a receptive audience for Georgist ideas is that they are relevant to so many seemingly-different things! This implies that we need as broad and inclusive a strategy as we can think of.

Interesting that none of our respondents chose to blame our lack of traction on Georgist education efforts — a complaint that I’ve heard a few times (there’s a likely bias here, in that those who disdain education efforts might not have bothered to complete the quiz). Be that as it may, it’s a very good sign that a strong majority of respondents believe things are looking up!

2. “Entrepreneurship” is sometimes considered to be a factor of production because

(0) — risk-takers get a secret handshake and decoder ring.
(11) — entrepreneurs don’t get hired; they do the hiring.
(2) — the profit motive is what keeps us from devolving into a slacker/taker society.
(9) — people like Donald Trump want us to think they earn everything they get.

There is some logical inconsistency in the leading response here. After all, people are hired to do the hiring; that part of “entrepreneurship” is undeniably labor.

The key insight here is the final one: the writers who classify Entrepreneurship as a factor of production tend to be the same ones who report that land rent is only a tiny fraction of overall income; the figure of 2% is often used. Logic and evidence tell us that there is much, much more rent than that! Where does it all go? Economists launder it, placing it in the category of “Profits,” which are held to be the legitimately-earned rewards of entrepreneurial risk-taking. Georgists need to be prepared to handle this kind of doubletalk.

3. A research project to ascertain the actual amount of land rent in today’s economy

(16) — is doable. The data is there; we simply need to devote the resources.
(2) — is basically impossible with the data that is currently available.
(13) — would be extremely useful in promoting our cause.
(3) — would say little about the probable effects of the Georgist remedy.

The fact of the matter is that the data really isn’t there. The only country in the world that more-or-less keeps this data is Australia, due to that country’s tradition of land-value rating; this allowed Terry Dwyer to do his very important research on aggregate land values in Australia. Unfortunately, though, in the US, and in basically every other country in the world today, the data isn’t available. Michael Hudson made broad-brush estimates using National Income Statistics, but biases in the data forced him to make corrections that incorporated a significant amount of guesswork.

Critics wag an admonishing finger and ask, “Where’s your data?” But would any honest economist deny that deductive reasoning from sound first principles has a legitimate place in economic science?

That, however, is not the most important issue here. Georgists should turn back to Book IX of Progress and Poverty to rediscover the many strong reasons why, if a society were to implement the full Georgist remedy, its aggregate amount of rent would have little or no resemblance to the level of aggregate rent under current tax and financial systems.

So we have a choice to make, folks. We have a certain amount of resources to devote to building our movement. Should we spend them on 1) A research project, for which the evidence is dubious and controversial, which would in any case say little or nothing about the effects of the reform which the research supposedly supports; or 2) Redoubling our efforts to get across, through clear logic and understandable thought experiments, the probable effects of the Georgist remedy?

4. A citizens’ dividend

(2) — is the best talking point with which to introduce people to our ideas.
(13) — is an essential part of the Georgist remedy.
(4) — has made housing more affordable both in Alaska and in Norway.
(12) — comes into play with full implementation of the Georgist remedy, not in the beginning stages.

The CD is a really attractive idea. There is a huge perception out there that nobody would be hurt, and lots of people would be helped, if some of the One-Percent’s huge income were spread around equally. But is this an essential part of the Georgist remedy? We assert that the rent of natural opportunities rightfully belongs to the community. But how should the community decide how to use that wealth? We really cannot discuss the policy of direct payments to citizens without addressing the need for public revenue for other government functions. Some CD advocates seem to imply that all the rent would be redistributed to citizens, who would then contractually arrange for the infrastructure and services they deem necessary. Is this Ayn Rand-ian fantasy compatible with, or implied by, the Georgist remedy? If it isn’t, then we must consider what level of public services we are willing pay for, out of the rent fund, before we give out the remainder as a CD.

Furthermore, we need to realize that if private ownership of land remains in place (even if it is taxed a bit more than it is now), a CD, or “Negative Poll Tax,” would increase the amount that people are able to pay for land. A significant portion of the CD — probably the lion’s share of it — would be taken in higher rents. This is why the Citizen’s Dividend only makes sense as an endgame strategy.

5. Henry George’s discussion of the Margin of Production

(13) — is not denied or refuted by modern economic theory.
(2) — is a theoretical abstraction that has limited relevance in a modern economy.
(3) — fails to explain why most of today’s workers earn more than mere subsistence.
(11) — should not be a priority in Georgist outreach efforts.

These results puzzle me. Indeed the first choice is the correct one: the Margin of Production is obviously a valid concept. If it isn’t, then neither is the notion of opportunity cost. The Margin of Production, defined as the best self-employment opportunity for average laborers, plays a huge, undeniable role in the distribution of wealth. That is so obviously true that mainstream economics can’t afford to mention it; if it did, many of its most reliable obfuscations and lies would not hold up. So why, then, oh why, should it not be a priority in our outreach efforts? What point could we possibly be making that is more relevant or important than this?

6. Economic depressions begin when

(1) — something happens to kick them off: a different “last straw” each time.
(19) — labor and capital are crowded out by rising speculative land prices.
(12) — at the height of the speculative bubble, land values suddenly fall, leading to a drop in available credit.
(0) — The Fed raises interest rates, and/or the federal government raises taxes.

Our views on this seem to be evolving. Seven respondents chose both the second and third answer. The second, of course, is Henry George’s classic statement from Progress and Poverty. The third is the modern view, promulgated by Gaffney, Fordvary and Harrison, et.al., which takes the collateralization of land values into account. This is the analysis that has been shown to have predictive validity. It is important for Georgists to realize this, because if we don’t, we leave ourselves open to being rejected as crank adherents of an outmoded 19th-century theory. And it would be a shame if that happened, because, after all, Henry George’s main point is that land speculation is the basic cause of depressions — and the modern theoretical correction, which simply acknowledges the role of the financialization of land values, does no violence to that view!

7. The creation of money by private banks loaning it into existence

(9) — is the root of as much evil as private landownership is.
(6) — was deregulated, leading to the Great Crash of 2008.
(3) — as such, is an organic, market-based phenomenon.
(6) — was explicitly denounced by Henry George.

This fraught subject is discussed elsewhere in this issue, so we’ll just touch on it here. The correct answer is the least-chosen one. The “borrow short, lend long” behavior of banks was never mandated by any government, and it has gone on in many different historical periods and political systems. The imposition of reserve requirements is a recent addition, not dictated by natural law, but rather established by governments to establish a way to influence the supply of money.

It became fashionable after the Great Crash of 2008 to see “Banksters” as the villains — and without doubt, great crimes have been perpetrated by financiers in cahoots with the government. This is a loud, compelling narrative, but we mustn’t let it drown out the deeper truth about land monopoly.

8. Successful implementation of two-rate LVT reform in a city would

(19) — curb land speculation and stimulate new construction.
(7) — collect more rent for public revenue and therefore lower land prices.
(6) — lead to popular support for a further tax shift off of buildings and onto land.
(10) — grow, once established, whether people understood Georgist principles or not.

A strong majority got this right, thank goodness — though a fair number did tick all four answers. The second one is the problem (the fourth one is a bit iffy too). Some prominent Georgists assert, based on a strict reading of P&P, that if a city collects more land rent via taxation than before, there will be less rent to capitalize, and hence land prices will fall — but this, of course, ignores other dynamic factors. If the increased revenue from land is coupled with reduced taxes on buildings, buildings will be a more attractive investment. Demand for building sites — and thus land prices — will increase. The sensible next step from a Georgist point of view, then, would be to progressively increase the tax rate on land values. Were this not done, the city would risk enhancing the profits of land speculators and undoing the benefits of its initial LVT reform.

9. If society implemented the Single Tax, economic growth would accelerate. Therefore

(10) — cities would become more affordable places to live.
(2) — human society’s environmental footprint would get bigger and heavier.
(19) — sustainable growth would result, if all natural opportunities were included in the revenue base.
(6) — No, “growth,” as conventionally measured, would not accelerate. We’d need a new measure.

We’re in pretty good shape here. It seems to me that this point represents a clear — and under-appreciated — aspect of the Georgist philosophy. “The Sovereign Remedy” would organically channel development toward environmental sustainability, without having to resort to inefficient command-and-control environmental regulations. This would, however, most effectively happen under the broadest (and most correct) understanding of “economic land” as including ALL natural opportunities, including various sorts of ecosystem services. Polly Cleveland’s article “Sustainability Squared” is an excellent discussion of these implications.

10. Free trade

(6) — has qualitatively changed since the days of Adam Smith.
(1) — is ruinously unsafe, until the full Georgist remedy is in place.
(15) — tends to increase production, as does a stable monetary system and good infrastructure.
(5) — ought to be removed from the IU’s official name.

I breathe a strong sigh of relief here. Or I assume, at least, that free trade’s tendency to increase overall production makes it a good thing, like paved roads or cheap computers, not a bad thing, like window-smashing or ethnic strife. It is worth pointing out, though, that “free trade” can mean many things. Prior to the US Civil War, for example, the industrial North favored a protectionist policy, while the agrarian South was for free trade. The South’s labor market, however, was anything but free; its enslaved workers had no control over any economic decisions at all.

11. The Georgist/Geoist economic philosophy

(0) — will probably never be accepted by academia.
(14) — provides a way to return traditional wisdom
to modern society.
(9) — must be adapted to 21st-century realities.
(9) — is extremely difficult to get across to most people.

The leading answer gives me a big smile. This thought has stuck with me ever since I first read Henry George’s works. Is there any other way in which industrial society could reconcile itself with the ancient, unarguable truth that the land cannot be privately owned, any more than people can be bought and sold? Neoclassical economics and 20th-century politics tried to make us give up that “romantic notion” — but we never quite could. The Georgist/Geoist economic philosophy lets us know that we don’t have to; indeed, we must not. Twenty-first century sustainability depends on our understanding and practicing the truth that the Earth is the birthright of all.

However, I’m afraid those last two responses indicate some fuzzy thinking. It sounds reasonable to say that “Georgism” needs to adapt to modern realities, and if we’re inclined to believe every sacred word Henry George ever wrote, then of course, it does. However, important Georgist thinkers have put in the work to correct George’s minor errors. The basic insights of the Georgist philosophy are more important and more relevant than ever. We must avoid the temptation to change for the sake of change, or out of frustration.

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