by Gar Alperovitz and Lew Daly
Isaac Newton and Gottfried Wilhelm von Leibniz simultaneously invented calculus in the 1670′s. As Isaac Newton wrote, “If I have seen far, it is because I have stood on the shoulders of giants.” Charles Darwin mulled over the origin of species for 20 years until jolted into publication by the arrival of a manuscript from Alfred Russel Wallace.
Great geniuses and great entrepreneurs make the strongest possible case for outsize rewards based on merit. Yet as Alperovitz and Daly argue, these giants drew their ideas from society around them. And they were often very lucky. For almost any modern invention, there are several potential claimants — even if only one actually got the patents.
The authors review the writing of a long line of the economists and philosophers, starting with John Locke, Adam Smith, David Ricardo, John Stuart Mill and Henry George, through Thorstein Veblen, Edwin Cannan and Frank Knight to modern economists and philosophers including Robert Solow, John Rawls and Amartya Sen, as well as economic journalist David Warsh. From these, they develop three basic propositions: First, from Locke: that an individual has a right to that which he actually creates by his own unique efforts. Second, from Ricardo: the demonstration that unearned income–economic rent–is created not by individuals but by external forces. Third, from Mill and others: the judgment that such income should belong to society as a whole.
Alperovitz and Daly add their own original fourth proposition: the more advanced a society becomes, the more each of us depends not only on those around us but also on those who came before–and bequeathed to us their knowledge. Moreover, “this past buildup of knowledge should be treated as a common inheritance.” The wealthier our society becomes, the less any individual can rightfully claim a large share of the wealth. That makes our present growing inequality profoundly unjust.
Georgists will find this book a treasure trove of arguments and quotations from scholars, obscure and famous, expressing views similar to those of George. For example, in 1854, Scottish philosopher Patrick Edward Dove wrote that the “principle of allocating the rent to the community, instead of to individuals” would “secure to every laborer his share of the previous labors of the community.” And from George’s contemporary, Edward Bellamy, “All that a man produces today more than his cave dwelling ancestor he produces by virtue of the accumulated achievements inventions and improvements of the intervening generations together with the social and industrial machinery which is their legacy.”
According to George, wages depend upon the margin of cultivation, “the highest natural opportunities” open to labor. Drawing from George, John Bates Clark created his theory that factors of production receive their marginal product, wages for workers and interest for capital. (Clark merged land with capital.) But Clark turned the marginal product argument against George, claiming that workers in fact deserved what they were paid. Of course Clark ignored George’s central theme: that the margin in turn depends upon the distribution of land ownership. Alperovitz and Daly add a further rebuttal to Clark, citing a 1914 article by Walter Adriance, that Clark’s error lies in “not attributing to the cooperation of the rest of the group any part of the so-called ‘marginal product.’”
Alperovitz and Daly offer the usual liberal proposals for income and inheritance tax reforms, with which I don’t disagree. But although they identify economic rent as rightly belonging to society, and cite George several times, they suggest no direct strategies for collecting rent for public purposes. In fact, they even claim “skyrocketing” property taxes burden the middle class! If we really hope to take back our common inheritance, we must strengthen the property tax, which is our original wealth tax. And we must go after rent wherever it pops up–not just land titles, but oil leases, broadcast licenses, patents, bank charters, pollution “rights”, fishing quotas, even taxi medallions!
Reviewed by Polly Cleveland, Association for Georgist Studies