From bostaph at udallas.edu Mon May 1 10:18:14 2006 From: bostaph at udallas.edu (Samuel Bostaph) Date: Mon May 1 11:53:15 2006 Subject: HES: Re: QUERY--Keynes on women, national accounts Message-ID: You can find that sort of statement in many principles textbooks. As George Reisman recently has pointed out, the statement is dead wrong if the implicit cost of sexual relations between spouses is added into GDP--as it should be, if it is also legitimate to include the implicit rent of owner-occupied housing. After all, only a relatively few men have sexual relations with their housekeepers, while a rather large percentage have sexual relations with their wives. The implicit cost of such relations is, of course, what a man would have to pay a prostitute for those same services. Because the rates of prostitutes far exceed those of housekeepers, if a man married his housekeeper GDP would go up. Sam Bostaph From rlipsey at sfu.ca Mon May 1 13:19:11 2006 From: rlipsey at sfu.ca (Richard Lipsey) Date: Mon May 1 13:45:14 2006 Subject: HES: Re: QUERY--Keynes on women, national accounts References: Message-ID: <008101c66d43$5f7f6a20$6501a8c0@richard> Sam Bostaph's quotation from George Reisman that the statement is "dead wrong if..." misses the point that Pigou and subsequent text book writers, including myself in several different text books, were making. This is that since GDP is meant to measure market transactions, non-market transaction, such as housewife's labour, are not included. Currently StatsCan has added a number of satellite accounts to the main National Accounts to cover many non-market transactions in which we are interested. But for many macro issues, such as studying inflation, unemployment, employment and exchange rates, it is precisely market transitions that are of interest. That is why most of these non-market transactions are kept to satellite accounts. (Of course there are some inconsistencies when imputed costs such as rent for owner occupied housing are included in the main accounts.) But in the National Accounts Advisory Committee of StatsCan we considered this non market issue at great length and consulted with the departments who use the accounts. The consensus was that the fewer non-market transaction included in the main accounts the better -- no matter how important they might be for other purposes, and how important it was to develop satellite accounts to measure them. Richard G. Lipsey From stillman at vassar.edu Mon May 1 13:02:47 2006 From: stillman at vassar.edu (Peter G. Stillman) Date: Mon May 1 13:45:46 2006 Subject: HES: Re: QUERY--Keynes on women, national accounts In-Reply-To: References: Message-ID: Sam Bostaph's statements about housekeepers, prostitutes, and GDP may well be good economics, but they do cause my eyes to roll, non-economist that I am. Peter G. Stillman From bostaph at udallas.edu Mon May 1 13:53:27 2006 From: bostaph at udallas.edu (Samuel Bostaph) Date: Mon May 1 14:09:54 2006 Subject: HES: Re: QUERY--Keynes on women, national accounts In-Reply-To: <008101c66d43$5f7f6a20$6501a8c0@richard> Message-ID: If Richard Lipsey is to be consistent, so that no one will somehow "miss the point," then all non-market transactions must be excluded from the NIA. Housewife's labor--whatever its form--and the imputed rent for owner-occupied housing must not be included. Of course, "consistency is the hobgoblin of little minds." Samuel Bostaph From rlipsey at sfu.ca Mon May 1 14:37:46 2006 From: rlipsey at sfu.ca (Richard Lipsey) Date: Mon May 1 15:36:33 2006 Subject: HES: Re: QUERY--Keynes on women, national accounts References: Message-ID: <00a201c66d4e$59477610$6501a8c0@richard> Complete consistency is the luxury of theorists. In practice, sadly, there are such things as history and path dependency. The early developers of the national accounts did not anticipate the vast almost of practical work that would be based on them. If we had it to do over again, we would do it differently. But as it is, we must live with history, and try to be as close as possible to what we NOW need. So the accounts measure mainly market transactions, but not (sadly) exclusively. We do not want to mix them up any further with non-market transactions and so use an elaborate set of satellite accounts to measure many other things that are of great interest. In any case, it is the decision of the National Accounts Division of Statistics Canada that I was referring to not mine--although what has been done is what I and others advised. Richard G. Lipsey From barretoh at wabash.edu Mon May 1 15:40:36 2006 From: barretoh at wabash.edu (Humberto Barreto) Date: Mon May 1 16:55:16 2006 Subject: HES: OBIT--John Kenneth Galbraith Message-ID: <5.1.1.6.2.20060501153837.01ff4590@wabash.edu> [Obituary in NYTimes posted by Humberto Barreto.] Economist John Kenneth Galbraith Dies By REUTERS Published: April 30, 2006 Filed at 4:08 p.m. ET BOSTON (Reuters) - John Kenneth Galbraith, an influential liberal economist, best-selling author and former presidential advisor, died on Saturday. He was 97. A Harvard professor emeritus and advisor to presidents Bill Clinton, John F. Kennedy and Lyndon Johnson, Galbraith died at Mount Auburn Hospital in Cambridge, Massachusetts, where was admitted two weeks ago, his biographer said. ``He had been in failing physical health for several years but his mind was incredibly alert right up until the last couple of months,'' Harvard economist and biographer Richard Parker, who was with Galbraith when he died, told Reuters. The Canadian-born economist, one of the towering economic thinkers of the century, often found himself at odds with the mainstream ideas of the day but delighted in his stubborn defense of principle. A lifelong Democrat, Galbraith saw the widening gap between the richest and the poorest as a threat to economic stability and a ``moral crime,'' said Parker, author of ``John Kenneth Galbraith : His Life, His Politics, His Economics.'' Galbraith's best-selling work, ``The Affluent Society,'' published in 1958, advocated large government investment in parks, transportation, education and other public amenities to narrow disparities between rich and poor. ``John Kenneth Galbraith was a brilliant economist and writer and a great friend of the United Kingdom and his books will be widely read in generations to come,'' British Finance Minister Gordon Brown told Reuters. An early opponent of the Vietnam War and outspoken critic of supply-side economics which dominated the 1980s, Galbraith taught for more than a half a century at Harvard University where few colleagues -- with the marked exception of Henry Kissinger -- had as much influence on American policy. He was heavily influenced by British economist John Maynard Keynes, who advocated government spending to reduce unemployment. Galbraith, who often described himself as an ''evangelical Keynesian,'' supported a much shorter work week, the women's liberation movement and an international council to help the victims of man-made disasters. COMPLEX THEORY A lanky giant who stood 6 feet 8 inches and often stooped before audiences, Galbraith had a rare ability to reduce complex economic theory to a level understood by the man in the street. After the Dow Jones Industrial Average's 1,500 point climb to break the 6,500 mark in November 1996, Galbraith remarked to Reuters: ``There is too much money chasing too little intelligence to manage it. It can't last.'' Galbraith remained a proponent of traditional Democratic ideals even as they came to appear shrill and out of step. ``Consigning the least fortunate of our people to the neglect and despair that a purely individualist society prescribes ... is not, I submit, a sound conservative strategy,'' he said in his 1986 book, ``A View from the Stands.'' John Kenneth Galbraith was born October 15, 1908, on a farm in Ontario, Canada. He received a science degree from the University of Toronto in 1931 and three years later earned a doctorate in economics at the University of California. His life at Harvard began as a tutor in 1934 but three years later he moved to Cambridge University, England, on a fellowship. Galbraith married the former Catherine Atwater in 1937 -- the same year that he became a U.S. citizen. They had three sons. His wife and two of his sons were by his side when he died, said Parker. He taught economics at Princeton University in 1939 and 1940 and in 1941 joined the Office of Price Controls. Later, Galbraith said, his office had started with no price controls and by 1943 almost every price was under control. In 1949 Galbraith received his appointment as an economics professor at Harvard. He was a close friend and early supporter of President Kennedy, who named him ambassador to India from 1961 to 1963, the only years he did not spend at Harvard. Galbraith also wrote speeches for two other Democratic candidates for the presidency, the late Adlai Stevenson in 1952 and 1956, and Sen. George McGovern in 1972. From tangora at uic.edu Mon May 1 17:25:25 2006 From: tangora at uic.edu (Martin C. Tangora) Date: Mon May 1 17:27:09 2006 Subject: HES: Re: QUERY--Keynes on women, national accounts In-Reply-To: References: <008101c66d43$5f7f6a20$6501a8c0@richard> Message-ID: <6.2.1.2.2.20060501162328.01ffbb90@mailserv.uic.edu> Samuel Bostaph wrote: >... Of course, "consistency is the hobgoblin of little minds." No, that was "A foolish consistency ... " So you are seriously mis-quoting (Emerson, in "Self-reliance"). I made the same mistake myself once, and got reprimanded similarly. Martin C. Tangora From econfusion at gmail.com Tue May 2 03:24:22 2006 From: econfusion at gmail.com (Benjamin Kahn) Date: Tue May 2 08:14:43 2006 Subject: HES: Re: QUERY--Keynes on women, national accounts In-Reply-To: <6.2.1.2.2.20060501162328.01ffbb90@mailserv.uic.edu> References: <008101c66d43$5f7f6a20$6501a8c0@richard> <6.2.1.2.2.20060501162328.01ffbb90@mailserv.uic.edu> Message-ID: <154335f20605020024g2702d4aeme28cfe599e2cd3e2@mail.gmail.com> One comment for Samuel Bostaph and a question for Richard Lipsey: On the note that Sam Bostaph makes about GDP increasing when a man marries his housekeeper, I wonder why you treat marriage as simply the addition of sexual favours into the equation of a relationship between man and woman, and that only from the male perspective... You forgot to mention that the housekeeper as a result of marriage loses her wage, or maybe her 'allowance' goes up, but by now, this is simply two people spending the same income, and not an employer and employee earning (and paying taxes) out of two incomes. Of course the fun begins when you ask what the woman is willing to pay for sex? (Why should the man pay, and the woman receive?) and more widely what are the new dynamics of the relationship... (Does the husband do housework now? Will there be a new maid?) - the argument put forward seems very narrow. More technically, If the housekeeper forfeits her salary, 'GDP' would be lower from a as we would account 'income' by tax records, and there would be fewer of those (that being said, rarely is the accounts actually estimated with income tax accounts). I guess one could argue that the two people still have the same income together and spend it together, so presumably effective demand, or the consumption in the economy should stay the same - so GDP would not move anywhere... Why GDP would rise, I fail to comprehend. My question for Richard Lipsey is this: I agree that the National Income Accounts have a history and have developed in a certain path, and you say "If we had it to do over again, we would do it differently." - so very simply, what would you do differently? Regards Benjamin Hav Kahn From rosserjb at jmu.edu Mon May 1 17:34:36 2006 From: rosserjb at jmu.edu (Barkley Rosser) Date: Tue May 2 08:18:30 2006 Subject: HES: Re: DISC--The challenge of teaching history of economic thought References: <4453B627.8080104@stlawu.edu> Message-ID: <003401c66d67$0b9a2bb0$a15b7e86@F1127> [On "John Keynes" in the cartoon at http://images.ucomics.com/comics/prc/2006/prc060429.gif HB] Except of course, Keynes always went by "Maynard," not "John." There was a similar situation with Galbraith, who always went by "Ken." Once a president of Havard, Nathan Marsh Pusey, called him, "John." Afterwards he always called Pusey, "Marsh." BTW, I am also someone who has the first name "John," but goes by my middle name, "Barkley." Increasingly with computerized listings I find myself called "John." When I once complained when entering a hospital, the woman in all seriousness told me, "well, you should just get your name changed legally to switch them around." J. Barkley Rosser, Jr. From dmackenz_2000 at yahoo.com Tue May 2 08:45:15 2006 From: dmackenz_2000 at yahoo.com (Doug Mackenzie) Date: Tue May 2 09:29:42 2006 Subject: HES: Re: QUERY--Statues in socialist calculation debate In-Reply-To: Message-ID: <20060502124515.12998.qmail@web32607.mail.mud.yahoo.com> Mat, I do not think that Don Lavoie ever wrote that Lange should have a statue in a stock exchange. I have read Rivalry and Central planning carefully and Lavoie wrote nothing like that there. I read his other book more quickly, but did not notice any such thing. I also took Don's class the last time he taught it, and he had nothing nice to say about Lange or any of the market socialists. Don had a high opinion of Marx. He was also quite clear that he thought that Lange and the other market socialists had no clue about economic calculation. I have suggested that there should be a statue to Lange in the NYSE and the Chicago Board of Trade. The full quote is- "As an expression of recognition for this service statues of Professor Lange ought to occupy honorable places in the New York Stock exchange and the Chicago Board of Trade." This is from a footnote in a paper I have under review, where I argue that Lange stumbled into agreeing with Mises. I can send you a copy. Doug MacKenzie --- "Forstater, Mathew" wrote: > ----------------- HES POSTING ----------------- > > I seem to recall that someone like Fred Taylor or > Lange once wrote > during the debate over "socialist calculation" that > there should be a > statue of Mises put up in front of the Ministry of > Planning. Does > anyone have the exact reference? Also, I believe > that someone (Don > Lavoie?) on the Austrian side later may have written > that a statue of > Lange(?) or someone should be erected in front of > the....what (stock > exchange?)? Can anyone point me to that citation? > > Thanks in advance! > > Mathew Forstater > > ----------------- FOOTER TO HES POSTING > ----------------- > HES@eh.net > http://eh.net/mailman/listinfo/hes > __________________________________________________ Do You Yahoo!? Tired of spam? Yahoo! Mail has the best spam protection around http://mail.yahoo.com From bostaph at udallas.edu Tue May 2 10:50:59 2006 From: bostaph at udallas.edu (Samuel Bostaph) Date: Tue May 2 11:43:05 2006 Subject: HES: Re: QUERY--Keynes on women, national accounts Message-ID: Thanks, I'll remember to maintain only wise consistencies--and not to misquote Emerson again. Sam Bostaph From bostaph at udallas.edu Tue May 2 11:03:02 2006 From: bostaph at udallas.edu (Samuel Bostaph) Date: Tue May 2 11:44:37 2006 Subject: HES: Re: QUERY--Keynes on women, national accounts In-Reply-To: <154335f20605020024g2702d4aeme28cfe599e2cd3e2@mail.gmail.com> Message-ID: I definitely agree that we should assume that they pay each other. Of course, there is also the cooking, childcare, chauffeuring, nannying, teaching the kids (if any), amusing each other and so on. If we stretch our imaginations enough, we can make GDP many times higher than it is now for every country. Of course, there is the nagging little question of "after we calculate it, what is GDP good for anyway?" Samuel Bostaph From rlipsey at sfu.ca Tue May 2 10:41:10 2006 From: rlipsey at sfu.ca (Richard G. Lipsey) Date: Tue May 2 11:45:02 2006 Subject: HES: Re: QUERY--Keynes on women, national accounts References: <008101c66d43$5f7f6a20$6501a8c0@richard> <6.2.1.2.2.20060501162328.01ffbb90@mailserv.uic.edu> <154335f20605020024g2702d4aeme28cfe599e2cd3e2@mail.gmail.com> Message-ID: <007401c6b642$ac87b730$1c02a8c0@DICK> In reply to Benjamin Khan: As I said in my first comment on this subject, GDP and related concepts are used by governments and private research agencies to study such macro variables as inflation, employment., unemployment and exchange rates. For these purposes, economic theory and evidence tells us that it is market transactions that matter. If, e.g., unpaid workers work more, ceteris paribus, this will not add to inflationary pressure. But if paid workers work more, earning more income which they spend, this will add to inflationary pressure. So if we had it to do again, we would have a measure that was restricted to the money value (in current and constant dollars) of transactions that flow through markets, removing e.g., imputed rents for owner occupied housing. Then we would have, as we do now in many cases, a series of satellite accounts than measure other things in which we are interested, such as the market value of household work (not easy to estimate as some of the exchanges on this topic illustrate), environmental degradation, resource depletion, etc But for most things the departments of finance and of industry do (whatever they are called in various countries), it is the money value of transactions that flow through markets that is the relevant variable. It is essentialist to ask: What is "the" best measure of national income? What one needs to ask is: What is one interested in? and then design a measure that best gets at that. GDP tells us the value of what goes through markets. Other measures are much better at judging national "welfare" or living standards and many text books, including my own, make that point in detail with illustrations such as 'home heating is provided free in hot countries and so in not included in the GDP (but does contribute to living standards), while it is costly in cold countries and so is included in the GDP". Richard G. Lipsey From ForstaterM at umkc.edu Tue May 2 12:09:11 2006 From: ForstaterM at umkc.edu (Forstater, Mathew) Date: Tue May 2 13:26:55 2006 Subject: HES: Re: QUERY--Statues in socialist calculation debate Message-ID: Doug et al. - Well, I have not been able to find the quote yet, either, so maybe Don Lavoie did not write it. I also was not sure it was Lange, but it seemed that it was a quip that more or less was written in the same spirit as Lange's about Mises. It could have been in an article. Well, at least I know if I made the whole thing up, I can quote your article! Please send me a copy at forstaterm@umkc.edu - but in the meantime, I am going to try to find the one I was talking about. Mathew Forstater From vorst2 at cc.umanitoba.ca Tue May 2 13:33:41 2006 From: vorst2 at cc.umanitoba.ca (Jesse Vorst) Date: Tue May 2 14:31:54 2006 Subject: HES: Re: QUERY--Keynes on women, national accounts In-Reply-To: <007401c6b642$ac87b730$1c02a8c0@DICK> References: <008101c66d43$5f7f6a20$6501a8c0@richard> <6.2.1.2.2.20060501162328.01ffbb90@mailserv.uic.edu> <154335f20605020024g2702d4aeme28cfe599e2cd3e2@mail.gmail.com> <007401c6b642$ac87b730$1c02a8c0@DICK> Message-ID: Richard Lipsey writes: > >In reply to Benjamin Khan: As I said in my first comment on this subject, >GDP and related concepts are used by governments and private research >agencies to study such macro variables as inflation, employment., >unemployment and exchange rates. For these purposes, economic theory and >evidence tells us that it is market transactions that matter. If, e.g., >unpaid workers work more, ceteris paribus, this will not add to inflationary >pressure. But if paid workers work more, earning more income which they >spend, this will add to inflationary pressure. Three points: (i) The criterion "that matter" is a function of the use made of the evidence. When we are interested in the availability of goods and services, their being produced in the non-market sector is not necessarily relevant. (ii) If paid workers work more and, thus, produce more, there is no need for any inflationary pressure as long as they do not try, ceteris paribus, to purchase more than their additional contribution to output. (iii) As the writing of economic history teaches us, market-based estimates of standards of living are unreliable when much of production is home-consumed, communally allocated without charge, or merely appropriated by extortion (military or criminal). All three were dominant for all but the last few centuries. Until recently, a great portion of home consumption on the Israeli kibbutz was provided according to need and without charge. I recall discussing with an Israeli economist a few years ago the problem of GDP calculation in those old days and the procedural adjustment to be made in the modern era when market exchange has become quite common within such communities. Jesse Vorst From james.ahiakpor at csueastbay.edu Tue May 2 14:41:26 2006 From: james.ahiakpor at csueastbay.edu (James C.W. Ahiakpor) Date: Tue May 2 15:12:13 2006 Subject: HES: Re: QUERY--Keynes on women, national accounts In-Reply-To: <007401c6b642$ac87b730$1c02a8c0@DICK> References: <008101c66d43$5f7f6a20$6501a8c0@richard> <6.2.1.2.2.20060501162328.01ffbb90@mailserv.uic.edu> <154335f20605020024g2702d4aeme28cfe599e2cd3e2@mail.gmail.com> <007401c6b642$ac87b730$1c02a8c0@DICK> Message-ID: <4457A7D6.60006@csueastbay.edu> Richard G. Lipsey wrote: "if paid workers work more, earning more income which they spend, this will add to inflationary pressure." I don't understand this. If inflation is the rate of growth of the price level (weighted average of all prices), why does the spending of more income earned from producing more constitute "an inflationary pressure"? Perhaps I have been confused by J.S. Mill's eloquent explanation that "What constitutes the means of payment for commodities is simply commodities. Each person's means of paying for the productions of other people consist of those which he himself possesses. All sellers are inevitably, and by the meaning of the word, buyers. Could we suddenly double the productive powers of the country, we should double the supply of commodities in every market; but we should, by the same stroke, double the purchasing power. Everybody would bring a double demand as well as supply; everybody would be able to buy twice as much, because everybody would have twice as much to offer in exchange." The price level does not rise (or the value of money fall) in this explanation. James Ahiakpor From ntheocar at econ.uoa.gr Wed May 3 06:23:11 2006 From: ntheocar at econ.uoa.gr (Nicholas J. Theocarakis) Date: Wed May 3 07:28:23 2006 Subject: HES: Re: DISC--The challenge of teaching history of economic thought References: <4453B627.8080104@stlawu.edu> <003401c66d67$0b9a2bb0$a15b7e86@F1127> Message-ID: <026e01c66e9b$975fc4e0$780a820a@njt.com> I am certain that they had John KEENES in mind. The worst offender in this respect is the name of Thomas Robert Malthus. Almost all textbooks outside HET refer to "Thomas Malthus". BTW, you should have offered to the petty hospital bureaucrat Eliot's Book of Cats. Their three names would have humbled the digital Procrustes. Nicholas J. Theocarakis From shahs at stjohns.edu Tue May 2 17:43:49 2006 From: shahs at stjohns.edu (Sumitra Shah) Date: Wed May 3 07:29:53 2006 Subject: HES: Re: QUERY--Keynes on women, national accounts References: <008101c66d43$5f7f6a20$6501a8c0@richard><6.2.1.2.2.20060501162328.01ffbb90@mailserv.uic.edu> <154335f20605020024g2702d4aeme28cfe599e2cd3e2@mail.gmail.com> Message-ID: Benjamin Kahn said: >You forgot to mention that the >housekeeper as a result of marriage loses her wage, or maybe her 'allowance' >goes up, but by now, this is simply two people spending the same income, and >not an employer and employee earning (and paying taxes) out of two incomes. >I guess one could argue that the two people still have the same income >together and spend it together, so presumably effective demand, or the >consumption in the economy should stay the same - In monetary value it may remain the same, but there may be substantive difference in the family dynamic. If the wife decides now to be a housewife, her economic independence will be a thing of the past. That does not necessarily mean that she will not be able to spend the same amount of money, but she is definitely in a vulnerable position of being left by her husband for a younger thing to seek sexual favors from. More seriously, being economically dependent works to women's disadvantage in subtle and obvious ways. John Stuart Mill equated their economic independence with true equality between the sexes and it happens to be so even in today's "companionate" marriages. Studies show a strong correlation between women's economic dependence and increased domestic violence. Perhaps bringing the value of household production in the national accounts (from the satellite accounts) will be a starting point in devising national policies for, say, childcare and eldercare. A reasonably accurate measure of household production can be used to make a claim for a more generous expenditures on both, if women choose to work in the marketplace. Their paid work with support for the caring activities will raise both the GDP and economic welfare. And if they choose to be homemakers, the publicly determined and acknowledged monetary value of their production will improve their bargaining position within the family. Conflating housework and prostitution seems like a distraction; witty, but a distraction nonetheless. The former is generally accepted as productive of consumption goods and to which values can be imputed relatively easily. The fact that some homemakers really enjoy working for their families should not preclude us from valuing it, any more than the fact that some professors really enjoy teaching does not stop us from considering their whole income as part of GDP. The second (sex and prostitution) runs into all kinds of conceptual problems mentioned by Benjamin Kahn, as to who is to receive it, how much and all the rest. Sumitra Shah From ksg at telusplanet.net Wed May 3 10:34:39 2006 From: ksg at telusplanet.net (Ken Gordon) Date: Wed May 3 11:08:22 2006 Subject: HES: Re: QUERY--Keynes on women, national accounts In-Reply-To: References: Message-ID: Samuel Bostaph wrote: > The implicit cost of such relations is, > of course, what a man would have to pay a prostitute for those same > services. The GDP, of course, measures value added. Sex, at least in the form discussed here, involves two people each of whom has an imputed input cost paid to the other. The value added by the transaction is zero. Ken Gordon From bostaph at udallas.edu Wed May 3 11:21:17 2006 From: bostaph at udallas.edu (Samuel Bostaph) Date: Wed May 3 15:21:24 2006 Subject: HES: Re: QUERY--Keynes on women, national accounts In-Reply-To: Message-ID: Ken Gordon wrote: >The GDP, of course, measures value added. Sex, at least in the form >discussed here, involves two people each of whom has an imputed input >cost paid to the other. The value added by the transaction is zero. You might profit from reading George Reisman. "The Value of 'Final Products' Counts Only Itself," The American Journal of Economics and Sociology, Vol.63, No. 3(July 2004). Samuel Bostaph From rlipsey at sfu.ca Wed May 3 21:12:30 2006 From: rlipsey at sfu.ca (Richard Lipsey) Date: Thu May 4 08:03:30 2006 Subject: HES: Re: QUERY--Keynes on women, national accounts References: <008101c66d43$5f7f6a20$6501a8c0@richard> <6.2.1.2.2.20060501162328.01ffbb90@mailserv.uic.edu> <154335f20605020024g2702d4aeme28cfe599e2cd3e2@mail.gmail.com> <007401c6b642$ac87b730$1c02a8c0@DICK> <4457A7D6.60006@csueastbay.edu> Message-ID: <010001c66f17$d7417500$6501a8c0@richard> To answer James Ahaikpor: I am sorry if my elliptical expression "inflationary pressure" was confusing. I did not want to go in detail into a first year lecture but here is a bit more detail that now seems called for. If more income is earned and spent, that adds to aggregate demand (or as Keynes would have put it Aggregate Consumption Expenditure). That has a potential effect on both employment and the price level. How the effect is divided between the two will depend on where the economy is in relation to its potential (or full employment) income/output,.or as some text books put it will, where the economy is on its aggregate supply curve . The key point is that if there is an increase in paid employment, there will be effects operating through increased market demand while if there is an increase in unpaid employment, ceteris paribus, there will be no such effects -- which is why, if we are interested in such macro variables as employment and the price level, we want to measure only monetary transactions. Richard G. Lipsey From stillman at vassar.edu Wed May 3 21:27:30 2006 From: stillman at vassar.edu (Peter G. Stillman) Date: Thu May 4 08:07:02 2006 Subject: HES: DISC--Methodology and Model Choice In-Reply-To: References: Message-ID: Ken Gordon wrote: >Samuel Bostaph wrote: >> The implicit cost of such relations is, >>of course, what a man would have to pay a prostitute for those same >>services. > > >The GDP, of course, measures value added. Sex, at least in the form >discussed here, involves two people each of whom has an imputed >input cost paid to the other. The value added by the transaction is >zero. > To be serious for a minute, and not just be subject to eye-rolling: isn't this precisely where economics as a serious science displays that it fails -- because, if you want to measure true GDP and need to deal with imputed costs, you as an economist don't know whether to use the prostitute model, the reciprocal model, or the giglio model to impute the costs -- and you can't, unless you study the norms and customs and behaviors of society or, perhaps, of all the individuals in the society. And the problem with sex is only the example that makes obvious that other economists' uses of indirect indicators or theoretical assumptions simply has no assurance of accuracy. (The sex discussion goes back to Becker's sexism, or non-sexism, or arbitrary assumptions, as was discussed on this list a while ago.) (And, as I said in an earlier post, this is a non-economist speaking -- a non-economist who is a political theorist and so inevitably interested in economic issues.) Peter G. Stillman From james.ahiakpor at csueastbay.edu Thu May 4 01:06:47 2006 From: james.ahiakpor at csueastbay.edu (James Ahiakpor) Date: Thu May 4 08:07:29 2006 Subject: HES: Re: QUERY--Keynes on women, national accounts In-Reply-To: References: <008101c66d43$5f7f6a20$6501a8c0@richard> <6.2.1.2.2.20060501162328.01ffbb90@mailserv.uic.edu> <154335f20605020024g2702d4aeme28cfe599e2cd3e2@mail.gmail.com> Message-ID: <44598BE7.6070009@csueastbay.edu> Sumitra Shah wrote: "Perhaps bringing the value of household production in the national accounts (from the satellite accounts) will be a starting point in devising national policies for, say, childcare and eldercare. A reasonably accurate measure of household production can be used to make a claim for a more generous expenditures on both, if women choose to work in the marketplace." It seems to me that the care of children is (and should be) the responsibility of their parents. And the care of the elderly is (and should be) the responsibility of adults to prepare for during their working age (or perhaps their children in some kind of reciprocity for their having been cared for in their growing-up years). Why is there a need for "devising national policies" for such cares, let alone making "a claim for a more generous expenditures on both"? Is any of these cares a "public good"? Second, given the differences in individual (subjective) valuations of goods and services produced or consumed, whom would the computed values of home production be expected to satisfy? I thought economists long learned to avoid engaging in interpersonal comparisons of worth, values, or utilities. James Ahiakpor From james.ahiakpor at csueastbay.edu Thu May 4 15:42:36 2006 From: james.ahiakpor at csueastbay.edu (James C.W. Ahiakpor) Date: Thu May 4 16:56:54 2006 Subject: HES: Re: QUERY--Keynes on women, national accounts In-Reply-To: <010001c66f17$d7417500$6501a8c0@richard> References: <008101c66d43$5f7f6a20$6501a8c0@richard> <6.2.1.2.2.20060501162328.01ffbb90@mailserv.uic.edu> <154335f20605020024g2702d4aeme28cfe599e2cd3e2@mail.gmail.com> <007401c6b642$ac87b730$1c02a8c0@DICK> <4457A7D6.60006@csueastbay.edu> <010001c66f17$d7417500$6501a8c0@richard> Message-ID: <445A592C.7060902@csueastbay.edu> I'm glad that Richard Lipsey has responded with his explanation:"I am sorry if my elliptical expression 'inflationary pressure' was confusing. I did not want to go in detail into a first year lecture but here is a bit more detail that now seems called for. If more income is earned and spent, that adds to aggregate demand (or as Keynes would have put it Aggregate Consumption Expenditure)." I questioned Lipsey's claim that people earning more income and spending it constitutes an "inflationary pressure" with the quote from J.S. Mill to force a confrontation with the Keynesian mythology that people spending their own incomes produce inflation. It is not only in first year macroeconomics textbooks that this myth is taught. It exists in upper level texts as well. What the Mill quotation explains is that before the so-called aggregate demand shifts to the right, supposedly to raise the price level, the aggregate supply curve must have shifted to the right as well. People earn income from producing goods and/or services. There are two causes of the aggregate demand curve shifting to the right without first an increase in supply (income). They are (1) an increase in the quantity of money (currency) and (2) a decrease in the demand for money (currency) to hold. Without an increase in the quantity of money, an increase in production and income must reduce the price level: note that P = H/ky, where P = the price level, H = quantity of (high-powered) money, k = proportion of income held as cash, and y = real output or income. Thus, it is quite misleading to talk about inflationary pressures without mentioning changes in the quantity of money (currency) or its demand by the public. The fact that we need monetary transactions to estimate the GDP is irrelevant to this point. Keynes (1936) gave us the explanation Lipsey has repeated because he couldn't make much meaning of the classical quantity theory of money as an explanation of the price level. Keynes (1936, 18), indeed, quoted the Mill explanation I cited but misinterpreted it. I'm still hopeful that those who have been teaching the Keynesian confusions would be willing to reexamine them in light of subsequent criticism. James Ahiakpor From shahs at stjohns.edu Thu May 4 18:57:08 2006 From: shahs at stjohns.edu (Sumitra Shah) Date: Fri May 5 07:58:58 2006 Subject: HES: Re: QUERY--Keynes on women, national accounts References: <008101c66d43$5f7f6a20$6501a8c0@richard><6.2.1.2.2.20060501162328.01ffbb90@mailserv.uic.edu><154335f20605020024g2702d4aeme28cfe599e2cd3e2@mail.gmail.com> <44598BE7.6070009@csueastbay.edu> Message-ID: Quoting James Ahiakpor : It seems to me that the care of children is (and should be) the responsibility of their parents. And the care of the elderly is (and should be) the responsibility of adults to prepare for during their working age (or perhaps their children in some kind of reciprocity for their having been cared for in their growing-up years). Why is there a need for "devising national policies" for such cares, let alone making "a claim for a more generous expenditures on both"? Is any of these cares a "public good"? I apologize if this takes us far afield from HET, but I don't believe so. This is related closely to the development of economics as the social science which de-emphasized social institutions. Perhaps it is apropos as we read the Galbraith obituaries. The care of children is the responsibility of their parents, of course. But since the reality is that we have many two-worker families, either by necessity or choice, then we can improve on the current system by making it more feasible for parents to find affordable childcare. The well-off can always find good care for their offspring, but the poor and working class parents find it either beyond their means or low quality. Why isn't this a public good somewhat analogous to public education? A better management through the public sector will improve total economic welfare. It will improve worker productivity; make for more secure future of children (the future labor force); and give harried parents some release time to participate in community affairs (better economic citizens?). Let me go back to the reality (by necessity or choice). If it is a necessity, a strong case can be made for devoting some social resources to something as important as the welfare of our children. If it is by choice, I would make the economic argument that having women in the workplace increases the quantity of labor and also its quality by broadening the skilled labor pool. The education levels of women have steadily increased, even vis-à-vis men. If affordable childcare is an obstacle for many of them in working outside the home, then lowering it will make for greater social utility. In the final analysis, whether we consider it a public good, semi-public good or purely private good depends on our institutional culture. Scandinavian countries treat it as the former and one can devise policies more suitable to the specific situations. I believe similar arguments can be made about eldercare where innovations in combining personal and public responsibility can be fruitful. "Second, given the differences in individual (subjective) valuations of goods and services produced or consumed, whom would the computed values of home production be expected to satisfy? I thought economists long learned to avoid engaging in interpersonal comparisons of worth, values, or utilities." For starters, it would satisfy the people engaged in such production. Economists have avoided making interpersonal comparisons of utility by adhering to some implicit assumptions. I offer two not unrelated arguments. One comes from feminist economists. In her essay, "The Separative Self: Androcentric Biases in Neoclassical Assumptions", in Beyond the Economic Man, (1993), Paula England writes: "The assumption that interpersonal utility comparisons are impossible flows from assuming a separative self. To see how this is true, imagine that we started by assuming the sort of emotional connection that facilitates empathy. Such empathy would facilitate making interpersonal utility comparisons, since being able to imagine how someone feels in a given situation implies the possibility of translating between one's own and another person's metric for utility.... if we assume instead that individuals can make interpersonal utility comparisons , then surely we would conclude that as scholars we, too, are capable of making such comparisons. These comparisons would provide information about the relative advantage and disadvantage of individuals under study. We then would view such comparisons as practical measurement problems (analogous to 'shadow prices') rather than as impossible in principle", p. 42. I will end by invoking Adam Smith's ideas about sympathy and the impartial spectator. To quote Keith Tribe in "Adam Smith: Critical Theorist", JEL (June 1999): The Smithian conception of self-interest is not an injunction to to act egotistically and without scruple, safe in the knowledge that by doing so the public good would somehow or other result; it is embedded within a framework of social reciprocity that allows for the formation of moral judgment", p. 269. The social institutions and norms do change and so our analyses should be capable of incorporating those in our frameworks. This post is far too long, both by choice and necessity. But I will resist the temptation in future! Sumitra Shah From R.E.Backhouse at bham.ac.uk Fri May 5 04:16:16 2006 From: R.E.Backhouse at bham.ac.uk (Roger Backhouse) Date: Fri May 5 08:01:52 2006 Subject: HES: ANN--INEM Registration Message-ID: <200605050916.17001.R.E.Backhouse@bham.ac.uk> INEM Registration This year the INEM Conference will be held on the Thursday and Friday before the HES at Grinnell. In case there are HES members who wish to attend, registration information follows. Apologies to those who will get this email two or three times through being in INEM and subscribing to the HES list. The INEM registration page is now up. Sorry it has been so long - there was an email failure at one point, and it was up without my knowing about it. You have the option to register online, by mail or fax. There is a range of packages available (perhaps too much choice!) so as to cater for various travel arrangements, and for those who are and are not staying for HES. If you have problems, the people at Grinnell seem very friendly and helpful. HES begins on Friday evening, and I have arranged that people coming just for INEM, but who want to leave Saturday morning rather than Friday evening, can come to dinner on Friday evening, whch is an HES event. If you are coming for both conferences, please make sure that you do NOT book the Friday dinner twice over. The programme is not up yet, but I hope to have a draft ready in the next few days. Crucial information is that we start around 2 p.m. on Thursday and will be finished by 5 or 6pm on Friday. This is so that people living in the mid-West, or anyone wanting to stay over in Chicago or Minneapolis, can travel to Grinnell on Thursday morning. Others will prefer to arrive Wednesday, and use Thursday morning to relax or read papers. The conference web pages are at http://web.grinnell.edu/dean/inem2006/home.asp >From here there is a link to the registration page. Note that you have a choice of accommodation. I have been told that the dorm accommodation is good. I have just noticed that the preferential rates on the hotels are till April 30, but I will inquire about whether that has been extended. If there are people who are not presenting a paper, but who are coming and would like to be a discussant or Chair a session, please let me know as soon as possible. Roger Backhouse From gunning at mail.knu.ac.kr Thu May 4 20:30:21 2006 From: gunning at mail.knu.ac.kr (Pat) Date: Fri May 5 08:02:43 2006 Subject: HES: DISC--Money, Prices and Unemployment In-Reply-To: <445A592C.7060902@csueastbay.edu> References: <008101c66d43$5f7f6a20$6501a8c0@richard> <6.2.1.2.2.20060501162328.01ffbb90@mailserv.uic.edu> <154335f20605020024g2702d4aeme28cfe599e2cd3e2@mail.gmail.com> <007401c6b642$ac87b730$1c02a8c0@DICK> <4457A7D6.60006@csueastbay.edu> <010001c66f17$d7417500$6501a8c0@richard> <445A592C.7060902@csueastbay.edu> Message-ID: <445A9C9D.2000008@mail.knu.ac.kr> With regard to the Lipsey-Ahiakpor exchange, Richard, I believe, is making the logically (or mathematically) correct point that, with unemployment, an exogenous increase in the quantity of money which causes a subsequent increase in aggregate demand need not cause an increase in prices. It depends on whether there are idle resources. James, I think, makes one crucial point about aggregate demand -- that it might result from something besides an increase in money. (Supply creates its own demand?) At least other point needs to be made. It is that the idle resources might also be the result of some factor that mitigates the causal sequence that Richard describes. Perhaps we should be reminded of the final lesson of the Phillips Curve episode in the history of thought. It is that the psychological factors that make a government policy appear desirable on the basis of statistical analysis may change. More specifically, the entrepreneurial errors made by workers (the money illusion) got corrected and a strategy that worked for a time to achieve its objectives became not only ineffective but detrimental. You can fool some of the people some of the time... http://en.wikipedia.org/wiki/Phillips_Curve Pat Gunning From james.ahiakpor at csueastbay.edu Fri May 5 12:09:43 2006 From: james.ahiakpor at csueastbay.edu (James C.W. Ahiakpor) Date: Fri May 5 17:03:32 2006 Subject: HES: Re: DISC--Money, Prices and Unemployment In-Reply-To: <445A9C9D.2000008@mail.knu.ac.kr> References: <008101c66d43$5f7f6a20$6501a8c0@richard> <6.2.1.2.2.20060501162328.01ffbb90@mailserv.uic.edu> <154335f20605020024g2702d4aeme28cfe599e2cd3e2@mail.gmail.com> <007401c6b642$ac87b730$1c02a8c0@DICK> <4457A7D6.60006@csueastbay.edu> <010001c66f17$d7417500$6501a8c0@richard> <445A592C.7060902@csueastbay.edu> <445A9C9D.2000008@mail.knu.ac.kr> Message-ID: <445B78C7.2030901@csueastbay.edu> Pat Gunning still clings to the Keynesian myth that the state of unemployment has anything to do with whether changes in the supply of money (H = currency) relative to its demand affect the price level. Thus, he writes: "Richard, I believe, is making the logically (or mathematically) correct point that, with unemployment, an exogenous increase in the quantity of money which causes a subsequent increase in aggregate demand need not cause an increase in prices. It depends on whether there are idle resources." In the first place, the claim is not mathematically correct. Verify that from the price level equation: P = H/ky. (By the way, Lipsey didn't mention the quantity of money in his posts. He talked about increases in nominal income.) Second, look around the world. Is it only in countries where there is "full employment" that increases in the quantity of money are associated with increases in prices? All the data I have seen show otherwise. It's about time we gave up on the Keynesian myth, I repeat. James Ahiakpor From BATEMAN at Grinnell.EDU Fri May 5 18:01:11 2006 From: BATEMAN at Grinnell.EDU (Bateman, Bradley) Date: Sun May 7 10:04:45 2006 Subject: HES: ANN--Mark Perlman Message-ID: <31203C7AFA7CC446BA0CB988F5504520019221DB@email.grinnell.edu> It is with great sadness that I announce to the members of this list that Mark Perlman, past president and Distinguished Fellow of the History of Economics Society, died of pancreatic cancer on Wednesday 3 May. Bradley W. Bateman From james.ahiakpor at csueastbay.edu Fri May 5 18:03:34 2006 From: james.ahiakpor at csueastbay.edu (James C.W. Ahiakpor) Date: Sun May 7 10:09:22 2006 Subject: HES: Re: QUERY--Keynes on women, national accounts In-Reply-To: References: <008101c66d43$5f7f6a20$6501a8c0@richard> <6.2.1.2.2.20060501162328.01ffbb90@mailserv.uic.edu> <154335f20605020024g2702d4aeme28cfe599e2cd3e2@mail.gmail.com> <44598BE7.6070009@csueastbay.edu> Message-ID: <445BCBB6.1000503@csueastbay.edu> I was hoping with my questions to motivate Sumitra Shah to rethink her position regarding childcare, eldercare, and the usefulness of attempting to impute values to home production. Her response shows that I failed. Let me restate the conclusions to which I was trying to direct her. First, neither childcare nor eldercare qualify as public goods, properly defined. We have two criteria (in economics) for them, namely (a) joint consumption -- vertical addition of individual demand curves -- and (b) difficulty of excluding from their consumption those who would not pay. An excellent example of a public good is thus national defense. "Public [school] education" does not qualify either. Besides, childcare and eldercare are services produced by those who employ their capitals (funds devoted to earning profits) and labor in such enterprises. Unless they received enough compensation for their services, they would be inclined to direct their capitals and labor elsewhere. Talking about making such services "affordable" does not get at the economics of the situation; much too imaginary. Besides, for the government to subsidize their consumption, taxes must be raised to pay for them. And taxes have their opportunity costs in terms of those things that do not get produced as a result. On interpersonal comparisons, I think only those who do not recognize the degree of presumption involved would be inclined to think that they can feel exactly what someone else feels. The adage, beauty is in the eyes of the beholder is quite apt, in this regard. Adam Smith's use of empathy as a *moderator* of individual actions (in public) must not be confused with this. In fact, Smith also warns in the Wealth of Nation against the folly and presumption (Hayek would call conceit) of law givers to direct the use or investments of other people's property, employing precisely this point. In Smith's own words: "What is the species of domestic industry which his capital can employ, and of which the produce is likely to be of the greatest value, every individual, it is evident, can, in his local situation, judge much better than any statesman or lawgiver can do for him. The statesman, who should attempt to direct private people in what manner they ought to employ their capitals, would not only load himself with a most unnecessary attention, but assume an authority which could safely be trusted, not only to no single person, but to no counsel or senate whatever, and which would nowhere be so dangerous as in the hands of a man who had folly and presumption enough to fancy himself fit to exercise it." This is miles away from Shah's view that "A better management through the public sector will improve total economic welfare," I submit. Voluntary exchange or laissez faire is thus a better guarantor of the overall betterment of the public than government management of otherwise private resources. Long before he wrote the Wealth of Nations, Smith also argued: "Little else is requisite to carry a state to the highest degree of opulence from the lowest barbarism but peace, easy taxes, and a tolerable administration of justice: all the rest being brought about by the natural course of things." Would that we paid careful attention to his views rather than attempt to extract from Smith that which he opposed. James Ahiakpor From k.d.bruce at aston.ac.uk Sun May 7 16:48:01 2006 From: k.d.bruce at aston.ac.uk (Kyle Bruce) Date: Sun May 7 17:18:10 2006 Subject: HES: QUERY--Veblen on non-economic goals and embeddedness Message-ID: Dear Colleagues I am looking for some quick passages in Veblen's work where he discusses non-economic goals (e.g. conspicuous consumption) and perhaps also the social/cultural embeddedness of agents (less obvious maybe?). My guess is that much of what currently goes under the guise of economic sociology can be found in Veblen and I need some "ammunition" against my sociologist friends and foes. Any pointers (e.g. chapters or page numbers in text) would be greatly appreciated. Kyle Bruce From shahs at stjohns.edu Sun May 7 22:21:04 2006 From: shahs at stjohns.edu (Sumitra Shah) Date: Mon May 8 08:05:09 2006 Subject: HES: Re: QUERY--Keynes on women, national accounts References: <008101c66d43$5f7f6a20$6501a8c0@richard><6.2.1.2.2.20060501162328.01ffbb90@mailserv.uic.edu><154335f20605020024g2702d4aeme28cfe599e2cd3e2@mail.gmail.com><44598BE7.6070009@csueastbay.edu> <445BCBB6.1000503@csueastbay.edu> Message-ID: James Ahiakpor wrote: "I was hoping with my questions to motivate Sumitra Shah to rethink her position regarding childcare, eldercare, and the usefulness of attempting to impute values to home production. Her response shows that I failed. Let me restate the conclusions to which I was trying to direct her." I thank James for his dispassionate post. But he is right, I was not persuaded to rethink my positions he mentioned. To the definition of "purely" public goods I would add externalities to expand the concept to a generally acceptable level. Please refer to any introductory textbook where education is mentioned as a quasi-public goods along with some others due to their positive spillover benefits. Taxes have their opportunity costs, but as a society we make public choices about which benefits overweigh the costs. Economists can help in making the cost-benefit analysis. Adam Smith's stand on the need for public education for the workers because of the mind- numbing effects of the division of labor is well-known. In his famous passage he says: "The man whose whole life is spent in performing a few simple operations,....He naturally loses, therefore, the habit of such exertion, and generally becomes as stupid and ignorant as it is possible for a human creature to be." Smith concludes the passage: "But in every improved and civilized society this is the state into which the laboring poor, that is, the great body of the people, must necessarily fall, unless government takes some pains to prevent it." I am not minimizing Smith's emphasis on martial virtues (and thus on national defense) as an important motive in recommending public education, but on balance it seems like more expansive a moral sentiment to me. Smith was pessimistic about the future of capitalism whose virtues he extolled. Would his pessimism have been tempered knowing that it evolved and adjusted sometimes in ways he did not foresee? In the final analysis, James and I will have to agree to respectfully disagree. That is not a bad thing among economists... Sumitra Shah From angner at uab.edu Sun May 7 17:54:29 2006 From: angner at uab.edu (Erik Angner) Date: Mon May 8 08:11:01 2006 Subject: HES: ANN--Mark Perlman In-Reply-To: <78C320BBEFD0894282F180FA42353F12051717FC@mailsv01.colgate.edu> Message-ID: On behalf of Morgan Marietta : > > The family of Mark Perlman has asked me to communicate the sad news of his > death and the arrangements for his services to his colleagues and friends. > This is a great loss for us all, both personally and for the world of ideas. > He was the model of a professor for me, and I know he served an inspiring role > for many others. He was an implacable fixture in a world too ready to adapt > to lower expectations. With that fixture gone we are all lessened. As Al > Roth mentioned at his 80th birthday celebration, as well as studying > institutions he had himself become one. > > > > His funeral will take place on Tuesday, May 9th at 10:00 a.m. at the Schugar > Funeral Chapel, 5509 Centre Ave in Shadyside. Visitation will begin at 9:00. > > > > Graveside services and his internment will be at Beth Moses Cemetery in > Farmingdale, New York on Wednesday at 10:30. > > > > A memorial service will be held later this summer when many friends and > colleagues will be able to gather from farther distances to commemorate his > life and works. For those interested in speaking or writing for the memorial > we will be in touch about the plans in the near future. You can reach his > daughter Abby at 508 868-8242 or awilliams@medical-law.com, and myself at 412 > 422-0919. > > > > > > Morgan Marietta > > > > From b.mosselmans at roac.nl Mon May 8 04:21:14 2006 From: b.mosselmans at roac.nl (Bert Mosselmans) Date: Mon May 8 08:12:39 2006 Subject: HES: RE: QUERY--Veblen on non-economic goals and embeddedness References: Message-ID: <4D6229681FF43B4A99E6458CEE5A627B0A9A5F@GANDALF.ra.shire> Chapter IV of the Theory of the Leisure Class is all about conspicuous consumption. There are many instances where Veblen discusses the social/cultural embeddedness, including this one: As wealth accumulates, the leisure class develops further in function and structure, and there arises a differentiation within the class. There is a more or less elaborate system of rank and grades. This differentiation is furthered by the inheritance of wealth and the consequent inheritance of gentility. With the inheritance of gentility goes the inheritance of obligatory leisure; and gentility of a sufficient potency to entail a life of leisure may be inherited without the complement of wealth required to maintain a dignified leisure. Gentle blood may be transmitted without goods enough to afford a reputably free consumption at one's ease. Hence results a class of impecunious gentlemen of leisure, incidentally referred to already. These half-caste gentlemen of leisure fall into a system of hierarchical gradations. Those who stand near the higher and the highest grades of the wealthy leisure class, in point of birth, or in point of wealth, or both, outrank the remoterborn and the pecuniarily weaker. These lower grades, especially the impecunious, or marginal, gentlemen of leisure, affiliate themselves by a system of dependence or fealty to the great ones; by so doing they gain an increment of repute, or of the means with which to lead a life of leisure, from their patron. They become his courtiers or retainers, servants; and being fed and countenanced by their patron they are indices of his rank and vicarious consumers of his superfluous wealth. Many of these affiliated gentlemen of leisure are at the same time lesser men of substance in their own right; so that some of them are scarcely at all, others only partially, to be rated as vicarious consumers. So many of them, however, as make up the retainers and hangers-on of the patron may be classed as vicarious consumers without qualification. Many of these again, and also many of the other aristocracy of less degree, have in turn attached to their persons a more or less comprehensive group of vicarious consumers in the persons of their wives and children, their servants, retainers, etc. Bert Mosselmans From r.j.sandilands at strath.ac.uk Mon May 8 06:28:44 2006 From: r.j.sandilands at strath.ac.uk (Roger Sandilands) Date: Mon May 8 08:16:25 2006 Subject: HES: RVW--Krugman's NYT review of David Warsh's Wealth of Nations Message-ID: David Warsh's new book, Knowledge and the Wealth of Nations, is hailed by its publishers thus: Like James Gleick's Chaos or Brian Greene's The Elegant Universe, [it] takes us to the frontlines of scientific research; not since Robert Heilbroner's classic work The Worldly Philosophers have we had as attractive a glimpse of the essential science of economics. Paul Krugman, in yesterday's New York Times, hails it as a major effort to explain to the public the intellectual revolution of new growth theory and new trade theory, and how that revolution resolves the "contradiction that has lain at the heart of economic theory ever since 1776... the struggle between the Pin Factory and the Invisible Hand". (www.nytimes.com/2006/05/07/books/review/07krugman.html) But it is evident from Krugman's review that he still has not grasped the deep import of Allyn Young famous paper on "Increasing Returns and Economic Progress" (EJ, 1928, in http://socserv2.mcmaster.ca/~econ/ugcm/3ll3/young/increas.html). Instead, he and most of modern endogenous growth theory (and new trade theory) interpret Adam Smith in terms of the size of the individual firm or the individual industry rather than the size of the overall economy. As Young wrote (1928, p.531): "... Otherwise, economists of standing could not have suggested that increasing returns may be altogether illusory, or have maintained that where they are present they must lead to monopoly. The first point is that the principal economies which manifest themselves in increasing returns are the economies of capitalistic or roundabout methods of production. These economies, again, are largely identical with the economies of the division of labour in its most important modern forms. In fact, these economies lie under our eyes, but we may miss them if we try to make of _large-scale_ production (in the sense of production by large firms or large industries), as contrasted with _large_ production, any more than an incident in the general process by which increasing returns are secured and if accordingly we look to much at the individual firm or even... at the individual industry. The second point is that the economies of roundabout methods, even more than the economies of other forms of the division of labour, depend upon the extent of the market-and that, of course, is why we discuss them under the head of increasing returns. It would hardly be necessary to stress this point, if it were not that the economies of large-scale operations and of "mass-production" are often referred to as though they could be had for the taking, by means of a "rational" reorganisation of industry." Krugman, Paul Romer etc (and now Warsh) seem to think that the pin factory suggests an incompatibility with competition. They congratulate themselves on having escaped the "mush" of old economics to develop rigorous mathematical models incorporating monopolistic competition and external economies -- such as arise from investment in human capital and R&D -- to justify protectionist government intervention to deal with "market failure". Let them instead ponder Allyn Young on the division of labour and size of the (free) market: "In an inclusive view, considering the market not as an outlet for the products of a particular industry, and therefore external to that industry, but as the outlet for goods in general, the size of the market is determined and defined by the volume of production. If this statement needs any qualification, it is that the conception of a market in this inclusive sense -- an aggregate of productive activities, tied together by trade -- carries with it the notion that there must be some sort of balance, that different productive activities must be proportioned one to another. Modified, then, in the light of this broader conception of the market, Adam Smith's dictum amounts to the theorem that the division of labour depends in large part upon the division of labour. This is more than mere tautology. It means, if I read its significance rightly, that the counterforces which are continually defeating the forces which make for economic equilibrium are more pervasive and more deeply rooted in the constitution of the modern economic system than we commonly realise. Not only new or adventitious elements, coming in from the outside, but elements which are permanent characteristics of the ways in which goods are produced make continuously for change. Every important advance in the organisation of production, regardless of whether it is based upon anything which, in a narrow or technical sense, would be called a new "invention," or involves a fresh application of the fruits of scientific progress to industry, alters the conditions of industrial activity and initiates responses elsewhere in the industrial structure which in turn have a further unsettling effect. Thus change becomes progressive and propagates itself in a cumulative way." Smithian increasing returns are thus macroeconomic (or "generalised"), not microeconomic nor even sectoral, and ensure that growth is truly endogenous in the sense that a main cause of growth is growth itself, through a progressive, induced division and specialisation of qualitatively different industries and firms as and when the overall size of the market justifies it. And, unlike modern endogenous growth theory that simply extends the neoclassical growth framework, it indicates why growth can be largely self-sustaining rather than self-exhausting. To see this, compare the following: Buchanan, J.M. and Y.J. Yoon (1999), Generalised Increasing Returns, Euler's Theorem, and Competitive Equilibrium, _History of Political Economy_, 31(3), 511-23. Buchanan, J.M. and Y.J. Yoon (2000), A Smithean Perspective on Increasing Returns, _Journal of the History of Economic Thought_, 22(1), 43-8. Currie, L. (1997), Implications of an Endogenous Theory of Growth in Allyn Young's Macroeconomic Concept of Increasing Returns, _History of Political Economy_, 29(3), 413-43. Sandilands, R.J. (2000), Perspectives on Allyn Young in Theories of Endogenous Growth, _Journal of the History of Economic Thought_, 22(3), 309-28. Roger Sandilands From eh.net-review at eh.net Mon May 8 09:41:08 2006 From: eh.net-review at eh.net (eh.net-review@eh.net) Date: Mon May 8 10:25:16 2006 Subject: HES: RVW--Hautcoeur on Smith, _The Emergence of Modern Business Enterprise in France, 1800-1930_ Message-ID: ------------ EH.NET BOOK REVIEW -------------- Published by EH.NET (May 2006) Michael Stephen Smith, _The Emergence of Modern Business Enterprise in France, 1800-1930 _. Cambridge, MA: Harvard University Press, 2005. x + 575 pp. $60 (hardcover), ISBN: 0-674-01939-3. Reviewed for EH.NET by Pierre-Cyrille Hautcoeur, Ecole des Hautes Etudes en Sciences Sociales. Michael S. Smith, associate professor of history at the University of North Carolina, proposes a synthesis on the emergence of big business in France in the tradition of Alfred Chandler. The book "seeks to explain how and why France acquired the roster of large corporate enterprises that would come to dominate France's domestic economy and project French economic influence throughout Europe and the world over the course of the twentieth century" (p. 1). It "argues that the same forces that were giving rise to a new kind of very large, very complex business organization in the United States, Germany, and Great Britain between 1880 and 1930 were also at work in France" (p. 2), contrary to the idea of a special or a backward path for French economic development. The book is well written and structured, revealing an exceptional knowledge of a large historiography and a capacity to organize it in a simple and mostly convincing narrative. It is also well presented, with minor typographical errors (usually in references to French names or publications, e.g. note 6, p. 501). The index includes all personal and firms names mentioned in the main text (not including the notes), as well as some analytical categories. The book is divided into three parts and sixteen chapters, plus an introduction and a conclusion. Part one deals in less than one hundred pages with commerce, banking and transportation, in three chronological chapters (1800-1840s; 1850s-1870s; 1870s-1900s), with no discussion of the twentieth century. Part two deals in two hundred pages with "the flowering of industrial capitalism." It starts with seven chapters on particular industries (textiles, coal, iron and steel, "hardware, machinery and construction," consumer goods, chemicals, "glass, paper and print"). It ends with a transversal chapter on "the new world of industrial capitalism" that deals with problems common to many industries and not dealt with elsewhere. Part three analyzes in 160 pages the second industrial revolution and the beginnings of managerial capitalism, from 1880 onward. It includes four "industry based" chapters on the steel, electrical, automobile and "chemicals and materials" industries, and ends with a transversal chapter on "the new world of managerial capitalism." In order to make visible the method followed by the author, I will discuss a few chapters in more detail. After an introduction in which the author presents a well-balanced (although not always up-to-date) synthesis on the "foundations for modern capitalism" before 1800, the first chapter centers on merchant capitalism, which it studies on a local basis and on an individual basis more than in terms of formal organization. It then follows the traditional historiography, sometimes missing the most recent works (even if it would be more consistent with its overall thesis, e.g., J.P. Hirsch, C. Lemercier). The role of the Haute-banque is presented in the conventional way. Chapter two describes the interrelated revolutions in banking and transportation, which were grounded in Saint-Simonian ideas and networks during the Second Empire. The chapter clearly shows the role of the relationship between the government and these networks in these changes. It does not discuss the conventional wisdom, nor look at the organizational consequences of these relationships (government administrations were structured, not only business ones). The organization of the railroads is not really discussed, except for its "grande politique" dimensions. The internal organization of the banks is not discussed either, and the concept of a financial system is not introduced. Chapter eight presents the chemical industry. Like most industry-based chapters, it is mostly organized as a succession of firms' histories in relation with the invention of new products and processes, but says almost nothing of firm or market organization. Technological innovation seems the only important way to success, and its origins are not much discussed. The transversal chapter 11 discusses three major themes: how industrial enterprises were financed, how they recruited and managed their labor force, and how they managed their external environment, especially the state. Finance and accounting practices are briefly described, but they are not analyzed as strategic choices and/or major explanations with responsibility for the varying success of firms or industries. The main conclusion is "the normality of the French industrial experience -- that is, its similarity to the British experience" (p. 303) in finance, accounting and labor relations. As concerns the management of the external environment, the author concentrates on three subjects: tariff policy, competition policy and railroad policy (network subsidies and rate regulation). The precise organization of business and the instruments of its intervention in policymaking or in policy application (industry-level or local-level organizations, such as the chambers of commerce) is not examined (except, briefly, for the iron and steel, chemical and textiles industries, mostly in terms of restriction to competition). In the view of this reviewer, this chapter is too brief and comes too late in comparison with its strategic importance in understanding the rise of big business as a major economic phenomenon. The third part focuses on those few industries in which French firms underwent a true Chandlerian revolution from the point of view of the author. Chapters on iron and steel, the electrical, automobile and chemical industries show how concentration, both through vertical and horizontal integration, allowed for the creation of important and complex organizations (although the internal organization is always treated only briefly). One important question is whether the factors behind the smaller size of French firms had an impact on their efficiency and their ability to develop all the economies of scale and scope favored by Chandlerian business historians. These factors certainly included market sharing (in iron and steel), interlocking directorates and participation, and family firms' preoccupation with secrecy and family control, all elements mentioned by the author but without providing a satisfactory answer to the above question. Like chapter 11, chapter 16 has a crucial role and could well have been extended beyond its twenty pages. It discusses the creation of complex organizational structures, the growing role of professional managers and the new challenges in corporate policies that made them necessary. After a rapid presentation of the railroad's pioneering role in organization, it presents the changes in management in industrial firms. It describes examples of divisional organization as early as the late nineteenth century, and emphasizes rightly the importance of holding structures from the 1920s onwards. It mostly insists on the rise of engineers as the main managers of French industrial firms, but discusses little their education, their efficiency, or the importance for their management style or their links with public administration. Overall, it suggests that new techniques of management or organization (including assembly lines) were already well developed in France prior to World War II. The conclusion describes briefly the evolution of French big business in the second half of the twentieth century. As a whole, the book gives a quite complete picture of French big (mostly manufacturing) firms in the nineteenth and early twentieth centuries. It reflects the many and important developments in the recent historiography of French business, and also its shortcomings, which explain most of the quibbles mentioned above. Nevertheless, the reader (especially if he is an economic and not a business historian) could have expected something more. Although in the prologue, the author presents a short survey of (English-speaking) macroeconomic interpretations of French development, he is not really in a position to discuss the views expressed at the macroeconomic level. Some assertions such as "firm-level research demonstrated that French industry was more expansive and technologically advanced ... than once thought" (p. 4), or "by the end of the nineteenth century, the activities [of the big firms] had become the focal point of economic life in France" (p. 324), suffer from a methodological bias, since the overall importance of big business in the economy is neither discussed nor compared to that in other countries. The book focuses on firms, not economic development, with an ambiguity since the only reason to discuss French firms separately is their link with French economic development. Bringing in more data comparing big firms with macroeconomic data (which exist at the industry level at least for the period after 1890) could have helped solve that problem. A short discussion of industries where big firms did not develop -- and why -- would also have been useful. A second, related quibble: the international position of French firms is mentioned but little discussed, even though some of them had major international operations. If "it is with an eye to France's eventual success in the late twentieth century that this book tells the story of the modernization of French business" (p. 5), one cannot but point out to the author that today's big firms make most of their business abroad (not only by exports, but also by producing abroad), so much so that their impact on the French economy is sometimes questioned. A third point, related to the two previous ones: the book is not very quantitative. It deals with a great number of firms, but provides little quantified comparisons among them (which could give way to typologies, for example) or between them and the rest of the economy or their foreign equivalents. The few tables (eight for the entire book, no figures) list the biggest firms in a given industry at a particular date; only the last two give some international comparison, and they provide few elements of comparison (total assets in general). Fourth point: the relationship between French firms and the state is discussed in the very first chapters for the early nineteenth century, and somewhat in chapter 11, but almost never thereafter, although discussions of nationalization are widespread in the interwar period. The relationships between government and big business people or organizational practices are worth more discussion. The role of governments regulations (major in the 1930s), but also of semi-public bodies such as the chambers of commerce (important during the all period), is under-appreciated. (Actually neither the Code de commerce, nor the chambers of commerce, the commercial courts, nor the commerce minister appear in the index, even if some of them occasionally appear in the text.) In conclusion, the book is a very useful synthesis for American students or scholars (French readers will find it strange that the discussion centers only on English-language historiographical debates, even if they are mostly based on French scholarship), more than an original contribution to our knowledge. Pierre-Cyrille Hautcoeur is Professor of Economic History, Ecole des Hautes Etudes en Sciences Sociales and Research Fellow, Paris Jourdan Sciences Economiques (PSE) (joint research unit, CNRS-EHESS-ENPC-ENS). He specializes in monetary and financial history. His recent publications include "Efficiency, Competition and the Development of Life Insurance in France (1870-1939); or: Why Some People Don't Trust Pension Funds," _Explorations in Economic History_ 41 (2004): 205-32; "Was the Great War a Watershed? The Economics of World War One in France," in S. Broadberry and M. Harrisson, editors, _The Economics of World War One_ (2005); and "Why Didn't France Follow the British Stabilization after World War One?" (with M. Bordo), NBER Working Paper 9860, forthcoming in the _European Review of Economic History_. Copyright (c) 2006 by EH.Net. All rights reserved. This work may be copied for non-profit educational uses if proper credit is given to the author and the list. For other permission, please contact the EH.Net Administrator (administrator@eh.net; Telephone: 513-529-2229). Published by EH.Net (May 2006). All EH.Net reviews are archived at http://www.eh.net/BookReview -------------- FOOTER TO EH.NET BOOK REVIEW -------------- EH.Net-Review mailing list EH.Net-Review@eh.net http://eh.net/mailman/listinfo/eh.net-review From dteira at usal.es Tue May 9 06:39:02 2006 From: dteira at usal.es (David Teira) Date: Tue May 9 07:52:33 2006 Subject: HES: ANN--New Philosophy of the Social Sciences Message-ID: <44607146.60600@usal.es> IX Urrutia Elejalde Summer School on Economics and Philosophy (2006) NEW PHILOSOPHY OF THE SOCIAL SCIENCES San Sebastian (Spain), July 10th-13th (2006) The goal of this Summer School is to present and discuss recent issues and approaches currently under discussion in the vast field of the philosophy of all social sciences -though, according to the tradition of this event, special attention will be paid to economics. SPEAKERS: J. Francisco Alvarez, Patrick Baert, Christina Bicchieri, Alain Bouvier, Nancy Cartwright, Jeroen van Bouwel, Ian Jarvie, Francesco Guala, A. Moreno Bergareche, Julian Reiss, Ignacio S�nchez-Cuenca, David Teira, Petri Ylikoski, J. Zamora. CONTRIBUTED PAPERS BY: Sabine A. Doering, Till Gr�ne-Yanoff, Tilman Hertz, Floris Heukelom, Frank Hindriks, Caterina Marchionni, Alessio Moneta, Juan V. Mayoral, Armando Men�ndez Viso, Michiru Nagatsu, Menno Rol, Hauke Riesch, Ana Santos, Paul Sheehy, Obdulia Torres. 3. Registration and grants: The organization offers a limited number of grants to cover registration fees and/or accommodation expenses. For further information visit: http://www.urrutiaelejalde.org/SummerSchool/2006.html David Teira From dteira at usal.es Tue May 9 08:01:20 2006 From: dteira at usal.es (David Teira) Date: Tue May 9 09:02:01 2006 Subject: HES: ANN--Economics and Language Message-ID: <44608490.4030800@usal.es> Economics and Language A workshop organized by the the Urrutia Elejalde Foundation at the Universidad Nacional de Educacion a Distancia Madrid, June 15-17 (2006) Coordinators: Ariel Rubinstein (Tel Aviv University) & Jesus Zamora Bonilla (UNED) Can economists contribute to the study of language? Very often philosophers have questioned that instrumental rationality could account for the rational structure underlying our natural languages. Most linguists have simply ignored the economic approach. After the publication of Ariel Rubinstein's Economics and Language (CUP, 2000) there seems to be an opportunity to bridge all these gaps. Speakers: Ariel Rubinstein (Tel Aviv), J. F. Alvarez (Madrid), Andreas Blume (Pittsburgh) Bruce Chapman (Toronto), Gerhard J�ger (Bielefeld), Fabi�n Muniesa (Paris), Robert van Rooij (Amsterdam) Contributed papers by: Asuncion Alvarez, David Austen-Smith +Timothy J. Feddersen, Manuel Bagues, Anton Benz, N. Goldschmidt + B. Szmrecsanyi, T. Honkela + V. Kononen + T. Lindh-Knuutila + M.S. Paukkeri, Kris De Jaegher, Maria Jimenez Buedo, Andrew Jorgensen, Raul Lopez-Perez, Ittay Nissan, Christina Pawlowitsch, Miguel Santa Olalla, Morgane Tanv�. Registration is free. For more information: http://www.urrutiaelejalde.org/WinterWorkshop/2006.html David Teira From zappia at unisi.it Tue May 9 12:40:51 2006 From: zappia at unisi.it (Carlo Zappia) Date: Tue May 9 16:39:05 2006 Subject: HES: ANN -- "General equilibrium for intellectual historians" Message-ID: <4460C613.4050401@unisi.it> The last issue of Storia del Pensiero Economico N.S. includes the written version of Frank Hahn's talk at the first Siena Meeting in the History of Economic Thought, a meeting preparatory to the foundation of the European Society for the History of Economic Thought. The conference was held at the Certosa of Pontignano near Siena, Italy, on September 15-16, 1995. Hahn's talk, titled "General Equilibrium for Intellectual Historians," dealt with the historical origin and contemporary significance of general equilibrium. Although the substance of his thesis was already familiar to those acquainted with his writings, the candid and straightforward way in which he addressed an audience including many intellectual historians sparked a lively discussion. In particular Donald Winch commented that, in spite of Hahn's effort to provide a more elaborate view of Adam Smith than that presented in his classic article "Reflections on the Invisible Hand," Hahn's interpretation was still one-sided. A revised version of Winch's talk at the Siena meeting was published in the Scottish Journal of Political Economy two years later, but Hahn's talk remained unpublished. On the occasion of Frank Hahn's 80th birthday, which was celebrated at Churchill College, Cambridge, in May 2005, it seemed appropriate to ask Frank Hahn permission to publish the written version of the talk, and to introduce it by an interview on the current state of economic theory. The interview, conducted in January 2005, is reproduced at the following web-site, intended to honour Frank Hahn: http://www.econ-pol.unisi.it/hahn/welcome.htm Carlo Zappia From eh.net-review at eh.net Thu May 11 21:25:19 2006 From: eh.net-review at eh.net (eh.net-review@eh.net) Date: Fri May 12 08:48:18 2006 Subject: HES: RVW--Classic Review: Saito on Smith, _The Agrarian Origins of Modern Japan_ Message-ID: ------------ EH.NET BOOK REVIEW -------------- Classic Reviews in Economic History Thomas C. Smith, _The Agrarian Origins of Modern Japan_. Stanford: Stanford University Press, 1959. xi + 250 pp. Review Essay by Osamu Saito, Institute of Economic Research, Hitotsubashi University. A Peasant Economy and the Growth of the Market In the 1950s, when the late Professor Thomas Smith wrote this book, peasant farming was portrayed as a mode of production and livelihood incompatible with the market economy. Japan before Meiji was regarded as a typical example of such peasant economies. As Smith notes in the opening sentence of the book, this was to some extent true because "In the course of its long history, Japanese agriculture has in some respects changed remarkably little": farming was a family enterprise, holdings tiny and fragmented, and cultivation methods simple -- all features of a typical peasant society. Of course, there were some changes but they were never as dramatic as the agrarian changes the West experienced, so that for many scholars "it is tempting to dismiss as unimportant such changes as in fact have taken place." Against this historiographical background, Smith argues in the book that the changes that actually took place in Japanese history, especially in the Tokugawa period (1603-1868), were in fact of great importance. His argument is that "their central feature was a shift from cooperative to individual farming" and that "if one of its causes may be singled out as especially important, it must be the _growth of the market_" (pp. ix-x; emphasis added). The book is about these changes and, based largely on a body of evidence uncovered by Japanese historians, traces their social and economic consequences. It begins with a model of the traditional village society in the seventeenth century, which is set out in Part I. At the core of village society, according to that model, was a large landholder's domestic group. It was composed of three concentric circles with the inner one being the family of the holder, the main household. The second circle consisted of a group of relatives outside the direct line of descent, and the third circle of hereditary servants and similar subordinate persons who were related to the holder by neither blood nor marriage but were nonetheless registered as part of his family group. In every village such large holder households were not many; only a few took this form of "extended family." Other villagers were all small holders whose family form was, according to Smith, in most cases "nuclear"; and they were in all likelihood households created by partitioning. Since the partition of family land, even when practiced, was never made on an equal footing, those "new" groups of branch-family households were bound to be small holders who had to rely on resources provided by the main household as well as the village itself. Thus the structure of the traditional village was both cooperative and hierarchical, with "clusters of interdependent interests that clung together with great force and were broken up only when competitive inducements of trade began, much later, to dissolve the internal ties" (p. 54). Such "competitive inducements" came from market growth in the countryside, which, it is suggested, was concomitant with urban growth. Thus, Smith begins Part II with a survey of the extent of commercial farming (cultivation of cotton, indigo, mulberries, oilseeds, tobacco, and other cash crops) and farm family by-employment (spinning, reeling, weaving, straw plaiting, etc.), both of which are supposed to have spread in the rural provinces during the eighteenth and nineteenth centuries. Then in the subsequent chapters Smith traces the consequent changes: how agricultural technology changed, how labor was transformed, how wealthy landlords emerged within the village society, and how the traditional ties between households dissolved. The underlying tendency in the eighteenth and nineteenth centuries was for some branch families and hereditary servants to become separate from the main household. They formed their own households. Their landholding was sometimes too small to feed themselves on the farm, but thanks to the expanding market economy, they were in all likelihood able to find either by-employment opportunities or wage jobs, or both, as former labor service was increasingly replaced by live-in servants on yearly contract, who were eventually substituted by workers employed by the day. Sometimes, especially in crisis years, they had to borrow money from large holders in the village with a parcel of land placed in pawn, which in many cases ended up with the loss of its holding right: they became tenants of the large holders. The latter half of the Tokugawa period saw their numbers increasing, but at the same time it is not unlikely that increased tenancy in turn allowed them to stay on the land. With these significant, if not revolutionary, tendencies established, Smith devotes the final chapter to relating them to the making of modern Japan, placing particular emphasis on what commercial farming and expanding labor markets taught peasants in relation to the forthcoming age of the factory. The book's major points, such as the supposition that the weight of non-agricultural income in the rural economy had become substantial by the early nineteenth century, have subsequently been confirmed by his own and other historians' works (Smith 1969/88, Nishikawa 1987, Shimbo and Saito 2004). From an early twenty-first century vantage point, however, it is not surprising that the progress of research since then has made some of the other propositions no longer tenable. One such example is his description of a shift from "extended" to "nuclear" family. Each of the cooperative groups in seventeenth-century documents that he regarded as one large and complex family household was probably nothing but an estate organization accommodating several separate domestic groups together, most of which were family households in a much simpler form and possessed their own hearth and living space. As a unit of production, however, the structure of the seventeenth-century estate organization may have been not much different from what he described in the book: it was hierarchical and there were extra-economic ties between those households. On the other hand, the family form that he considered "nuclear" should now be taken to mean "stem family," since by the term "nuclear" Smith meant a small family that had no lateral extension but tended to extend vertically. As far as the family system is concerned, therefore, there seems to have been little change throughout the Tokugawa period. What actually changed was the way in which farming was organized and its tasks carried out, which was _not_ associated with a transformation in the system of family formation. Another point I have to make concerns the extent of urbanization and the role given to it as an engine of market growth. In the chapter on "The Growth of the Market," Smith noted that "in the two centuries after 1600, urban population grew with astonishing speed" (p. 67). Probably it did as far as the seventeenth century is concerned, but we now know, from Smith's own research work published later, that urban population did not grow in the one and a half centuries after 1700: Edo, Osaka and some of the castle towns even recorded a population decline. Market-led output growth -- "Smithian growth" in recent terminology (named after Adam Smith) -- that took place in the latter half of the Tokugawa period should now be considered "rural-centered" (Smith 1973/88; see also Shimbo and Saito 2004). Such necessary revisions notwithstanding, _The Agrarian Origins of Modern Japan_ remains a landmark achievement in Tokugawa economic history. It is not just because the book is still very informative and makes lucid reading, but chiefly because what Smith delineated with respect to "what changed" and "what remained unchanged" is largely accurate. Given the intellectual milieu of the 1950s and the 60s, however, this publication may have been considered a book about "what changed" only -- a work fitting very nicely in the framework of modernization theses such as the rise of individualism and the transition from status to contract, since the "growth of the market," the guiding concept of the book, has long been regarded as an important component of the modernization process. However, Smith makes several important points that do not necessarily fit with the modernization scenarios. First, he makes it clear that Tokugawa Japan's path of agricultural progress was distinctly different from the Western one, suggesting that they would never converge on a single model. As he describes in the chapter on "Agricultural Technology," farm output rose with the expansion of commercial farming, which was closely associated with the more intensive use of fertilizers, widening plant varieties, proliferation of farming tools, and the extension of irrigation. The irrigation work, i.e. construction of dikes, ponds, ditches, devices for lifting water into paddy fields and for other purposes, required a substantial amount of capital, much of which was provided by overlords and wealthy merchants. At the same time, however, the construction work itself required a substantial input of labor. And all the other improvements in farming methods were also labor intensive. Some individual innovations may have reduced labor requirements per unit of cultivated land, but the overall effect was to intensify the use of labor. All this made farming even more labor intensive and the unit of farming even smaller, the characteristics that remained unchanged throughout the period from Tokugawa to Meiji. To put it differently, "the character of agrarian change [in Tokugawa and Meiji Japan] ... was determined as much by what did _not_ change about farming as by what did" (p. 208; see also Ishikawa 1978, Francks 1983). Secondly, while Smith examines in detail the rise of landlord-tenant relations and its accompanying phenomenon of increasing differentiation of landholdings within the agrarian society, and also the processes of hereditary subordinates evolving into servants for yearly wages and of service agreements becoming from long-term to short-term contracts, thus describing a long-run transition to wage labor, he never speaks of the emergence of a wage earning class of landless agricultural labors. This may be interpreted as suggesting that those tendencies, together with the above-mentioned move towards the intensification in farming and the spread of non-agricultural by-employments in the rural districts, resulted in keeping the peasantry from disintegrating itself (Saito 1986). Thirdly, therefore, all this "kept the agricultural population a relatively homogeneous class of small peasant farmers despite the presence of landlords and obvious differences in wealth; [and] it preserved the organic unity of the village community despite the growth of a nonfarming population within it" (p. 107). In other words, the coming of commercial farming and the associated growth of labor markets in the Tokugawa period did not signal the end of a peasant economy. Rather, in the Japanese past peasant farming evolved towards more uniformity as the market grew. Thus, this 1959 book suggested that the Tokugawa peasant household, as an integral unit of production and reproduction, had a modus operandi distinctly different from those found for other early modern agricultural populations, and also that it emerged in the process of interactions with the growth of the market. Smith addressed this research question later when he worked on demography and on the history of time discipline (Smith 1977, 1986/88). In the first, he demonstrated how the Tokugawa peasant families tried, with a dim idea of family planning, to adjust their size and composition to alternating life-cycle stages and also changing economic circumstances, and in the second, how they developed a stringent sense of time discipline within the household in order to cope with the increased intensity of labor in farming and by-employment activities and, hence, an increased need for planning over the whole farming year. This latter point implies that Meiji Japanese workers did not need to be taught time discipline in the factory, which strongly suggests that there was _continuity_ from Tokugawa to Meiji. In the former demographic study, Smith made a strong argument that Tokugawa peasants adjusted their family size and composition by means of sex selective infanticide. This provoked a debate, but as I have commented elsewhere (Saito 1989), the gist of his entire argument was that the Tokugawa peasant family household tried hard to balance its numbers with farm size and to secure the right composition in the family workforce, for which purpose infanticide was only one of the options accessible to the family. There were some other means of demographic adjustments such as abortion and the timing of marriage-out of non-inheriting children, as well as economic ones such as sending children, both male and female, into service in the village and in cities and towns, or getting them to take up an industrial by-employment at home. Those economic opportunities increased with the growth of the market, and with changes that accelerated after the Meiji reforms. This consideration, therefore, points to another element of _continuity_ from the early modern to the modern period, the theme already explicit in the writing of _The Agrarian Origins of Modern Japan_. Smith noted, retrospectively in the preface to a collection of essays he had published since the 1950s, that while writing on "how Japan became a modern society ... with a generalized notion drawn from Western history of how much transformations occur," he had "paid particular attention to factors that contributed to making modern Japanese society similar to but _profoundly different_ from Western counterparts" (Smith 1988, p. 1; emphasis added). As such, therefore, his work collectively made a pioneering contribution to the on-going debates in global economic history. References: Francks, P. (1983), _Technology and Agricultural Development in Pre-war Japan_, New Haven: Yale University Press. Ishikawa, S. (1978), _Labour Absorption in Asian Agriculture: An Issues Paper_, Bangkok: Asian Regional Programme for Employment Promotion of the International Labour Office; reprinted in S. Ishikawa (1981), _Essays on Technology, Employment and Institutions in Economic Development_, Tokyo: Kinokuniya, 1-149. Nishikawa, S. (1987), "The Economy of Ch�sh� on the Eve of Industrialization," _Economics Studies Quarterly_ 38 (December), 323-37. Saito, O. (1986), "The Rural Economy: Commercial Agriculture, By-employment and Wage Work," in M.B. Jansen and G. Rozman, eds., _Japan in Transition: From Tokugawa to Meiji_, Princeton: Princeton University Press, 400-420. Saito, O. (1989), "Bringing the Covert Structure of the Past to Light: Review Article of T.C. Smith, _Native Sources of Japanese Industrialization, 1750-1920_," _Journal of Economic History_ 49 (December), 992-999. Shimbo, H. and O. Saito (2004), "The Economy on the Eve of Industrialization," in A. Hayami, O. Saito and R.P. Toby, eds., _The Economic History of Japan, 1600-1990_. I: _Emergence of Economic Society in Japan, 1600-1859_, Oxford: Oxford University Press, 337-68. Smith, T.C. (1969), "Farm Family By-employments in Preindustrial Japan," _Journal of Economic History_ 29 (December), 687-715; reprinted in Smith (1988), 71-102. Smith, T.C. (1973), "Pre-modern Economic Growth: Japan and the West," _Past and Present_ 60 (August), 127-160; reprinted in Smith (1988), 15-49. Smith, T.C. (1977), _Nakahara: Family Farming and Population in a Japanese Village, 1717-1830_, Stanford: Stanford University Press. Smith, T.C. (1986), "Peasant Time and Factory Time in Japan," _Past and Present_ 111 (May), 165-197; reprinted in Smith (1988), 199-235. Smith, T.C. (1988), _Native Sources of Japanese Industrialization, 1750-1920_, Berkeley: University of California Press. Copyright (c) 2006 by EH.Net. All rights reserved. This work may be copied for non-profit educational uses if proper credit is given to the author and the list. For other permission, please contact the EH.Net Administrator (administrator@eh.net; Telephone: 513-529-2229). Published by EH.Net (May 2006). All EH.Net reviews are archived at http://www.eh.net/BookReview. -------------- FOOTER TO EH.NET BOOK REVIEW -------------- EH.Net-Review mailing list EH.Net-Review@eh.net http://eh.net/mailman/listinfo/eh.net-review From eh.net-review at eh.net Fri May 12 19:27:40 2006 From: eh.net-review at eh.net (eh.net-review@eh.net) Date: Sat May 13 09:48:31 2006 Subject: HES: RVW--Frey on Laurent, ed., _Henry George's Legacy in Economic Thought_ Message-ID: ------------ EH.NET BOOK REVIEW -------------- Published by EH.NET (May 2006) John Laurent, editor, _Henry George's Legacy in Economic Thought_. Cheltenham, UK: Edward Elgar, 2005. vii + 271 pp. $110 (hardcover), ISBN:1-84376-885-2 Reviewed for EH.NET by Donald E. Frey, Department of Economics, Wake Forest University. This book, edited by John Laurent (University of Southern Queensland, Australia), contains eleven essays dealing with highly diverse aspects of the ideas of Henry George, the nineteenth century American economic reformer. Several of the contributors are Australians, in whose country George had a significant influence on public policy. Although George is little known today, these essays demonstrate that he was significant in the history of economics and that his ideas have some relevance to contemporary issues. George's most famous work was _Progress and Poverty_ (1879), which I summarize next before reviewing the book at hand. Henry George's _Progress and Poverty_ George tried to explain the paradox of persistent poverty amidst economic progress; he sought an alternative to Laissez Faire, which he understood to justify the inevitability of poverty. Laissez Faire, as theory, rested on a triple base: the wages-fund theory, Malthusian population theory and Ricardo's rent theory. The first held that wages were paid from a pool of funds set aside by employers. This left the worker beholden to the employer class and devoid of any claim to the economic output that workers themselves produced. Malthusian theory held that population would outrun food production, thus driving wages down to subsistence (i.e., the wages-fund would be divided among more and more workers). Finally, Ricardo's rent theory held that fertile land would reap higher and higher rents as farmers bid more and more for the right to till the better land; growing population would intensify the bidding for fertile land as more marginal land was forced into production. George emphasized that these theories had an ethical meaning: "poverty, want, and starvation are by this theory not chargeable either to individual greed or to social maladjustments; they are the inevitable results of universal laws, with which ... it were as hopeless to quarrel as with the law of gravitation" (George, _Progress and Poverty_, p. 99). George set out to show that because two of these laws were wrong, poverty was not inevitable; further, poverty could be ended by just laws that captured land rents for the public good. In his attack on the wages-fund, George argued that workers are paid from _current production_ -- i.e., workers had a legitimate claim on what they produced, and what they produced was growing, not a static fund. In this approach George anticipated modern income and product accounts, which treat wages as charges against production. In his attack on Malthusianism, George argued that injustice, not over-population, was the cause of poverty. In fact, claimed George, denser populations resulted in _more_ productive industry. Although his discussion of productivity increases is not entirely clear, George seemed to invoke what are now known as urbanization economies, which occur when economic activity is densely concentrated. Productivity would far outpace Malthusian population growth, he thought. Although productivity growth ought to have made all people richer, this was not occurring because landlords were reaping most of the gains, which were generated by the creativity of society itself. Without lifting a finger, land owners collected rising land rents and land prices as a more productive economy, needing space, drove up the value of good locations. In short, George generalized Ricardo's rent theory beyond an agricultural framework. George thus attributed poverty in the midst of _highly productive_ societies to the inequality created by huge land rents. This could not be morally justified, he argued. First, poverty itself was so distorting of human goodness, that it should not be tolerated if a remedy could be had (e.g., George, p. 461). Secondly, absolute private-property rights to land were wrong because "no one can be rightfully entitled to the ownership of which is not the produce of his labor [i.e., land]" (George, p. 336). Land, which is not produced by any human, is part of the common heritage of all. He said "the unjust distribution of wealth" (George, p. 342) was due to the "fundamental wrong" of land ownership. His solution to this was a steep tax on the value of land. Set high enough to capture all rents for society, he thought that a land tax could replace other taxes; because of this, others dubbed it the "Single Tax." George never advocated outright expropriation of land, recognizing that society could capture the fruits of progress without government ownership. Though some considered this socialistic, it was decidedly non-Marxian, for capitalists were as victimized by landlords as were laborers. George also refuted the restatement of Laissez Faire presented by the Social Darwinists. He referred to the "hopeful fatalism" of popular Social Darwinism, in which social evils "are the impelling causes which drive man on, by eliminating poorer types," relying on "hereditary transmission" through fitter individuals who shape society (George, p. 480). But, he said, this argument comes face to face with "an enormous fact," namely that civilizations generally don't progress (p. 481-2): "If progress is to be the result of fixed laws, inevitable and eternal, which impel men forward, how shall we account for [retrograde civilizations] " (George, p. 482)? George concluded that "what has destroyed all previous civilizations has been the conditions produced by the growth of civilization itself" (George, p. 488). In nineteenth-century western nations, the obvious civilization-destroyer in his view would have been private appropriation of land rent (George, p.514). Review of _Henry George's Legacy in Economic Thought_ _Henry George's Legacy_ divides into chapters devoted to George's connection to the ideas of his own time and chapters considering current issues where his ideas might be relevant. The introductory chapter provides a very useful outline of George's influence in Australia and New Zealand and a short introduction to most of the issues considered in later chapters. In the second chapter, Erin McLaughlin-Jenkins dissects the 1890s attack on Henry George by an aging Thomas Huxley, well-known defender of Darwinism and capitalism. Determined to blast socialism, Huxley chose to refute George, whom he erroneously considered a socialist; George was even lower in Huxley's estimation for also daring to question the way Darwinism had been applied to social thought. McLaughlin-Jenkins argues that Huxley erroneously claimed George followed Rousseau, misrepresented George as a leveler, advanced a fictitious history of property to justify vested land interests, and generally missed the point of George's _Progress and Poverty_. Huxley also used physical-science concepts mostly to obfuscate the issues and support the wages-fund. According to McLaughlin-Jenkins, Huxley -- an agnostic -- was also angered by George's temerity in noting the similarity between Darwinist social thought and that of "the natural theologians whose authority the Darwinians had undermined in the first half of the century" (Laurent, p. 47). In short, Huxley's stance on capitalism and science, which had once been progressive, had become reactionary by the 1890s. The essay illustrates beautifully how often special pleading passed as social analysis in the nineteenth century. Perhaps George was wrong, but not for Huxley's reasons. The Duke of Argyll was a class-interest reactionary, who defended the landed aristocracy against George. The chapter on the Duke on Argyll by Warren Samuels, Kirk Johnson and Marianne Johnson roams leisurely through the social and intellectual landscape of Argyll's writing and George's reactions. (Only 13 pages of a 48-page essay are expressly devoted to Argyll's writings; the rest sets the context of the debate at great length.) The essay points out Argyll's essentially feudal view of relations between landowners and renters, and his assertion that landownership itself is productive activity. Argyll also sought to legitimate existing patterns of land ownership, despite their checkered history. Again, this chapter is less about George and his ideas than about the reaction of vested interests to him. The chapter also usefully points out how elastic natural-law arguments could be: both Argyll and George made natural-law arguments about land rights, yet drew opposite conclusions. Another historical essay, by John Laurent, asks whether George was an evolutionary economist. Laurent, who draws from George's later essays, reviews the many points at which George showed familiarity with and interacted with evolutionary ideas, which were Malthusian in nature. Laurent questions why George rejected Malthusian population theory, given that population pressure drove the rent increases that were central to his own theory. Laurent notes what I consider the central reason, namely that George rejected Malthus for _moral_ reasons: Malthusianism made poverty "inevitable" and so absolved society of ethical responsibility for poverty. Yet, despite this insight, Laurent still seems to think George should have appreciated the contribution of Malthus to his own theory. Here, I would disagree; George did not need Malthusian population growth to create land rents. My reading of George's model does not have rising rents resulting from rising population, per se. Rather George explained rising rents as the result of increasing productivity due to increasing population _density_ (and perhaps other causes) rather than due to population as such (see _Progress and Poverty_, Book IV, II). Laurent shows that over his life-time George had a strong grasp of evolutionary ideas and agreed in some places with the Social Darwinists. However, in making an assessment, most weight probably should be given to George's major work, _Progress and Poverty_, which is distinctly negative toward Social Darwinism. In that work, George, the religious humanist, objected to the materialistic and reductionist tendencies in Darwinism. Also, he rejected Lamarkian ideas held by Social Darwinists (correctly observing that a "child no more inherits his father's knowledge than he inherits his father's glass eye"). And he rejected the evolutionary implication that societies invariably progress (which would have portrayed nineteenth-century industrial economies as the apex of human development). In fact, he argued, most societies become static and decline; in his era, that decline would be due to land-ownership laws that divert the fruits of progress to an unproductive landlord class. A chapter by Rob Knowles demonstrates that George's ideas could be translated into another idiom. Knowles argues that Leo Tolstoy appropriated many of George's ideas to advance his own reform agenda for Russia. Perhaps the largest lesson of these historical chapters is that George was seen through the lenses that contemporary readers brought with them to his writings. However, the second portion of _Henry George's Legacy_ shows that George's ideas can also emerge in modern debates as well. Laurence Moss's chapter argues that the increment in land values caused by social progress, which George identified, may provide a way to fund public goods (provided they bestow most benefits on those located closest). Moss observes the standard economic result that projects with public-good characteristics may go undone in the absence of subsidy. However, if a proposed real-estate development with public-good characteristics promises to raise the value of surrounding locations, the developer who owned the surrounding properties could provide the public good and be compensated by the gains in surrounding property values. Moss notes that "the private provision of public goods ... is one of the most stunning accomplishments of private entrepreneurs in the post-war U.S. economy" (Laurent, p. 163). Indeed, planned communities (e.g. Columbia, MD) have been developed on this principle. Although his interpretation stands Henry George on his head, Moss credits him with identifying the phenomenon. In the first of a pair of articles, John Pullen takes a philosophical look at the distinction between private ownership and private possession of land. George believed that his tax proposal would effectively replace private ownership with private possession. Pullen argues that this way of putting it may have been a rhetorical mistake that alienated potential support for George's ideas; Pullen suggests a term such as "conditional" ownership. In his second chapter, Pullen reviews a series of objections to George's land-value tax; these range from the philosophical to the pragmatic. His conclusion is that the objections are formidable enough that a thorough-going Single Tax is still unlikely to occur. Terry Dwyer's chapter relates land-value taxation to contemporary trends in regulatory economics -- specifically the tendency toward privatization of industry with monopoly characteristics. Dwyer notes that bad implications for efficiency of monopoly have dropped from recent discourse as inefficient prices are charged to cover capital investment by privatized monopolies. He argues the efficiency might be restored -- as well as a measure of equity -- by taxing enhanced land values created by an infrastructure monopoly. Two concluding chapters argue that heavy taxes on land, of the sort inspired by George, have more relevance in the twenty-first century than before. The essay by Frank Stilwell and Kirrily Jordan and the essay by Phillip Day both argue that a land tax is compatible with environmentalism. As Laurent notes in his introduction, this is a novel interpretation, for George and his followers argued that the Single Tax would encourage _more intensive use of land_. Typically, they argued that the Single Tax would capture speculative profits from those who held idle land while awaiting for a price rise. A steep tax on land would encourage its development to earn a return to pay the tax. More intense development hardly seems something that would conserve nature. I think a case could be made (perhaps a general-equilibrium analysis to the effect that more intense use of urban land would result in denser use of less land overall). However, the chapter does not set out a model and convincing detail. These authors also point out that there may be new reasons for considering a land tax that were not relevant in George's own era. In our era of globalization, taxes on other factors, which have become increasingly mobile, may be shifted. The immobility of land may become a particularly important consideration for taxation policy as taxes on land cannot be shifted. This immobility also means that society suffers no efficiency penalty in taxing land. None of these authors suggests that George's recommendations could have radically changed social history. However, each of them shows, in one way or another, that George left a significant legacy in economic thought and policy. Reference: Henry George. _Progress and Poverty_ (fiftieth anniversary edition), New York: Schalkenbach Foundation, 1936. Donald Frey is completing a manuscript, _America's Economic Moralists_, which includes a discussion of Henry George. Copyright (c) 2006 by EH.Net. All rights reserved. This work may be copied for non-profit educational uses if proper credit is given to the author and the list. For other permission, please contact the EH.Net Administrator (administrator@eh.net; Telephone: 513-529-2229). Published by EH.Net (May 2006). All EH.Net reviews are archived at http://www.eh.net/BookReview. -------------- FOOTER TO EH.NET BOOK REVIEW -------------- EH.Net-Review mailing list EH.Net-Review@eh.net http://eh.net/mailman/listinfo/eh.net-review From eh.net-review at eh.net Mon May 15 11:25:16 2006 From: eh.net-review at eh.net (eh.net-review@eh.net) Date: Mon May 15 13:42:52 2006 Subject: HES: RVW--O'Rourke on Osterhammel and Petersson, _Globalization: A Short History_ Message-ID: ------------ EH.NET BOOK REVIEW -------------- Published by EH.NET (May 2006) Jurgen Osterhammel and Niels P. Petersson, _Globalization: A Short History_. (Translated from the German by Dona Geyer.) Princeton, NJ: Princeton University Press, 2005. xi + 182 pp. $23 (hardcover), ISBN: 0 691 12165 6. Reviewed for EH.Net by Kevin H. O'Rourke, Department of Economics, Trinity College Dublin. This is a short book on a big topic, and as such is sure to appeal to a fairly wide readership. Its aim is to provide a brief introduction to the history of globalization, stretching back into the Middle Ages, in around 150 pages. Given that aim, it seems a shame that the first two chapters are devoted to terminological and methodological issues, but this is a book evidently aimed at social theorists who worry about such things, rather than at economic historians who are content to examine the more tangible dimensions of economic globalization -- trade, labor migration and capital flows -- one at a time. Once they get onto the history, the judgment of the authors seems for the most part fairly sound. Thus, they emphasize the important roles played by the Muslim, Mongol and Iberian empires in creating links between different regions of the world, as well as the break-through role of the Industrial Revolution. On one or two occasions, their perspective does seem to be a little Eurocentric. Thus, they characterize the period 1846-80 as an "age of free trade," although the republics and dominions of the New World were protectionist during this period, and Asia and Africa were free-trading afterwards. They also spend a lot of time on the Bretton Woods institutions in discussing the 1945-1970s period, thus giving the impression of a world increasingly influenced by international institutions, when they might just as well have emphasized the dramatic inward turn of large swathes of the planet associated with communism or the collapse of European empires. Another example comes on p. 117, when the authors state that "economic and political cooperation within a framework of European structures may even have been necessary for the survival of the nation-state model." European inter-state political cooperation has indeed been a great success, but even a cursory look at the non-European evidence suggests that nation states can indeed survive without such structures. On the other hand, whenever this reviewer started to sharpen his quill in anticipation of highlighting such egregious errors of judgment, he would inevitably find that the text implicitly or explicitly acknowledged the contradictory nature of the evidence a few paragraphs or pages later. The main flaw of the book, it seems to me, is the fact that its narrative ends some time in the mid-1970s. To most economists this will seem like Hamlet without the prince, for it is only since the 1980s that China, India, and many other developing countries have started embarking on radical reform programs leading to their reinsertion into the international economy after decades of self-imposed isolation. To be fair, this is briefly mentioned in the concluding chapter, but more emphasis on the phenomenon would have been helpful. However, it is probably no harm for economists to have their preconceptions challenged in this way from time to time. To us, the Cold War obviously led to de-globalization, but it probably did also lead to "a new kind of globalization ... as people slowly perceive the world as a ... community of fate threatened by nuclear annihilation." The book is a useful reminder, to those who need reminding, that globalization is not new. I liked the authors' emphasis that it is a process, not an end-state, and that it is the outcome of a complex range of individual and state decisions, as well as a large random error component. There is little new here for practicing academics, but it might be a useful introduction to the subject for students and non-specialists. A final word of warning, however, especially to my more faint-hearted American colleagues: if you are the sort of person whose blood pressure is likely to rise on reading assertions such as the one on p. 144 that "quite a few trends in ... theory that enjoy worldwide popularity are created in Italy or France," then this book is probably not for you. Kevin O'Rourke is Professor of Economics at Trinity College Dublin, a co-organizer of the CEPR Economic History Initiative, a Research Associate at the NBER, and an Editor of the European Review of Economic History. He is the co-author of _Globalization and History: The Evolution of a Nineteenth Century Atlantic Economy_ (MIT Press, 1999, with Jeffrey G. Williamson), and is currently working on a history of international trade in the very long run (with Ronald Findlay) which will be published in 2007. Copyright (c) 2006 by EH.Net. All rights reserved. This work may be copied for non-profit educational uses if proper credit is given to the author and the list. For other permission, please contact the EH.Net Administrator (administrator@eh.net; Telephone: 513-529-2229). Published by EH.Net (May 2006). All EH.Net reviews are archived at http://www.eh.net/BookReview. -------------- FOOTER TO EH.NET BOOK REVIEW -------------- EH.Net-Review mailing list EH.Net-Review@eh.net http://eh.net/mailman/listinfo/eh.net-review From pgunningp at yahoo.com Wed May 17 03:50:43 2006 From: pgunningp at yahoo.com (Pat Gunning) Date: Wed May 17 08:24:23 2006 Subject: HES: Re: RVW--Frey on Laurent, ed., _Henry George's Legacy in Economic Thought_ In-Reply-To: Message-ID: <20060517075043.76638.qmail@web37701.mail.mud.yahoo.com> It is remarkable how doctrines that have been refuted time and again can still be touted by reviewers as having merit today. If there is an unearned increment and if it could be isolated, it could be taxed without doing any damage. But it is simply not feasible in the vast majority of cases to determine what per cent, if any, of the current rent on a piece of land is unearned. Some is due to improvements and some to making a superior appraisal and thus setting it aside for a specific use. Only an omniscient being could succeed in a general sense in separating these contributors to the rent of a specific parcel of land. If one is really interested in taxing the unearned increment, he should advocate a tax on consumer surplus or on the positive externalities of technological advance. Nor is it more fair to tax owners of land than, say, to tax people who earn income because of their high IQs, natural beauty, or natural athletic skill. Davenport, Herbert J. "The Taxation of Unearned Increment,"Addresses and Proceedings of the National Conference on State and Local Taxation, November 1907. Davenport, H.(1910) "The Single Tax in the English Budget," Quarterly Journal of Economics, February, 1910. Davenport, H. J.(1911) "The Extent and the Significance of the Unearned Increment," American Economic Review 1: 322-332) Davenport, H.(1917), "Theoretical Issues in the Single Tax," American Economic Review 7 (March): 1-30. Wieser, Friedrich A. von.(1960) "The Theory of Urban Ground Rent." In Louise Sommer. (ed) Essays in European Economic Thought." London: D. Van Nostrand. (Originally published in German 1909) Pat Gunning From polly at mcleveland.org Wed May 17 13:31:26 2006 From: polly at mcleveland.org (Polly Cleveland) Date: Wed May 17 14:12:44 2006 Subject: HES: Re: RVW--Frey on Laurent, ed., _Henry George's Legacy in Economic Thought_ In-Reply-To: <20060517075043.76638.qmail@web37701.mail.mud.yahoo.com> References: <20060517075043.76638.qmail@web37701.mail.mud.yahoo.com> Message-ID: <6.2.0.14.2.20060517122424.02e71e38@localhost> When I studied real estate appraisal at UC Berkeley many years ago, we learned that an appraiser should first value the location. How? By taking sales of nearby vacant or run-down properties and extrapolating. It's rather like making a contour map of terrain using selected readings on altitude. Then the appraiser values the whole property from comparables, assigning the residual value after the land to the structures. I went out and made a land value map of downtown San Francisco. It wasn't difficult. Land values are just the capitalized present values of expected rents. Many cities in Pennsylvania, such as Harrisburg, tax land at higher rates than buildings. Large areas of Australia and New Zealand rely on pure land taxes. George got a lot of things wrong--capital theory especially--but not the argument for taxes on the value of land. And not just land, but other rent-generating titles, such as spectrum, taxi medallions, drilling rights, pollution rights, fishing rights and many more. All these titles have markets independent of necessary equipment. Mark Blaug, who originally joined Robert Heilbroner in disparaging George, more recently changed his mind. (See my article, "Mark Blaug: Edging Toward Full Appreciation" in Critics of Henry George, Robert Andelson ed, Blackwell, on my website at http://www.mcleveland.org/publications/Mark_Blaug.CV.pdf.) The Austrians and the Georgists should be friends. At Grinnell, Mason Gaffney will give a paper on "Keeping Land in Capital Theory: Faustmann, Wicksell and George." Meanwhile, see the paper on his website on "An Austro-Georgist Synthesis" http://www.masongaffney.org/workpapers/Causes_of_downturn--Austro- Georgist_synthesis_1982.pdf Polly Cleveland From wjsamuels at bellsouth.net Wed May 17 14:16:36 2006 From: wjsamuels at bellsouth.net (Warren Samuels) Date: Wed May 17 15:01:01 2006 Subject: HES: Re: RVW--Frey on Laurent, ed., _Henry George's Legacy in Economic Thought_ Message-ID: <002601c679de$08d0f390$6101a8c0@WARREN> The "refutation" outlined by Pat Gunning is not quite as conclusive as he would have it. His argument turns on the desire for precise measurement and for equity across all classes of unearned increments. The imposition of a meaningful differential betwewen improved and unimproved land will accomplish much, without pretending full isolation. And there is a difference between classes of rent. Perhaps all classes other than land rent also require the action of the recipient to put their endowments to work, whereas land value increases independent of that due to population growth. Warren J. Samuels From radav at webtv.net Wed May 17 17:58:08 2006 From: radav at webtv.net (Roy Davidson) Date: Thu May 18 08:28:16 2006 Subject: HES: Re: RVW--Frey on Laurent, ed., _Henry George's Legacy in Economic Thought_ In-Reply-To: "Warren Samuels" 's message of Wed, 17 May 2006 14:16:36 -0400 Message-ID: <12543-446B9C70-1258@storefull-3337.bay.webtv.net> The neoclassicals certainly did a number on Henry George by confounding land with capital and/or wealth. It would certainly help the dialogue if, instead of rent, the return to land as a separate factor of production is designated as "ground rent." The quotation from w of n, Book V, Chapter II, Part II, taxes upon the rent of houses, perhaps clarifies the point. "Ground-rents are a still more proper subject of taxation than the rent of houses. 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. More or less can be got for it according as the competitors happen to be richer or poorer, or can afford to gratify their fancy for a particular spot of ground at a greater or smaller expence. In every country the greatest number of rich competitors is in the capital, and it is there accordingly that the highest ground-rents are always to be found. As the wealth of those competitors would in no respect be increased by a tax upon ground-rents, they would not probably be disposed to pay more for the use of the ground. Whether the tax was to be advanced by the inhabitant, or by the owner of the ground, would be of little importance. The more the inhabitant was obliged to pay for the tax, the less he would incline to pay for the ground; so that the final payment of the tax would fall altogether upon the owner of the ground-rent. The ground-rents of uninhabited houses ought to pay no tax. V.2.74 Both ground-rents and the ordinary rent of land are a species of revenue which the owner, in many cases, enjoys without any care or attention of his own. Though a part of this revenue should be taken from him in order to defray the expences of the state, no discouragement will thereby be given to any sort of industry. The annual produce of the land and labour of the society, the real wealth and revenue of the great body of the people, might be the same after such a tax as before. Ground-rents and the ordinary rent of land are, therefore, perhaps, the species of revenue which can best bear to have a peculiar tax imposed upon them. V.2.75 Ground-rents seem, in this respect, a more proper subject of peculiar taxation than even the ordinary rent of land. The ordinary rent of land is, in many cases, owing partly at least to the attention and good management of the landlord. A very heavy tax might discourage too, much this attention and good management. Ground-rents, so far as they exceed the ordinary rent of land, are altogether owing to the good government of the sovereign, which, by protecting the industry either of the whole people, or of the inhabitants of some particular place, enables them to pay so much more than its real value for the ground which they build their houses upon; or to make to its owner so much more than compensation for the loss which he might sustain by this use of it. Nothing can be more reasonable than that a fund which owes its existence to the good government of the state should be taxed peculiarly, or should contribute something more than the greater part of other funds, towards the support of that government. V.2.76 Though, in many different countries of Europe, taxes have been imposed upon the rent of houses, I do not know of any in which ground-rents have been considered as a separate subject of taxation. The contrivers of taxes have, probably, found some difficulty in ascertaining what part of the rent ought to be considered as ground-rent, and what part ought to be considered as building-rent. It should not, however, seem very difficult to distinguish those two parts of the rent from one another. Roy Davidson From r.j.sandilands at strath.ac.uk Thu May 18 10:24:46 2006 From: r.j.sandilands at strath.ac.uk (Roger Sandilands) Date: Thu May 18 13:28:43 2006 Subject: HES: Re: RVW--Frey on Laurent, ed., _Henry George's Legacy in Economic Thought_ Message-ID: On the distinction between ground rent and the rental value of the land plus building (improvements), professional valuation officers and estate agents currently examine both the physical state of a property and its location, taking account of market prices for similar or comparable properties. Where a parcel of land is currently vacant they can likewise infer its market value, both from the prices of similarly located vacant sites and by comparing the whole value of similar houses in different locations. As they say in Spanish: "Quien puede mas puede menos": he who can do more can do less. A valuation officer can (and does) calculate the site value more easily than the value of the building. Adjacent buildings are often much more heterogeneous than the value of adjacent land. Hence cadastral (land) valuations could be done more frequently and less expensively if site values alone were required for purposes of revenue-raising -- and with far fewer disincentive effects than with taxes on improvements. And as Adam Smith (Bk.I, ch.VI) also wrote: "As soon as the land of any country has all become private property, the landlords, like all other men, love to reap where they never sowed." Roger Sandilands From eh.net-review at eh.net Fri May 19 10:23:00 2006 From: eh.net-review at eh.net (eh.net-review@eh.net) Date: Fri May 19 10:54:07 2006 Subject: HES: RVW--Ekelund on Galenson, _Old Masters and Young Geniuses_ Message-ID: ------------ EH.NET BOOK REVIEW -------------- Published by EH.NET (May 2006) David W. Galenson, _Old Masters and Young Geniuses: The Two Life Cycles of Artistic Creativity_. Princeton, NJ: Princeton University Press, 2006. xv + 233 pp. $30 (cloth), ISBN: 0-691-12109-5. Reviewed for EH.NET by Robert B. Ekelund, Jr., Department of Economics, Auburn University. David Galenson has repeated the hypothesis he examined in _Painting Outside the Lines: Patterns of Creativity in Modern Art_ (2001) -- that some great artists did path-breaking work at early ages while others created seminal art only later in life. This time, however, sculptors, poets, novelists and movie directors are said to be included in these two cohorts. At base, Galenson believes that he has found a "new understanding of the life cycle of human creativity." The basis of this new understanding is set out in Chapter 1 of his book. Again, as in virtually all of his previous and contemporaneous work, Galenson bifurcates art and other creative endeavors into two types -- the "experimental" and the "conceptual." According to the author, experimental innovators "repeat themselves, painting the same subject many times, and gradually changing its treatment in an experimental process of trial and error." The epitome in the world of art, according to Galenson, is Paul Cezanne. In contrast, the conceptual artist makes "innovations motivated by the desire to communicate specific ideas or emotions," with goals stated precisely before an image or "process" is produced. After this, their role is essentially finished. Lots of advance planning goes into this esthetic and Pablo Picasso is offered up as an exemplar of this type of artist. Galenson then argues that experimentalists produce their "most important ideas" late in their careers, while conceptual artists get to the same point much younger in their careers. In Chapter 2, Galenson presents what he calls "evidence" for the above proposition(s). He examines auction prices and age-price profiles, textbook illustrations, museum collections and retrospective exhibitions for Cezanne and Picasso. Galenson then maintains (with good reason) that a binary division of the theory above will not do because there are "continuous" variations in art practitioners -- "extreme and moderate." With admittedly interesting and carefully selected anecdotes, the author further amends his initial proposition. Now, Galenson conjectures, "it might be hypothesized that _extreme_ conceptual artists will tend to achieve their major contributions earlier in their careers than any other type of innovator" (p. 55, emphasis added) and, further, that "it may be possible for conceptual artists to evolve gradually into experimental ones, [but that] it is not likely that experimental artists can change into conceptual ones" (p. 60). There are, as Galenson tacitly admits, many exceptions to his theory. Chapters 4 and 5 tackle, respectively, the implications of his theory (or theories) and its application to Old Master works. The globalization of modern art is caused, he argues, by the increasing dominance of conceptual art in the post-World War II era. The era of "isms" and experimental art was a product of the increasingly abstract art developing in Europe and America in the era of Abstract Expressionism and European modernism. The author concludes that "the dominance of conceptual approaches to fine art in the recent past has clearly served to accelerate the spread of new artistic ideas" (p. 93). Old Master painters, however, do not escape Galenson's attention. Here he purports to show (given reproductions of their works in textbooks on art history to show "peak value") that in three out of the ten of the most reproduced paintings the artists were "conceptual" and were below 30 years of age (one, Vermeer, was 29). For the remainder, alleged to be "experimental," however, only three were 46 or over and three were in their thirties. One artist, Frans Hals, skews the data with age given at 79/84. The issues are "How old is old" and how can a sample of 9 artists tell us anything about the distinction Galenson is attempting to draw? Chapter 6, the unique part of the book, pushes the distinction between conceptual and experimental innovators into other realms. Using highly selected individuals, quotations and interpretations, Galenson examines seven sculptors and eight poets, authors and film directors. Consider some of Galenson's observations. With respect to writers: "Conceptual writers are more likely to base their works on library research and to strive for precise factual accuracy, whereas experimental writers typically rely on their own perceptions and intuition" (p. 134). Conceptual film directors, using the same logic, "often avoid linear narrative and conventional story lines" (p. 150), while experimental directors stress the importance of telling a story with a clear narrative. Distinctions such as these are so fuzzy and the samples used to produce credence for them so small that almost any close and selected biographical synopsis could produce any desired result. Galenson reveals a certain depth of erudition and research in all this. Unfortunately there is no theoretical or empirical foundation to the main argument. There is no clearly demonstrable distinction between conceptual and experimental thought _processes_ in art, music or any other kind of creative activity. Cherry-picked quotations and exhibitions aside, Galenson has not clarified the argument that creative thinkers can be dichotomized into seekers and finders. Anyone who has known a working artist (or poet) would recognize that these two processes are not divisible and, indeed, are often inextricably intertwined _within_ the same work. Measurement, if one can call it that, consists of anecdotes that Galenson selected to support the dichotomy. For example, age distributions of artists clearly matter if one is to use ex post rationalizing of peak valued work. Some artists die young, others do not. Most Old Masters had far more limited life spans, making peak value productivity a logical impossibility at older ages. Highly selected samples of artistic works do not help his argument either. There are many "great film" lists. Virtually all put _The Godfather_ and _Raging Bull_ on or near the top of the list. But Francis Ford Coppola and Martin Scorcese, clearly _experimental_ directors in Galenson's scenario, were only 33 and 38 at their executions. Consider another example. Was W. A. Mozart "conceptual" or "experimental" and would he have produced "peak valued" work had he composed to seventy years old? The point is that Galenson's samples are simply inadequate. These and many other factors have an effect on outcomes. Plentiful exceptions to the experimentalist/older-conceptual/younger theory make the theory unbelievable. An added complexity to the theory of "extreme" and "moderate" does nothing to untangle this false dichotomy. It may well be that there are different forms of creativity and that, in general, some genre of conceptual -- often coupled with a "con" -- art has replaced earlier forms. But in the art world there are other and likely better explanations than an artificially divided creative impulse. Post-World War II demand factors with lightening-fast taste changes is one reason and the use of "art as an investment" is another. These factors clearly have had an impact on auction prices, museum exhibitions and the "story" of art. The new seventh edition of the best-selling _Jansen's History of Art: The Western Tradition_ illustrates how the story of art history can be retold and retold in multiple ways and with different illustrations and emphases. The increased pace of conceptual artistic endeavor may also have much to do with the incentives of abstract artists in particular and the vastly lowered transactions cost in artistic "communications" of all types. Galenson's book, to be fair, is entertaining and informative in its own way and the study of factors affecting creativity is interesting. Unfortunately his study of bifurcated creativity will require a well-executed theoretical and empirical study to make any of his conclusions believable. Robert B. Ekelund, Jr. is Edward and Catherine Lowder Eminent Scholar (Emeritus) in the Department of Economics at Auburn University and Acting Director, Jule Collins Smith Museum of Fine Art at Auburn University. He is the author of numerous papers on political economy, including studies in the _Journal of Cultural Economics_. He is the author of fourteen books, including _The Marketplace of Christianity_ (MIT Press, forthcoming 2006) and is an amateur artist. Copyright (c) 2006 by EH.Net. All rights reserved. This work may be copied for non-profit educational uses if proper credit is given to the author and the list. For other permission, please contact the EH.Net Administrator (administrator@eh.net; Telephone: 513-529-2229). Published by EH.Net (May 2006). All EH.Net reviews are archived at http://www.eh.net/BookReview. -------------- FOOTER TO EH.NET BOOK REVIEW -------------- EH.Net-Review mailing list EH.Net-Review@eh.net http://eh.net/mailman/listinfo/eh.net-review From pgunningp at yahoo.com Fri May 19 10:17:03 2006 From: pgunningp at yahoo.com (Pat Gunning) Date: Fri May 19 11:16:38 2006 Subject: HES: Re: RVW--Frey on Laurent, ed., _Henry George's Legacy in Economic Thought_ In-Reply-To: <12543-446B9C70-1258@storefull-3337.bay.webtv.net> Message-ID: <20060519141703.26613.qmail@web37715.mail.mud.yahoo.com> Hi, HESers Apparently, I hold a minority position. Fortunately, scientific issues are not decided by majority vote. Regarding Roy�s points, my post aimed to avoid the dubious distinction between what George called �ground rent� and other rent. I am not persuaded that this distinction has theoretical significance or that it is practical. I am not speaking only for myself. I have learned a lot from studying Davenport, Wieser, Knight and Mises. My remarks reflect that learning, in retrospect, as Mark would put it. Roy accepts this distinction and says that it should not be too difficult to separate the two. Roger seems to concur. We (my dead economist colleagues and I) believe the distinction itself is vague and that it would be impossible to identify �ground rent.� Of course, some �professional valuation officer� could attach a price to a parcel of land by doing a mental experiment. But we are not talking about some government bureaucrat attaching A price, we are talking about attaching THE price that reflects an UNEARNED INCREMENT and one that, if this increment was taxed, would not have adverse incentive effects on the production of consumers� surplus. As we see it, giving such a job to the kinds of �professionals� who are usually assigned such tasks would lead to just the opposite of what George thought could be achieved. It would not destroy the economy, but it would be no more justifiable from an economic or ethical point of view than any other kind of tax. Let me explain why we believe this. The majority cannot deny, we maintain, that if it were not for the competing entrepreneurial appraisals, no �ground rent� or any other kind of rent would exist. Indeed, no prices could exist without entrepreneurial appraisals. Prices do not establish themselves. Of course, there are past prices but these are continually being challenged and revised by current entrepreneur appraisers. Both an existing owner and all of the prospective owners of a parcel of land or site act as entrepreneurs and, consequently, make appraisals. The interaction of the appraising entrepreneurs determines ALL prices. The appraisals of entrepreneurs are based on expected uses. Each of the separate competing entrepreneurs brings his own distinct and private human capital and possibly that of his assistants and partners to bear on the matter. If he believes that he needs more knowledge to make a good decision, he may cause the human capital to be produced that he believes is needed to make the decision. In today�s high-tech world, the ability to appraise is typically a resource that has been at least partly produced for the distinct purpose of making an appraisal that is superior to that of other entrepreneurs. (This is the deeper implication of Polly�s observations.) The ability to appraise is the consequence of an entrepreneurial venture in which a would-be appraiser has invested. If the venture is a success, the superior appraisal is made and the price of the appraised item rises. The item is more valuable in the eyes of the producing entrepreneur. Under pure market economy conditions, this implies that it benefits consumers. In other words, the effort that goes into producing the information that causes the market price to rise has the unintended effect of producing consumers� surplus. It is an example of Smith�s invisible hand. These ideas apply no less to land than to all of the other resources. The ideas are the backbone of the neoclassical revolution. They were produced mainly by Menger and Clark. They were taken for granted by economists like Wicksteed, Fetter, Davenport, Knight, and Mises. It is obvious that others who are called neoclassicals did not grasp or accept these ideas. And those who did accept (the above mentioned neoclassical economists) them did not express them in this way, partly no doubt because they were living and fighting for the revolution, and not reporting on it in retrospect. There are formal classes that help to train real estate agents how to make appraisals. But there is no set formula for deciding the present value of the future net revenue that can be earned from using a parcel of land in a particular place with particular characteristics with one of a practically infinite set of other resources for some demand-satisfying purpose. Entrepreneurship, almost by definition, cannot be learned from power point lectures. If the land tax bureaucrat makes a credible threat to take away a part of the expected profit from an increase in price, she also takes away part of the incentive to make the superior appraisal and the incentive of the owner to put himself in the position to benefit from someone else�s appraisal. �She squeezes the consumers� surplus out of the entrepreneurial tube.� Entrepreneurs attach a market price to a site in anticipation of the revenue they will earn if they own the site. Suppose that a site already has buildings on it. Then an entrepreneur may assign a revenue product that is greater than the same site if it had no buildings but less than a site that had buildings that he regards as suitable for the most profitable use. Or, he may assign a revenue product that is less than if there were no buildings. If the site is on potentially fertile land that can be farmed, an entrepreneur who is planning a shopping center or an apartment complex may have to compete with one who is planning to turn it into rice paddies. These are only two of the numerous potential entrepreneurs who may be appraising the site. The numerous potential uses of a site and the numerous individuals whose entrepreneurship may play a role in raising the site�s market value suggest that the �ground rent� is itself variable and dependent on entrepreneurial appraisals and entrepreneurial knowledge much of which is produced. Or, to put the issue in a way that is more consistent with my earlier post, it is not possible for a government agent or an economist to separate, for practical purposes, the unearned from the earned increment, if indeed there is an unearned increment. Let us suppose that �ground rent� exists. Then the payment received by the owner of a site must contain both this and other rent. Any realistic implementation of the �ground rent tax� would require a government agent to determine (1) what is in the minds of the many different entrepreneurs and (2) what the rent would be if, somehow, there were no current entrepreneurs. It is not credible to think that we could find someone to do this job, even if we did not have to worry about rent-seeking and other public choice issues. To think otherwise is tantamount to committing the central planning fallacy. This, in simple terms, expresses Davenport�s critique and, more generally, the (correctly understood) neoclassical critique of the single tax ideology. But the errors continue to be made. Let me try to give some reasons why people, including apparently our own society, continue to make errors. Some people think that a tax on land rentals will cause rich people to pay a greater share of the tax burden. This thinking is popular but fallacious. No one in her right mind advocates taxing gross ground rent, whatever that is. The reason is that in a pure market economy, the current owner of a parcel of land is most likely to have bought it with the proceeds of her productive work and entrepreneurial skill. To tax the future rent would be to punish someone from using her savings to buy ground or sites instead of condos, holiday trips, lazy-boy chairs, and HES subscriptions. The more advanced thinkers aim to tax APPRECIATION of land values. But they also make a mistake. They do not realize that such appreciation cannot occur without some entrepreneur believing that his appraisal is superior to someone who owns the land now. A tax on the appreciation in value would necessarily reduce the production of the information needed by entrepreneurs to make the superior appraisals. We say succinctly and anthropomorphically that land prices have appreciated. Then we reason fallaciously that we can tax the increase in market value because land cannot move. What we ought to say, in accord with the neoclassical revolution, is that competing entrepreneurs have bid higher prices. If we keep this in mind, we would understand immediately that to tax any appreciation in price, including that of land, amounts to taxing the activities of the entrepreneurs that cause the price to rise. It would have an effect that is comparable to the effect of taxing middleman activity. As Frank Knight pointed out, the entrepreneur is, in a grand sense, the agent of the consumer. He is the goose who lays the golden eggs. To tax the goose is to reduce the incentive to lay. Reference Gunning, J. Patrick (1997) "Herbert Davenport on the Single Tax." American Journal of Economics and Sociology. 56: (4): 565-574. (Pre-publication copy available on request.) Gunning, J. Patrick. (1998) "Herbert J. Davenport's Transformation of the Austrian Theory of Value and Cost." In Malcolm Rutherford (ed.). The Economic Mind in America: Essays in the History of American Economics: London: Routledge. (Pre-publication copy available on request.) Pat Gunning From fontaine at ecogest.ens-cachan.fr Sat May 20 03:41:04 2006 From: fontaine at ecogest.ens-cachan.fr (Philippe Fontaine) Date: Sun May 21 10:21:52 2006 Subject: HES: ANN--Cachan-Amsterdam History of Economics as History of Science Workshop Message-ID: Dear all, Please find enclosed the programme for the next Cachan-Amsterdam History of Economics as History of Science Workshop. Spring Workshop, Friday 16 June 2006 �cole normale sup�rieure de Cachan Harro Maas (University of Amsterdam & MPIHS, Berlin) The Inner Eye of Victorian Economists: John Elliot Cairnes on the Slave Trade Paola Tubaro (EconomiX, CNRS) Jules Dupuit's Contribution to Mathematical Economics Sybilla Nikolow (Universit�t Bielefeld) "Society and Economy": An Atlas in Otto Neurath's Pictorial Statistics from 1930 Robert Leonard (University of Quebec at Montreal) >From Chess to Catastrophe: Psychology, Politics and the Genesis of von Neumann's Game Theory Philip Mirowski (University of Notre Dame) The Making of the Neoliberal Thought Collective Best wishes, Philippe Fontaine From polly at mcleveland.org Sat May 20 09:41:11 2006 From: polly at mcleveland.org (Polly Cleveland) Date: Sun May 21 10:22:35 2006 Subject: HES: Re: RVW--Frey on Laurent, ed., _Henry George's Legacy in Economic Thought_ In-Reply-To: <20060519141703.26613.qmail@web37715.mail.mud.yahoo.com> References: <12543-446B9C70-1258@storefull-3337.bay.webtv.net> <20060519141703.26613.qmail@web37715.mail.mud.yahoo.com> Message-ID: <6.2.0.14.2.20060520093244.02ee9cd8@localhost> According to Milton Friedman, the land tax is "the least bad tax." Assume Pat Gunning is correct, that a land tax, no matter how well administered, would still impinge harmfully on entrepreneurs. Assume also, that some government is essential, if only to allocate and protect titles to land and other resources such as spectrum. That is, courts and police. With what tax would Pat finance essential government? Can he propose a tax that would have less negative impact than a land tax? Polly Cleveland From colander at middlebury.edu Sun May 21 11:37:48 2006 From: colander at middlebury.edu (Colander, David) Date: Mon May 22 08:05:51 2006 Subject: HES: DISC--Entrepreneurs and the land tax Message-ID: <2604BCE1171C434C912C75ED42F419F0775C7C@dragonfly.middlebury.edu> Pat Gunning raises some theoretical arguments about the land tax. This post addresses those arguments, leaving all the practical issues of land taxation that he also discusses aside. Pat argues that entrepreneurs are needed to discover the value of land, or of any asset. I agree. But I disagree with his conclusion that this is necessarily an argument against the land tax. The reason is that the market price reflects the combined judgment of all entrepreneurs of the future stream of earnings that will come from that asset. In the pure market economy that Pat speaks of all individuals (entrepreneurs) have access to that market price. It is the informational content of the market price. Now say that some information comes out that pushes the relative market price of that asset up. The holder of that asset will be richer, and holders of other assets will be poorer (if the change is only one reflecting relative changes in the price of the asset subset). I agree that if the holder of the asset is to be taxed only on the appreciation of the asset, that he will have less incentive to study the nature of the asset pricing. But that is not how I see a land tax operating is the pure market economy that Pat posits. (I only talk about appreciation of the asset (and not the asset tax) here to avoid problem that Pat states; actually, I see the issue of asset tax or asset appreciation tax as just a starting point issue similar to problems in taxation whenever one has capitalized future rents.) My argument is that in this pure market economy entrepreneurs would also find that some of the assets that they bought would also possibly fall in value since I have posited only relative asset price changes. If the asset appreciation tax were neutral--that is if the entrepreneur can deduct the asset depreciation from what he or she would otherwise pay in taxes, then his or her incentive is not changed. (subject to a few conditions) Of course if this were the case--if there were only relative changes in asset prices--it is also true that the asset appreciation tax would produce no revenue. But that is not what most of us, including Henry George, expected for the land tax. They expected that the appreciation tax would produce revenue, which means that they expected that the asset would rise in relative value above what the market has valued the asset at. (This expectation goes back to Ricardo, who built it into his theory of income distribution.) This means that the change in asset price is not only expected to be a relative change, but one which generally increases the value of assets, in this case land. When asset values on average rise, then the asset appreciation tax would generate positive revenue, which means that the average expectation has to be that the price of these assets (land) will rise and thus does not fully reflect the expected future appreciation that it should in a pure market economy. In this case the asset tax would affect that portion of the entrepreneurial incentives to figure out how much land in general was going to appreciate. (The issue of entrepreneurial incentives still does not affect entrepreneur's incentives to figure out relative values of land.) Why might not the price of land fully reflect future appreciation? The reason has to be some monopoly or restriction in the market. My sense is that the restriction comes in the capital (credit) market. Credit is highly restricted. If all agents had access to infinite capital resources, then they could all bet on future appreciation of assets (subject to bankruptcy laws). In this case the price of the asset would likely be far higher than it is, and the land appreciation tax (with deductions for depreciation) would bring in zero revenue. But where that is not the case, and there is limited access to borrowing, then those entrepreneurs who are able to bet on the land appreciation are those with access to credit. Those without access to credit are excluded from the market. In this case, the land tax serves as a tax on those with differential access to credit. If that differential access to credit is due to a monopoly restriction, then the land tax is actually a tax on those subset of entrepreneurs with monopoly access to credit. It is a tax on monopoly, which makes George's association with the monopoly game all the more interesting. Dave Colander From r.j.sandilands at strath.ac.uk Mon May 22 04:04:08 2006 From: r.j.sandilands at strath.ac.uk (Roger Sandilands) Date: Mon May 22 08:08:02 2006 Subject: HES: Re: Henry George's Legacy in Economic Thought_ Message-ID: As I read Pat Gunning's post (no doubt he will correct me), it seems to me that it condenses to the idea that the only rental value that attaches to, say, a prime site in Oxford Street, London, is the difference between what, say, a shopkeeper selling clothes can make from her purchase of the site (or payment of rent to the owner) compared with what the next best use might have yielded (say selling records instead). It is based on a competitive opportunity cost concept. The annual rent that the highest bidder pays for 100 square metres of space (net of the cost of the bricks and mortar and fittings) on Oxford Street could be, say, �200,000. Its capital value could be �4m. The next highest bidder may have been offering �190,000 a year. The surplus (possibly Pat's concept of "unearned increment"?) is a mere �10,000. The other �190,000 is esteemed as "entrepreneurial earnings". On prime sites such as Oxford Street the land (or space, or location) value may well be at least 90 percent of the whole value of the property inclusive of the building. (The latter is a specific man-made improvement on that site; in the above example it would have an annual value of 10% x �200,000, or �20,000). But on Pat's reasoning the entrepreneur, by selling enough clothes to cover the cost of the land, and more beside (to make a return on the other elements of cost) has added (contributed) all of that value. It is her contribution to GDP. But the rent is a cost (yes, an opportunity cost) to the individual and, after deducting other explicit and opportunity costs, her net income (net entrepreneurial profit) is, say, �50,000 a year. Meanwhile, back in Glockamorra, a similar 100 square metre clothes shop rents for �10,000 a year, attracting fewer customers. Nevertheless, the shopkeeper makes enough to cover those costs and earn satisfactory net entrepreneurial profits of, say, ... �50,000. As I read him, Pat implies that the Oxford Street entrepreneur has contributed enormously more to GDP than has the lady in Glockamorra. Or maybe it's only the landlord who did the contributing, if the lady in Oxford Street is only a tenant? Contrast the Ricardian view: Oxford Street commands enormously more than Glockamorra (for the same amount of human effort, entrepreneurial skill, and man-made capital costs) because it is very "intra-marginal", whereas Glockamorra is near the margin. The difference is due to the fixity and pure scarcity value of land located closer to natural advantages and man-made amenities (social infrastructure paid for by other people). It is pure surplus. The opportunity cost of the Oxford Street site is very great, so its neo-classical and Knightian rent is relatively trivial. But the labour cost of that particular site (as empty space) is zero. So the difference between its labour cost and its market price is classical Ricardian (or Marxian or Georgist) surplus (just like monopoly profit). Yes, the labour cost of the surrounding amenities was very great, but the owner of the site did not put in that labour or entrepreneurship. The rent that is paid and received is a pure transfer payment. Think parking charges, or (by analogy only) the price of the better theatre seats. If those rents were the prime source of public revenues instead of taxes on our productive labour and man-made capital, inter alia we could expect the following: 1. As taxes fall, there would be much greater incentive to work, save and be entrepreneurial; 2. There would be less incentive to hold land purely for its expected appreciation, so the supply of available land would increase, along with its fuller use; 3. The demand for land would rise because of greater activity and greater after-tax income; 4. Land rentals would rise accordingly. This would absorb much, but not all, of the increase in after-tax income, but still provide an elastic source of state revenue; 5. With a "tax" on annual land rental values (actually a fee for benefits received for exclusive ground occupancy rights) the "capital value" of land (based on the expected stream of future net rentals) would fall drastically, probably eliminating much of the boom-bust house price (i.e., land price) cycle, and making it easier to be a home owner. Essentially this debate boils down to whether we follow (i) neo-classical marginal productivity theory (what we get is what we contribute to GDP, and this includes land rental income), or instead (ii) the classical view that what is true of the individual (land is a cost; payments reflect contributions to the enterprise) is not also true of the whole. In the social viewpoint land rents are transfer payments from producers to owners; and what the owners of labour, capital and land get is a matter of the relative degrees of competition and mobility. Labour and capital are mobile and elastic in supply, so their rewards are relatively competitive; land is fixed in supply and immobile, so it gets what its market will bear, a monopoly price. Return these community values to the community, and get labour and capital taxes off our backs. (And don't distract from this message by suggesting that just because we don't deny top footballers their due (so-called quasi-rents), so too must we leave landowners with whatever they can get from us.) Roger Sandilands From pgunningp at yahoo.com Mon May 22 10:09:41 2006 From: pgunningp at yahoo.com (Pat Gunning) Date: Mon May 22 10:52:10 2006 Subject: HES: Re: DISC--Entrepreneurs and the land tax In-Reply-To: <2604BCE1171C434C912C75ED42F419F0775C7C@dragonfly.middlebury.edu> Message-ID: <20060522140941.74611.qmail@web37706.mail.mud.yahoo.com> I reply to David first and then to Roger. Suppose that A owns a piece of land that he values at $100. Entrepreneur B appraises the land and his unique entrepreneurial knowledge, which he has produced, leads him to appraise it at $200. The present value of the future income he expects after buying the land and diverting its use is $200. He is able to buy the land at $101 because A is not an entrepreneur. A year later, C's entrepreneurial knowledge leads her to appraise the land at $300. B's appraisal has not changed. C buys the land at $201 because B does not recognize the higher appraised value. Now B has enjoyed a capital gain of $100. $99 of that was due to his superior appraisal. $1 was due to his ownership of the land. Now if you threaten to tax all of the $1, you will take away the incentive to sell. If you tax the $99, you will take away the incentive to produce a superior entrepreneurial appraisal. If you tax a per cent, you will reduce the incentive to the degree that you tax. A low per cent tax will reduce the incentive to a low degree a high per cent tax will reduce the incentive to a high degree. The price of "the prime site in Oxford Street" is the consequence of the accumulated appraisals and reappraisals of countless individuals over a period of hundreds of years. No doubt there were lucky landowners who gained windfalls at particular times from those appraisals and the actions that followed. But we cannot tax them today. We can only tax their heirs, if we can find them and if they have anything left to tax. I cannot think of any way to tax the future windfall gainers without also taxing the entrepreneurship that causes the gains to occur and, at the same time, taxing the entrepreneurship that gives consumers the additional surplus because the prime site is used in the best way that the competing entrepreneurs know. I understand Roger's struggle, I think. One way to approach the issue is to make a concrete proposal and then to consider the likely effects of adopting it. What specific tax would George promote, as you see it? Pat Gunning From radav at webtv.net Mon May 22 17:22:10 2006 From: radav at webtv.net (Roy Davidson) Date: Mon May 22 18:18:35 2006 Subject: HES: Re: DISC--Entrepreneurs and the land tax In-Reply-To: Pat Gunning 's message of Mon, 22 May 2006 07:09:41 -0700 (PDT) Message-ID: <14242-44722B82-67@storefull-3331.bay.webtv.net> A non-text attachment was scrubbed... Name: not available Type: multipart/mixed Size: 1238 bytes Desc: not available Url : http://eh.net/pipermail/hes/attachments/20060522/ba039580/attachment.bin From r.j.sandilands at strath.ac.uk Tue May 23 07:59:31 2006 From: r.j.sandilands at strath.ac.uk (Roger Sandilands) Date: Tue May 23 08:28:28 2006 Subject: HES: Re: DISC--Entrepreneurs and the land tax Message-ID: Pat Gunning writes of an entrepreneur who succeeds in buying a plot of ground for $101, marginally more than it is worth to its current owner ($100), because he expects to use it for something that will yield him $200. If a year later he sells it to another person (another entrepreneur, in his example, with superior knowledge of the land's worth) for $201, he says he has made an entrepreneurial profit of $99 (due to his superior appraisal) and a mere $1 due to his land ownership. There are two possibilities here: (i) The first 'entrepreneur' bought the land for $101 only because he expected an appreciation in its value, with no intention of doing anything with it. It is held idle purely as a speculative venture. If a year later he succeeds in selling it on at a profit this is almost entirely ($99) a reward for "superior appraisal". Question for Pat: Has GDP risen by $99 this year? (ii) This person instead bought it in order to put it to a superior use. He spends $99 in clearing and building on the land. A year later someone offers him $201 for this property with $99 of improvements on it. Question: Has GDP risen by $99 this year? Pat then asks me for a concrete proposal as to how to tax windfall gains. First, I would make a sharp distinction between (i) and (ii). As I said in a previous post, valuation officers and estate agents distinguish location value and building values all the time; and so "quien puede mas puede menos". In case (i) a windfall gains tax would be imposed on the appreciation of the land value; in case (ii) there is no windfall. But my preference would not be for a windfall tax at point of sale (this would discourage sales in hope the tax would later be repealed). Rather, I would impose an annual ground rent charge. (It would be wrong, though conventional, to call it a 'tax' since a 'tax' is unrelated to benefits; rather it would be a 'fee' or 'charge', like a parking charge, for the specific benefits associated with exclusive holding of a specific site.) There is a fallacy of composition in assuming that the 'entrepreneur' in Pat's example is making a contribution to the nation's annual product when he succeeds in making money for himself from a speculative holding of land in hopes of its appreciation. What is true for the individual (he gets an income for the 'marginal product' of his land) is not true for society. If, collectively, we speculate on a rise in the price of land and hold it idle, there may be, _for a while_, a self-fulfilling prophesy as the supply of land for actual development falls, as in Japan in the late 1980s. Where there is genuine entrepreneurial activity (development) Henry George argued that the income should be left in the hands of the entrepreneur and not be taxed (taxation as theft). In case (ii) above, a Georgist government would "tax" the _annual rental value_ of the site (not the capital value; this would fall as the rental value is "taxed"), say $10, and would simultaneously un-tax the genuine entrepreneurial profits by a similar sum. The land "tax" (on unearned income) has no adverse incentive effects; the un-taxing of earned income would release the energies of labour and genuine entrepreneurship. Roger Sandilands From YGT at nm.ru Wed May 24 03:16:17 2006 From: YGT at nm.ru (Yuri Tulupenko) Date: Wed May 24 09:06:59 2006 Subject: HES: Re: RVW--Frey on Laurent, ed., _Henry George's Legacy in Economic Thought_ References: <12543-446B9C70-1258@storefull-3337.bay.webtv.net><20060519141703.26613.qmail@web37715.mail.mud.yahoo.com> <6.2.0.14.2.20060520093244.02ee9cd8@localhost> Message-ID: <001701c67f02$3b625500$0100a8c0@me> Polly Cleveland mentioned spectrum alongside with land. Some critics of spectrum allocation systems have been arguing that allocators artificially create rents. Is the argument scientific? Yuri Tulupenko From polly at mcleveland.org Wed May 24 11:25:05 2006 From: polly at mcleveland.org (Polly Cleveland) Date: Wed May 24 16:10:28 2006 Subject: HES: Re: RVW--Frey on Laurent, ed., _Henry George's Legacy in Economic Thought_ In-Reply-To: <001701c67f02$3b625500$0100a8c0@me> References: <12543-446B9C70-1258@storefull-3337.bay.webtv.net> <20060519141703.26613.qmail@web37715.mail.mud.yahoo.com> <6.2.0.14.2.20060520093244.02ee9cd8@localhost> <001701c67f02$3b625500$0100a8c0@me> Message-ID: <6.2.0.14.2.20060524103117.02fb3e58@localhost> No question that allocators artificially INFLATE rents, by restricting the supply of spectrum. They give away spectrum or sell it cheaply to speculators. They don't pressure large broadcast companies to put their spectrum hoards to use. They also unnecessarily withhold large sections of spectrum, and limit the use of private spectrum as technology changes. See http://www.newamerica.net/Download_Docs/pdfs/Pub_File_808_1.pdf and other articles on the New America Foundation website. Do allocators CREATE rents? There's an efficiency argument for creating private titles to spectrum, just as there is for private land titles, oil leases, or fishing rights. Restricting access to a scarce natural resource does generate rent. Georgists argue that while it may be more efficient to leave titles in private hands, the rent can and should be returned to the public in the form of lease payments or taxes. If the Federal Government were to lease spectrum at market, or tax its market value, spectrum hogs would be forced to use it or sell it. Rents would plummet, but not disappear. Polly Cleveland From wjsamuels at bellsouth.net Wed May 24 17:40:46 2006 From: wjsamuels at bellsouth.net (Warren Samuels) Date: Thu May 25 08:36:53 2006 Subject: HES: Re: RVW--Frey on Laurent, ed., _Henry George's Legacy in Economic Thought_ Message-ID: <05dd01c67f7a$b7778980$6101a8c0@WARREN> The "refutation" outlined by Pat Gunning iss not quite as conclusive as he would have it. His argument turns on the desire for precise measurement and for equity across all classes of unearned increments. The imposition of a meaningful differential betwewen improved and unimproved land will accomplish much, without pretending full isolation. And there is a difference between classes of rent. Perhaps all classes other than land rent also require the action of the recipient to put their endowments to work, whereas land value increases independent of that due to population growth. Warren Samuels From fukagai at ynu.ac.jp Thu May 25 09:56:05 2006 From: fukagai at ynu.ac.jp (Yasunori Fukagai) Date: Thu May 25 14:45:20 2006 Subject: HES: CFP--J.S. Mill Conference on September 2006 (Yokohama, Japan) Message-ID: <20060525225605.30C80905@ynu.ac.jp> Liberty, Human Values and Utilitarianism: Bicentenary Conference of John Stuart Mill Call for Papers September 9-11, 2006 Yokohama National University, Japan John Stuart Mill was born on May 20, 1806. In celebrating the bicentenary of John Stuart Mill, this conference will cover - the research on the very idea of John Stuart Mill in historical, intellectual and theoretical perspective. - the utilitarian approaches to contemporary issues especially on liberty and on human values, including the field of applied ethics and social philosophy. The conference will take place at Yokohama National University on September 9-11, 2006. Please send paper proposals (200 words in length) with affiliation, mailing address and e-mail address to Yasunori Fukagai below no later than June 25, 2006. The key note lectures include Jonathan Riley (Tulane University), Fred Rosen (University College London), John Skorpuski (University of St Andrews) and Georgios Varouxakis (Queen Mary, University of London). Yokohama is located about 30 minutes train trip from central Tokyo. For the participants from abroad, the organizing committee will provide the guidance for accommodation in due course. Further information will appear on the URL: http://www.econ.ynu.ac.jp/news2006/index.htm Organizers: Yasunori Fukagai, Yokohama National University Noriaki Katagi, Osaka Dental University Contact: Professor Yasunori Fukagai Yokohama National University Faculty of Economics 79-3 Tokiwadai, Hodogaya, Yokohama 240-8501 Japan E-mail: mill2006@ynu.ac.jp From pgunningp at yahoo.com Thu May 25 09:49:23 2006 From: pgunningp at yahoo.com (Pat Gunning) Date: Thu May 25 14:46:00 2006 Subject: HES: Re: RVW--Frey on Laurent, ed., _Henry George's Legacy in Economic Thought_ In-Reply-To: <001701c67f02$3b625500$0100a8c0@me> Message-ID: <20060525134923.4956.qmail@web37711.mail.mud.yahoo.com> Yuri asks whether spectrum allocation systems "create rents." He does not make it clear whether (1) the purpose of the systems is to create private property rights where, otherwise, there would be common property and therefore an externality problem or (2) the purpose is to benefit some special interest group. Polly seems to be assuming the latter. I will assume the former. The question thus interpreted, it seem to me, is a sub-question of a larger question of whether establishing private property rights creates rents. What it creates, it seems to me, are opportunities to earn profit -- or perhaps higher profit than otherwise. Some people are better positioned than others to earn profit by owning a license. Under an auction system and under the usual simplifying assumptions, they will win the bids for licenses if they can get financing. These winners expect to earn profit on the difference between their appraisal of the licence's value and the appraisal of the next highest bidders who do not win. The same principle would apply to a government that privatizes land that it previously reserved for "public use" or for non-use. There are rents, in a sense. Or they are taxes. But whatever they are, they disappear immediately when the auction is over. If the government made a policy of take them again, it would destroy the incentive to bid. Just as rents on privatized government-owned land would disappear as soon as the auction of the land was over. This suggests that the confusion of the Georgists is between (1) some original value which was captured so long ago that it is unidentifiable today and (2) today's land price. One might claim that there is a sense in which today's price reflects that captured price. But such a claim is irrelevant to an effort today to tax some unearned increment. It has already done been captured and the people who captured are most likely at least six feet under. By all rights, the revenue from creating property rights in the spectrum should go to the smarty who thought up the system. But it is difficult to appropriate such rents and to give them to the smarties unless the smarties are aligned with an autocratic government. In any case, to the entrepreneurs who pay for the licenses, these "rents" are merely costs of production. Best wishes Pat Gunning From m.gaffney at surfcity.net Fri May 26 00:36:21 2006 From: m.gaffney at surfcity.net (Mason Gaffney) Date: Fri May 26 10:07:43 2006 Subject: HES: Re: RVW--Frey on Laurent, ed., _Henry George's Legacy in Economic Thought_ In-Reply-To: <20060525134923.4956.qmail@web37711.mail.mud.yahoo.com> Message-ID: <20060526043627.50CB770225@eh.net> Pat Gunning said: >In any case, to the >entrepreneurs who pay for the licenses, these "rents" >are merely costs of production. OK, tell you what, if the licenses are worth nothing, give them all to me. Then you smart entrepreneurs start bidding. Mason Gaffney From pgunningp at yahoo.com Fri May 26 02:26:59 2006 From: pgunningp at yahoo.com (Pat Gunning) Date: Fri May 26 10:08:33 2006 Subject: HES: Re: DISC--Entrepreneurs and the land tax In-Reply-To: Message-ID: <20060526062659.39118.qmail@web37711.mail.mud.yahoo.com> Roger points out that George believed that where there is entrepreneurial activity, the income should be left in the hands of the entrepreneur and not be taxed. I have argued that increases in the value of land is practically always the result of entrepreneurial activity and that the notorious �unearned increment� would be virtually impossible to identify. I want to deal with the case in which an entrepreneur buys land at $101, improves it at a cost of $99, and then sells it for $201. Roger suggests that because the entrepreneur has increased the land's value, the increase in value should not be taxed. But he goes on to say that the land should nevertheless be taxed for its �annual rental value.� An example of an annual rental value tax, he says, is $10. I maintain that any NEW tax is a tax on entrepreneurship. Who will pay it? The entrepreneur or the new buyer? Whoever pays it, the tax will be borne by the entrepreneur. Presumably this would go against George's wishes. So it would be unacceptable. Thus, if we follow George's principle, as stated by Roger, we should not impose a new tax on the annual rental value of the land in this case. And, of course, we cannot impose an OLD tax. Either it is already imposed or it is not. But we cannot impose it. Roger discusses another case of speculation. I disagree with his conclusion but I hesitate to go into that case. I assume that it is not relevant to George. Did George consider speculative gains? If he did, no one has yet mentioned this aspect. Pat Gunning From kdhoover at ucdavis.edu Fri May 26 15:43:43 2006 From: kdhoover at ucdavis.edu (Kevin D. Hoover) Date: Fri May 26 16:00:04 2006 Subject: HES: ANN--History of Economics Working Paper Series Message-ID: <6.2.3.4.2.20060526112907.01ebc988@green.ucdavis.edu> ANNOUNCING A NEW HISTORY OF ECONOMICS WORKING PAPER SERIES I am pleased to announce that the History of Economics Society now sponsors a working paper and published paper (abstract) "journal" on the Economics Research Network (ERN) a part of the Social Sciences Research Network (SSRN). The History of Economics "journal" is free in every sense: anyone is free to post papers, anyone is free to subscribe and to receive regular e-mail notices of newly posted papers, and the series will be edited with an eye to promoting the free exchange of ideas. Work related to any aspect of the history of economics and cognate areas -- and indeed to any topics that are likely to be of interest to historians of economics -- is welcome. Although the series is edited, the guiding thought of the editorial policy is to promote the free exchange of ideas. There is no refereeing, and virtually all papers will be posted without editorially interference. Posting papers on the History of Economics journal does not conflict with subsequent submission to professional journals. The homepage for SSRN is www.ssrn.com To Subscribe: Go the Homepage (www.ssrn.com) and click the subscription button. Click on the link: Subscribe/Unsubscribe to SSRN Journals . Following the links through login (where you will set up an ID and password), to your personal page. Click on the Subscription link, and then click on the link to subscribe/unsubscribe from journals on the Economic Research Network. The History of Economics journal is found under the Subject Matter Journals. To Submit Working Papers or Abstracts of Published Papers: Go to the Homepage (www.ssrn.com), click on the Submit button and follow the instructions. (You will need to have a pdf copy of your paper (they may be able to convert other files to pdf on the site; if so you will find the instructions there), an abstract, the appropriate JEL codes, and a list of keywords. You may also list the abstracts, though not post, published papers.) Once Subscribed, You May: 1) Search the SSRN databases or Browse journals from links on the homepage; 2) Track your own papers through the posting process and keep track of your download statistics by clicking on the MyBriefcase button on the homepage. Technical questions about posting papers should be addressed, in the first instance, to SSRN (see information on their website). Policy questions should be directed to me. The History of Economics journal on SSRN has the potential to be a highly valuable resource for all historian of economics. Its success, however, requires that as many scholars as possible subscribe and routinely post their papers to the network. I encourage you all to begin the process without delay. Kevin D. Hoover Editor, ERN History of Economics Journal From wjsamuels at bellsouth.net Fri May 26 16:00:15 2006 From: wjsamuels at bellsouth.net (Warren Samuels) Date: Fri May 26 16:11:36 2006 Subject: HES: Re: RVW--Frey on Laurent, ed., _Henry George's Legacy in Economic Thought_ Message-ID: <000b01c680ff$018fe0a0$6101a8c0@WARREN> I think that others will be interested in our private exchange, which I send with your permission. I would add one point: The entrepreneurial and other activity of which you and others, e.g., Larry Moss, write, can be explained this way: Remember Marx said that profit was a class activity and its distribution a matter of competition within the bourgeois class. So, too, may Ricardian-Georgian rent be seen as something to distribute among land owners via the entrepreneurial activity in your examples. Warren Samuels From Lmos at aol.com Sat May 27 12:58:52 2006 From: Lmos at aol.com (Larry Moss) Date: Sun May 28 13:00:24 2006 Subject: HES: Re: RVW--Frey on Laurent, ed., _Henry George's Legacy in Economic Thought_ Message-ID: <48d.1156424.31a9df4c@aol.com> Warren Samuels said: >I would add one point: The entrepreneurial and other activity of which >you and others, e.g., Larry Moss, write, can be explained this way: >Remember Marx said that profit was a class activity and its distribution a >matter of competition within the bourgeois class. So, too, may >Ricardian-Georgian rent be seen as something to distribute among land >owners via the entrepreneurial activity in your examples. I need to respond briefly to Warren's post. The context is an essay I wrote and included in the Laurent book. The basic Georgist insight is that public goods (goods that are nonrivalrous and where excludability presents a challenge to the investors to recover their investments ) can be profitably financed in ways that do not seriously disturb the existing allocation of resources. This, I read as a proposition in largely positive economics. A variation of the idea now lives on and is known in the urban economics texts as "the Henry George Theorem." The Henry George "blind spot" comes when gains to the ownership of what is essentially "location" are referred to as "unearned" "accidental," "uncaused by identifiable labor," etc. In an entrepreneurial economy, the discovery of opportunity is as important as brute labor if not more so. The modern Austrian school has persuaded a new generation about the "creativity theory of value" as a replacement for the overworked and misleading "labor theory of value." Isn't this the central finding of modern growth economics ---brain power over brawn. If one were to turn George on his head and state that some "capital gains" to land ownership are "anticipated" and perhaps even politically brought about by cronyism down at the zoning department in Town Hall, then a new and more dazzling array of economic discussions can follow. That was the main contribution of my essay in the Laruent book. I was consciously following Krugman's advice to bring "location" back into modern economics. Georgist economics shows us one way how that might be done. By identifying new economic phenomena and explaining them (stories about motivation, execution and results) we pay homage of Henry George and his acumen. Please notice that I have not mentioned the "single tax" or followed Warren in the arena of class analysis or hierarchy in modern society. Some of the land developers in the big cities where I have lived were from humble circumstances---immigrant stock in some cases. Most never heard of Henry George. Laurence Moss From youngw at mail.biu.ac.il Sun May 28 11:56:35 2006 From: youngw at mail.biu.ac.il (Warren Young) Date: Sun May 28 13:02:44 2006 Subject: HES: OBIT--Haim Barkai Message-ID: <000f01c6826f$4c5cf8e0$05664684@IBMC7120137F65> It is with great sadness that I report the passing of Prof. Haim Barkai over the weekend. Prof. Barkai passed away at age 81. He was one of the most influential researchers in the area of the Economics of Israel and Israel's economic history, and made many contributions in the area of the History of Economic Thought. During the 1980s, he was Chair of the Council of Advisors to the Bank of Israel, and also served as an economic advisor to the Government of Israel. Educated at the Hebrew University and LSE, he became Chair of the Depratment of Economics at the Hebrew University in Jerusalem and also served as Dean of the Faculty of Social Science there. After retirement, he founded the Economics Department at the Israel College of Management, and was Head of that Department. He will be missed by all who knew him, as he always had a smile and cheerful word for all... Warren Young From pgunningp at yahoo.com Mon May 29 00:18:29 2006 From: pgunningp at yahoo.com (Pat Gunning) Date: Mon May 29 08:39:10 2006 Subject: HES: Re: RVW--Frey on Laurent, ed., _Henry George's Legacy in Economic Thought_ In-Reply-To: <48d.1156424.31a9df4c@aol.com> Message-ID: <20060529041829.70185.qmail@web37708.mail.mud.yahoo.com> Dear list: Warren Samuels and I have had a private discussion on this issue that he believes is worth sending to the list. So I agreed to send it. It is slightly edited. Warren's initial message was posted on May 17 and inadvertently reposted on May 24. The correspondence began when I replied privately to his reposting. Warren's most recent message, to which Larry Moss responded, neglected to include the correspondence that he meant to send. FIRST IS GUNNING'S REPLY TO THE SAMUELS COMMENT: Regarding "my" "refutation" of George, you know, of course, that I am really representing the ideas of others who, for reasons other than being wrong, have been disregarded. It seems to me that the burden is on you or others to identify what you claim are classes of unearned increments in the price of land -- i.e., to tell how you would set about separating the income due to improvement and superior appraisal from some unearned increment. To me and my dead economist colleagues, the unearned increment is like the legendary animal that is always hiding behind me but which I could never see. Citing Henry George, as some others have done, is clearly insufficient. I doubt that one can meaningfully distinguish between improved and unimproved land. But even if one could, the problem is not even close to being solved. If the land is unimproved, who wants it? The demand for unimproved land, it seems to me, is practically non-existent. Even the poorest peasant who occupies land aims to improve it from his or her point of view. Let us imagine that somewhere in the world there is a parcel of unimproved land that nevertheless has market value. Then I maintain that the market value is due to one of two things, unless someone has made a grave error. First, it could be due to an expectation that the land will have use value after it is improved. Such expectations vary from entrepreneur to entrepreneur. Second, it could be due to a speculation that some entrepreneur will find a valuable use and be willing to pay a higher price than the current one. In either case, the focal point, it seems to me, should be on the entrepreneurial appraisal not on the physical nature of the earth. Finally population does not cause land rent to rise. There are poor countries with very large populations where the price of land is quite low (the refugee camps in Sudan, for example) and there are places where the population density is very low but the price of land is very high (a private beach on the coastline). There may be a correlation between the two but that does not imply causation, one way or the other. SECOND IS SAMUELS' REPLY TO GUNNING'S REPLY My answers to your points are as follows: 1. Land value taxation has been adopted around the world. Even when not adopted the improved/unimproved distinction enters into appraisal. 2. Like most anything else, appraisers have conflicting theories when it comes to valuation. Years ago I studied the subject but have not kept up. I also learned, from other sources, that the value of property varies for different purposes, as odd as it may seem: taxation, purchase, sale, insurance, ... So I am neither disturbed nor surprised at imprecision. 3. A substantial part of the portfolios of the ultra rich in every country--the details varying between countries--is holdings of land for long-term growth due to population pressure. 4. During the final years of the USSR a petition was sent to Gorbie's regime proposing Georgian taxation. Signers came from every wing of economics. 5. The problem which pervades Georgian taxation is choosing an historical base point for the calculation of economic rent. I think that the foregoing should cover most if not all of your concerns and objections. THIRD IS GUNNING'S REPLY TO SAMUELS' REPLY TO GUNNING'S REPLY: Warren, I know that the land tax has been adopted around the world. So have tariffs. In any event, I am not claiming that land taxes are a worse way for to raise revenue than, say, income taxes. I am just claiming that they won't achieve George's goal. I am not disturbed or surprised by imprecision either. Yes, the rich own land; but I will bet that this is because land is ordinarily a good hedge against inflation or because its services yield rental income. In any case, if you want to accomplish the objective of increasing taxes on the rich, there is a more direct way to do it. Too many wings of economics, I would suggest, tongue in cheek. In my view, it is impossible to choose a base year without entrepreneurship paying practically the entire tax either in retrospect or in prospect. If it is to pay the tax in prospect, the entrepreneur will simply shift to using his entrepreneurship somewhere else that is less in the interests of consumers. END Pat Gunning From A.Brewer at bristol.ac.uk Tue May 30 07:46:59 2006 From: A.Brewer at bristol.ac.uk (Tony Brewer) Date: Tue May 30 08:02:45 2006 Subject: HES: ANN--ESHET 2007 conference dates Message-ID: Advance notice: next year's conference of the European Society for the History of Economic Thought (ESHET) will be held in Strasbourg, France, 5-7 July 2007. The theme of the conference will be 'Justice in Economic Thought', though papers on other aspects of the history of economics will also be welcome. A call for papers will be issued in due course. Tony Brewer From YGT at nm.ru Mon May 29 18:19:30 2006 From: YGT at nm.ru (Yuri Tulupenko) Date: Tue May 30 08:03:11 2006 Subject: HES: Re: RVW--Frey on Laurent, ed., _Henry George's Legacy in Economic Thought_ References: <12543-446B9C70-1258@storefull-3337.bay.webtv.net><20060519141703.26613.qmail@web37715.mail.mud.yahoo.com><6.2.0.14.2.20060520093244.02ee9cd8@localhost><001701c67f02$3b625500$0100a8c0@me> <6.2.0.14.2.20060524103117.02fb3e58@localhost> Message-ID: <003101c6836e$457b7d80$0100a8c0@me> To Polly Cleveland and Pat Gunning: I was referring to the claim that spectrum rents owe their existence to the artificially created scarcity of licenses. That is, rents might have been zero if it hadn't been for the limitation of entry. The claim is made, for instance, by B. Owen, J. Beebe and W. Manning in _Television Economics_ (1976). I was interested in any comments on such a pesumably extreme position. As it seems, most critics admit that spectrum _is_ scarce, and rents are necessarily generated. Although, according to Mark Blaug, it is spectrum rent which is perhaps the perfect Georgist rent for us today, it is not my intention to divert attention from the discussion of LVT. However, any replies offlist are welcome. Yuri Tulupenko From pgunningp at yahoo.com Tue May 30 13:40:37 2006 From: pgunningp at yahoo.com (Pat Gunning) Date: Tue May 30 15:27:29 2006 Subject: HES: Re: RVW--Frey on Laurent, ed., _Henry George's Legacy in Economic Thought_ In-Reply-To: <48d.1156424.31a9df4c@aol.com> Message-ID: <20060530174037.10456.qmail@web37706.mail.mud.yahoo.com> Larry wrote that "[t]he basic Georgist insight is that public goods...can be profitably financed in ways that do not seriously disturb the existing allocation of resources." And he refers to urban economics texts as a place where you can find the name "Henry George" attached to this insight. Too bad for urban economics which, like television economics, is perhaps yet another case of too many wings of economics. As I see it, Larry, this second basic insight is just as wrong as the first one. Probably more so, since it employs the policy non-relevant idea of a public good. The insight you describe assumes that resources somehow exist without entrepreneurship. The problem of allocating them is a simple maximization problem. Yet, in a market economy there would be no resources without entrepreneurship. Parcels of land would exist, but they would not be a resource. And no one would know how to use the land to satisfy wants. One of the tasks of entrepreneurship is to identify how items like parcels of land in different places and other items and actions can be combined and coordinated to satisfy consumer wants. Assume that, in a market economy, entrepreneurship has appraised the land and put the different parcels to different uses. If parcels of land are taxed, entrepreneurs will act differently toward land than otherwise. (Keep in mind that I am talking about a modern economy. Even primitive peoples know very well how to use parcels land. But they have no markets and no entrepreneurship. The �average Jane� in a modern market economy has practically no idea of the most economical use of a parcel of land.) Under these conditions, taxing site values would affect entrepreneurship in the same way that a tax of any other kind would affect it. I will grant that the Georgian tax cannot affect the production of improvements to land that have already occurred. Bygones are bygones. I will also grant that such a tax is an easy way to raise revenue to pay for �public goods.� But the Georgian tax does affect the production of NEW improvements. It causes landowners to build taller and deeper in order to economize on the use of land. However, extra stories to a building that are added only because of a land value tax will not ordinarily be in the interest of consumers. If it were not for the tax, the city would expand in length and width, instead of in height and depth. Of course, the problem is more complicated than one can describe by referring to only three dimensions. But this should be sufficient to make my point. This second insight, it seems to me, is just the first insight in a different package. The Georgian tax is still an effort to tax the elusive unearned increment. Could we say that it is an exercise best studied by economists in yet another wing of economics, �advertising economics�? Pat Gunning From Lmos at aol.com Tue May 30 15:51:20 2006 From: Lmos at aol.com (Larry Moss) Date: Tue May 30 16:42:28 2006 Subject: HES: Re: RVW--Frey on Laurent, ed., _Henry George's Legacy in Economic Thought_ Message-ID: <45c.2301af5.31adfc38@aol.com> Yuri Tulupenko said: > Although, according to Mark Blaug, it is spectrum rent which is perhaps the > perfect Georgist rent for us today, it is not my intention to divert > attention from the discussion of LVT. However, any replies offlist are > welcome. > I think Yuri Tulupenko is on to something that is helpful to clarify the issue at hand about Georgists rents. I think a distinction can be made between Georgist rents and other types of rents that are "artificially created" by the work (or misdeeds) of man. The issue with the spectrum rent as I understand it, has to do with technology more than economics. One engineer that I once met insisted that there is no inherent scarcity in the spectrum because signals can be piggybacked on the same number (for example, 104.5 FM ) can have hundreds of stations broadcasting on 104.5 in the format of 104.5 (a), 104.5 (b), and so on. The radio receiving the signals would be programmed to unscramble them so that each station can be heard without interference. (Someday we could have out own HET station broadcasting the lastest archival findings!) This means that the limited number of radio broadcasting licenses that some of us have grown up with and still decorate the dashboard of our cars, is a creature of monopoly and springs from no natural monopoly or anything like that. If my engineer source were correct, then this would not be Georgist rent since the rent itself is unnecessary to produce an efficient (even rational)allocation of resources and is more likely the result of rent seeking or the licensing limitation an atavistic institution that has not been adjusted to the new technological realities. Of course my engineer source may have told me the wrong information. My engineer friend may have misinformed me about the state of the arts. I certain do not pretend to know much about this technology. Perhaps others on this network can clarify the true origin of the rent on the broadcasting spectrum. In Henry George, some rents must be paid to produce an efficient allocation of resources. Here George followed David Ricardo and even von Wieser and the Austrians about the nature and necessity of land rent. Still, the fact that certain types of rents must be paid to Joe (in the first instance) doesn't mean that they have to stay with Joe, they could be redistributed to Sam (in America that is "Uncle Sam") without seriously impeding incentives. That is the insight behind the "single tax" and LVT. Also, in America to own a radio station means the right to broadcast on a particular frequency. The value of a radio station is far in excess of the value of the tiny building on a postage stamp of land with a broadcasting tower projecting upwards. That scarcity of broadcasting frequencies is what is driving the value of the broadcasting license). If my engineer friend were correct about what is technologically possible, then like liquour licenses and zoning regulations, many station owners would fight not to reform the licensing system in broadcasting. It would be ironic if Georgist theorists ended up defending a monopoly entitlement system by mislabeling those payments as "Georgist rents" when they are "rent-seeking rents" instead. A thoroughgoing Georgist needs to maintain and keep a sharp distinction between these two sorts of rents. Laurence Moss From james.ahiakpor at csueastbay.edu Wed May 31 01:53:19 2006 From: james.ahiakpor at csueastbay.edu (James Ahiakpor) Date: Wed May 31 07:51:21 2006 Subject: HES: Re: RVW--Frey on Laurent, ed., _Henry George's Legacy in Economic Thought_ In-Reply-To: <45c.2301af5.31adfc38@aol.com> References: <45c.2301af5.31adfc38@aol.com> Message-ID: <447D2F4F.2070806@csueastbay.edu> It seems to me that all the effort to distinguish between pure land rent that should qualify for taxation and non-pure land rent that should be tax-exempt misses a crucial point. The search for such "unearned" rent or "income" is envy or covetousness in the guise of promoting the efficient use of resources. Marx and Marxists are more upfront about it when they declare their war on private property and seek to expropriate landowners of their entitlement to them. All land is to be held or owned by someone. I don't see what rightful business it is of anyone else to insist that some plot of land be put to this or that use, other than what the current owner or title holder chooses to do with it. The fact that an appreciation in the value of undeveloped land (received by the seller) is not added to GDP is beside the point. It is not added because it is properly considered to be a transfer payment. The new purchaser(s) must have earned income (from current production), which already would be included in the estimated GDP. Had the owner of the land hired people to work on it -- that is improved upon its "usefulness" -- that expenditure would have been added to GDP as well. If the people hired had been taken away from doing something else in the economy, the estimated GDP may not then be different from the previous one in which income earned in some other activity was used or added to some other borrowed funds to purchase the undeveloped land. I think it is a lucky thing for economic well-being of humanity that Henry George's single tax proposal has not been adopted across the world. Pat Gunning has avoided responding to the request to name a proper tax, other than the land rent tax. His focus on the entrepreneurial activity of a landowner or purchaser can hardly be a satisfactory answer to that request. I think everyone who earns income from whatever source has to pay a tax, perhaps a flat 10%. This because everyone enjoys the public goods provided by government, including national defense, the police service, and the administration of justice. The attempt to gang up on landowners should be seen for what it is: free-ridership in the enjoyment of public goods clothed in the guise of the pursuit of economic efficiency. James Ahiakpor From YGT at nm.ru Tue May 30 18:33:10 2006 From: YGT at nm.ru (Yuri Tulupenko) Date: Wed May 31 07:51:52 2006 Subject: HES: Re: RVW--Frey on Laurent, ed., _Henry George's Legacy in Economic Thought_ References: <45c.2301af5.31adfc38@aol.com> Message-ID: <006d01c68439$55ba1aa0$0100a8c0@me> Blaug on spectrum rent is quoted in Polly Cleveland's article "Mark Blaug: Edging Toward Full Appreciation". There is a link to the article in Polly's post of May 17. Yuri Tulupenko From pgunningp at yahoo.com Wed May 31 08:55:25 2006 From: pgunningp at yahoo.com (Pat Gunning) Date: Wed May 31 09:48:09 2006 Subject: HES: Re: RVW--Frey on Laurent, ed., _Henry George's Legacy in Economic Thought_ In-Reply-To: <447D2F4F.2070806@csueastbay.edu> Message-ID: <20060531125525.79475.qmail@web37705.mail.mud.yahoo.com> Dear James: I agree fully with your assessment of the Georgists' motivations. I said pretty much the same thing in my initial post. But I don't see the point in responding directly to the question about what kind of tax would be best. I have already given the broad answer that the best kind of tax is one that taxes consumer surplus. But to respond in the way that I think you want, I would have to say something about sales taxes, income taxes, or the like. All taxes, including these, affect entrepreneurship, as I have said -- and as everyone but the Georgists seem to know. But the issue in the discussion is not about this. The issue, in its initial form or in Larry's disguise, is about whether the land value tax or land rental tax affects entrepreneurship. There is another related issue that I have been avoiding, however. It is the claim implicit in Larry's post relating to taxing on the basis of elasticities of supply. To deal with this would take me very deeply into Davenport's competitive entrepreneurship approach to price and value, which differs categorically from the Marshallian approach that we all have imprinted on our brains. It is enough at the moment to present Davenport's criticism of George. But perhaps you have not been paying close attention to this. Best wishes, Pat Gunning From eh.net-review at eh.net Wed May 31 12:43:48 2006 From: eh.net-review at eh.net (eh.net-review@eh.net) Date: Wed May 31 13:19:37 2006 Subject: HES: RVW--Wright on Macdonald, _A Free Nation Deep in Debt: The Financial Roots of Democracy_ Message-ID: ------------ EH.NET BOOK REVIEW -------------- Published by EH.NET (May 2006) James Macdonald, _A Free Nation Deep in Debt: The Financial Roots of Democracy_. Princeton: Princeton University Press, 2006. ix + 564 pp. $20 (paperback), ISBN: 0-691-12632-1. Reviewed for EH.NET by Robert E. Wright, Stern School of Business, New York University. Storied trade publishing house Farrar, Straus and Giroux (FSG) published _A Free Nation Deep in Debt_ in cloth in 2003 but did not see fit to send a copy to EH.Net for review. Princeton University Press, the publisher of the new paperback edition technically reviewed here, is taking closer aim at the scholarly market. That is likely a good call. Though ably written, this book is closer in tone, density, and substance to a scholarly tome than a bookstore blockbuster. Likely, FSG was attracted to the book's Niall Ferguson-esque Big Thesis: Democracies eventually defeat autocracies because "countries with representative institutions are able to borrow more cheaply than those with autocratic governments" (p. 4). Bond markets also strengthen democracies internally by giving citizens some of the proverbial power of the purse and by aligning their interests with those of their governments. Heady, important stuff. To prove his thesis, James Macdonald, a British investment banker and independent scholar, has written a wide-ranging survey of the co-evolution of representative governments and public debt markets. He starts with the Old Testament, which he uses as a primary source to explicate the transition of societies from a Lockean state of nature to autocracy. Small family groups that highly valued leisure were subsumed or slaughtered by larger and more powerfully organized autocracies that forced their subjects through taxation to create economic surpluses. Autocracies soon came to control much of the ancient world but found it impossible to control the vast expanses of Asia, the forests and fjords of Northern Europe, or the jungles of Africa. A few small city states, often strengthened by alliances with other nearby cities, also managed to hold off the imperial advance for a time. The ancient autocracies financed wars from savings, their legendary "treasure troves," and equity contracts that divided the spoils of war. The democratic city states, by contrast, borrowed to fund resistance to imperial encroachments. "The picture that emerges," however, was "not of a regular system of public finance, but of a series of improvised reactions to fiscal emergencies" (p. 36). The ancient Greeks, for example, moved toward modern public credit but never explicitly connected "the principle of voluntary contribution to the public funds and the principle of distribution of surplus assets" (p. 36). The result was a dizzying array of debt instruments, some forced and some voluntary, some paying interest and others not, most short-term but some in the form of life annuities. The Greeks sometimes found it difficult to honor their obligations but the extant documentation is too sparse to say anything more definitive about their creditworthiness. Modern public finance had to await the emergence of a different group of city states some 1,500 years later in the northern Italian peninsula. There emerged, for the first time since the fall of Carthage, a group of states run by merchants instead of soldiers. Desperate to maintain their freedom from regional despots, the representative governments of Venice, Florence, and Genoa hit upon the notion of repayable taxes, levies upon which interest would be paid if the government's finances allowed. To evade the Church's then stringent usury prohibition, repayment of the principal sum was left at the pleasure of the government. The Venetians circumvented that inconvenience by making the right to receive the tax repayments transferable to third parties, which quickly led to the creation of a secondary market. "They had invented the bond market" (p. 77) as Macdonald writes, but the Italian city states did not regularly pay interest on their repayable taxes, the market prices of which spiraled downward. City states in northern Europe eventually improved upon the Italian model by avoiding forced loans and repayable taxes and religiously servicing their debts. The Dutch Republic was the major innovator here. Medieval and Early Modern European autocrats also borrowed but almost invariably eventually defaulted. Unsurprisingly, they could not borrow as much or as cheaply as the Dutch, who won their independence by wearing down the once mighty Hapsburg Empire. By the end of the 80-year struggle, a majority of Dutch households were creditors to their government. Default, rebellion, or large scale tax evasion became unthinkable because the interests of the government and the citizenry were thoroughly intertwined. After revolutions of their own in 1688 and 1776, the British and the Americans adopted Dutch-style finance, funding their wars in large measure by selling bonds to citizen creditors rather than resorting to punitive levels of taxation, ruinous inflation, or physical coercion. The democracies thrived, while autocracies in France, Germany, Russia, and elsewhere lost wars and rebellions. By World War II, however, government wartime financial techniques, including financial repression, rationing, and payroll deduction, had become so powerful that the great patriotic bond drives of earlier wars lost much of their importance. The wartime financial system of that greatest of autocrats, Adolf Hitler, looked eerily similar to that of the United States. If Macdonald is right -- and there is more than a little truth in this book -- then adherents of the English "Country" and American Jeffersonian Republican traditions exaggerated the negative aspects of national debts. Far from endangering democracies, national debts bolstered them by enabling them to defeat powerful external and internal foes. Eternal interest was as much the price of liberty as eternal vigilance. Authors who dare proffer such a Big Thesis confront numerous tradeoffs, the most important of which is that between depth and breadth. A twenty-page bibliography is always impressive, but less so for a book that covers several millennia of finance, government, and politics. Specialists will likely be disappointed with the treatment of their areas of expertise. (I cringed at several points in his discussion of the early U.S. monetary and financial systems.) But readers should concentrate on the forest rather than the trees and judge this ambitious and important book on its panoramic vision. Robert E. Wright teaches business, economic, and financial history at the Stern School of Business, New York University. His most recent books include _The First Wall Street: Chestnut Street, Philadelphia, and the Birth of American Finance_ (Chicago, 2005) and _Financial Founding Fathers: The Men Who Made America Rich_ (Chicago, 2006, with David J. Cowen). He is currently working on a book tentatively titled _Financing Freedom_ that will describe how the entire financial system, not just the government securities market, enabled America to vanquish its most dangerous enemies at home and abroad. Copyright (c) 2006 by EH.Net. All rights reserved. This work may be copied for non-profit educational uses if proper credit is given to the author and the list. For other permission, please contact the EH.Net Administrator (administrator@eh.net; Telephone: 513-529-2229). Published by EH.Net (May 2006). All EH.Net reviews are archived at http://www.eh.net/BookReview. -------------- FOOTER TO EH.NET BOOK REVIEW -------------- EH.Net-Review mailing list EH.Net-Review@eh.net http://eh.net/mailman/listinfo/eh.net-review From james.ahiakpor at csueastbay.edu Wed May 31 15:16:31 2006 From: james.ahiakpor at csueastbay.edu (James C.W. Ahiakpor) Date: Thu Jun 1 09:39:35 2006 Subject: HES: Re: RVW--Frey on Laurent, ed., _Henry George's Legacy in Economic Thought_ In-Reply-To: <20060531125525.79475.qmail@web37705.mail.mud.yahoo.com> References: <20060531125525.79475.qmail@web37705.mail.mud.yahoo.com> Message-ID: <447DEB8F.4030601@csueastbay.edu> Hi Pat, I've been paying close attention to the discussion. I think it would have ended long ago had you directly pointed out the covetousness of George's single tax proposal: Roger Sandilands and Warren Samuels probably wouldn't have made their contributions after that. I think you are using the definition of entrepreneurship that Cantillon and most Austrians have employed, but which most people apparently have not become acquainted with. (By that definition, the beggar or thief is an entrepreneur.) That's why I think they can't see the point of a landowner being an entrepreneur. However, I don't think you easily persuade people to treat landlords the same as all other property owners because they can always come back with the claim that land is fixed while other resources are not. Therefore, landlords are a different breed. After a while, I just get tired of an interminable debate. Get people to realize the essence of an argument. Maybe then they'll quit their persistence in error. (Talking about elasticities would just be another diversion and a waste of time.) I'm pretty sure most admirers of George's single-tax argument don't realize that they are Marxists in disguise. When they do, I think they'll quit belonging to that camp. That's what I'd been waiting for you to do. I finally had to do it clearly myself. Cheers, James Ahiakpor From polly at mcleveland.org Wed May 31 13:13:14 2006 From: polly at mcleveland.org (Polly Cleveland) Date: Thu Jun 1 09:40:14 2006 Subject: HES: Re: RVW--Frey on Laurent, ed., _Henry George's Legacy in Economic Thought_ In-Reply-To: <45c.2301af5.31adfc38@aol.com> References: <45c.2301af5.31adfc38@aol.com> Message-ID: <6.2.0.14.2.20060531121727.03025020@localhost> Larry Moss says that spectrum rent is entirely artificial, because technology could make almost unlimited amounts of spectrum available. Larry forgets that this spectrum-expanding technology is expensive. In effect, it substitutes capital for land. Here's an analogy. Imagine a third-world town of scattered mud-brick huts. Larry would argue that land is not scarce, because the town's entire population could fit into a single New York City highrise! Spectrum actually helps clarify Georgist concepts. Title to spectrum is just the publicly-created and policed right to broadcast at a certain frequency and power in a certain location. In effect, it is a circle of land centered on the broadcast tower, with radius determined by power. Clearly this title has a completely separate value from the value of the equipment, or the studio that produces the broadcasts. Landowners can't easily move structures from one site to another. But broadcasters can move signals from one frequency to another by turning a dial! Polly Cleveland