Abstract
George understood “progress”—economic growth—to be disruptive and innovative, taking place through developments that changed the proportions and relative prosperity of different sectors. He began his analysis with the movement of settlers to the “unbounded savannah,” where they cultivated fertile land, cooperated and established the division of labor, increasing productivity, and, as a result, they became a complex society with differential advantages and disadvantages to certain locations and parcels of land. Rents thus emerged (modeled using Sraffa’s equations). This picture is a good basis on which to build an approach to inequality and instability, but it is not consistent with the factor markets of conventional marginal productivity theory. George’s approach is superior.
The rent of land is determined by the excess of its produce over that which the same application can secure from the least productive land in use.
—Henry George
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Notes
- 1.
See Sraffa (1960), chap. 11.
- 2.
I have argued elsewhere that this is a mistake and can be avoided, but requires a serious change in how we think about labor (Nell 2017).
- 3.
Divide the first equation in the text by A, the second by B, and so on; the result will be the equation in its more usual form.
- 4.
- 5.
- 6.
- 7.
Not altogether wrong if the level of aggregate demand is low; higher wages will lead to higher household spending which will increase revenues. But this is not what George meant.
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Nell, E. (2019). Understanding Rents in the Real Economy. In: Henry George and How Growth in Real Estate Contributes to Inequality and Financial Instability . Palgrave Studies on Henry George for the 21st Century. Palgrave Pivot, Cham. https://doi.org/10.1007/978-3-030-18663-0_2
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