Glen Weyl: “The Very Structure of Capitalism Is Inherently Monopolistic” — Asher Schechter interviews Glen Weyl

In an interview with ProMarket, Glen Weyl, co-author of the wildly ambitious (and wildly controversial) new book Radical Markets: Uprooting Capitalism and Democracy for a Just Society, talks about antitrust, data as labor, and why he thinks the free market system is not actually free. “The entire business community has been speaking with one voice in the common interest of capital as a class,” he says....

A different take on "socialism" and how to implement it using markets in addition to government.

Good read. It's the basis of a proposal that is set forth in Radical Markets: Uprooting Capitalism and Democracy for a Just Society.

Q: You criticize the left and the right for drawing ideas from old modes of political and economic thinking. What should both do different?

I think the problem with the right is that it believes in the free market, which we absolutely believe in, but it doesn’t know what the market really is or what it requires to have a free market. It assumes that by going backwards to a totally monopolized and retrograde form of markets we’re going to get the dynamic free market of the future, which I think is deeply naïve and mistaken. I think they have a good goal in mind, having a truly free and competitive system, but they created systems that ignored the ways in which what they called markets actually led to concentrated forms of power, very similar to the forms of state power that they decried.

The left, on the other hand, also has good aims. It believes in greater equality and believes in breaking up concentrated corporate power, but it thinks it can trust in benevolent state actors to impartially execute this, which to me is just as naïve as trusting corporate actors or the owners of private property to somehow benevolently have the public interest in mind. Like the left, we want to reduce inequality, diffuse power more broadly, and have a more profound democracy, but we think that standard discretionary state power is a perfect way to reestablish the tyranny of the elite, precisely the same sort of oppression that they’re trying to alleviate....

The proposal is a form of public choice but differs from what now goes by the name of public choice theory.

ProMarket — The blog of the Stigler Center at the University of Chicago Booth School of Business

Glen Weyl: “The Very Structure of Capitalism Is Inherently Monopolistic”

Asher Schechter interviews Glen Weyl

Michel Hudson — Tollbooth Trump

Shamini Peries interviews Michael Hudson. Video and transcript.

Michel Hudson
Tollbooth Trump
Michael Hudson | President of The Institute for the Study of Long-Term Economic Trends (ISLET), a Wall Street Financial Analyst, Distinguished Research Professor of Economics at the University of Missouri, Kansas City, and Guest Professor at Peking University

Alex Tabarrok — The Return of Henry George?

The notion that property owners should pay extra for their proximity to the subway is called “value capture” and has long been debated in urban planning circles. Now Gov. Andrew M. Cuomo, a Democrat, has made value capture a prominent part of his plan to salvage the subway system by proposing to give the Metropolitan Transportation Authority the power to designate “transit improvement subdistricts” and impose taxes.

Marginal Revolution
The Return of Henry George?
Alex Tabarrok | Bartley J. Madden Chair in Economics at the Mercatus Center and Professor of Economics at George Mason University, and a research fellow with the Mercatus Center

Livia Gershon — The Different Meanings of Monopoly

The history of the board game.

JSTOR Daily

The Different Meanings of Monopoly
Livia Gershon

Sandwichman — The Strange Cult of Henry George

Interesting quote from a Libertarian about abolishing property tax as necessary to secure freedom.

Libertarians hold that taxes are simply a substitute for the direct confiscation of property that governments used to impose. Taxation, even with representation is a fig leaf for that.

This is relevant to the Chartalist and MMT view that taxes drive state money by creating a demand for it, allowing governments to transfer private resources to public use, and that the tax power is coercive, enforced by state power.

Libertarianism is based on freedom from coercion.

The radical right libertarian position — anarcho-capitalism — is to end coercion by making private property rights absolute. Governance is through natural spontaneous order.

The radical left libertarian position — anarcho-socialism — is to abolish private property rights and return to the commons. Governance is by consensus.

Both see their view as the fair way to deal with this issue.

Econospeak
The Strange Cult of Henry George

Sandwichman

Merijn Knibbe — Bob Solow, Matt Rognlie, Paul Romer, Mason Gaffney, the economic statisticians and rent incomes.

Important. How and why economic rent is back on the table after being excluded by neoclassical economics in reaction to Henry George.

It's short. Read the whole thing. This is potentially a game-changer, as Michael Hudson has been saying. 

Once rent comes into the picture, it becomes clear how the game is rigged by power, since power is required to extract rent. 

If one wants to continue claiming with neoclassical economists that economics is based on laws of nature, then it is necessary to include laws of power in the equations.

Real-World Economics Review Blog
Bob Solow, Matt Rognlie, Paul Romer, Mason Gaffney, the economic statisticians and rent incomes.
Merijn Knibbe

Miles Kimball — The Wrong Side of Cobb-Douglas: Matt Rognlie’s Smackdown of Thomas Piketty Gains Traction

What's getting traction is Henry George's idea of a land value tax. Miles Kimball follows his student Noah Smith in advancing consideration of it.

Talk of taxing away economic rent can only be good. It's a discussion that needs to be had.

Confessions of a Supply Side Liberal

The Wrong Side of Cobb-Douglas: Matt Rognlie’s Smackdown of Thomas Piketty Gains Traction

Miles Kimball | Professor of Economics and Survey Research at the University of Michigan

Noah Smith — A misguided attack on Land Value Taxes

Noah doubles down on the LTV after his Bloomberg View post generated some critical response.

Henry George rules. Take that John Bates Clark.

John Bates Clark (January 26, 1847 – March 21, 1938) was an American neoclassical economist. He was one of the pioneers of the marginalist revolution and opponent to the Institutionalist school of economics....

In 1888 Clark wrote Capital and Its Earnings. Frank A. Fetter later reflected on Bates' motivation for writing this work:

"The probable source from which immediate stimulation came to Clark was the contemporary single tax discussion. ... Events were just at that time crowding each other fast in the single tax propaganda. [ Henry George's ] Progress and Poverty... had a larger sale than any other book ever written by an American. ... No other economic subject at the time was comparable in importance in the public eye with the doctrine of Progress and Poverty. Capital and its Earnings "... wears the mien of pure theory .... But ... one can hardly fail to see on almost every page the reflections of the contemporary single-tax discussion. In the brief preface is expressed the hope that 'it may be found that these principles settle questions of agrarian socialism.' Repeatedly the discussion turns to 'the capital that vests itself in land,'...[6]"

Tax away the land rent.

Noahpinion
A misguided attack on Land Value Taxes
Noah Smith | Assistant Professor of Finance, Stony Brook University

Noah Smith — Piketty's Three Big Mistakes

Noah Smith is a Georgist! Who knew?

Bloomberg View
Piketty's Three Big Mistakes
Noah Smith | Assistant Professor of Finance, Stony Brook University

Bill Mitchell — Henry George and MMT – Part 2

This is the second part in my discussion about Henry George and Modern Monetary Theory (MMT). In general, there is nothing particularly incompatible between the introduction of a broader LVT at the Federal level to replace or reduce other taxes currently levied and the insights provided by MMT. However, once you understand MMT, you realise that the discussion of the design of the tax system is quite different than just raising income from the most ‘efficient’ means. The Georgists would do well to come to terms with that and demonstrate how a land value tax (LVT) would work to free up real resources to give the real space for governments to spend. There doesn’t appear to be any analysis provided by Georgists to calibrate the impacts on non-government spending of such a tax and how this would alter the tax mix required to maintain full employment spending levels and satisfy the socio-economic spending goals of government. There are other things that might be done as well (if not prior to imposing a LVT) which would reduce the likelihood of property price bubbles. Finally, the obsession with the single LVT as a saviour is in denial of the causes of recessions and the the role that financial capital plays in destabilising economic systems. A LVT alone will do little to resolve those problems.

Bill Mitchell – billy blog
Henry George and MMT – Part 2
Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at the Charles Darwin University, Northern Territory, Australia

Bill Mitchell — Henry George and MMT

I get several E-mails (regularly) from so-called Georgists who want to know how the Single Tax proposal of Henry George, outlined in his 1879 book Progress and Poverty, fits in with Modern Monetary Theory (MMT). I have resisted writing about this topic, in part, because the adherents of this view are vehement, like the gold bugs, and by not considering their proposals in any detail, I can avoid receiving a raft of insulting E-mails. But, more seriously, I see limited application. In general, the Georgists I have come across and the literature produced by those sympathetic to the Single Tax idea, is problematic because there is a presumption that national governments need tax revenue to fund their spending. Clearly, this is an assertion that MMT rejects at the most elemental level. But there is some scope for considering their proposal once one abandons the link between the tax revenue (which they call rent) and government spending capacity. The question that arises, once we free ourselves from that neo-liberal link, is whether a land tax has a place in a government policy portfolio with seeks to advance full employment, price stability and equity. The answer to that question is perhaps. I am writing about this today and tomorrow (with an earlier related post – Tracing the origins of the fetish against deficits in Australia) as part of my research into the life of Clyde Cameron, given I am presenting the fourth Clyde Cameron Memorial lecture tomorrow night in Newcastle. I hope this three-part blog suite is of interest. In some parts, the text is incomplete.…

Bill Mitchell – billy blog
Henry George and MMT
Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at the Charles Darwin University, Northern Territory, Australia

Polly Cleveland — Piketty’s Model of Inequality and Growth in Historical Context, Pt 2

Neoclassical economics was designed for the purpose of eliminating economic rent from consideration.

Mason Gaffney has shown how many individuals helped construct neoclassical economics, often with financial support from the robber barons and their successors. I will focus on two: in the United States, John Bates Clark (1847-1938), and in Europe, Vilfredo Pareto (1848 to 1923). 

Recall from Part I that the classical economists divided society into three classes: Owners of land and other natural resources received unearned income or “rent” from their holdings—often derived from conquest or inheritance. Capitalists (who often overlapped with landowners) owned physical capital (like factories or ships) and received interest or profit from investing. Workers received wages. Also recall that the classical economists favored taxing “rent” by taxing land values; Henry George crusaded for this tax. 

John Bates Clark of Columbia University, for whom is named the prestigious John Bates Clark Medal, transformed economics into an inequality-free abstraction.Writing in the 1890’s, Clark merged land into physical capital, thus obliterating the classical understanding of land. In the new neoclassical world, capital (including land) originates solely from productive investment. There is no unearned “rent”, only legitimate “profit.” (Ironically, Marx merged rent into profit because he considered both illegitimate.)

Power rules.

In my view, Piketty’s and Solow’s models are both fundamentally flawed in that they rest on the same ahistorical, apolitical, two-factor neoclassical foundation. As the classical economists understood, inequality derives from power, ultimately the power of conquerors to extract tribute from the conquered. And as the Progressives, the New Dealers, and the civil rights activists have demonstrated, democratic societies can counter that power with well-designed tax and regulatory policies supported by an aroused public. We are not prisoners of a mathematical model.

Dollars & Sense
Piketty’s Model of Inequality and Growth in Historical Context, Pt 2
Polly Cleveland | Executive Director of the Association for Georgist Studies

Polly Cleveland — Piketty’s Model of Inequality and Growth in Historical Context, Pt 1

The background to Piketty. Must read unless you are a historian of economics or read Michael Hudson. Short summary of what political economy is really all about.

Dollars & Sense Blog
Piketty’s Model of Inequality and Growth in Historical Context, Pt 1
Polly Cleveland | Executive Director of the Association for Georgist Studies

Charles Lane — Thomas Piketty identifies an important ill of capitalism but not its cure

Roger already posted a link to this but I want to focus on a particular section that hit to the heart of the matter, economic rent and how to tax it. Michael Hudson especially has convinced me that this is the key issue and the only workable approach within the system of capitalism that is consistent with the principles of capitalism.

In a perfectly competitive system there would be no economic rent because it would be competed away. Economic rent is the rotten fruit of imperfect competition. But perfect competition is an unachievable ideal in a modern monetary society, so other means to address rent as an externality are needed.

The purpose of capitalism is "capital formation, " where "capital" means productive capital as the means of production rather than financial claims on it or other financial wealth. In other words, capitalism is not about making people wealthy, increasing shareholder value, or making a profit. It's about increasing the ability of the society to produce the consumer goods that it needs and desires, and the capital goods necessary for that.

Economic rent is parasitical on the this process, and according to the principles of capitalism should be eliminated institutionally or discouraged, e.g., by taxing away. Henry George proposed doing this by taxing land rent, but land rent is not the only form of economic rent. There is also monopoly rent and financial rent, for example, and they figure large in the contemporary context of mass markets and the managerial capitalism and finance capitalism that are replacing entrepreneurial capitalism.

And so, updating Henry George’s single tax, Piketty proposes a global wealth tax, making similar claims about its benefits for both equality and growth.

For Piketty and George, the bottom line, both moral and economic, is to socialize “rent” — rent, that is, not in the colloquial sense but in the economic sense of income disconnected from productivity.

It’s an attractive vision: an egalitarian, productive society, purged of parasitical rent-seeking through the expedient of well-aimed taxes.

Alas, Piketty’s global wealth tax and George’s single tax suffer from the same defect, and it’s not political impracticality — after all, George nearly got himself elected mayor of New York City in 1886.

It’s the inherent difficulty of separating the productive, untaxed component of the return on land or capital from the unproductive, taxed part.

Clear in the pages of a treatise, the distinction is murkier in practice. The market price of a vacant lot can reflect potential productive uses, as well as the risk a buyer takes by betting on them. A similar analysis applies to the rate of return on capital.

As a result, it’s hard to devise a tax on wealth that raises a significant amount of revenue but doesn’t discourage at least some socially beneficial saving or entre­pre­neur­ship. The potential for adverse unintended consequences — economic and political — is greater than Piketty seems to realize.

Great private fortunes can indeed entitle their owners to an undue share of society’s current income and political power. At times, however, private wealth can serve as a font of charity or, indeed, a bulwark against government overreach.

We’ve been debating the right balance since the 19th century and probably will be long after the 21st.

The Washington Post Editorial
Thomas Piketty identifies an important ill of capitalism but not its cure
Charles Lane, Editorial Writer

The Wealth Lobby Survived Henry George, It's Not Worried About Thomas Piketty Rehashing The Same Data

   (Commentary posted by Roger Erickson)

Thomas Piketty identifies an important ill of capitalism but not its cure

Editorials like this are arriving all over the globe, from many diverse sources who feel that their ill-gotten status is threatened by Piketty re-lifting the same waistcoat .... as well as by the many who already knew the ailment, had seen the flab before the waistcoat was donned, and are impatient for a cure - not just yet another description.

A diagnosis is only half way to a cure? And a description is only half way to a diagnosis of how the ailment was brought to be.

There's an old saying in philosophy.

To know the truth, ask "why" five times.*

Asking why just once, every 10 generations? No threat to the disease agent whatsoever!




* example:
1) Why is there declining resilience & growing Output Gaps? Inequality.
2) Why is there inequality? Biased incomes & taxes.
3) Why are there biased incomes & taxes? Biased policy.
4) Why is there biased policy? Grossly impaired feedback loops.
5) Why are there grossly impaired feedback loops? Neglected practice at democracy?

[It seems that we have constipated democracy.

It's backed up more than 5 steps!]

(This calls for more than just political_ExLaxPlus.)

(Our PolicyColon needs some DemocracyProBiotics, as systemic replacement therapy.)

(If Adaptive Rate is going to stay the same, everything must change - sooner.)

If it takes 700 pages to say "inequality" ... then we're going nowhere, as fast as Henry George did, 100+  years ago.

Rumplestatskin — All taxes come out of rents

Mason Gaffney has for years been describing the nature of economic rents and its relation to taxation. His key idea, which would have been uncontroversial prior to the rise of the neoclassical school, is that all taxes come out of rents (ATCOR). This means that a single tax on the rents earned from ownership of natural resources can always provide sufficient taxation revenue.

This post shows how a land tax works, based on the work of Henry George.

Michael Hudson has been pounding on this forever, too. Tax economic rents, not productive contributions. Doh.

Warren Mosler has said that in his view a land tax would be sufficient to control inflation using functional finance. Taxes do not fund government. 

Michael Hudson would also tax away monopoly, oligopoly and monopsony rents, as well as financial rents, too, in order to discourage them, since they disrupt markets and lead to social dissonance. Generally such rents can only be collected with either favor government policy, often from capture of the political process, or at least government inaction to preserve a level playing field.

The hidden agenda of neoclassical economics from the get-go was to exclude economic rent from consideration after it had been featured in classical economics. This has been a roaring success and any attempt to address economic rent is now denounced as anti-free market, socialism, class warfare, and Marxism. So most economists, even heterodox economists other than Marxists and Marxians avoid mentioning economic rent, just as they avoid mentioning class structure and power structure. All these go hand it hand.

Rumplestatskin provides a very simple explanation of how conflating land and capital as "capital," as neoclasssical models do, obscures the role of land rent.

For example, when we whittle our way through the production chain down to the landowner, who has one input, land, the neoclassical framing say that this owner rents their land inputs, which are compensated at their marginal contribution to production. Okay. So she rents off another person who owns the land, who we then model as renting from another person, and so on.

The buck never stops. [This involves the informal logical fallacy of reductio ad infinitum, or infinite regress, also called "turtles all the way down."]

That’s what happens when you conflate land and capital into a single input. They nee[d] to be treated differently because land is not an output of any production process, unlike capital.

When you allow the buck to stop at ownership of land and natural resources, you get a very different picture of the economy. One in which the taxation capacity of rents is not limited their current value. As Gaffney points out, when we “lower other taxes, the revenue base is not lost, but shifted to land rents and values, which can then yield more taxes”.

Henry George made this argument concisely a mere 130 years ago when writing in 1881 about the fund from which taxation is drawn

MacroBusiness
All taxes come out of rents
Rumplestatskin

Edward L. Glaeser — Tax land, not buildings, to help cities thrive

Contemporary Georgism.

The Boston Globe
Tax land, not buildings, to help cities thrive
Edward L. Glaeser
(h/t Dan Sullivan)

See also The 140 year cycle in macroeconomic thought at Fresh economic thinking— New ideas and analysis by Cameron K Murray

Willie Osterweil — The Secret Sharing History of Monopoly

But Monopoly wasn’t actually designed to encourage ruthless cut-throat land grabs. Instead, the game was envisioned as a teaching tool about the injustice of landlords, one whose in-built ruthlessness would demonstrate the dangers of such practice. Called “The Landlord’s Game” when it was first invented by Lizzie Magie, in 1903, the game was in many ways similar to how it is played now.

But recently a remarkable rediscovery has been made: Magie designed advanced rules into the game which were made to demonstrate that everyone could live in harmony and sharing. They were never included in the Parker Brothers version, but, in all the early boxes, you were given an address to send to Magie for her advanced rules. If you did, under the heading of “For Advanced and Scientific Players”, Magie suggested a way to play where, rather than one person owning everything, all the players could share in the wealth.

Magie was a Georgist. The Georgists believed that people should be able to hold onto what they create with their own efforts, but that all things “found in nature”, especially land, are owned by all. For the Georgists, landlords were the root of all injustice, and they argued for a single progressive land value tax, to replace all other forms of taxation. This, they argued, since it would only tax wealth, could bring about equality and justice, and also break down the hegemony of the landlords.

Shareable
The Secret Sharing History of Monopoly
Willie Osterweil

Steven Spadijer — "The old, the new and the ugly"

Presentation and interview at Prosper Australia
Blaming The 70′S Economic Bust On Oil Is Incorrect

Posted by Karl Fitzgerald

(h/t Senexx at Modern Monetary Mechanics)

Senexx adds that Steven Spadijer is both a Neo-Chartalist and a Georgist.