Note to the reader: I had originally planned to divide what follows as a series of posts in order to better present the ideas herein.  However, I've decided to simply cram it all into one post in the interest of getting the ideas out there and hopefully sparking a discussion.  I know that this isn't in the interest of good writing, but I think the prospect of getting these ideas out, here and now, is a more pressing matter.

Also, I want to especially address this post as a response of sorts to much of what I've been reading here recently, particularly to recent posts by coatesd, destor23, Dan Kervick and Another Trope regarding the current economic mess and capitalism in general.  I hope that my contribution here will help to further that discussion.

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Part 1 - "Do we hate each other that much?"

That's what I remember thinking to myself after hearing Rick Santelli's famous on-air rant that helped spark national interest in the Tea Party.  Santelli was fuming at the notion of bailing out homeowners in the midst of the greatest financial crisis in 80 some odd years.  The injustice in his crosshair was the possibility that he might end up subsidizing the bathroom addition of some irresponsible neighbor.

But I was thinking of John Thain's infamous executive bathroom at the now defunct Merrill Lynch, replete with a $35,000 toilet.  Santelli didn't rant about that.  Or, if he did, I must have missed it.

I kept thinking about that rant as I watched support for Tea build up over the following year.  There was a clear, familiar tension here.  Once the banks had been successfully propped up, it was back to business as usual and along very familiar lines: big government versus free enterprise.

All of the familiar cultural heroes were back too, from Roosevelt to Rand.  Right to Left, people were engaging in long practiced rhetorical rituals.  You know.  Going Galt.  New Dealing.

I started thinking a lot about the tension between these forces, which I've come to regard more or less as the tension between the individual and the collective.  I see our economic problems along these lines.  I see our environmental problems along these lines.  Of course, all of this is steeped in our politics, in which battles are fought almost entirely along these lines.

How to reconcile the two has become something of an obsession for me.  I can see clearly the tension between the two, but it is primarily because of the need for both that one or the other hasn't simply taken over.  Large parts of the world have now engaged in bold experiments toward both extremes, and yet we still seem to be facing some very considerable problems.  But I think that the failure of these systems is precisely in relying on too extreme a version of one or the other concept - extreme collectivism in the case of communism and extreme individualism in the case of capitalism.

But back in 2009 I still had no idea how we might approach a reconciliation of these seemingly opposing forces.  So, I started with a concept that I thought at least got the big picture right.

Part 2 - "Spaceship Earth"

Though he isn't particularly well known these days, there was an economist named Kenneth Boulding that I happen to admire.  Boulding exemplified some characteristics that I think are lacking among many economists.  In particular, he had a sense of humor, but he also cared a lot about things like peace and equity.

If you study economics these days, it's a very technical subject that is mired in analytics pointed at maximizing efficiency.  That's good as far as it goes, but efficiency isn't the only concern in the world.  In the wake of the Occupy, this seems to be something that people are waking up to right now.

I think that's a good thing.  I would guess that Boulding would have thought so, too.  In particular, I think it's useful to consider Boulding's essay entitled "The Economics of the Coming Spaceship Earth."  In the essay, Boulding describes two economic paradigms.  The first, arguably still our current paradigm, is the cowboy economy.  Think of the westward expansion in the US.  Rugged individuals.  True grit.  Bootstraps.

And land.  Lots of land that had not yet been claimed by the forces of Western civilization.

Boulding goes on to point out that the cowboy paradigm really only works until the frontier is settled.  After that, there isn't much room for all of us to run around and act like proper cowboys.  So, where does leave us?

Enter "Spaceship Earth."  The idea is simple.  We're all on this rock together and somehow we have to make it work.

Boulding's idea here seems to line right up with a lot of the problems we're beginning to face, especially with respect for the environment and natural resources.  In the cowboy paradigm, there's always more room to roam.  On Spaceship Earth, we've got a different role entirely: maintain life support.

It is, however, quite clear that there are many modern cowboys who aren't ready to turn over their pistols and play a different game.  And it would also seem that their philosophy has a wide enough appeal to stymie the dawning of the Age of Aquarius.  Boulding had, I felt, provided the proper conceptual model, at least in the big picture sense, but I still lacked a way to reconcile the individual and collective.  That is, until now.

Part 3 - "The Ground Beneath Our Feet"

What if I told that there existed a political economy that reconciled these two forces, without appealing to failed systems like laissez-faire or central planning?  And that this political economy was proposed by an American who, a century ago, self-published what became at the time the most popular book in America?  And that he nearly became the mayor of New York City, losing narrowly to the Tammany Hall machine, but besting a young Teddy Roosevelt?  And that his ideas inspired the popular board game Monopoly and became influential in the progressive and labor movements in the US and the UK?

What if I told you all that and that his proposal is simple, economically sound and could be potentially phased in, either nationally or locally, starting right now?  That there is good reason to believe that his proposal can actually increase efficiency and equity without sacrificing one for the other?  That it provides and sound basis for regulating the environment?  That it can potentially reconcile the tension between the needs of the individual and the needs of the collective?

I am sure you would probably think that's all too good to be true.  But then maybe you, like so many, have never heard of Henry George, who proposed a simple, but fundamental tweak to the political economy we all know and love.  Henry George argued that land, and essentially all natural resources, belong to all people collectively.

Philosophically, this a rejection of Locke's labor theory of property and an affirmation of the critique levied at Locke by Rousseau.  The implication here is that since land belongs to all of us equally, that the ground rent is owed to the community.  This is the tax base of the community, meant to provide for its needs.

George parts with both Marx and the modern neoclassicists in making this distinction between land  and capital, but I think it's far more profound than it might seem at first brush.  Obviously, land is distinct from capital in that it cannot be created by labor, but where modern economists dismiss this as a conceptual triviality, it would seem that this is not entirely so.

For one thing, taxes on competitive markets create inefficiencies in the form of loss of surplus and in the form of deadweight loss, where the market basically underperforms potential:

Those two white triangles in the middle represent the deadweight loss.  However, a tax on something with a fixed supply, like land, looks different:

Two key things are different here: there is no deadweight loss, or economic inefficiency, produced by this tax and the tax also cannot be passed on from the producer to the consumer.  This relates to an important concept deployed by George, that of the "unearned increment."  To George, there's a big difference between the founder of a start-up in Silicon Valley and Donald Trump.  Trump's infamous real estate speculation blighted cities like New York back in the 80s and 90s, rather than actually adding productive value to the economy.

George and his followers argue that his tax helps tamp down on land speculation.  That's worth considering the wake of the housing bubble.  In fact, there are modern followers of George who argue that the modern business cycle actually relates to an 18 year, land-based boom and bust cycle that goes back 200 years.

George's ideas have also found support with modern economists as diverse as Milton Friedman and Joseph Stiglitz.  Friedman called George's land tax the "least bad" of all taxes, which I'm pretty sure is the exact same thing he said about constitutional democracy as a political system.  Einstein was a fan.  So were Leo Tolstoy, Clarence Darrow and, probably unsurprisingly, George Bernard Shaw.

Economists like UC Riverside's Mason Gaffney, University of Santa Clara's Fred Foldvary and UMKC's Michael Hudson have all been speaking out for years in favor of a George-style land tax.  Gaffney has chronicled the way in which Prop. 13 has been devastating to the state of California, but also to the nation as it became a major battle won in repealing taxes on property.  California has certainly been a harbinger of deficit, debt and political gridlock for the nation at large.

So, in the modern day a Georgist economic regime would seek, first and foremost, to tax economic rents as close to 100% as possible.  Fred Foldvary suggests something a little less than that, maybe 75%, but the point is to make sure that rent-seeking is minimized throughout the economy and that public services are provided for.  Then, the second goal would be to tax negative externalities, like air pollution.  Any other natural resource, including things like broadcast spectrum, could be similarly taxed.

Though never implemented to the extent that George described, his ideas have been implemented at various levels in place like the UK, Australia, New Zealand, Hong Kong, Singapore and even Pittsburgh.  The Henry George Theorem, still taught in some graduate public finance courses, indicates that government expenditures are always roughly equivalent to land rents, indicating that land alone, not to mention resources like gas, oil and radio spectrum, should be more than enough to fund the desired level of government.

So, think of it: A political economy that was homegrown here in America, that recognizes that what a person creates is theirs while simultaneously acknowledging that we all have a stake in the planet, wherein lies the potential to create both a fairer and​ more prosperous system and the only people who have to lose anything are the Donald Trumps of the world.

In the view of Henry George, it's not the 99% versus the 1%.  There is no squishy moralizing over potential ill-gottens required here.  No one needs to demonize so-called job creators, but neither must we lionize they of the "unearned increment," who simply extract wealth from the system via economic rents.

Anyhow, that's where I'm at now.  I know I haven't been very active on a Dag over the past year, but I still stop by and read frequently.  I certainly haven't stopped looking for ways to make a better world.  I may be wrong, but I think this might really be an answer to a lot of the problems we're facing right now, including the divisive political environment.

I know that although Dag can sometimes feel like just another divisive political environment there is more diversity here than there is true division.  You're all intelligent.  You all give a shit.  I therefore graciously await my savaging.

Happy Holidays.

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For those interested, here are a few items for consideration:

An essay on George by his granddaughter.

George's Progress and Poverty.

A simple graphical depiction of how George's political economy differs.

Mason Gaffney's Corruption of Economics, an intriguing re-injection of George into American economic history that has him going toe-to-toe with the early wonks of neoclassical economics.  Also in PDF.