Georgists Should Study Post-Sraffian Economics

1.0 Introduction

Here are some attempts to step back, but not very far, from some of the details in my numeric examples.

2.0 Henry George and Piero Sraffa

Henry George's book Progress and Poverty misrepresents classical political economy. I cannot justify this claim, since I read George's book more than a decade ago. But George and his followers are absolutely correct on a couple of points.

Marginalism developed by extending the theory of intensive rent, as in David Ricardo's Principles for example, to capital. This mistake results in the conflation of capital and land. And the acceptance of this mistaken approach was politically motivated to cover over the conflict between classes evident in classical political economy. It was an attempt to ignore the social question.

Henry George was also correct in thinking economists give good reason to tax rent on unimproved land. I think Quesnay and Ricardo each provide evidence that George was correctly understanding this aspect of classical political economy.

Piero Sraffa generalized interesting properites of land to the distinction between basic and non-basic goods. As I recall, he suggests a definition of non-basic goods, in the case of joint production, as those goods whose price of production is changed by a tax but in which that change has no wider impact on the prices of all goods.

I think a study comparing some aspects of the economics of George and and Sraffa might be a good research prospect for others.

3.0 Marginalism as an Illegimate Generalization of Ricardo's Theory of Intensive Rent

Part of the point of my numeric examples is demonstrating that marginalisms attempt to treat capital and land by the same theory fails. Capital (goods?) cannot coherently be considered as a given quantity to be allocated among alternative uses. Jevons, Menger, Walras and their fellow marginalists were mistaken.

The marginalists also had a utility theory of consumer demand. Amazingly, the human psyche and production follow the same laws.

I have thought, not very hard, about how appending demand functions for consumer goods might impact my exposition of numeric examples of rent theory. An additional fluke case would arise. This edge case would be between a case where a certain type of land is partially farmed and pays no rent and a case where this type of land is fully farmed and pays a rent. In the edge case, this type of land needs to be fully farmed to meet requirements for use. Rent on this type of land can range from zero to the rent it would pay if net output were increased by an infinitetesimal amount. In the edge case, prices of production are indeterminate. I guess payments to factors of production are still not rewards to physical contributions to production.

4.0 Fixed Capital and Extensive Rent

Models of single production (circulating capital) have some nice propeties that do not hold in general joint production. Given the rate of profits, prices of production are uniquely defined. Given a higher rate of profits, the wage is lower.

These properties hold in models of pure fixed capital and in models of extensive rent. I suspect they do hold in a model that combines fixed capital and extensive rent.

One might consider a model in which an industrial good, a tractor, is produced in a process that does not use land. It can be run for several years in processes that produce agricultural goods on different types of land. The analysis of the choice of technique would consider the economic life of the tractor, as well as which lands are fully or partially farmed. It seems to me this model would have at least some of the properties of the theory of intensive rent.