Joseph Stiglitz: October, 2002, interview

Q: A former Director of Robert Schalkenbach Foundation was given a grant recently to research the adequacy of land as a tax base. He's a professor at the University of California, Riverside, named Mason Gaffney, and he wrote a book titled, "The Corruption of Economics." Are you familiar with his work?

JES: No.

Q: I'll send you a copy of the book. Basically, he argues that the founders of neo-classical economics, which, as you know, is the paradigm taught in schools such as the University of Chicago, distorted the science of economics to protect vested interests. For example, Rockefeller money was spent to hire professors of economics with a view to their discrediting the ideas of Henry George. Did that happen?

JES: My general impression is that most donors that give money to universities don't take a very strong view of [who should be on] the faculty. Sometimes it ends up on one side, sometimes on the other. It would have been unusual [at Chicago], but it could have happened there. What is striking about Chicago as a school of economic theory is that it's very conservative. One would have thought that Henry George was someone who would have been liked by "Conservatives."

Q: In that George wanted to reduce tax on the fruits of one's own labor?

JES: Exactly. And you want non-distortionary taxes, so I would have thought that every "Conservative" would be in Henry George's camp. Now, as far as I know, I'm one of the few people who keeps emphasizing that you ought to view Henry George in a broader way, to include natural resources. I didn't think that people thought about that a hundred years ago. But if they had, and maybe Rockefeller was smart — he realized that he obviously didn't want a tax on natural resources.

Q: He wouldn't have wanted rents flowing from natural resources to go to the people rather than to him.

JES: Yes, he obviously wouldn't like that perspective. But I don't know if that view was at that time recognized, and I just don't know whether he actively intervened at Chicago.

... read the entire interview

Michael Hudson: The Lies of the Land: How and why land gets undervalued

BAUDELAIRE OBSERVED that the devil wins at the point where he convinces humanity that he does not exist. The Financial, Insurance and Real Estate (FIRE) sectors seem to have adopted a kindred philosophy that what is not quantified and reported will be invisible to the tax collector, leaving more to be pledged for mortgage credit and paid out as interest. It appears to have worked. To academic theorists as well., breathlessly focused on their own particular hypothetical world, the magnitude of land rent and land-price gains has become invisible. But not to investors. They are out to pick a property whose location value increases faster rate than the interest charges, and they want to stay away from earnings on man-made capital -- like improvements. That's earned income, not the "free lunch" they get from land value increases.

Chicago School economists insist that no free lunch exists. But when one begins to look beneath the surface of national income statistics and the national balance sheet of assets and liabilities, one can see that modern economies are all about obtaining a free lunch. However, to make this free ride go all the faster, it helps if the rest of the world does not see that anyone is getting the proverbial something for nothing - what classical economists called unearned income, most characteristically in the form of land rent. You start by using a method of appraising that undervalues the real income producer, land. Here's how it's done.     Read the whole article