Seligman was a dogged critic of George, to whom George was almost an obsession, like Jean Valjean to Inspector Javert. His World Book Encyclopedia biographer notes his lifelong strife against George and Georgists. His Palgrave biographer, A.W. Coats, characterizes him as "a severe critic of Henry George." He is also one who "created the field of public finance in America" - in case there is any doubt how the twig was bent, and by whom. It is not that all academic economists scorned George. The founders of the National Tax Association included Lawson Purdy, and other Georgist names. Rather, those who did favor or tolerate his ideas were gradually isolated, ridiculed, silenced, or, if necessary, proscribed and ostracized.
Clark was the theorist, who set things up; Seligman was "the mailman" who delivered the message at the point of impact. Seligman was a frequent witness before the New York City Council, repeatedly working to stifle proposals from the Manhattan Single Tax Club (Marling, 1916), a large and active organization. He was influential in shaping the new Federal income tax, although, as to that, he was trumped in Congress by Congressmen Warren Worth Bailey, Henry George, Jr., and other "single-taxers" who shaped the original income tax legislation of 1916 along their lines (Brownlee, 1985). Seligman's attitudes, however, dominated the economics profession, and slowly prevailed over the popular position, first in the ivied halls where young minds are molded, and then in the legislatures where these molded minds act on the ideas that shaped them.
In his major work, Essays in Taxation (1895 plus many reprintings), Seligman devotes Chapter III, 31 pages, to savaging "The Single Tax." The manner is openly critical; there is not even a gloss of objectivity or impartiality. He gleefully quotes from Voltaire's "L'Homme a quarante ecus," a sarcastic attack on Quesnay, who had proposed taxing just farmland (George's tax was aimed mostly at city land, but never mind, any device was relevant and respectable when used to put down Henry George). Voltaire proceeds from the strange position that the poor people own all the land, an oxymoronic premise that Seligman implicitly endorses without the burden of responsibility. Seligman himself describes the work as "caustic ... mordant sarcasm" - and continues to cite it approvingly through ten or more editions of Essays in Taxation.
The spirit of invective is not the spirit of science nor philosophy. The spirit of Seligman's reference group seems to have been that any stick will do to beat Henry George, for whom decorum may be suspended, and for whom no upright scholar would demand fair treatment or equal time. Again and again we see the arts of drawing-room violence practiced against George: the artful sneer, the sarcasm, the giggle, the condescension, the feigned incredulity, the manufactured data. Seligman is not alone in his attitude: no one could pull this off alone, he would appear outrageous. There must have been an orchestrated campaign of academic terrorism. Its echoes reverberate down to the present. Note, for example, the admission by Prof. Paul Ormerod, who has taught economics at several British universities:
Turning to Marx, Seligman was anything but provincial, he was an historian of European thought on tax policy. Yet, neither "Marx" nor "communism" are in his index. The modern bias is to marginalize George and to characterize all conservatism as a reaction to Marx. That appears to be bad history. Seligman's guns, like Clark's, were trained on Henry George, clear through the 1920s. Clark dominated neo-classical theory; Seligman dominated its applications to tax policy.
Seligman, otherwise known as a sober scholar, let his hostile rhetoric lead him into multiple contradictions and inconsistencies. These are detectable with only a modest effort, and have been detailed elsewhere (Andelson and Gaffney, 1979). However, otherwise they have passed unchallenged within the profession: an indication that the "academic reward system" was luring or driving "objective" scholars in other directions. The most blatant misrepresentations of George, the most superficial arguments, may be and are advanced without rebuke.
Seligman had the practical sense to use Clark's strongest weapon against George. This was not the demonstration that land is productive (has a marginal product). The fact that land is productive does not say the owner is, nor gainsay that land income is a taxable surplus. After all, Quesnay and his group had championed land taxes in the belief that land was not just productive, but the only productive factor. Wicksteed, who worked the kinks out of marginal productivity five years before Clark published, continued to favor special taxation of land (Barker, p.382; Steedman, 1987, p.915). Actually, the fact that land has a marginal product turns out to be a useful tool of the Georgist case: it shows that the return to land may be separately imputed, and measured for tax purposes.
So, rather, Seligman uses Clark's mystical capital theory. This is the essential, distinctive Clark. Seligman writes that if land is taxed, this drives capital out of land, into housing, misallocating capital in favor of housing (Essays in Taxation, p.92). That presumes land is convertible into capital, and vice versa, just as Clark said when debating George at Saratoga in 1890. Thus, the essential for neutrality in taxation is uniformity, including uniformity between land and capital. Seligman goes on to apply this to income taxation as well as property taxation. (Others have applied it to excise taxation.) Like Clark, he believes that wages are another form of rent, and just as fully taxable as property income.
Seligman's doctrine of uniformity has grown mighty through the years. It is the theoretical basis for the watershed tax reform act of 1986 under which the American economy briefly boomed before crashing dismally. Neo-classicals were in command, led by Charles McLure. Uniformity was the touchstone. The 1986 reformers did away with devices like the investment tax credit, which favors new investing. They did this to help lower tax rates that apply to the income from old assets like land. The reaction to Henry George, embodied in the doctrine of uniformity, reached a century through time to mold our tax system in the name of the "level playing field."
Seligman is much more applied than Clark, but his theoretical assumptions are in harmony. Seligman was perhaps the most influential American tax economist of all time. His ideas form the basis of much of modern tax theory, the cutting edge of neo-classicism in policy. Like Clark, he faults George for thinking capital supply is elastic.
Seligman makes the above views even more explicit in "Tax Exemption through Tax Capitalization" (1916). As with Clark, the supply is fixed, by assumption. This is purely static analysis at a point in time. Significantly Arnold Harberger (1968), the more recent Chicago tax theorist, is also known for rejecting the view that housing taxes are shifted off capital, and by the same line of reasoning.
George Bernard Shaw, another George fan, also engaged Wicksteed to instruct him in the basic Ricardian economics he needed to extricate Fabianism from Marxist theoreticians. Shaw found these too mystical and cryptic. Wicksteed's and Shaw's common interest in George helped bring them together, and deeply affected the Fabian Society, which continued to support George after Hyndman and his Social Democrats turned against him. After being tutored by Wicksteed, Shaw attacked the Marxist Hyndman caustically, as Wicksteed never would, but GBS himself could (Shaw, 1889). Concerning rent, he wrote "... profit to the proprietors of the more favourable raw material (is) economic rent, the main source of 'surplus value.' Without a thorough grip of this factor it is impossible to defend Socialism ... " Marx's failure to see this point makes Das Kapital "useless" (1889, pp.196-98).
Defending George, Shaw wrote the London Star "... by his popularization of the Ricardian law of rent, which is the economic keystone of Socialism, and concerning which the published portion of Marx's work leaves his followers wholly in the dark, Mr. George is doing incalculable service in promoting a scientific comprehension of the social problem in England" (June 7, 1889, cit. Lawrence, p.86). Shaw claimed credit for first putting land taxation in the platform of the Liberal Party in 1892 (Fabian Society, 1950, p.208, cit. Lawrence, p.171). The voice was the voice of Shaw, but the hand was the hand of Wicksteed.
George was system-minded and sought to unify the laws of production and distribution in a coordinated harmonious system. His theoretical framework foreshadows the marginal productivity theory of wages, which he integrates with Ricardo's rent law. The idea that the wage rate equals the marginal product of labour is simply George's law of wages formalized and rounded out. The title of Wicksteed's masterpiece, An Essay on the Coordination of the Laws of Distribution (1894), is paraphrased closely from Progress and Poverty, Book III, Chapter VII, "The Correlation and Coordination of These Laws (of Distribution)," (George, 1879, p.218). Wicksteed was formalizing, in more elegant form, an insight from his friend George.
In the process, Wicksteed wrote that land and labour are coordinate and symmetrical, and none yields a surplus any more than any other. He was expressing a mathematical insight, not an anti-Ricardian dogma. He was saying that distribution exhausts the total product when every factor, including land, is paid its marginal product. He showed that the same laws of distribution may be established regardless of whether land or labour is arbitrarily treated as the variable. It is a valuable insight, and fully compatible with recognizing land rent to be a taxable surplus (Gaffney, 1962, pp.149-54; Alonso, 19xx, pp.46-49).
It has been used by some, like Clark, to claim that land rent is not a taxable surplus, but that was not Wicksteed's purport at all. "... (the logic) ... so far from weakening the position of those who regard rent as a surplus, by showing that the use of land is paid for in accordance with the marginal utility of the service rendered by it, shows what is indeed Mr. Wicksteed's object to prove, that the two views are essentially contained, each in the other" (Flux, p.312). He even credits part of his insight to Graham Wallas (1894, p.40,n.1) Wallas, a Fabian socialist, was surely not intent on justifying private collection of land rent in the manner of J.B. Clark. On the contrary, Wicksteed's life history demonstrates that one can see this element of factor symmetry - one can even discover it, as he did - and see land-rent as a taxable surplus.
Wicksteed remained sympathetic to George and his cause. "He remained always loyal to Progress and Poverty's central idea. Land nationalization, to be achieved gradually by way of taxation ... remained a conviction to the end, with Philip Wicksteed" (Barker, p.382). The lasting Georgist element in Wicksteed is discussed in Wicksteed (1933) I, vi-vii; II, 686-90, and in Herford, 213-14.
Marshall's reaction to George is rather one of caution, compromise, ambivalence, and gradualism. It was the lack of these qualities in George, the importunate activist, (plus a touch of xenophobia and caste-feeling in Marshall?) that exercised Marshall at the Oxford debate. Marshall's imprint on neo-classicism is his two-handedness, that notorious quality of economists that later disturbed President Harry S. Truman. In one of the 1883 lectures, Marshall grants the merit of nationalizing land after 100 years. At the time it must have seemed safely temporizing; it is a sobering thought that that centennial is now eleven years behind us.
George Stigler (1969) seeks to invoke Marshall against George, but that is to misrepresent him. Marshall actually supported Lloyd George's land-tax budget of 1909, accompanied though it was with Henry Georgist oratory, political upheaval, and social ferment (Hutchison, 1969). It is possible that Marshall had weathervane tendencies. This tradition, too, is powerful in the profession. In the end, however, George could hardly ask for a more useful, constructive critic than Marshall. Marshall was cautious to a fault, and surrounded by rent-takers whom he had to live with, but in spite of all, quite sincere and honest.
Marshall actually accepted much of George's case, although probably preferring to trace its provenance to others. His opposition was not simply captious, but thoughtful and constructive. He even improved on the case with his concept of "the public value of land" (1891, rpt. 1947). Marshall's public value is what George means by "community-created value," the joint result of nature, location, public works and services, settlement, and community synergy or "urban linkages." Marshall saw that urban values were outgrowing rural values, and provides an appropriate concept.
He also spotted (along with Cannan, 1907) the flaw and upper limit on raising local land rates (in Britain, local property taxes are "rates") to high levels, noting this would distort locational decisions by over- attracting people to jurisdictions with higher rate bases - a kind of "tragedy-of-the-commons" effect, working through the rating system and locally financed public services. He leaned toward a benefits-received limit on rates, describing rates in excess of benefits-received (narrowly construed) as "onerous." The viewpoint is that of the upper middle class or retired landowner in a suburb.
This was not an unplanned problem, to be sure. The Tory political leader Austen Chamberlain (Neville's half-brother), thinking ahead, saw this as how to keep down public charges on land.
That was by no means the limit of Marshall's horizon, however. If we shift to national land taxes, the "overused commons" problem disappears. George has been faulted for not specifying in Progress and Poverty what level of government should collect land taxes, but his later career made clear that he wanted national governments to rely heavily on land taxes, for approximately the same reasons that Austen Chamberlain wanted to keep them local. George opposed tariffs in large part to force national governments to turn from them to land taxes. His followers in both Britain and the United States pushed for national land taxes after Marshall wrote and, as noted above, Marshall supported the Lloyd George land tax budget in his own country in 1909. Marshall's successor, A.C. Pigou, wrote favorably (if hypercautiously) of land taxation (1949). The core of overt anti-Georgism is not to be found in British economists, but American.
Walker's first reaction was to go into denial. He wrote of George's proposals, "I will not insult my readers by discussing a project so steeped in infamy" (1883b, rpt. 1888). Walker soon discussed it anyway (1883c), and with some slow return toward objectivity. In spite of his initial arrogant approach to George, he was perhaps too large-minded to nurse a grudge for years, or let it reshape his entire way of thinking. He was a person of leadership qualities, soon to be demonstrated when he pulled together dissident factions to launch the American Economic Association (see discussion under Richard T. Ely, below). For others, however, silence has become a pillar of the neo-classical tradition. It has proven effective, but how sturdy a structure can be supported, and for how long, by silence and denial?
Walker was generally forthright, but clumsy and heavy-handed. He lacked the kind of sneaky subtlety Clark used to undercut George by recasting economics. He remained a Ricardian in methodology. He flirted with the notion of Leroy-Beaulieu that rent was declining in importance, but then seemed to dismiss it (1883b, pp.147, 191). Later in the same year, however, he came back with the interesting point that public works that raise the value of specific lands have the reverse effect in the aggregate (1883c). This is the doctrine now identified with the name of Robert M. Haig (1926). Haig was the Seligman protege who had earned his spurs at Columbia by minimizing the benefits of the then-popular movement to exempt buildings from property taxes (Haig 1915a, b, and c). This idea from Walker has been much used by others then and later, to trivialize Henry George (Seligman, W.I. King, 1921, 1924; Ely, 1922; Schultz, 1953). Ely was to italicize it as (what he calls) a "formal definition": "... in a progressive society, ... with increasing wealth and stationary population, land values will decline (Ely, 1927, p.131).
Walker also criticized George for alleging that the progress of technology was always labour-saving and land-using. George had overstated this case in a rhetorical flourish (1879, p.253), even though Mill, his classical mentor and foil, had written that technology might also be land-saving (1872, Article 4). Granting that Walker wisely corrected an overstatement in George, however, Walker went to the other extreme and remained there. To him, capital formation is the salvation of labour.
Since then NCEists have presumed that capital is always complementary to labour, and a substitute for land. They present it as such a perfect substitute for land that they may eliminate land as a separate term. They thus remove from their purview such events as the disemployment of labour by sheep-capital during the enclosure movements in England, the mechanization and chemicalization of American farming, automation of assembly lines, ATM bank cashiers, bar-code checking-out, etc. If there are only two factors of production, as in the NCE dreamworld, then capital must always complement labour. In the real world of three factors, capital may preempt land from labour, as in the cases noted.
J.B. Clark entered in on Walker's side, writing on "The Law of Wages and Interest" (1890d). As a rule Clark assumed the supply of capital is fixed, but he departed in this case. Clark concluded that a rise in the supply of capital acts to lower interest rates, and thus to lower all property incomes, thus transferring all the gains from capital formation to labour. This leads to "the workman's paradise that we have sought ... more attractive than an ideal vision, since progress toward it is assured by natural law" (1890d, pp.64-65). The problem with this forecast is that lower interest rates act to raise land rents, whenever land use entails heavy use of capital. Lower interest rates do not eliminate property income, but transfer it from capitalists to landowners. The relationship of rent and interest is clearly inverse, a matter totally lost in NCE by virtue of its identifying land with capital.
Lower interest rates do not just raise land rents in general, but specifically in those land uses that are most capital-intensive, some of which are labour-saving. This important aspect of distribution theory may have been overstressed by Henry George, but NCEists have surely overreacted. They have simply wiped it out of NCE without a trace.
The net result has been a polar contrast between Georgism and NCE. George stressed that land complements labour, and labour may find more jobs by taxing land into use. NCE stresses that capital complements labour, and land taxation may prejudice capital formation. Saving may be fostered by limiting taxes to consumption.
In the hands of modern NCEists, theory teaches that any withholding of good land from use can be no problem. It is easily offset by developing new lands. In the hands of Keynesians and "NCE-synthesists," land monopoly becomes a positive benefit: it creates new investment outlets for capital to develop new frontiers. Alvin Hansen saw public works as the new frontier, replacing the old. Imperialists saw new military and naval frontiers. In all these variations there is a constant: economic land can be created by creating capital, with no limits imposed by nature. In this view, the world is an infinite reservoir of raw land, needing only the touch of mankind and capital to make it into economic land. It took the modern environmental movement finally to blow the whistle on this nonsense (Gaffney, 1993c, and 1994, A-1).