Academic journal article The American Journal of Economics and Sociology

Henry George and Social Theory: Consequences of Inattention to His Contributions

Academic journal article The American Journal of Economics and Sociology

Henry George and Social Theory: Consequences of Inattention to His Contributions

Article excerpt


The Miscarriage of Political Economy

George considered the unjust distribution of wealth in modern society to be the result of "the miscarriage of political economy, . . . [and which he] traced to the adoption of an erroneous standpoint" (George, 1898A: 162). This miscarriage of political economy "lay in the failure of the so-called science (i.e., of scholastic political economy) to define its subject-matter or object-noun" (1898B:181). Failure to define its subject-matter, wealth, has resulted in the confusion of wealth and value, of power and production, of ethics and science. With the result, as we saw, of ethics being banished from economic considerations. Thus, an ethically deficient economics has become authoritative for ethical decision-making by governments and businesses alike.(1)

This failure to clarify its key term has resulted in political economy making a series of critical errors in its development. The first of these is a confusion of the terms "natural" and "minimum" on the part of "both Smith and Ricardo [who] use the term 'natural wages' to express the minimum upon which laborers can live; whereas, unless injustice is natural, all that the laborer produces should rather be held as his natural wage" (George, 1898A:163).

Among the most serious consequences of this confusion is that the law of diminishing returns was only applied to agricultural production. Consequently, economic teaching produced "'the law of diminishing productiveness in agriculture.' But the law is not peculiar to agriculture" (George, 1898B:358). The production of wealth requires space in no matter what form or mode it takes place. An increasing concentration of labor-power in a limited space only utilizes the available cooperative power up to a point, at which overcrowding begins and the productive power of all present is diminished with every further increase of labor-power. By generalizing the so-called "law of diminishing returns in agriculture" to prove that it is merely an application of "the spatial law of material existence," George considers himself to have proved that the physical, economic and moral universes are all susceptible to one law (George, 1898B:359, 360).

George's theory of natural law is significant for our Spenglerian concern because George's conception of the law of decline is not based on an analogy with the life cycles of biological nature. It is, nonetheless, equally directly and empirically verifiable in the economic consequences of the relations of human social nature. The question remains, then, why has the Spenglerian concern not been addressed, tested empirically, and either verified or disproved?(2) Wolff censures Weber for failing to address this question, and by implication, all who followed him. Is its failure to be taken seriously really the result of undetected errors in the formulation of the founding fathers of political economy? Is this the source of errors that have become part of the "family disciplines" of all the social sciences?

The historical evidence supports George's thesis that modern economics incorporates political economy's flawed origins. The incorporation of the founding fathers' errors is characterized by the transition from political science to "economics," first recognized in the Encyclopedia Britannica in 1886. The fatal elimination of ethics from economics is achieved by its practitioners constantly increasing the importance of statistics in economic discussion. The moral considerations that were part and parcel of political economy's original considerations, have been dismissed from economic consideration because they cannot be expressed by the rules of arithmetic. Political economy, as modern economics, has been reduced to the science of calculating commercial transactions, without regard for their larger human implications.(3)

This elimination of ethical from economic considerations made the confusion of wealth and value, production and power, possible. …

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