"Make Tyranny Tremble"


People Don't Like Their Beliefs Challenged

In the United States, too many people get their economic ideas from Karl Marx. We need to look at better sources for good economic principles, and Everett Gross has some suggestions on that.

by Everett Gross

In recent weeks, I have mentioned a great classic written by Adam Smith and published in 1776. The title is The Wealth of Nations. It is praised by some yet today, and disparaged by others. In some cases the praise is just lip service, and in other cases sincere.

In some cases the disparaging is deserved and in others not. For the most part, it is read by very few people. I first found it in a set of books called The Harvard Classics. It is highly abridged there. I would recommend that to you if your reading time is limited.

I once mentioned that when it first appeared, it was scary. People do not like their beliefs challenged in significant ways. It argued against trade tariffs. To a great extent, up to that time, each producer of anything did so only by permission of the king. (The book was written and published in England.) Horrors! Now someone can compete with me! Even someone in another country might compete with me! He doesn't need the king's blessing.

"Thy mandates make tyranny tremble!" I'll venture you sang that in grade school. It was sung of our country, but many of those mandates either were derived from that book or derived from whatever were the sources of the influences that shaped Smith's mind. Freedom can be scary for someone who thought he had a market cornered.

So much for the introduction. One of the main claims to fame for the book is its listing of four maxims of taxation: (1) equality, (2) certainty, (3) convenience of payment, (4) economy in collection.

Each of these has been the subject of many books and much agonizing in the last several hundred years. Probably the first one, equality, gives the most trouble. But let us see how Smith expands on that one. It starts out: The subjects of every state ought to contribute towards the support of the government, as nearly as possible, in proportion to their respective abilities; that is, in proportion to the revenue which they enjoy under the protection of the state. That last phrase is where the rub comes in. What constitutes the protection of the state? Is the revenue which you enjoy by virtue of your own labor in exactly the same class as the revenue which accrues to some monopoly or privilege granted by the government?

Less than a half century later, David Ricardo, a practical English business man, clarified some of what Smith had discussed, especially with respect to what made effort and tools and natural resources valuable. (I am using the word "tools" here instead of "capital" because the word "capital" has been used for so many years with so many different meanings.)

Houses are tools. Factories are tools. Certificates of debt are not tools. Stocks and bonds are not tools even if they are sometimes traded for tools. (I am sure there exists a nit picker somewhere who will dispute me about houses being tools. May I ignore him? If not, why not?)

Anyway, Ricardo, and later John Stuart Mill, and Henry George, pointed out that different kinds of income or property might be penalized (for instance by taxation), with vastly different effects on the total economy of a region.

The reason, of course, is that in a non-dictator society, each person has to read the bottom line and decide. Shall I build, or shall I not build? Of all of our states, Pennsylvania is leading in down-taxing buildings, and up-taxing bare lots. But Australia and New Zealand are way ahead on that.

You have to wonder why our centers of so-called learning don't find out about regions that are solving their revenue problems. I have heard someone worry about getting too many buildings and jobs: It hasn't happened yet.

See Adam Smith's Recommendations on Taxation http://www.progress.org/banneker/adam.html Also see Fred Foldvary on Economic in Six Minutes http://www.progress.org/archive/fold144.htm and Ricardo and Marshall are Brothers http://www.progress.org/archive/fold179.htm

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