spain trash georgist falsifiable

Nobody Disproves, Nor Adopts, What Really Works
hypothesis richard ely

Why are People in Spain Eating out of Trash Bins?

Some of the best ideas get mislaid by history. The author below works to rectify that. He holds degrees in Physics and Materials. He has been a Georgist for over thirty years, and has had letters published in various newspapers, as well as serving on the Boards of several Georgist organizations, and doing Georgist tutoring through the Henry George Institute. He has even tried to educate politicians.

by Nicholas Rosen, 17 January 2013

This was a brief item in the Washington Examiner (Sept 28, p. 2):

"Social service groups report that austerity measures imposed by a government trying to balance its budget have lead [sic] to a sharp increase in the number of people rummaging through trash bins looking for food. Nearly 20 percent of Spain's households now live in poverty, and 600,000 have no income at all. One city is combating the scavenging by installing locks on supermarket trash bins."

Spain seemed to be prospering, which led to a real estate boom, which led to a bust, which led to people rummaging through trash bins. There may well be other problems with regulations and the labor market, but, as any Georgist should be able to tell you, the fundamental injustice at the root of this is that Spain relies on income and VAT taxes, not land value tax.

This is why I need to keep agitating, and keep supporting Georgist organizations. I remember when I was a teenager, after I had read through Progress and Poverty the first time, and found it intellectually persuasive, I was rereading the chapter where George wrote that, though the people of New York consent to the landed possessions of the Astors, the puniest infant that comes howling into the world in the most wretched tenement becomes at that moment possessed of the same right as the millionaires. "And the child is robbed if the right is denied."

And the child is robbed if the right is denied. That was when a sort of mental spasm passed through me, and I got political economy the way some people get religion.

As I write, children and their parents are rummaging through trash bins because their rights are denied. How could I understand this, and not work to set things right?

There's some fuzziness around the edges, but one criterion by which science is generally distinguished from non-science is falsifiability. Scientific hypotheses are supposed to enable us to make falsifiable predictions about the physical universe. If what we observe is just what the hypothesis predicts, the hypothesis at least may be true. If what we observe is contrary to what the hypothesis predicts, the hypothesis is false, and should be rejected, or at least modified.

If no possible observation or experiment could prove a proposition false, then that proposition is not a scientific hypothesis. The religious belief, "Any bad things that happen are God's condign chastisement for our sins, intended for our correction and ultimate good; any good things are signs of God's beneficence and mercy, despite our multitude of sins," may be true, but is not science, because no observed phenomenon, save an observed divine revelation, could ever prove it false.

Freudianism, which can explain anyone's psychological quirks, but cannot predict what psychology will result from a particular upbringing and family environment, is another nonscientific belief system.

There is, as I said, some fuzziness about falsifiability. A bio-medical hypothesis which predicts that drug X should be a good therapy for disease Y is not proven false if a patient with Y takes drug X and dies. Biological systems can be complicated, and it may be that the disease was too far advanced, or the patient had a drug allergy, or something. On the other hand, if 200 patients sick with Y are divided at random. and assigned to receive X or sugar pills, and the results, as measured by death rates, recovery times, etc., are at least as good for the patients who receive sugar pills as for those who receive medication X, the hypothesis that X is effective therapy for Y has been dealt a serious blow.

All of this leads me to Georgism (of course). Does Georgism make falsifiable, preferably quantitative, predictions? If so, what are these predictions, and do the results show Georgism as proven false, or likely to be true? My answer is that Georgist economics does make testable predictions, and passes the tests pretty well, although it is on the fuzzy side, rather than the mathematically precise side, of the scientific spectrum.

I remember a fellow Materials grad student at Penn State, who had been to Aliquippa, and had seen that it's a depressed, grungy town. Since Aliquippa follows a semi-Georgist policy of taxing land at a higher rate than buildings, he thought that was a major point against Georgism.

I disagreed, of course. Aliquippa might well be in sad shape, but so were other Pennsylvania communities hard hit by the fall of the steel industry, including communities which did not have two-rate property taxes.

Henry George offered explanations of the boom and bust cycle, unemployment, and poverty amidst advancing wealth, but he did not offer complete explanations; for example, he explicitly said that various other problems besides land speculation played a role in industrial depressions (Progress and Poverty, Book V, Chapter 1). Political economy, he wrote, could deal only in general tendencies (ibid.).

Nonetheless, he was sufficiently clear about the logic of general tendencies that one can make testable predictions from his theory:

1. Communities which tax land at a substantial fraction of its full rental value will dampen the tendency to a boom-and-bust cycle in real estate prices.

2. Communities which approximate the Georgist program of a single tax on land values, free enterprise, and no other taxes will tend to have higher economic growth rates and per capita gross products than comparable communities which do not.

3. Communities which approximate the Georgist program will tend to have a greater degree of economic equality than communities which do not.

4. Communities which approximate the Georgist program will tend to have lower unemployment than communities which do not.

5. Communities which approximate the Georgist program will tend to be built compactly, without vacant lots and blight in the middle of built-up areas.

The Georgist program has not been fully applied, but there are various partial applications. A number of towns in Pennsylvania tax land at a higher rate than buildings, as do various communities in Australia, New Zealand, and formerly in South Africa. Other cities and rural districts in all these places do not, so there is a basis for comparison. Denmark had a land value tax during much of the 20th century. Estonia now has a land-only property tax, and Tsingtao in China did when it was a German concession before World War One. Hong Kong derives substantial revenue from land rents. There are also the California irrigation districts, with their land-only taxes, and the Georgist communities of Arden, Delaware, Free Acres, New Jersey, and formerly Fairhope, Alabama. States in the US where public revenues come in large part from real estate taxes (partly land taxes) can be compared to states which rely more on taxes on income, sales, profits, personal property, etc. In short, there are enough examples that other factors can be expected to even out, and it should be possible to compare partially Georgist cities and countries to very non-Georgist ones. Is there an econ student reading this who wants a thesis topic?

If Georgism is falsifiable, the next question is whether it has been falsified. To the best of my knowledge, no. People have debated Henry George's economic theories, disputed the ethics of taxing only land, and raised questions about what the results might be (see Critics of Henry George, edited by Robert V. Andelson ), but with one semi-exception, I know of no who has even attempted to refute Georgist theory by empirical evidence. The empirical evidence points the other way.

As an aside, Richard Ely, anti-Georgist polemicist, founder of the academic discipline of land economics, and of the Institute for Research in Land and Public Utility Economics, financed by real estate interests, opposed the Ralston-Nolan bill of 1921, which would have put a federal excise tax on land ownership, pretending that his Institute had done research discrediting the idea. However, since Ely and Benjamin Hibbard, his partner in crime, had not done any research, even biased and incompetent research, this doesn't count. (See Gaffney and Harrison, The Corruption of Economics, Chapter 5.)

The semi-exception is a study by the Pennsylvania Economy League, back in the late 1980's or early 1990's. The PEL is not a gang of paid liars, like Ely's Institute, and not even anti-Georgist, since, as I understand it, in some cases the PEL supported Pennsylvania towns going two-rate. They did, however, produce one study alleging that the two-rate property tax did not confer the benefits its enthusiasts claimed for it.

In particular, the PEL study claimed that the two-rate property tax did not lower taxes for most homeowners, but to reach this conclusion, instead of looking at all homeowners affected, or a valid random sample of homeowners, they concentrated on homes in mixed-use neighborhoods, industrial and residential, and further chosen on the basis of other factors, like "ethnic balance" (not defined in the study). Since most homes are not located in such mixed-use neighborhoods, the results could not properly be extended to homeowners in general.

The PEL study also concluded that Pittsburgh's construction boom of the 1980's was not related to Pittsburgh's expansion of its two-rate tax. Evidence for this was that PEL researchers had consulted experts, many of whom did not think that the two-rate tax was the cause of the construction boom, and some of whom did not even know that Pittsburgh taxed land at a higher rate than buildings. As Dr. Steven Cord put it, whatever these gentry were experts about, it wasn't property taxation in Pittsburgh.

It remains possible for a rightwing anti-Georgist to complain that burdening landowners alone is unjust, and that in a Georgist society, land would be so cheap that a gentleman could not find anyone to black his boots. It remains possible for a leftwing anti-Georgist to complain that Georgism would leave overpaid corporate CEO's and pop stars free to keep all their questionable earnings, while other people stayed stuck in poverty. It remains possible for an anti-Georgist of some other wing to raise questions about the long-term effects of Georgism on society, population growth, the environment, and more. But to the best of my admittedly imperfect knowledge, no one has ever shown empirically that Georgist economic theory is wrong.

JJS: A century ago, a rich businessman hired an “expert” to falsify George’s theory; the hireling reported back that he tried but it couldn’t be done. The entrepreneur, owner of the street cars of Cleveland, became convinced of the rightness of the Single Tax on land value and went on to become mayor of Cleveland and ranked as one of the best American mayors ever. Tom Johnson's statue in the center of downtown has him holding a copy of Progress and Poverty. He is the hero of Dennis Kucinich, the newest commentator at Fox News.

For more on “Where Tax Reform Has Worked”, one could check out our article by the same name ; it’s a bit older and much shorter than the Andelson book cited above.

The author above mentioned the possibility of a grad student becoming interested. Coincidentally, there is an essay contest on Georgism for econ students. Would you or anyone you know like to enter it? To learn the details, contact Izzy Gliener, Edmonton, Alta, Canada: izzy at acousticsolutions.com. Good luck!

And finally, if you have an article, preferably a newsy one, please submit it. Thanks. And if you're good and prolific, you may want to blog here. Get in touch.

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Editor Jeffery J. Smith runs the Forum on Geonomics and helped prepare a course for the UN on geonomics. To take the “Land Rights” course, click here .

Also see:

Don't Just Say No, Say Justice Now
http://www.progress.org/2012/barnofsk.htm

Hunger Haunts Many in Africa While …
http://www.progress.org/2012/agragate.htm

Why You're Losing and How to Win
http://www.progress.org/2012/morality.htm

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