|January 12, 2005||Posted by Fred Foldvary under Progress Report, The Progress Report|
by Fred E. Foldvary, Senior Editor
The Association of American Law Schools held its annual meeting in San Francisco the first week of 2005, including several sections interested in various issues and policies. The Section on Socio-Economics held two meetings, in San Francisco and Berkeley.
Socio-economics seeks to place economics in the context and intersection with culture, law, history, and social evolution. It combines economics with theory from anthropology, sociology, political science, psychology, engineering, management, biology, and physics.
Socio-economics recognizes that the market process includes both competition and cooperation. It encompasses institutions as well as individual behavior, and recognizes sympathy with others as an important human motivator along with self-interest. Socio-economics views rationality more broadly than the narrow rational-expectations approach of neoclassical economics.
Socio-economics encompasses both economic reality (positive economics) and social justice (normative economics). The moral dimension of socio-economics is in tune with the geoclassical economics of Henry George, who melded economics and ethics. To George, there is a harmony between morality and economic efficiency, since the policy that maximizes productivity is also morally just. That geoist policy is the full ownership of wages by the worker and the equal distribution of land rent either as dividends or for public revenue. George also saw an ultimate harmony among economic interests, regarding the conflicts between labor and management as an artificial outcome of ignorance and vicious government policies.
Socio-economics is not tied to any particular school of economic thought, but is open to all sound methods and theories. Since neoclassical economics dominates economic thought today, socio-economists examine the assumptions and techniques of neoclassical thought to understand both its limitations and its sound applications. Drawing on other schools of thought, socio-economics seeks a more complete understanding of theory, history, and policy.
A key interest of socio-economists such as Robert Ashford has been the failure of economics to perform to their maximum productive capacity, with unutilized labor and underutilized land and capital goods. Georgist economics explains why this occurs. Land speculation, pricing land at expected higher future values, prices land too high for current investment, causing investment to slump. Secondly, taxes on labor and enterprise create an excess burden of misallocated resources. Third, central-bank-distorted interest rates create artificial stimuli that create the waste of unprofitable real-estate development. All these distortions prevent the full use of labor and other resources.
Professor Robert Ashford has developed the socio-economic theory of “binary economics,” where the distribution of income plays a role in economic productivity. This is consistent with geoclassical economics, which finds that the distribution of the rent has effects on productivity. A highly unequal ownership of land, its value pumped up by public works financed by taxes on labor, creates underused land held for prestige and price appreciation. The public collection of the rent puts land to its full productive use, and the untaxing of labor and elimination of restrictive labor regulations removes the blockage preventing full employment.
Followers of the economics of Henry George should be very glad that legal scholars are taking an interest in economics and seek better policies and economic understanding. The approach of socio-economics is friendly to geoclassical economics, geonomics, and geoism. Economists should pay attention to and teach socio-economics. I presented a talk on the economics of Henry George at the Berkeley meeting of the AALS Section of Socio-Economics, and also participated in the Section’s meeting in San Francisco. Geoists should seek to connect with socio-economics to make Georgist thought a major element of the socio-economic literature and activity.
The Journal of Law and Socio-Economics publishes articles and news about socio-economics. There have also been articles on socio-economics in law journals. Socio-economics and geoism have much in common, and I see a great future for geoists and socio-economists working together.
Copyright 2005 by Fred E. Foldvary. All rights reserved. No part of this material may be reproduced or transmitted in any form or by any means, electronic or mechanical, which includes but is not limited to facsimile transmission, photocopying, recording, rekeying, or using any information storage or retrieval system, without giving full credit to Fred Foldvary and The Progress Report.
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