Radical Markets: Uprooting Capitalism and Democracy for a Just Society

Bibliographic Information

• Authors: Eric A. Posner (University of Chicago Law School) and E. Glen Weyl (Microsoft Research)
• Publisher: Princeton University Press, Princeton and Oxford
• Year: 2018
• ISBN: 978-0-691-17750-2
• Library of Congress Control Number: 2017964479
• Pages: 336 (xvi + 320 + notes + index)
• Dedication: "To the memory of William S. Vickrey"

Core Thesis

Posner and Weyl argue that the most important markets in wealthy countries are monopolized or entirely missing, and that creating truly competitive, open, and free markets — "Radical Markets" — would dramatically reduce inequality, increase prosperity, and heal political divisions. They contrast Market Fundamentalism (nostalgic commitment to idealized 19th-century markets) with Market Radicalism (restructuring markets at their very roots).

The book's central proposal for property is the Common Ownership Self-Assessed Tax (COST), a hybrid of Henry George's land value tax and Arnold Harberger's self-assessment scheme, extended to all property — not just land. Under a COST, possessors self-declare the value of their assets, pay an annual tax on that declared value, and must sell to anyone willing to pay the declared price.

Structure

Key Concepts

The Monopoly Problem (Ch. 1, pp. 30–35)

The authors define the "monopoly problem" broadly: any private property owner can act as a monopolist because most assets are unique in character and location. A landowner can hold out for a high price, keeping the asset unused or underused. This extends beyond land to business equipment, automobiles, art, intellectual property — anything that is not a homogeneous commodity.

"Because of the ubiquity of private property in our economy, empirical research suggests that the misallocation of resources due to monopoly and related problems we discuss below may be reducing output by 25% or more annually — trillions of dollars per year in the United States alone." (p. 38)

Henry George's Land Tax (Ch. 1, pp. 36–44)

The book provides an extended treatment of Henry George as a key intellectual precursor:

• George's 1879 Progress and Poverty was "perhaps the most prominent idea among economists for solving the monopoly problem" (p. 41)
• George proposed "appropriat[ing] land rent for public use, by taxation" — the "simpler, easier and quieter way" to achieve common ownership (p. 41)
• His tax would be much higher than modern property taxes (the full land rent) but would exempt all structure value
• By 1933, John Dewey estimated Progress and Poverty "had a wider distribution than almost all other books on political economy put together" (p. 43)
• The board game Monopoly was originally The Landlord's Game (1904), designed by Elizabeth Magie to educate the public about George's ideas (p. 43)

Georgism's identified defects: 1. Investment inefficiency: Taxing away all land value removes incentives to invest in or care for the land (p. 44) 2. Administrative difficulty: Distinguishing land value from structure value is "fiendishly difficult" — e.g., the Empire State Building defines its neighborhood, so the pure land value is inseparable from the building (pp. 44–45) 3. Natural resource waste: If all land value is taxed away, possessors of depletable resources (oil, minerals) extract them as quickly as possible (p. 44)

The Vickrey Commons (Ch. 1, pp. 49–51)

William Vickrey (1914–1996, Nobel Laureate 1996) is the book's intellectual hero. His 1961 paper "Counterspeculation, Auctions, and Competitive Sealed Tenders" founded mechanism design. The authors construct the "Vickrey Commons" — a system where all property is held in common and the right to use it is continuously auctioned:

• Every asset has a standing highest bid (rental payment)
• Anyone can outbid the current possessor
• Revenue funds public goods and a social dividend
• Limitation: Like George's land tax, the Vickrey Commons provides no investment incentives — if possessions can be taken at any time, possessors won't maintain or improve them (p. 51)

Partial Common Ownership and the COST (Ch. 1, pp. 51–73)

The authors' central proposal synthesizes George, Vickrey, Harberger, and Cramton et al.:

Historical precedents: - Athenian antidosis (exchange): self-assessment with forced sale as enforcement (p. 55) - Sun Yat-sen's self-assessment land tax in Taiwan (pp. 56–57) - Arnold Harberger's 1962 proposal: self-declare property value, pay tax on it, must sell to anyone willing to pay the declared value (pp. 57–58)

The COST mechanism: - Possessors self-assess the value of each asset - They pay an annual tax (the COST) on that self-assessed value - Anyone can buy the asset at the self-assessed price - The optimal tax rate equals the turnover rate (the probability a higher-valued user appears within a year) - At the turnover rate, possessors set price exactly equal to their true reservation value → full allocative efficiency (p. 59) - Below the turnover rate, some monopoly power persists; above it, investment is over-discouraged - Recommended rate: ~7% annually for typical assets (based on ~14-year average turnover) (p. 66)

Balancing allocative and investment efficiency: - The social loss from monopoly power grows quadratically with the extent of that power - Reducing the markup by one-third eliminates ~5/9 of the allocative harm - A 10% tax achieves 5/9 of the allocative benefit at only 1/9 of the investment cost (pp. 60–61) - This quadratic structure means it is always optimal to have at least a small tax

The Monopoly Board Game Origin (pp. 43–44)

Elizabeth Magie designed The Landlord's Game in 1904 to teach George's ideas. The original rules included a land rent tax that funded public works, gave players free access to utilities and railroads, and paid a social dividend when passing "Go." These rules made domination by one player impossible — as every player developed property, all benefited. The familiar Parker Brothers version stripped out the Georgist rules.

Walras and Jevons on Property as Monopoly (pp. 40–41)

Léon Walras, one of the three fathers of the marginal revolution, stated: "Declaring individual land ownership … means … thwarting the beneficial effects of free competition by preventing the land from being used as is most advantageous for society." Walras advocated state ownership of land with rents returned as a "social dividend." William Stanley Jevons wrote: "Property is only another name for monopoly."

Data and Estimates

Key Quotes

"Henry George, whom we met earlier, proposed what was perhaps the most prominent idea among economists for solving the monopoly problem. He argued that the 'simpler, easier and quieter way' to achieve common ownership than state ownership would be to 'appropriate land rent for public use, by taxation.'" (p. 41)

"Property is only another name for monopoly." — William Stanley Jevons, quoted p. 40

"Declaring individual land ownership … means … thwarting the beneficial effects of free competition by preventing the land from being used as is most advantageous for society." — Léon Walras, quoted p. 40

"If taxes are to be levied … on … the value of … properties allow each … owner … to declare the value of his own property, make the declared values … public, and require that an owner sell his property to any bidder … willing to pay … the declared value." — Arnold Harberger, quoted p. 58

"We refer to this tax as a 'common ownership self-assessed tax' (COST) on wealth. The COST on wealth is also the cost of (holding) wealth." (p. 64)

"The most persistent distributive conflict in capitalist economies arises from the concentration of wealth. … A COST would make most of the return to capital flow to the public, making it more equally distributed than wages." (p. 75)

"By 1933, American philosopher John Dewey estimated that George's Progress and Poverty 'had a wider distribution than almost all other books on political economy put together.'" (p. 43)

"Monopoly, perhaps the most popular board game ever, was originally titled The Landlord's Game. Elizabeth Magie designed it in 1904 as a way to educate the public about George's ideas." (p. 43)

Intellectual Lineage

The book traces a continuous tradition from Adam Smith through Henry George to William Vickrey:

1. Adam Smith (1776): Markets and free trade as radical reform; enclosure of commons as prerequisite for capitalism
2. Henry George (1879): Land value tax as "common ownership through taxation"; Progress and Poverty as the most widely read economics book of its era
3. Léon Walras (1889): State ownership of land with competitive management; "synthetic socialism"
4. William Vickrey (1961): Auctions as mechanism design; continuous competitive allocation
5. Arnold Harberger (1962): Self-assessment with forced sale as corruption-proof tax enforcement
6. Posner & Weyl (2018): COST as synthesis — partial common ownership balancing allocative and investment efficiency

Sun Yat-sen is noted as a Georgist who made George's philosophy "the economic pillar of his Three Principles of the People" (p. 46). Sun implemented self-assessment land taxation in Taiwan, though it largely failed due to government reluctance to take possession of undervalued land (pp. 56–57).

Relationship to Georgism

What the book takes from George: - Land value taxation as the starting point for common ownership - The monopoly problem as inherent in private property - The social dividend concept (revenue returned to citizens equally) - George's intellectual lineage from Smith through the marginal revolution

Where the book departs from George: - Extends the tax to all property, not just land — George distinguished land (natural, taxable) from "artificial capital" (human-made, exempt) - Sets the tax rate below 100% of rent — George advocated taxing away all land rent; the COST rate (~7%) is far lower - Adds self-assessment — George relied on government appraisers; the COST uses individual self-declaration with forced sale as enforcement - Addresses investment efficiency — George's scheme is criticized for ignoring this; the COST's below-turnover-rate design explicitly balances both efficiencies - Includes natural resources, intellectual property, and personal property — George focused on land

Critique of George: The authors identify three defects in George's original proposal (pp. 44–45): 1. Investment inefficiency — no incentive to maintain land if all rent is taxed away 2. Administrative difficulty — separating land value from structure value is "fiendishly difficult" 3. Resource depletion — possessors of oil/mineral lands extract resources as fast as possible

The COST is presented as resolving all three through its partial (below-100%) tax rate and self-assessment mechanism.

Other Chapters (Non-Property Proposals)

• Ch. 2 — Quadratic Voting: Voters buy votes at quadratic cost (n votes cost n² credits), making intensity count; prevents majority tyranny
• Ch. 3 — Visas Between Individuals Program (VIP): Allow citizens to sponsor immigrants who pay a bond; breaks the employer monopsony over migrant labor
• Ch. 4 — Dismembering the Octopus: Break up institutional investor common ownership; restrict index funds from voting shares
• Ch. 5 — Data as Labor: Pay users for data they generate; treat data production as labor, not a free byproduct of platform use

Limitations

1. Utopian implementation: The COST requires universal property registration, continuous valuations, and a buyout mechanism — enormous administrative infrastructure
2. Personal attachment: The authors acknowledge but underweight the psychological disruption of forced sales of homes and personal items
3. Valuation complexity: Determining appropriate turnover rates for each asset class requires extensive empirical work
4. Transition problem: Moving from current property law to a COST regime would require compensating existing owners for massive value losses (1/3 to 2/3)
5. Political feasibility: The authors themselves note that even limited applications (spectrum, domain names) face entrenched opposition
6. Financial system disruption: Asset price falls of 1/3 to 2/3 would devastate banks, pension funds, and anyone with leverage
7. Self-assessment gaming: While the mechanism is theoretically sound, practical evasion through undervaluation (as occurred in Taiwan) remains a risk
8. Scope creep: Extending land value tax to all property conflates George's distinction between natural and artificial factors of production — precisely the distinction Gaffney and Harrison argue must be preserved

See Also

• The Corruption of Economics (book page) — Gaffney & Harrison's argument for keeping land separate from capital
• Land is a Big Deal (book page) — Doucet's modern data-driven Georgist defense
• Land Value Tax — The traditional Georgist proposal
• Economic Rent — Rent as unearned income from land and natural resources
• ATCOR — All Taxes Come Out of Rent
• LVT Dampens Land Speculation — Evidence on LVT reducing speculation

Sources

• Posner, Eric A. and E. Glen Weyl. Radical Markets: Uprooting Capitalism and Democracy for a Just Society. Princeton University Press, 2018. ISBN 978-0-691-17750-2.