Review of the Book:
Basic Principles of Economics,
and Their Significance for Public Policy
By Harrry Gunnison Brown
Glenn E. Hoover
[Reprinted from the American Journal of Economics
and Sociology,
Vol. 1, No. 3 (April, 1942), pp. 327-329]
I
ALTHOUGH PROFESSOR BROWN'S NEW BOOK[1] was presumably designed as a
text, it deserves a wide reading by those who would understand our
economic system and recognize both its defects and its potentialities.
If this were an ordinary economics text one would hesitate to
recommend it to the general reader, for the American tradition
prescribes that college texts should be dull. Most of them have the
literary style of the Infantry Drill Regulations; but Dr. Brown's book
is replete with exclamation points and teems with "rhetoric and
wrath."
He is reputedly as gentle as St. Francis, but when fools and knaves
close in on him, he fights valiantly. There are the self-styled "liberals"
who are either Marxians without knowing it or who have grabbed a
protective sheep-skin. There are the honest but naive, who subscribe
unquestioningly to a kind of socialism that, according to the late
Samuel Gompers, "bears the same relation to economics that
astrology bears to astronomy." There are, too, the politicians
who are beneath contempt but not beneath ridicule, the labor
racketeers and always, of course, the greedy and hypo- critical
protectionists who pretend that protective tariffs benefit their
victims.
II
It will be observed from the title that Dr. Brown is chiefly
concerned with the science of economics as a means of influencing
public policy. In this he is in the grand tradition of Adam Smith and
John Stuart Mill, but is poles removed from those who think they are
dealing with economics when they are evaluating various advertising
devices, or sales methods for retailers of ready-to-wear. This book is
not "practical" at all in the sense that it will help us to
increase our incomes which are already too often in excess of our
capacity to spend them with intelligence and dignity. It is a book for
statesmen and students of statecraft rather than the money- getters.
No one who is familiar with Dr. Brown's writings will adjudge him free
of prejudices. He is not content to describe our economic system with
an Olympian detachment. He wants very much to do something with it and
he particularly wants to increase the rewards that go to workers and
savers, and reduce the rewards that now go to the "permitters"
(land owners). That theme occurs again and again but your reviewer
regrets only that he does not encounter it more often. It is
especially good to hear it at a time when some economists are speaking
of "quasi-rents," "capital rents" and even "rents
of ability" until they have obscured the fundamental fact that
land, the free gift of nature to each succeeding generation, yields a
revenue (rent) which can be sharply distinguished, conceptually at
least, from either wages or interest.
With respect to the desirability of the social appropriation of land
rents, Dr. Brown is proudly heretical. But he is no "radical"
as that term is now improperly employed. He is a stanch believer in
the system of private property, free enterprise and competitive
prices. In his final chapter he argues, with much cogency, that those
who wish to preserve that system in its essentials, and protect it
from the socialist attacks from the left and the fascist attacks from
the right, should bestir themselves to eliminate the unearned incomes
that result from monopoly prices and the private appropriation of
socially-created land values. If his critics were as wise as they are
captious, they would realize how essentially conservative he is -- in
the best sense of the word.
III
But a reviewer, to avoid suspicion of collusion, must not be content
with the accolade, but must go on to the unpleasant task of pointing
out possible blemishes in whatever chef-d'oeuvre is assigned to him.
The following specks are tiny, and may in fact be mere optical
illusions, but I shall report them for what they are worth. The first
is really a matter of terminology. Dr. Brown says (p. 69):
It is sometimes supposed that the banks mysteriously "manufacture"
credit since they seem, thus, to lend more than they have. In fact
it is not really the banks which lend, except in name. The banks are
intermediaries. They bring borrowers and lenders together. And the
lenders are the bank depositors.
It is of course obvious that banks are enabled to lend only because
depositors do not exercise their right to demand of the banks, in
legal tender, the full amount of their deposits, but it seems a bit
far-fetched to call the depositors, for that reason, the lenders. In
the common speech of men the term "lender" is limited to one
who enters into a contractual relationship with a borrower, and
notwithstanding my complete agreement with Dr. Brown's analysis of
deposit banking, I shall not accord him the privilege of re-making the
English language, except where the emergency is greater than it seems
to be in this case.
Some of the sections dealing with labor unions seem to be quite
divorced from reality. Dr. Brown says (p. 41):
Labor monopoly, like other monopoly, operates adversely
to the general interest. But labor unions as such and collective
bargaining as such, or even strikes, do not necessarily mean
monopoly. If the striking employees of a company are seeking wages
very much above a normal competitive level, if no monopolistic
limitation of the number in the trade is attempted, and if no
intimidation is applied to possible competitors, the employer will
probably find that he can fill the places of the strikers at lower
wages than the strikers are demanding and the strike will be a
failure.
If there was ever a union which operated with no intimidation of
strike- breakers, where strike-breaking was possible, I do not know of
it. More- over Dr. Brown neglects the threat of considerable financial
loss to any employer who may try to break the strike, a loss that
measures the "nuisance value" of the union. It is this "nuisance
value" that a union may secure for its members which roughly
measures the difference between union wage rates and the wages which
would result from a free market.
IV
Your reviewer does not know to what extent Dr. Brown is accepted by
the "official" Georgists. He seems (p. 123) to question the
propriety of applying the word "monopoly" to the private
ownership of land, a practice followed by the Georgists which your
reviewer believes makes only for confusion, and (p. 124) he criticizes
the claim that such private ownership is the cause of business
depressions. He rightly points out that the evils complained of are
chronic in character and could therefore not account for the
oscillations in business which only a money-credit theory can explain.
But whatever may be the differences between Dr. Brown and those who
believe the final truth was revealed in the writings of Henry George,
it is not too much to say that he is, in academic circles, the leading
advocate of the social appropriation of economic rent. Those who have
heard that doctrine expounded only by the economically naive, owe it
to themselves to read the arguments for it which are to be found in
this latest work of a very competent, professional economist.
NOTES AND REFERENCES
- Harry Gunnison Brown, Basic
Principles of Economics and Their Significance for Public Policy,
Columbia, Mo., Lucas Brothers, xvii + 542 pp.,
|
