The Relationship Between Location Rent
and Land Price:

A Criticism of L.D. Beckwith

J.B. Ellert

[Reprinted from Land and Freedom, September-October 1937]

I see that Mr. Beckwith still holds that rent is part of price and goes still further by saying it is not connected with land; also, he states that rent is a cost item.

He states in "No Taxes," May 24, 1937, "The idea that we can escape the cost of a service by having the public install sewers, build highways and bridges, develop ports, etc., and then pay for all this in rent instead of paying for this directly, is fantastic."

But here he is dealing with effects, not causes. Public improvements and private improvements are the result of labor, and the return of labor is wages. We may find the same public improvements in a small city or in one part of a large city as in another, but the land value will be many times greater in one place than another, both having the same public improvements and services. Why is this?

Henry George gave us the cause in the beautiful Story of Savannah. Two men working together can build two houses in less time and with smaller expenditure of labor than they can build the two by each building one separately.

As population increases it brings many advantages, saving in transportation by having markets all around or close at hand, amusements at less cost, larger turnover of goods, etc., with less labor and time, best of skilled workers, and the many other advantages which make for a greater division of labor and saving in the cost of production. It is this saving, when not absorbed by taxation, that makes the cost of goods, building industries and private and public improvements cheaper; and, on account of this saving in time and labor, people try to get where this advantage takes place. And it is this advantage that gives rise to land values or rent and not the improvements. It is the saving that increased population creates, and not what it does, that brings about an increase in land values.

When the government collects this value, which we refer to as rent, then those, who have the advantage by holding the more valuable sites, lose that advantage by reason of the Government collecting a higher rent. And when the government returns the rent to all the people in public improvements and services, they have lost nothing; for the public improvements and services cut down the cost of production to the amount of rent gathered; provided, of course, that the expenditure be made to the best advantage. To do otherwise would violate natural law.

When, by the increase of population, a greater number of people come into association with one another, it makes for this great saving. And, out of this saving, it is possible for society to make great public improvements and produce a greater amount of wealth with less time and effort. Public improvements result from this saving the saving is the cause of public improvements, not the effect. This saving makes it possible to gather from the earth material to work up into a greater amount of wealth with less time and effort. The greater the saving, the higher land values, and the cheaper the improvements.

The nearer we come to the law of justice by recognizing every individual's equal right to the use of land, then the nearer we come to freedom to produce, which, with freedom to exchange, is all that the natural law calls for. Then, with this saving, an ever higher standard of living will follow under the full Single Tax. When the rent is gathered in accord with the natural law by the State, and given back to the people in public improvements, services, etc., it becomes a method whereby we equalize the advantage to the use of land, and has nothing to do with price or costs. The only price we pay for wealth is the effort we make, mental or physical, to extract it from its source, and to shape and fashion it to satisfy human desires. To talk about money price, consumption, etc., is to get away from fundamentals, which confuse thought by leading the mind away from the base upon which price and wealth are grounded.

To be in accord with natural law by freeing all land brings a greater production of wealth, which, in turn, makes it possible to bring in other branches of science, which make an ever greater advance in the arts and sciences in the production of wealth. This results in a saving additional to that brought about from increase of population and, thereby cuts down still further the cost of production. And, with just distribution, makes a greater effective demand for the source of wealth or land, which results in higher rents.

And, as we draw a greater amount of wealth and a higher standard of living from land by less effort, then, to that extent, land becomes more valuable to us. And, as I have stated before, when this increased value is picked up one place and distributed to other places in public improvements and services, thereby making the advantage to the use of all land equal, it does not change price or cost. To say that rent is for any other purpose is to forget about land, and that is taking our feet off the ground.

Why Mr. Beckwith continues to defend Mr. Jorgensen in his contention that rent enters into price, is more than I can understand. I am not a philosopher, much less an authority, but when anyone tries to correct George, I want him to prove his problem in a scientific manner by separating cause and effect. Anyone taking Henry George to be infallible is not a Henry George man, for George's work calls for everyone to use his own reason and not to rely on authority. Jorgensen, in his book, "Did Henry George Confuse the Single Tax," page 79, states: "George switches from the rent question to the land question." When we forget about or lose sight of land, we are lost, for land is the foundation of all structures social as well as material.

On page 81 of his book, Jorgensen states: "Moreover, most vacant land above the margin can also be had today by whoever will pay the title holder a rental which is no higher probably than what he would have to pay the government under the full Single Tax." But, right here, he fails to state that the government returns this rent to the people; not so with the title holder. He still further fails to state that, under the full Single Tax, taxes are removed on the cost of improvements and living, which is not the case when the title holder gets it.

Now, anyone with a little reason can see what happens to speculation of land values and rent under our present system with people making an effective demand for land. Rent or land values go up from rumors of a demand for land before the demand for land actually takes place. Our stock and bond markets will prove this. On page 77, Jorgensen further states: "The theory that low wages are responsible for lack of purchasing power is absurd because it is confusing cause and effect." And, in his Instructor's Manual, page 14, he teaches that it is lack of consumption that is the cause of unemployment. And, in his book, page 93, he goes on to say: "The lack of purchasing power is not the result of low wages and unemployment," and continues: "On the contrary, low wages and unemployment are the result of the lack of purchasing power." But Jorgensen fails to state what purchasing power is, and where it conies from. Does he hold it comes from greater consumption? If so, how can people purchase with what they consume?

George states purchasing power comes from production which is the result of labor, or the returns of labor, which are wages. High wages mean greater production, low wages mean less production, less production means less demand for labor, or lower wages. The people, directly or indirectly, exchange or purchase with what they produce and the return of production is wages the greater the production, the higher the wages. Money is only the medium of exchange.

With all this Jorgensen is badly confused and builds all his reasoning on effects instead of cause for cause comes first. There never was an effect without a preceding cause. Now, then, if consumption is the cause, as Jorgensen states, then consumption precedes production. Which is to say, that we consume wealth before we produce it. For, it must ever be borne in mind that a mere desire to consume does not constitute consumption. But, if production comes first, as Henry George states is the case, then we must produce before we consume. The greater the production, the greater the demand for labor, and the greater the demand for labor, the higher the wages. When George says that where land is locked up against labor and capital through private property in land, which causes speculation, it then causes unemployment and low wages. He goes on, "It might be on the other side of the world, but the effect will be felt in our industries here by a lack of orders for goods."

Henry George is correct in tracing the cause of unemployment to lack of production caused by denying labor access to land. If the Central States were wild and open for settlement and free today, people would flock there by the millions, and unemployment would soon be a thing of the past, as it was when land was free. But the Single Tax would make all land free, and our lands now held out of use would be open to labor and capital. And, with the price of goods coming down by removing taxes on them directly or indirectly, production in all lines would tend to increase. Then, who would work for less then he could get by making himself useful on free land? The productive power of marginal lands establishes the minimum wage level. And, as clear as George has proved this, Jorgensen and Beckwith do not yet seem to understand this natural law, and at the same time talk about science and cause and effect.

Labor applied to land produces all wealth; wealth is stored up labor; capital is that part of stored up labor or wealth used for further production. Rent plays no part in producing wealth. The reason, under our present system why one receives part of the wealth as rent without labor, does not change the cost of producing it, and has nothing to do with price. But it does cut down the amount left to those who produce it, and to that extent cuts down their wages. When rent is gathered by the state, instead of the title holder, and returned to all the people equally, and doing away with all taxes, it then leaves the full production to the producer.

The collecting of the full rent under natural law plays its part in freeing to all the source of all wealth. Free trade, supply and demand, and competition play their part in a just distribution of wealth. We cannot collect the full rent for the people without equalizing the advantage to the use of land, which is fair and just to all. And, we cannot be fair and just to all without being in accord with the moral law. And, we cannot apply this without being scientific. Therefore, the science of political economy and the moral law are inseparable. When we recognize man's equal right to the use of land, and his right to freedom in the exchange of the products of his labor, we will have less trouble to find the correct answer to this problem. With a just distribution of wealth, consumption will take care of itself.

Henry George says: "Justice seems to be the supreme law of the universe," and, when obeyed, makes it possible for all branches of science to come to the surface so that they can work in harmony with people's knowledge to the good of all, and make for an ever increasing advance in civilization. Justice is the moral law and, when obeyed, will light the way to bringing us safely to a more beautiful life here and hereafter. Those who see effects and not cause will not agree with Henry George. Henry George is not here to defend the truth he tried to make clear. For all that he does not need to be, for, as near as I can see, his work is sound and unanswerable and airtight against the feeble attempts made to disprove it.

As I am a student, I stand to be corrected.