McConnell, Rent, Say's Law, etc.

Harry Pollard

[Reprinted from a Land-Theory online discussion, 29 March 2000]

You asked about McConnell's treatment of George in his latest edition.

He offers a fair discussion of George, but seems not to have thought about it a lot. He apparently believes that an Economic Rent collection occurs only when Rent is being used by a site. Therefore, a vacant lot will incur no Rent. Rather, as if when you buy a theater seat, but are unable to occupy it - you should get your money back.

He doesn't say this - but it is implied.. As is the supposed difficulty in assessing land, and the fact that Rent collection wouldn't be enough to pay what is needed by government. (Assume that is so, but his praise of the economic advantages of a land tax should at least make that tax the first to be collected, before all the other impositions with their obviously unsound effects.)

I have advocated Say's Law for umpteen years. As I think we have discussed before, supply and demand are the same thing, and don't let anyone tell you anything different.

The act of supply is also the act of demand.

What these clowns do is to introduce money into the equation. Then it's back to the arithmetical trick, where you prove that 3 is equal to 4 (generally by something like multiplying each side by zero - 3x0 = 4x0 - then take out the zeros from each side and, by golly, 3 = 4!!!).

Perhaps we should outlaw "money" from economics and concentrate on the real stuff -- food, clothing and shelter.

McConnell says two things spoiled Say's Law. The Great Depression and Keynesian analysis. Obviously he doesn't understand the 'leak' in the economy (and his pretty flow charts) caused by land speculation. Speculative land-value like the return from any privilege is a kind of one-way exchange (yes, Georgists are Zen, too).

That's the leak.

McConnell talks of Keynes' theory that widespread underspending causes the problem.

He offers no clue as to why there is this underspending. It just happens. Bah!

Whether you buy a truck for personal use, or a truck for your factory (investment) makes no difference. In each case you swap your bologna for a vehicle. The transfer balances.

There is also the silly Keynesian notion that savings and investment get out of whack!

This only happens if you decide not to spend your bologna, but to keep it under the mattress for a rainy day. (That conjures up some thoughts.)

If people do put some gold under the mattress (ah, that's better) it causes no particular problem - even if lots of people do it.

The market notes lessened demand, prices re-arrange, everything settles. I think that as modern economists frequently give some lip service to the market process, they should try to understand it, but then I'm incurably optimistic.

Oh, yes, one other point. I also think that Quantity Theory is correct - not "crude". The error comes in the failure of the clowns properly to define "money".

I just checked. No mention of Quantity Theory. Also, a single mention of "market clearing", which I regard as a vital link in the understanding of the market. "Market Clearing Price" is the highest price a seller (producer) can get in the market while clearing his shelves. A lower price means that his shelves are empty. A higher price means that the goods "stick to his shelves".

How fast should they clear? That's the producer's decision. He knows how quickly he wants the products to clear. The economist doesn't, for before he has time to get his supply/demand curves drawn - conditions have changed and so has the market clearing price.