Henry George and Social Theory:
Consequences of Inattention to His Contributions
Robert Peter Siemens
[Reprinted from the American Journal of Economics
and Sociology, April 1995]
I. The Miscarriage of Political Economy
George considered the unjust distribution of wealth in modern society
to be the result of "the miscarriage of political economy, . . .
[and which he] traced to the adoption of an erroneous standpoint"
(George, 1898A: 162). This miscarriage of political economy "lay
in the failure of the so-called science (i.e., of scholastic political
economy) to define its subject-matter or object-noun"
(1898B:181). Failure to define its subject-matter, wealth, has
resulted in the confusion of wealth and value, of power and
production, of ethics and science. With the result, as we saw, of
ethics being banished from economic considerations. Thus, an ethically
deficient economics has become authoritative for ethical
decision-making by governments and businesses alike.(1)
This failure to clarify its key term has resulted in political
economy making a series of critical errors in its development. The
first of these is a confusion of the terms "natural" and "minimum"
on the part of "both Smith and Ricardo [who] use the term
'natural wages' to express the minimum upon which laborers can live;
whereas, unless injustice is natural, all that the laborer produces
should rather be held as his natural wage" (George, 1898A:163).
Among the most serious consequences of this confusion is that the law
of diminishing returns was only applied to agricultural production.
Consequently, economic teaching produced "'the law of diminishing
productiveness in agriculture.' But the law is not peculiar to
agriculture" (George, 1898B:358). The production of wealth
requires space in no matter what form or mode it takes place. An
increasing concentration of labor-power in a limited space only
utilizes the available cooperative power up to a point, at which
overcrowding begins and the productive power of all present is
diminished with every further increase of labor-power. By generalizing
the so-called "law of diminishing returns in agriculture" to
prove that it is merely an application of "the spatial law of
material existence," George considers himself to have proved that
the physical, economic and moral universes are all susceptible to one
law (George, 1898B:359, 360).
George's theory of natural law is significant for our Spenglerian
concern because George's conception of the law of decline is not based
on an analogy with the life cycles of biological nature. It is,
nonetheless, equally directly and empirically verifiable in the
economic consequences of the relations of human social nature. The
question remains, then, why has the Spenglerian concern not been
addressed, tested empirically, and either verified or disproved?(2)
Wolff censures Weber for failing to address this question, and by
implication, all who followed him. Is its failure to be taken
seriously really the result of undetected errors in the formulation of
the founding fathers of political economy? Is this the source of
errors that have become part of the "family disciplines" of
all the social sciences?
The historical evidence supports George's thesis that modern
economics incorporates political economy's flawed origins. The
incorporation of the founding fathers' errors is characterized by the
transition from political science to "economics," first
recognized in the Encyclopedia Britannica in 1886. The fatal
elimination of ethics from economics is achieved by its practitioners
constantly increasing the importance of statistics in economic
discussion. The moral considerations that were part and parcel of
political economy's original considerations, have been dismissed from
economic consideration because they cannot be expressed by the rules
of arithmetic. Political economy, as modern economics, has been
reduced to the science of calculating commercial transactions, without
regard for their larger human implications.(3)
This elimination of ethical from economic considerations made the
confusion of wealth and value, production and power, possible.
Furthermore, as a result of this confusion, "the writers on
political economy have treated exchange as a part of distribution"
(George, 1898B:400) when "it properly belongs to production. It
is by exchange and through exchange that man obtains and is able to
exert the power of cooperation which with the advance of civilization
so enormously increases his ability to produce wealth" (George,
The confusions George attributes to Smith and Ricardo thus, when we
consider the economy in relation to the totality of human reality,
actually stifle altogether what C. Wright Mills has called the "sociological
imagination." Classical political economy's errors have prevented
social theory from coming to self-consciousness in American society.
By treating the value created by exchange as a part of distribution,
the social nature of exchange-value became obscured. The value of
sociology failed to be realized as a result; and social theory arrived
at its present state of general disrepute from without and self-doubt
II. The History of Sociology's Failure
To understand social theory's present-day failure we must return to
the discipline's modern origins. Although we do not want to commit the
"genetic fallacy" of implying that the "fate" of
modern sociology was written Oedipus-like into its birth, we do concur
with Henry George and Sigmund Freud that the unconscious motives of
our genetic origins (whether cultural or biographical) must be brought
to the surface as a precondition to progress toward the freedom that
is our goal. A "postmodern" social theory must proceed in
consciousness of the unconscious motives that directed modernity to
its characteristic expression.
Our focus is the "fate" of the modern relationship between
ethics and the economy. We have seen that a separation of these two
spheres of life has led to uncertainty as its best expression, and to
totalitarianism and genocide as its worst (Wolff, 1991).(4) This
unhappy state of affairs has taken place, to extend George's argument,
because unconscious forces were repressed by modernism (defined as
external-orientation). For, "despite . . . insistence upon the
'scientific character' of [political economy], the classic writer were
. . . rationalizing their own ethical predilections, or rather those
of their backgrounds" (Geiger: 1933:80).(5)
The reason the classical writers produced a flawed theory, in other
words, is because they refused to engage the role of their own moral
assumptions in the development of their theory. Consequently, moral
ideals and economic values were allowed to go their separate ways.
Transposing Freud's insights to the political-economic level, we
encounter Marx's sociology of knowledge dictum that economic interests
determine moral values. And we see, when we examine the historical
records, that economic interests have created the ideal of "interest-free"
sociology. George traces the source of this "repression" of
legitimate demands of the moral instincts to the "constant
tendency" on the part of the canonized treatises on political
economy to assume "that landowners, through their ownership of
land, contribute to production" (1898B:410).
The first significant sociological expression of this fateful
separation of economics and social science from ethics is that of
Herbert Spencer, who repudiated and withdrew his published views when
Henry George claimed him as an authority figure to gain legitimacy in
the academic world. Spencer extricated himself from the Weberian
dilemma by distinguishing "between the 'purely ethical view of
the matter' and the 'political-economical view' and stat[ing] that
they apparently did not harmonize" (Geiger:1933:296).
We recognize Weber's concern with the relationship between personal
ethics and morally neutral economic life. The former are ideal, the
latter pragmatic. "'Social Statics . . . was intended to be a
system of political ethics - absolute political ethics, or that which
ought to be, as distinguished from relative political ethics'"
(Geiger, 1933: 296). Furthermore, Spencer shared Weber's dilemma
between the irreconcilability of these two spheres (i.e., the ethical
and the scientific as expressed in economic laws): "'I cannot see
my way toward a reconciliation of the ethical requirements with the
politico-economic requirements'" (Geiger, 1933:297). The implicit
tragedy of Spencer's system of absolute political ethics, which was to
be a model for reforming existing institutions (Geiger, 1933:301), is
that when George suggested putting Spencer's ideal into practice
(Geiger, 1933:302), Spencer not only changed his mind, but "fail[ed]
to justify his completely reversed opinion on the land question with
sufficiently cogent arguments" (Geiger:1933:309). Spencer, in
other words, one of the founding fathers of sociology, consciously and
deliberately participated in the separation of economics and ethics
that became so perplexing to Max Weber.
This separation of ethics and economics, with which Weber was so
immensely preoccupied, is characteristic of modernity because it
betokens modernity's partition from feudalism, most specifically in
reference to land ownership. For, as anthropologists demonstrate, the
only ownership of land among primitive (i.e., pre-modern) peoples was
semicommunal (Geiger, 1933:305). Classical political economy retained
vestiges of its "pre-modern" origin by retaining the "classic
distinction between land and capital" (Geiger, 1933:305). The
modern perspective, in which ethics and economics, ideals and reality,
personal and corporate life have gone their separate ways, approaches
the problem of the relationship between land and capital "from
the angle of function, an approach which . . . tend[s] to remove such
a distinction [as] between land and capital" (Geiger, 1933:101).
This separation, however, introduces the confusion that the new
conception of "function" blurs the distinction between
wealth and land by permitting both to "function" as capital.
"The individualization of ownership . . . eventually affects the
ownership of land. Bought and sold by measure and for money, land is
assimilated in this respect to the personal property produced by
labor; and thus becomes, in this general apprehension, confounded with
it" (Geiger, 1933:291).
Another critical juncture in the miscarriage of political economy, as
George characterizes the fate of ethics in the modern world, is the
quarrel between George and Alfred Marshall, whose Principles of
Economics was probably the most influential work of the classical
political economists' first generation successors. Marshall, because
he believed that "The diminishing productiveness of the free soil
has a greater influence in lowering wages than the payment of rent
fees" (Andelson, 1979:64), represents the errors of the founding
fathers in its second-generation guise.
The fate of ethics in the modern economy was sealed when "Marshall,
whose influence impacted with great force upon the appointed guardians
of the 'new' science of economics" (Andelson, 1979:69), declared
rent from land an economic surplus, on the basis of the similarity of
land to "some of the other agents of production [which] cannot be
produced quickly, so that in the short run their stock is practically
fixed" (Andelson, 1979:65-66). Even though George was vehemently
dismissed by the established academic economic community, "the
disagreement between [George and Marshall] . . . raises questions
concerning the scope and methods of economics that are still alive to
controversy" (Andelson, 1979:69). Not only has George not been
given credit that is his due. His theoretical reasoning that the
minimum wage was determined by what an individual could earn by his
own effort on rent-free land "anticipated the marginalist
revolution in economic theory which is commonly associated with
neo-classical economists like Alfred Marshall" (Andelson,
The problem that remains with Marshall's system is that it rests upon
a compromise between the short and the long run, as Spencer's ethic
compromised between its absolute and relative expressions. "(I)n
the 'short-run' - to use Marshall's phrase - alternative
reproducibility is no more present in capital than in land"
(Geiger, 1933:109). A short run similarity is used as a heuristic
device to gloss over a troublesome discrepancy between economic logic
and economic practice, as well as to obliterate the ethical problem of
the unequal distribution of common goods (i.e., land and benefits from
Marshall's influence, and his influential perpetuation of the
fathers' errors has had ramifications beyond economics. Talcott
Parsons complains that "'[T]he expansion of economics into an
encyclopedic social science by Marshall and his followers was a form
of 'economic imperialism,' which had the effect of 'suppressing the
rights of neighboring sciences to an independent existence in the
society of the sciences'" (Parsons, 1934,522). (Quoted in Levine,
A further testament to Marshall's significance to Anglo-American
sociology is that "a major tradition of work in the social
sciences . . . achieved its prevailing contemporary form with the
elaboration of marginal-utility economics as codified by Marshall.
Accepting the validity of Marshallian economics was the starting point
of Parsons' earliest work. Parsons believed that Marshall's correction
of the previously prevailing conception of homo economicus was sound.
He affirmed Marshall's attention to the normative and ideal components
of action in addition to the utilitarian propensities previously
considered exclusively by Anglo-Saxon economists" (Levine,
The alienation of ethics is carried over from economic to social
theory by "Parsons . . . [who] had been trained as an economist,
and [whose] first publications appeared in journals of economics - and
for whose achievements he always maintained the highest respect"
(Levine, 1985:120). Consequently, he "yielded to economics the
right to set the terms for organizing the whole universe of knowable
social phenomena" (Levine:120).
That we have, largely unconsciously, like the rounding fathers of
political economy, accepted the modern ethic that sanctifies the
separation of personal and economic conduct is apparent from our
orthodox reading of Parsons. We have forgotten the shadow of the
parental authority of economic rounding fathers' errors; have we
eliminated them, or merely absorbed and forgotten them?
Weber, like Parsons, articulated his theory under the domination of
the separation of personal ethics and professional science. "During
the first years of this century Weber still viewed himself as an
economic historian, showing little sympathy for the efforts of
sociologists (Levine:95). Weber, however, did not accept the rejection
of ethics from economics, and attempt to work around the claims of
economic definitions of reality, as did Parsons. He recognized the "irrational"
character that any personal ethos the individual might choose to
practice necessarily has in a "disenchanted" world. An ethos
only has a rationality in a community in which it is comprehended,
respected and reciprocated. Rather than acquiescing to the moral
authority of the economic order, Weber took the pose of the devil's
advocate by arguing that by reducing the individual's personal cosmos
to irrationality, the economic order confesses its own
The closed canon of the modern economic order, by obliterating
ethical and social concerns as anomalous to its project, has embarked
on a course of self-annihilation; self-annihilation that is literal,
and not metaphorical, because the health of the economy rests on a
healthy relationship to the anomalous human subjects whose continued
cooperation constitutes the ground of its existence.
- Weber points out that "our
science [of 'social-economic' phenomena]" was created for "the
attainment of value-judgements concerning measures of State
economic policy (1949:51)," and its goal is "the
education of judgement about practical social problems" with
the goal of affecting legislation (1949:50).
- Paul Feyerabend, a philosopher
of science, offers a suggestion in another context that is
applicable to understanding the rejection of cyclical theories in
history as well: "Aristotelian dynamics was a general theory
of change, comprising locomotion, qualitative change, generation
and corruption, . . . Galileo's dynamics and its successors deal
with locomotion only, and here again just with the locomotion of
matter. Other kinds of motion are pushed aside with the promissory
note that locomotion will eventually be capable of explaining al
motion" (1978:99-100). It is easy to see how cyclical
theories of history or society would fall out of favor with a
positivistic social science modelling itself after the natural
sciences by creating an idea of linear progress.
- In 1831 Richard Whately
suggested changing the name of political economy to "catallactics,"
meaning "the science of exchanges."
- Lash & Whimster have
discussed the separation of value spheres as a characteristic of
modernity: "Concepts of values and ideals in the sphere of
morality or art are sealed off from societal rationality, a field
predominated by instrumental rationality" (1987:19). Their
attitude toward this situation is diametrically antithetical to
George's and Weber's: "the mature person should recognize the
separation of the value-spheres as a condition of the modern world
that has to be lived with" (Lash & Whimster, 1987:25).
George and Weber both considered this situation in dire need of
changing, lest it bring about the destruction of Western
.... The critical difference between
this paper's and Lash & Whimster's analysis is that between
rejection and acceptance of modernity: "modernist
differentiation of the spheres [of life], worlds and dimensions of
utterance and discourse" in which "unbound subjectivity
. . . the necessary condition of rational critique and of
substantive rationality" exists (Lash, 1987:368). Modern, not
modernist, differentiation of the spheres of life has led to
totalitarianism and moral irresponsibility. Lash & Whimster's
effort must be judged, in the final analysis, as a defense of a "modern"
interpretation of Weber that does not stand up in the light of
critical comparison of the congruence of the views of George and
- "Economics was originally
. . . integrated into the great scheme of the natural law and
rationalistic Weltanschauung of the eighteenth century. The nature
of that Weltanschauung with its optimistic faith in the
theoretical and practical rationalizability of reality had an
important consequence insofar as it obstructed the discovery of
the problematic character of that standpoint [the 'at least
ostensibly unambiguous and stable practical valuative standpoint:
namely, the increase of the 'wealth' of the population"]
which had been assumed a self-evident. As the rational analysis of
society arose in close connection with the modern development of
natural science, so it remained related to it in its whole method
of approach" (Weber, 1949:85).
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- [Robert Peter Siemens, Ph.D., is an
independent scholar who resides in Clearbrook, V2T 1H9 B.C.,