Ed, Well put together article, but it suffers from the usual problems. It is written as if land does not exist. Yet, there can be no production without access to land. And if land prices become too high, production stops.
Sen wrote: Certainly, the cumulative downturn we are observing right now, which is edging us closer to a depression, has clear Keynesian features; the reduced incomes of one group of persons has led to reduced purchases by them, in turn causing a further reduction in the income of others. Georgists would immediately ask "Why are there 'reduced incomes of one group'?" George argued that depressions are not caused by overproduction, nor are they caused by under consumption (everyone's favorite). Rather, said George, they are caused by under production. People cannot find jobs, which means they can't buy -- underconsumption. This means the shelves aren't cleared -- obvious evidence of overproduction So, why can't they find jobs? You may recall the first assumption of Classical Political Economy period. It is: "Man's desires are unlimited." If we worked 25 hours a day, we could never satisfy unlimited desires. So, why it's so hard to find a job? In a free market economy, businesses succeed and fail all the time. People fall out of work and get new jobs continually. But what happens if new jobs dry up because increasing land costs dampen the supply of new businesses? "Underproduction" is with us -- a condition, which leads to apparent underconsumption and overproduction. The free market requires fresh supplies to come to market in response to price increases. These return prices to equilibrium. New land cannot come to market in response to increasing price. Under pressure of increasing demand, prices keep rising, as they try to draw more land to market. As Will Rogers said: "They ain't making no more dirt." Further, you can't move land to market to bring prices. So, in a normal economy, land prices are always pushing the envelope. As I've said, at that point, any "trigger" can set off a depression. This should be separated from the land bubble (for heaven's sake, not a housing bubble). It is probable that 'bubbles' don't do much economic harm. When the 'exuberance' has abated, some will have won, others will have lost. While the producer of a Beanie Babies walks away with $1 billion, others may have garages packed tight with unsellable Babies. Of course, in the present case it didn't help much that the Bush administration was deliberately forcing lower interest rates, even as the Democratic Congress was encouraging Fanny and Freddie to lend billions to people who were poor risks. Nor did it help that Wall Street was effectively hiding this suspect paper in packages that they sold around the world. Needless to say, all this nonsense is supposed to be evidence that the free market has failed. Bah! Harry ****************************** Henry George School of Los Angeles Box 655 Tujunga CA 91043 Tel: 818 352-4141 ****************************** From: [email protected] [mailto:[email protected]] On Behalf Of one Weick Sent: Sunday, March 08, 2009 6:00 AM To: [email protected]; futurework Subject: [Futurework] Sen on Keynes and Pigou Good discussion of the current implications of Keynesian and Pigovian economics by Amartya Sen in the current New York Review of Books. Took me way back to when the world was green (or purple or whatever). It's at http://www.nybooks.com/articles/22490 . Ed _______________________________________________ Futurework mailing list [email protected] https://lists.uwaterloo.ca/mailman/listinfo/futurework
