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Frank H. Knight's criticism of Henry George
American Journal of Economics and Sociology, The, Jan, 2008 by Ross B. Emmett
The second aspect of Knight's attack on George that bears mention is, of course, economic. In the early 1930s, Knight began to rethink his way through economic theory, starting with cost theory. George's single-tax theory was built upon the classical cost theory of David Ricardo, with its tripartite division between land, capital, and labor. It was this classical cost theory on which Knight focused his theoretical criticism. The language was strong, reminding us of Knight's general rhetorical strategy of attack: His article on Ricardian theory (Knight 1999c), he tells us, is written on the premise that study of the classics is motivated by an interest in correcting their mistakes.
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Tideman and Flassmann make Knight's rejection of classical cost theory the center of their critique of his response to George. They argue that Knight's refusal to treat land differently than labor and capital simply misses the obvious fact that marginal land is brought into economic use not by its improvement, but by one economic agent excluding others from use of the land. Assuming that justice demands that everyone be able to enjoy land's rewards, taxing land rents brings economics and ethics together.
The problem here is not that Knight rejected what Georgists see as the obvious claims of justice, nor is it that Knight misunderstood the economic process of bringing marginal land into economic use. Rather, Knight disagrees with George and classical economics on the central issue of land use. Knight's economic theory is built on the assumption that there is no difference between the way in which land, labor, and capital are brought into economic use. As he says in the second essay, the acquisition of "unearned wealth" by the heirs of those who initially acquired land is "not a sequel peculiar to land." (8) In Knight's estimation, no factor of production is simply acquired--they are always produced. Or, to put it differently, if land may be acquired unimproved, so too may labor or capital. Knight's position is one of the fundamental differences between neoclassical and classical economics.
Finally, Knight's attack on George has an ethical aspect. For Knight, social problems are ultimately ethical in character, not simply economic. No "single tax" can replace the wisdom gained from judgment of what we want now, and what we may come to be later. For Knight, social problems can only be addressed by social discussion, in which we consider the options, judge the relevance of various principles, and reflect upon who we are and what is good for us. The outcomes of those discussions can never be known in advance, either by appeal to moral principles or scientific prediction. George's single-tax proposal, in Knight's estimation, tries to substitute "scientific" conclusions for social discussion. (9)
References
Hands, D. W. (1997). "Frank Knight's Pluralism." In: Pluralism in Economics: New Perspectives in History and Methodology. Ed. A. Salanti and E. Screpanti. Cheltenham, UK: Elgar.
