7 Moffat's "Unorthodox" critique - Part II: nineteenth-century British and continental critics

American Journal of Economics and Sociology, The,  Nov, 2003  by George Babilot

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Moffat is not at all comfortable with George's explanation of the source of and rationale for interest, and he is even more disturbed with his unqualified acceptance of the Ricardian rent concept. He believes that George is being inconsistent in his justification for the private receipt of interest while rejecting the same justification when it is applied to the private receipt of rent. What Moffat is alluding to is George's reference to the legitimacy of interest as originating in the inherent powers of nature--the same powers, according to Moffat, that George attributes to land. "Thus interest springs from the power of increase which the reproductive forces of nature, and the in effect analogous capacity for exchange, give to capital. It is not an arbitrary, but natural thing, it is not the result of a particular social organization, but of laws of the universe which underlie society. It is, therefore, just." (35) George's "principle of growth or reproduction" explanation for interest brings forth a comment by Moffat not untainted with irony:

   This is Mr. George's discovery, and he announces it with the air of a
   man whose penetration has been profoundly exercised to reach it....
   Clearly the modesty of a Newton could not have sufficed to announce
   such a discovery in a less ostentatious way, and we shall find that
   even the dexterity of Ricardo could not more rapidly have turned a
   conjecture into a certainty. What is most remarkable about this
   singular theory is that its one trait of originality lies in its
   application. Mr. George having no occasion to account for the
   legitimate existence of rent, which he purposes to deny altogether,
   takes the physiocratic theory of the source of rent, and converts
   it to the use of "interest." What is strange is that he does not
   see that in doing this he transfers to interest the very objection to
   the legitimacy of rent. It is because the produce due to the natural
   increase of the soil is supposed to be constituted without the
   exertions of the landlord that so many theorists have objected to
   rent; now Mr. George tells us that the source of interest is the
   reproductive forces of nature.
   Thus while it is unlawful for a man who pretends to be an owner to
   appropriate these, it is quite lawful for a man who professes to be a
   borrower to do so. (36)

If land were the creation of human effort as capital goods must be, then Moffat's point would not be without merit. However, he was aware of the difference when, in an earlier discussion of the basis for trading between capitalists and labor, he recognized the capitalist's interest in acquiring "labour stored"--capital goods, (37) There is a distinction to be made between the natural resource, land, and the stored-labor notion of capital goods that absolves George from the accusation of inconsistency. Capital goods are the products of human endeavor and as human-made instruments they are clearly designed for the furtherance of production. Land's contribution to production, on the other hand, is independent of human exertion, and in that sense rent, if taken as the measurement of this productivity, must be regarded as an unearned addition to the earned components of personal income.