<aside> ✏️ Original review: https://astralcodexten.substack.com/p/your-book-review-progress-and-poverty

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A note from me, Kris:

I’ve condensed and refactored the review while adding many of my own comments. It was a great personal learning exercise for something I’ve been interested in.

Enjoy…

<aside> ⚠️ The Problem Stems From A “Bold Claim”…

…namely, that the resilience of poverty, oppression, and inequality in the face of advancing economic development is not some embarrassing accident we'll eventually get around to fixing, it's an inescapable consequence of our socioeconomic system.

• The argument </aside>

<aside> 📒 Defining Terms

George insists sloppy terminology leads to sloppy thinking. Naturally, he spends an entire chapter beating words to death to correct this.

• Value
• Production
• Labor
• Wages
• Wealth
• Capital

And this all brings us to a special category: Land

The unique specialness of land is George's entire schtick and the very core of his philosophy.

The term land embraces, in short, all natural materials, forces, and opportunities

• Land

The upshot

We must never put land in the same category as wealth, labor, capital, wages, production, money, or anything else.

If you treat land the same way you would a bar of pig iron, an hour of work, or a dollar bill, before you know it you'll get poverty paradoxically advancing alongside progress, inexplicable bouts of industrial depression, literal genocides and holocausts (he's dead serious about this), and The Rent Being Too Damn High.

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<aside> 👷🏾‍♂️ Wages, Capital, and Labor

The reviewer compresses several chapters because they all address the same question from different angles:

Why, in spite of increase in productive power, do wages tend to a minimum which will give but a bare living?

He starts by debunking an implicit assumption that misleads policy

• George argues that wages aren't drawn from capital but instead from production

If wages aren’t drawn from capital, then what is the role of capital?

Capital "increases the power of labor to produce wealth.". Capital is a force multiplier that supercharges the productive power of labor.

How?

• By enabling labor to apply itself more effectively (power tools go brrrr)
• By availing labor of the reproductive forces of nature (cows make baby cows)
• By making possible the division & specialization of labor (you dig bait, I'll catch fish)

Capital does not:

• supply labor with raw materials (nature does)
• provide for the maintenance of workers (who eat bread by the sweat of their own brow)….the only way capital actually "limits" productivity in real life is in the degrees by which it force-multiplies labor's productivity and unlocks certain forms of labor in the tech tree. The kind of "limit"

George objects to the idea that you need capital just to get any work done at all, or that without capital to sustain it, labor will shrivel up. Instead, capital is rocket fuel that labor supplies to itself by investing a portion of its wages. Because the prevailing theories of George's time are based on incorrect ideas about the relation between wages and capital:

"all remedies, whether proposed by professors of political economy or workingmen, which look to the alleviation of poverty either by the increase of capital or the restriction of the number of laborers or the efficiency of their work, must be condemned."

In short, more investment, more protectionism, and more efficiency programs can't, won't, and haven't fixed poverty and industrial depressions because they all proceed from false premises.

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<aside> 🔀 The Laws of Distribution

When society produces wealth, who gets different shares of it, and why?

Defining the drivers of value and their respective yields

Three factors in production: Land, Labor, and Capital and the name of their “return”:

1. The reward you get from production by owning Land is called Rent.
   • Defining Rent
2. The reward you get from production by supplying Labor is called Wages.
   • Wages, like interest, are limited by the margin of production.
3. The reward you get from production by supplying Capital is called Interest.
   • Interest is a term intended to express the return to capital alone and nothing else.

Defining Profit honestly

*Profits is "almost synonymous" with revenue, assuming you have some left after you deduct expenses. It means a gain in money or wealth, but the trouble is this gain is a mix of rent, wages, and "compensations for the risk peculiar to the various uses of capital." **What we want is a term that means the return to capital alone, totally separate from the return to laborers and landowners.

[Kris: the commitment to proper return attribution warms my heart. One of the most difficult aspects of performance evaluation in trading/investing is decomposing luck from skill. In the ideal framework, you’d want to extract all the return that is not due to “beta” which is cheap exposure to acquire. You want to identify idiosyncratic skill/alpha/edge. By isolating the components of return we are more capable of assigning prices we are willing to pay for those idiosyncratic and often “uncorrelated” sources of return. George was a stickler for creating an accounting paradigm that actually represented reality. Thus represented, we can have meaningful discussions about the trade-offs of policy and outcomes just as conservative accrual accounting gives a better representation than cash accounting for a business’ opportunities and challenges]***

Putting It All Together To Form A More Accurate Economic Framework

1. Land is "all natural opportunities or forces" and its return is rent.
2. Labor is "all human exertion" and its return is wages
3. Capital is"all wealth used to produce more wealth" and its return is interest

George says the false assumption at the root of the old theories is in thinking of "capital as the prime factor in production, land as its instrument, and labor as its agent or tool."

Instead, George asserts:

1. "Labor can be exerted only upon land"
2. "It is from land that the matter which it transmutes into wealth must be drawn"
3. "Capital is not a necessary factor in production”

Therefore, we should always put land first in all our inquiries rather than capital, which ought to come last.

Summing:

*Where land is free and labor is unassisted by capital, the whole produce will go to labor as wages.

Where land is free and labor is assisted by capital, wages will consist of the whole produce, less that part necessary to induce the storing up of labor as capital.

Where land is subject to ownership and rent arises, wages will be fixed by what labor could secure from the highest natural opportunities open to it without the payment of rent.

Where natural opportunities are all monopolized, wages may be forced by the competition among laborers to the minimum at which laborers will consent to reproduce.*

This is the reason George says that wages are so high in "new countries" where there's more land available than in countries where it's been locked up for centuries.

Here's how it all fits together:

Though neither wages nor interest anywhere increase as material progress goes on, yet the invariable accompaniment and mark of material progress is the increase of rent – the rise of land values.

where the value of land is highest, civilization exhibits the greatest luxury side by side with the most piteous destitution

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<aside> 🩹 Misunderstandings

1. The paradox of why poverty is chained to progress

How land-based wealth inequality stems from:

• 1. Population growth
• 2. Technological advancements

2. Conflating monopoly with capitalism

The monkey wrench that causes the boom-bust cycle of industrial depressions is rent, and even though we have more than enough material wealth to provide for everybody's needs, rent prevents us from distributing it fairly and equitably.

[Kris: Note that “equitably” has nothing to do with some moral justice as we are used to considering in classic tradeoffs between equality and efficiency.

There is no tradeoff here!

What we are seeing is that we do our accounting wrong and that much of the return we ascribe to capital is really just rent and as demonstrated needs to be treated differently]

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<aside> 💊 The Remedy

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<aside> 💀 Extra: Dunking On Malthusianism

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