How our Economy really works
BOOK REVIEW How our Economy really works – A radical reappraisal by Brian Hodgkinson.
Brian Hodgkinson, author of the book, was, unusually for a supporter of land value taxation and free trade, a graduate in economics, having gained a first class honours degree in Politics, Philosophy and Economics at the University of Oxford. This puts him in the advantageous position of being able to apply a critique of mainstream economics in its own terms.
Most advocates of land value taxation come to the idea through a study of economics within the mainstream classical tradition as it was developed by the French Physiocrats, Smith, Ricardo and Henry George. As explained in ‘The Corruption of Economics’ by Mason Gaffney, and referred to briefly in this book, the classical tradition of economic thinking was re-worked at the end of the nineteenth century, with the conflation of land and capital, the former being regarded as a sub-species of the latter.
For those who have studied in one of the few institutions which has continued to teach economics in the classical tradition, this volume is a useful summary of the principles. It relates classical theory to the main issues which are currently a matter of public concern, and for which politicians have no effective policies; on the contrary, the policies imposed are almost always counter-productive. Surprise is then expressed when, predictably, they do not work; with a knowledge of basic classical principles such as Ricardo’s Law of Rent, the failure could have been predicted. If you are familiar with the supporting body of theory, this volume is therefore an invaluable resource and it will keep the readers’ thinking up-to-date and relevant.
Unfortunately, for anyone who does not have a grounding in classical economics theory, the book might be difficult, since it involves un-learning contemporary thinking. Ricardo’s Law, which is foundational to the arguments presented, is covered only briefly and the gap needs to be filled in from other sources; fortunately, there are some clear explanations on YouTube which set out the principles of Ricardo’s Law, such as this one.
The widepread ignorance of Ricardo’s Law became particularly evident in discussions on the effects of departure of the UK from the European Union – such as the possible end of farm subsidies and import tariffs. Because the book assumes that the reader would be familiar with Ricardo’s work, it is not something that could be handed to anyone in the expectation that it would enlighten them; to that extent, it does not altogether live up to its title. In fairness to the auther, however, the book was originally written as a text book for a course on the subject, where students had the opportunity to pose questions, with a tutor on hand to clear up any difficulties. It would be ideal for this purpose.
As a bonus, Hodgkinson resolves a long standing confusion in the work of Henry George: that interest is the return to capital. Hodgkinson distinguishes invested money from real physical capital, which is an input to production, no different in principle from other inputs such as labour and components which are a product of labour. On that analysis, interest is the price of the credit needed to purchase the capital. This view has the advantage of dividing the products of wealth creation into just two streams instead of three: rent and wages, accruing respectively to land and labour.
How our Economy Really Works – A Radical Reappraisal by Brian Hodgkinson. Published by Shepheard-Walwyn (Publishers) Ltd · 107 Parkway House · Sheen Lane London · SW14 8LS
ISBN: 9780856835292 – Paperback £9.95