From Henry Law, Land Value Taxation Campaign
It is very interesting that the wealth of the majority of people fits a curve that describes the energies of atoms in a gas (12 March, p 6), but there is no mystery here. The underlying reason for this skew was explained in 1879 by the economist Henry George, who showed it was caused by the conditions of land tenure.
One way to understand what is happening is to imagine three people playing a game of Monopoly. When all the properties have been bought, a fourth player joins the game. He will inevitably be subject to unfair terms as, wherever he lands on the board, he has to pay rent to one of the other players.
This is an accurate model of a key aspect of real economies. Those who do not own land have no option but to work for wages, which will be driven down to a minimum level by competition for work. Landowners need do nothing but collect the rent for allowing labour access to land.
The question in real economies is how the rules could be changed to enable newcomers to join the game once it is under way and all the sites are taken. George proposed that the rental value of land should be collected and used to replace existing taxes. In this way, the game can go on for ever, giving equal opportunities to newcomers and succeeding generations.
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From Jim Penman
Arguing that some sort of natural law promotes inequality in a market economy is not only wrong but dangerous. For 200 years the growth of the market economy accompanied a dramatic closing of the gap between rich and poor. Only recently has the gap started to widen, and this has more to do with government policy than market forces. We have impossibly complex tax codes that allow the wealthy to pay far less than their share, and Byzantine legal systems that put justice out of reach for those who can’t afford the best lawyers. We have social security systems that lock the unemployed into degrading poverty and, in Australia at least, a family law system that robs ordinary people for the benefit of wealthy lawyers.
Treating inequality as some sort of physical law justifies it and stops people looking for solutions. It is the result of people knowing a great deal about statistics but nothing of history.
Montrose, Victoria, Australia
From Paul Schleifer
It has long been recognised that there is one law for the rich and another for the rest of us. If we all competed fairly in the market economy, we might all follow a Pareto distribution of wealth which, while far from equal, would at least be meritocratic. The problem is that political power follows wealth, so the rich can influence legislation in their favour. This allows the super-wealthy to benefit disproportionately from economic growth.
Addressing wealth inequality by attempting to tax the super-wealthy is unlikely to succeed. The only approach that will work is to limit their influence. The challenge is to be nice about it.
London, UK
From David Charlton
While this article raises interesting analogues in the physical world to explain the distribution of income, it does not, as headlined, have much to do with the distribution of wealth. Income – earnings received per unit time – does not completely represent wealth, defined as net economic value of assets owned at any point in time.
Corning, New York, US
From Stephan Bren
A model that likens economic interactions to atomic collisions in a gas is justified with the statement “the analogy also holds because money is like energy, in that it has to be conserved”.
Victor Yakovenko needs to extend the bounds of his model to encompass wealth generated from, among other things, natural resources and the intellectual domain. The amount of steel available today, for example, is vastly greater than it was just 100 years ago. This increases the amount of money in the economy. Simple observation shows that real wealth has been increasing – more individuals own or have access to transportation, housing, medical care, disposable income, and so on, than at any previous time.
Elkridge, Maryland, US
Brighton, UK
