The economist John Bates Clark was paid by special interests to find a means to skirt around the Henry George equation production (P) minus land and natural resource rents (R) leaves labour (W) & capital (I) untaxed: i.e. P – R = W + I. George’s formulation had achieved enormous circulation in his top-selling “Progress and Poverty” and was a clear and present threat to those powerful rent seekers who had been capturing publicly generated unearned land and natural resource rents unto themselves. George had argued that these rents were owed equally to all citizens and needed to be captured publicly. This was war!

Clark and his followers set about establishing a new economics, ‘neoclassical economics’, to conflate land and natural resource rents with capital, to make land and its rent disappear, a measure that would have had classical economists turning in their graves.

Once done and accepted—Mason Gaffney’s “Neoclassical Economics as a Stratagem Against Henry George”, mentions that it took about thirty years to win over the economics’ profession—it became open for rent seekers to merge with ‘capitalists’ to argue that there was a necessary conflict between labour and capital, and that capital could not afford “high wages” because it was inflationary. George had argued that labour and capital had a common interest, as opposed to privatisers of economic rent, or surplus product. Under neoclassical economics, the inflation of escalating land prices and the deadweight losses injected by taxes on incomes and purchases has gone virtually unremarked.

So, now we have central banks and political commentators argue daily that a lid must be kept on wages, so that capital (sotto voce: and rent seeking) may achieve its “rightful reward”. Citing RBA thoughts, the reputable business commentator Alan Kohler did as much on the ABC-TV news tonight.

Once land price inflation and the taxes passed off into prices are seen for the inflation-generators that they are, we’ll be well on the way to mending an atrocious economic rort. It has indeed been kept well hidden.

Tax reform is in the air in Australia. Have we the wit to expose the fundamentalist neoclassical nonsense to which we’ve sadly become accustomed?