It’s Income-Tax Day in America. In The Ethics of Liberty, Rothbard stated the obvious when he wrote:
It would be an instructive exercise for the skeptical reader to try to frame a definition of taxation which does not also include theft. Like the robber, the State demands money at the equivalent of gunpoint; if the taxpayer refuses to pay, his assets are seized by force, and if he should resist such depredation, he will be arrested or shot if he should continue to resist.
8. Production: Entrepreneurship and Change
2. Determination of the Discounted Marginal Value Product
3. The Source of Factor Incomes
Our analysis permits us now to resolve that time-honored controversy in economics: Which is the source of wages—capital or consumption? Or, as we should rephrase it, which is the source of original-factor incomes (for labor and land factors)? It is clear that the ultimate goal of the investment of capital is future consumption. In that sense, consumption is the necessary requisite without which there would be no capital.
4. Land and Capital Goods
The price of the unit service of every factor, then, is equal to its discounted marginal value product. This is true of all factors, whether they be “original” (land and labor) or “produced” (capital goods). However, as we have seen, there is no net income to the owners of capital goods, since their prices contain the prices of the various factors that co-operate in their production. Essentially, then, net income accrues only to owners of land and labor factors and to capitalists for their “time” services.
5. Capitalization and Rent
The subject of “rent” is one of the most confused in the entire economic literature. We must, therefore, reiterate the meaning of rent as set forth above. We are using “rent” to mean the unit price of the services of any good. It is important to banish any preconceptions that apply the concept of rent to land only.
6. The Depletion of Natural Resources
One category has been purposely omitted so far from the discussion of land factors. At first, we defined land as the original, nature-given factor. Then we said that land which had been improved by human hands but which is now permanently given must also be considered as land. Land, then, became the catallactically permanent, nonreproducible resource, while capital goods are those that are nonpermanent and therefore must be produced again in order to be replaced.
Appendix A: Marginal Physical and Marginal Value Product
For purposes of simplification, we have described marginal value product (MVP) as equal to marginal physical product (MPP) times price. Since we have seen that a factor must be used in the region of declining MPP, and since an increased supply of a factor leads to a fall in price, the conclusion of the analysis was that every factor works in an area where increased supply leads to a decline in MVP, and hence in DMVP. The assumption made in the first sentence, however, is not strictly correct.
Appendix B: Professor Rolph and the Discounted Marginal Productivity Theory
Of current schools of economic thought, the most fashionable have been the Econometric, the Keynesian, the Institutionalist, and the Neo-Classic. “Neo-Classic” refers to the pattern set by the major economists of the late nineteenth century. The dominant neoclassical strain at present is to be found in the system of Professor Frank Knight, of which the most characteristic feature is an attack on the whole concept of time preference.
Philipp Bagus, author of The Tragedy of the Euro, has completed a new book In Defense of Deflation, now available at Amazon. The only downside is that it has an “academic” (i.e., a very high) price. However, for those who can swing it:
