Key terms
George gives ordinary words exact meanings, and most misreadings of the book start here. In the text, the first use of each term in a chapter is underlined with dots. Select it to see the definition.
The three factors of production
George divides everything involved in production into three, and nothing belongs to more than one.
Land
Every natural resource and opportunity: soil, minerals, water, forests, and above all location. Anything that exists without human effort.
Not only farmland or real estate. A building is never land, but the site under it is.
“The term land includes all natural opportunities or forces”
Labor
All human effort spent producing wealth, by hand or head. A shopkeeper, a doctor and a farmer working their own field all labor.
Not only manual or hired work, and not 'the workers' as a class.
“the term labor includes all human exertion in the production of wealth”
Capital
Wealth used to produce more wealth: tools, machines, buildings, seed, stock in trade.
Not money, stocks, bonds or land titles. Those are claims on wealth, not capital.
“the term capital, all wealth used to produce more wealth”
Wealth
Natural materials shaped by human labor into things people want. A society gets wealthier only when there are more such things.
Not anything with a price. Land, debts and shares are excluded, because one person's gain on them is another's loss.
“Nothing which nature supplies to man without his labor is wealth”
The three shares of what is produced
Everything produced is split three ways, one share for each factor. A single person's income can include all three.
Rent
The share that goes to landowners for the use of land, measured by how much better a site is than the best land available for free.
Not what you pay for an apartment, which mixes rent with a return on the building. An owner who uses their own land still gets rent.
“That part which goes to land owners as payment for the use of natural opportunities is called rent”
Land value
Rent paid up front. The price of land is the expected rent, capitalized into one sum.
Not the value of the buildings or improvements on it.
“When land is purchased, the payment which is made for the ownership, or right to perpetual use, is rent commuted or capitalized.”
Wages
The share that goes to labor: every return for human effort, whether paid by an employer or earned working for yourself.
Not only a paycheck. Fees, salaries and a self-employed person's earnings are all wages.
“that part which constitutes the reward of human exertion is called wages”
Interest
The share that goes to capital: every return for the use of tools, machines and stock, whether or not anyone borrowed money.
Not just interest on a loan, and not profit in general. Profit usually mixes interest with wages and rent.
“that part which constitutes the return for the use of capital is called interest”
How the shares are set
Margin of cultivation
The best land people can use without paying rent. What labor and capital earn there sets wages and interest everywhere.
Not literally the edge of a farm. In a city it is the edge of where building is affordable.
“the highest point of natural productiveness to which labor is free to apply itself without the payment of rent”
Law of rent
Ricardo's rule that a site's rent is whatever it produces beyond what the same effort would produce at the margin. George accepts it and builds his theory of wages and interest on it.
“Rent is determined by the margin of cultivation”
Land speculation
Holding land out of use while waiting for its price to rise. George argues it pushes the margin out too far and sets off depressions.
“tends to the withholding of land from use, in expectation of higher prices”
Theories George argues against
Wage-fund theory
The view, standard in 1879, that wages are paid out of a fixed pool of capital split among the workers. George argues that labor produces its own wages.
“wages are fixed by the ratio between the number of laborers and the amount of capital devoted to the employment of labor”
Malthusian theory
The idea, from Thomas Malthus, that population grows faster than food, so poverty is nature's doing. George argues that more people produce more, and that poverty comes from how land is held.
“population tends to increase faster than the power of providing food”
The remedy
Taxing land values
George's remedy: collect rent for the public through a tax on land values, and abolish every other tax. Titles stay with their current holders.
Not the government seizing or buying land, and not a tax on buildings.
“It is not necessary to confiscate land; it is only necessary to confiscate rent.”
Political economy
The old name for economics: the study of how wealth is produced and divided.
“It is the science which, in the sequence of certain phenomena, seeks to trace mutual relations and to identify cause and effect”
The definitions and notes are written for this site. The quotations are George’s own words, and each links to the paragraph it comes from.