The
Henry George theorem, named for 19th century U.S.
political economist and
activist Henry George, states that under certain conditions, aggregate spending by
government on
public goods will increase
aggregate rent based on land value (
land rent) more than that amount, with the benefit of the last marginal investment equaling its cost. This general relationship, first noted by the French
physiocrats in the 18th century, is one basis for advocating the collection of a
tax based on land rents to help defray the cost of public investment that helps create land values.
Henry George popularized this method of raising public revenue in his works (especially in
Progress and Poverty), which launched the
'single tax' movement.
In 1977,
Joseph Stiglitz showed that under certain conditions, beneficial investments in
public goods will increase aggregate land rents by at least as much as the investments cost.
[1] This proposition was dubbed the "Henry George theorem", as it characterizes a situation where Henry George's '
single tax' on land values, is not only efficient, it is also the only tax necessary to finance public expenditures.
[2] Henry George had famously advocated for the replacement of all other taxes with a land value tax, arguing that as the location value of land was improved by public works, its
economic rent was the most logical source of public revenue.
[3]