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Mason Gaffney: Land as a Distinctive Factor of Production
Economic land excludes many things, too, that are colloquially called land. It excludes land-fill, for example, by which many cities are extended into shallow waters. The site and seabed are properly land; the land-fill is an improvement. There is no "made land" in the economic sense: it is reallocated from other uses. Expanding cities take farmland from producing food and fiber, much of it for the expanding city itself. Filled land in shallow water near cities is taken away from anglers and sailors and viewers and ecologists, who now routinely organize to prevent it being "made" away with. Drained and filled wetlands are taken away from endangered species, as well as from their primal role as filters protecting coastal waters from river trash and pollutants. Thanks to the myopia and dereliction of economists, it has taken militant environmentalists to carry home this truth, developing in their struggle to be heard and understood a deep skepticism of economists and their "way of thinking." Some economists and environmentalists are now coming to terms with each other, after decades of mutual shunning. Too many modern economists, however, still use their "way of thinking" to seal out important new evidence that doesn't fit the model.
Capital (K) is that which has been produced but not yet used up. Capital is formed by human thrift, forbearance, investment and production. Only after mankind forms and makes capital does it bear much likeness to land, in that they coexist. Ordinary micro-economics obscures the differences because it deals mainly with relations of coexistence, ignoring the continual formation and destruction of capital, ignoring time and relations of sequence. Thus it excludes from its purview one of the prime differences between land and capital. The life of capital, like that of people, is marked by major sacraments of birth, growth, aging and death - all missing from micro theory. Economic life is a cavalcade in which the birth and death of capital are dated events. Micro deals mainly with how existing resources are allocated at a moment in time, not how they originate, grow, flourish, reproduce, age, die, and decompose.
Capital occupies space; land is space. In common micro theory, resources and markets come together at a point not just in time but in space. Again, it excludes from its purview one of the prime qualities of land.6
For the reasons given, alone, land and capital are mutually exclusive. There are, however, nine more, which follow. ...
Land as "site" (location plus extension) does not normally wear out, depreciate, spoil, obsolesce, nor get used up by human activities incident to occupancy and production. In contrast, capital depreciates from time and use, routinely and by nature. After being formed, it must be conserved from entropy by continual maintenance, repair, remodeling, safeguarding against theft and fire, and so on.7 Like our own bodies, it returns to dust; land is the dust to which it returns. Inventories are depleted; moving parts wear out; fixed capital depreciates with use and time. ...
No one can get more land without others keeping less. One can acquire more capital by forming it through saving and investing. One can consume more by working more, while others work no less. Land is different: it is the most common basis of market power, therefore. ...
When demand grows for land in a specific area or neighborhood, land cannot immigrate to meet the higher demand. It is true that land elsewhere can be converted to the specific land use that is demanded. Some micro theorists argue that this makes land as "mobile" as anything else, equating land and capital. It dovetails with and reinforces their paradigm centered on "the firm," a unit that can add unlimited inputs of all kinds in the long run, and among which competition drives all profits to zero. This rationalization overlooks the hoary adage of real estate: "value depends on three factors, location, location, and location." What happens then is not that supply rises to meet higher demand, but ground rent rises.
Land is not convertible into capital, nor vice versa. Exchange of land for capital has misled many into equating them, but only through inadvertence and the fallacy of composition. Exchange is not interchange: exchange does not change the quantity of either land or capital. Capital is convertible into any other form of capital each time it turns over, by using Capital Consumption Allowances, the proceedings of turnover, to hire people actually to produce new capital. Capital may also be disinvested and consumed, or augmented by new saving and investment. None of those is true of land. ...
Land is indispensable to life, hence to economic activity. The same is generally true of labor and capital, but less "absolutely". Land can exist perfectly well without labor or capital, and support timber and wildlife, but labor and capital cannot exist at all without at least some land, and often a great deal of land. Substitution is limited. It will not do just to have 57 varieties of labor, or of capital. There must be at least some land. Remember, land includes space itself, and a time-slot in it. It includes air and water, the environment and the ecology and all original matter itself. Without land there is nothing.20 Coupling this with the non-reproduceability of land, and its fixity, land is distinctive.
"Homelessness," a modem plague, is essentially landlessness. A popular ditty from the 1930s includes the catchy line, "If you can't pay the rent, you can live in a tent," but you can't do even that without a campsite. Perhaps this is why modern economists have so little to say about homelessness. Joblessness they have dismissed as part of the vital economic function of "job-seeking," with which they have persuaded at least themselves. The next logical step is that the person sleeping in the doorway is not really homeless, but just engaged in the vital market function of "home-seeking". Rather than seem totally absurd they are simply silent, except to stress the "exclusionary principle" of private property as the bedrock of their system, and their system as a panacea. ...
Land is traditionally subject to a host of legal and customary limits on use and ownership. Covenants are found in land titles: seldom in titles to cars or canned goods. Divided ownership is common, there is so much about land to be owned. There are easements through, air rights over, mineral rights under, and neighbors and zoning all around any parcel of land. Changing lot lines is unavoidably a social process, there is no other way.
A large share of the more valuable land in cities is held by estates. Public and eleemosynary [non-profit] holders are preferentially tax exempt and often without any visible motive to economize. Water licenses are held subject to "use it or lose it" traditions leading to appalling waste. Broadcasting/telecasting licenses are highly political. And so on. Only a resource with the characteristics of land could be subject to such a wide range of non-economic pressures. ....
Amassing land is always done, can only be done, by shrinking the holdings of others. To expand is to preempt. If A is to have more then B, C, D et al. must have less, there is no other way. A can amass more capital by saving, creating new capital, leaving B, C, D et al. with as much as before. A can increase his labor income by working longer, or harder, or smarter, producing more, leaving others with as much as before. He and she together can also spawn more children: labor, like capital, is reproducible, and indefinitely augmentable. Possessing land, however, means just one thing: bumping others.
In the region of the mind, the thing possessed may be shared by all with no diminution to anyone. No one's pleasure In Shakespeare, or Beethoven, or understanding physics is any less because at the same time millions of others have the same pleasure. Art, letters and science are the common property of mankind, open to all who care to acquire them. The creative producer's pleasure is in proportion to the number with whom he shares. The gratification is from sharing, not excluding. The contrast with landholding is nearly total.35
Amassing claims on wealth by creating and producing is not, therefore, a threat to others. Amassing capital through saving does not weaken or impoverish others. Producing goods does not interfere with others' doing the same. One producer may drive another from a particular limited market, but glutting one market increases real demand for the products of other markets, and raises the real value of others' incomes by lowering prices. Amassing land, however, has to deprive others, both relatively and absolutely. Concentrated holding and control of land, therefore, have always been threats to the well-being of those left out.
Conversely, the only way the landless, e.g. in South Africa, can get land is from those who now have it. "Growth" is often advanced as the solution to maldistribution, injustice and poverty, but that is mere temporizing because land does not grow. When production and demand grow, land rents rise. Of land it is starkly true, "the problem is not production, but distribution". There is no production; only distribution. Read the whole article
HG: Bedford Level, from Science of Political Economy
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Wealth and Want
... because democracy alone hasn't yet led to a society in which all can prosper