Land is a different entity from capital. Land is fixed
in supply, while capital, and all the things human beings can create with
labor and raw materials, can respond to increased demand with increased
supply. Since we can't create more land, and, more specifically, can't
additional building lot downtown, we need to use what we've got as
effectively as possible, and share its value justly among all of us. It
a private source of income for some of us — not if we believe
that we're all created equal.
Ted Gwartney: Estimating
When considering world-wide
economics, most people think that land
rent contributes only a small insignificant portion of value. But as
societies progress, land has become the predominant force in
determining the progress or poverty of all people within a community.
Land in major or cities is so costly that people are forced to move
further away and travel great distances in order to get to work and
social attractions. In the more developed countries of the world,
land rent represents more than 40% of gross annual production.
Since land is fixed in supply, as
more land is demanded by people
the rent will increase proportionally. Demand is the sole determinant
of land rent. Changes in land rent and land taxes have no impact on
the supply of land, because the land supply is fixed and cannot be
significantly expanded. Labor and capital are variable in supply. A
higher price for commodities causes more labor and capital to make
itself available. Labor and capital are rewarded for their work. A
high price is an incentive to work harder and longer, while a low
price is not an incentive to work harder and longer. ... Read
the whole article
Louis Post: Outlines of Louis F. Post's
Lectures, with Illustrative Notes and Charts (1894)
c. The Law of Division of Labor and Trade
Now, what is it that leads men to conform their conduct to the principle
illustrated by the last chart? Why do they divide their labor, and trade
its products? A simple, universal and familiar law of human nature moves
them. Whether men be isolated, or be living in primitive communities, or
in advanced states of civilization, their demand for consumption determines
the direction of Labor in production.67 That is the law. Considered in connection
with a solitary individual, like Robinson Crusoe upon his island, it is obvious.
What he demanded for consumption he was obliged to produce. Even as to the
goods he collected from stranded ships — desiring to consume them,
he was obliged to labor to produce them to places of safety. His demand for
consumption always determined the direction of his labor in production.68
And when we remember that what Robinson Crusoe was to his island in the sea,
civilized man as a whole is to this island in space, we may readily understand
the application of the same simple law to the great body of labor in the
civilized world.69 Nevertheless, the complexities of civilized life are so
likely to obscure its operation and disguise its relations to social questions
like that of the persistence of poverty as to make illustration desirable.
67. The term "production" means not creation but
adaptation. Man cannot add an atom to the universe of matter; but he can
so modify the condition
of matter, both in respect of form and of place, as to adapt it to the satisfaction
of human desires. To do this is to produce wealth.
"Consumption" is the ultimate object of all production.
We produce because we desire to consume. But consumption does not mean
Man has no more power to destroy than to create. His power in consumption,
like his power in production, is limited to changing the condition of things.
As by production man changes things from natural to artificial conditions
to satisfy his desires, so by consumption he changes things from artificial
to natural conditions in the process of satisfying his desires.
Production is the drawing forth of desired things, of Wealth, from the Land;
consumption is the returning back of those things to the Land.
"All labor is but the movement of particles of matter from one place
to another." — Dick's Outlines, p. 25.
Production consists merely in changing things — Ely's
Intro., part ii, ch. i; Mill's Prin., book i, ch. i, sec. 2.
"As man creates no new matter but only utilities, so he destroys no
matter, but only utilities. Consumption means the destruction of a utility." — Ely's
Intro., part v. ch. i., p. 268.
Production means "drawing forth." — Jevons's
Primer, sec. 17.
"Man cannot create material things. . . His efforts and sacrifices
result in changing the form or arrangement of matter to adapt it better for
the satisfaction of wants." — Marshall's Prin., book ii, ch. iii,
"It is sometimes said that traders do not produce; that while the cabinet
maker produces furniture, the furniture dealer merely sells what is already
produced. But there is no scientific foundation for this distinction." — Id.
"As his [man's] production of material products is really nothing more
than a rearrangement of matter which gives it new utilities, so his consumption
of them is nothing more than a disarrangement of matter which diminishes
or destroys its utilities." — Id.
"In like manner as by production is meant the creation not of substance
but of utility, so by consumption is meant the destruction of utility and
not of substance or matter." — Say's Trea., book ii, ch. i.
"All that man can do is to reproduce existing materials under another
form, which may give them a utility they did not before possess, or merely
enlarge one they may have before presented. So that in fact there is a creation
not of matter but of utility ; and this I call production of wealth. . .
There is no actual production of wealth without a creation or augmentation
of utility."— Say's Trea., book i, ch. i.
68. It is highly significant that while Robinson Crusoe had unsatisfied
wants he was never out of a job.
69. Demand for consumption is satisfied not from hoards of accumulated wealth,
but from the stream of current production. Broadly speaking there can be
no accumulation of wealth in the sense of saving up wealth from generation
to generation. Imagine a man's satisfying his demand for eggs from the accumulated
stores of his ancestors! Yet eggs do not differ in this respect from other
forms of wealth, except that some other forms will keep a little longer,
and some not so long.
The notion that a saving instinct must be aroused before the great and more
lasting forms of wealth can be brought forth is a mistake. Houses and locomotives,
for example, are built not because of any desire to accumulate wealth, but
because we need houses to live in and locomotives to transport us and our
goods. It is not the saving, but the serving,, instinct that induces the
production of these things; the same instinct that induces the production
of a loaf of bread.
Artificial things do not save. No sooner are the processes of production
from land complete than the products are on their way back to the land. If
man does not return them by means of consumption, then through decay they
return themselves. Mankind as a whole lives literally from hand to mouth.
What is demanded for consumption in the present must be produced by the labor
of the present. From current production, and from that alone, can current
consumption be satisfied.
"Accumulated wealth" is, in fact, not wealth at
all in any great degree. It is merely titles to wealth yet to be produced.
A share in a mining
company, for example, is but a certificate that the owner is legally entitled
to a proportion of the wealth to be produced in the future from a certain
Titles to future wealth may be both morally and legally valid. This is so
when they represent past labor or its products loaned in free contract for
future labor or its products; for example, a contract for the delivery of
goods of any kind today to be paid for next week. or next month, or next
year, or in ten years, or later.
They may be legally but not morally valid. This is so when they represent
the product of a franchise (whether paid for in labor or not) to exact tribute
from future labor; for example, a franchise to confiscate a man's labor through
ownership of his body, as in slavery, or a franchise to confiscate the products
of labor in general through ownership of land.
Or they may be both legally and morally invalid, as when they are obtained
by illegal force or fraud from the rightful owner.
The following chart classifies about every kind of wealth that man requires,
and also "personal services," which, though as useful as
wealth, do not crystallize in material products — such services
as those of lawyers, barbers, doctors, teachers, actors, and so on:
The circle of variegated colors represents the commercial reservoir into
which Wealth is poured by production, and from which it is drawn for consumption,
each color typifying the kind of wealth or service named in it. Now, let
us suppose that Personal Servants tap the commercial reservoir for food.70
They do it by applying at retail stores for what will relieve their poverty
as to food, and food flows out to them" as indicated by the blue arrow,
which we now insert in the chart: [chart]
70. If it be asked how Personal Servants can draw this food out of the retail
stores unless they have money, let the questioner inform himself as to the
ways in which business is done. No man, unless he be a notorious cheat, needs
money in order to obtain goods at retail stores, provided he has or can presently
get profitable employment. All he needs is employment, or an early prospect
of employment, and a reputation for honesty. There is therefore no unwarranted
assumption in the example, even if we exclude the use of money from consideration.
See post, note 72.
How would the outflow of food affect managers of retail stores? Every
merchant's office-boy knows. It would admonish them to order further supplies
wholesalers. Wholesalers would fill these orders, and replenish their stock
by ordering from manufacturers. Manufacturers would thereupon send all
over the world for materials; would call for new machinery and better machinery;
would order new buildings and repair old ones, and would scour the country
for workingmen to come into their factories and renew their lowered stock
of goods. Thus all kinds and grades of labor that could assist in producing
food, from farm hands to inventors, from bookkeepers to sailors, would
feel the influence of the demand for food in a demand for their labor.
What Personal Servants really do in demanding food is to direct the expenditure
of labor to the production of food and food-producing implements and materials.
... read the book
Gaffney - Landlord
Fred E. Foldvary — The
Ultimate Tax Reform:
Public Revenue from Land Rent
It is widely understood that when something is taxed, we get less of
it. As discussed above, this reduction in labor, production, and investment
is called the “excess burden” or “deadweight loss” of
taxation. Income taxation discourages work, sales and value-added taxes
discourage consumption, capital gains taxes discourage investment,
and real property taxes discourage building and improving property.
make the asset or activity more costly, which then reduces the quantity
bought of the thing being taxed.
What makes land different is that its supply is fixed, and it is independent
of human action. When land value or rent is tapped for public revenue,
the land does not shrink, flee, or hide.
Recall the definition above, that land means natural resources. Real
estate sites consist of the three dimensional space within some boundary
or jurisdiction. We cannot import land to expand the amount of space.
There can be no land factories to produce more space. Chopping down trees,
inclined slopes, and draining and filling in water only change the
material contents of the space, not the extent or location of the space.
taller just makes more space usable; the three-dimensional space does
not expand. ...
Another source of confusion is the claim that since the rent of land depends
on demand, which is done by human beings, this makes the supply of land
variable. This view confuses supply with demand. Demand is the willingness
of buyers to pay. This is independent of the quantity that is available.
If there are three specimens of a rare stamp, the bids of those wanting
to buy it do not change the number of stamps in existence.
Another error made even by academic economists is to confuse the supply
of land for a particular use, such as housing, with the overall supply
of land. Of course the supply for a particular use can vary, since, for
example, we can convert farmland to housing land. But the total area available
for all uses does not change, and that is the relevant supply. ... read
the whole document