Sources of Land's Value
Ted Gwartney: Estimating
THE SOURCE OF PUBLIC
What are the factors that cause land to have market value and to
whom does this market revenue advantage properly belong? Land has
market value for three reasons:
- the limited supply and "natural"
productivity of the soil and natural resources,
- the publicly provided
services, including planning, improvements that increase the market
value of land and
- the growth of communities and peoples' competitive
demand for the exclusive use of prime locations.
Land rent is the price that people
and businesses are willing to
pay for the exclusive right to possess and use a good land site for a
period of time. For example, people prefer to use sites of good
location because it gives them an advantage of spending less time in
travel by being near what they choose to do and where they work. A
businessman can sell more goods at a site where many people pass each
day, compared to a site where only a few people would pass.
The collection of land rent should
be used as revenue, by the
community for supplying public needs. This returns the advantage an
individual land possessor receives from the exclusive use of a land
site, to the balance of the people who live within the community and
have allowed the land possessor the exclusive use of the land site
for the period of time. ... Read
the whole article
Nic Tideman: The Case for
Site Value Rating
The Social Justice of Site Value
The Efficiency of Site Value Rating
How Valuations would be Made
Both for reasons of social justice
and for reasons of economic
efficiency, site value rating deserves a continued place in the
programme of the Liberal Party.
The case for site value rating in
terms of social justice is
founded on two understandings: first, that the value of land in the
absence of economic development is the common heritage of humanity,
and second, that increases in the rental value of land arising from
economic development and government expenditures should be collected
by governments to finance those activities. What is meant by "land"
is the unimproved value of sites and the value of extractable natural
resources such as North Sea oil.
While there may someday be
institutions capable of implementing a
recognition of land as the heritage of all humanity on a worldwide
basis, in the absence of such institutions each nation should
implement a recognition that land within its boundaries is the common
heritage of its citizens. This is accomplished not by making the
nation a gigantic Common or by instituting government management of
all land, but rather by requiring all persons and corporations that
are granted the use of land to pay a fee or tax equal to what the
rental value of the land they control would be if it were in an
The case for site value rating in
terms of economic efficiency is
founded on the fact that a tax on resources that are not produced by
human effort is one of the few sources of government revenue that
does not reduce incentives for people to be productive. Two other
revenue sources that have this virtue are taxes on other
government-granted privileges such as exclusive use of radio
frequencies and taxes on activities with harmful consequences, such
as polluting the air. An economy will be more efficient if revenue
sources that do not diminish productivity are employed to the
greatest possible extent before any use is made of taxes that impede
What makes a tax efficient is that
the amount of tax that is due
cannot be reduced by reducing productive activities. When incomes are
taxed, people can reduce the amount of taxes owed by working less.
They do so, and the productivity of the economy falls. When houses
are taxed, people can reduce the amount of taxes owed by building
fewer house and smaller houses. They do so, and the housing shortage
worsens. But when the unimproved value of land is taxed, there is no
resulting diminution in the quantity of land. Thus taxes can be
levied on land without diminishing the productivity of an economy.
And shifting taxes from other, destructive bases to land will improve
the productivity of an economy.
Subsequent sections explain in
more detail these social justice
and efficiency arguments for site value rating, describe procedures
for implementing such a tax system, and explain why a variety of
potential objections are without merit. ...
The three sources of land
rent, the gift of nature, public
services and community development, lead logically to the justice of
three distinct taxes on land. The gift of nature is primarily the
agricultural value of land, but also the value of natural resources
and the extra value of land near rivers and harbors that arises
because such land represents good places to put cities whether or not
cities are presently there. This component of the rental value of
land should be collected nationally and
used to support a guaranteed
income for all citizens. The part of land value that arises from
public services is justly the income of the community that provides
those services. When private individuals and firms undertake
activities that raise the rental value of surrounding land, the value
thereby created should justly be awarded to those whose actions
If site value rating is used only
to finance local public services
and to reward private activities that raise the rental value of land,
the resulting reductions in other taxes on commerce and housing can
be expected to raise the rental value of land by enough that land
will retain most of its present sale value, and there will be no
issue of compensating the existing owners of land. On the other hand,
if the full rental value of land is collected through site value
rating, then the sale value of unimproved land will fall to
approximately zero. The sale value of houses will fall to the value
of the houses themselves. Do the owners of land deserve compensation
for these reductions in the market value of their wealth? ... Read
the whole article
Nic Tideman: Using Tax
Policy to Promote Urban Growth
Urban growth is desired because it raises peoples' incomes.
market economy, incomes can be divided into components derived from
four factors of production:
- the rent of land,
- the wages of labor,
- the interest received from owning capital, and
- the profits of entrepreneurship (the activity of choosing
investments and organizing production).
Thus a successful urban growth strategy in a market economy
either increase the amounts of land, labor, capital and
entrepreneurship that are used in a city or increase the payments
that are made per unit of each factor, or both.
The land that a city has is fixed (or if it changes, it does
the expense of other administrative units). Therefore, with respect
to land, socially productive urban growth means adopting policies
that raise the productivity of land. Labor, on the other hand, is
reasonably mobile, and capital is highly mobile. Entrepreneurship
springs up and fades away with the rise and fall of opportunities.
Therefore, in a market economy, the payments that must be made to
attract these factors are substantially outside the control of a
city. Thus the growth of a city with respect to labor, capital and
entrepreneurship is achieved primarily by making the city a place
that attracts more of these factors, taking the rates of wages,
interest and profits that must be paid to attract them as given by
Tax policy is critical for urban growth because taxes on the
earnings of labor, capital and entrepreneurship drive these factors
away. A city that desires to grow should refrain from taxing wages,
interest or profits and concentrate its taxes on land, which does not
have the option of moving away.
Certain other sources of public revenue, in addition to the
of land, have the characteristic of not discouraging growth. These
sources of revenue involve either charging people for using scarce
opportunities that no one created, as with land, or charging people
for the costs that their actions impose on others.
A city that wishes to grow should confine its search for
to these sources. In this way it will attract more labor, capital and
entrepreneurship, thereby raising the rent of land, which can be
collected publicly without discouraging growth.
Additions to the stock of capital are extremely important for
urban growth, because of the impact of abundant capital on wages and
rents. When capital is abundant, labor and land are more productive,
and the more productive they are, the higher wages and rents are. ...
... Every activity that is
continued should pass a test of providing adequate value for money.
Most of the worthwhile activities of local governments raise the
rental value of the land in the vicinity of the activity by enough to
pay a substantial fraction if not all of the costs of the activity.
Thus the rental value of land is a natural first source of
financing for local public expenditures.
Making the rental value
of land a principal source of local public
revenue has both an equity rationale and an efficiency rationale. The
equity argument for social collection of the rent of land is founded
on a recognition that the rental value of land has three sources.
- Part of the rental value
of land is the gift of nature--the fertility
of soil, the value of good rivers and harbors, the depletable value
of minerals, and so on. This part of the rental value of land should
be collected publicly because no individual has a just claim to more
than a proportionate share of it. Public collection is just either if
it is followed by an equal distribution to all citizens or by
spending on activities that provide equal benefits to all.
- A second part of the
rental value of land comes from the provision
of public services. The local agencies that provide these
can justly claim the increase in the rental value of land that
results from their activities.
- A third part of the
rental value of any particular site arises
from private activities that are conducted in the vicinity of that
site. Social collection of this part of the rental value of
particularly appropriate if this money is used to reward those
private activities according to how much they increase the rental
value of land.
The efficiency argument for social collection of the rent of
has two parts.
- First, the rental value
of land has the rare quality of being a source of public revenue that
does not discourage productive activity. If people are taxed
according to their labor earnings, they can be expected to work less,
and to tend to move from the places that tax them. If people are taxed
on their investments and savings, they can be expected to save and
invest less, and to find it attractive to put their savings and
investments in other places where they will not be taxed as much. But
when the rental value of land is collected, no one will reduce the
amount of land in existence, and no one will move his land elsewhere.
Thus social collection of the rent of land does not reduce the
productivity of an economy in the way that most other sources of public
- The second part of the
efficiency argument is that social collection of the rent of land tends
to make land more available to those who want to start new enterprises.
When the rent of land is
not collected publicly, those who have rights to land will tend to
ignore the possibility of releasing it to someone who might make better
use of it. On the other hand, if those who have rights to land
are required to make annual payments equal to the market value of the
rights they hold, then these continuing payments will induce people to
ask themselves regularly whether they ought to release the land to
someone who can make better use of it.
To achieve the potential efficiency of public revenue from
it is important that people not be charged more for the use of land,
just because they happen to be using it particularly productively.
The rental value of land should be reassessed regularly, the values
that are determined should vary smoothly with location, and they
should be available for public inspection so that all users of land
can see that they are being charged amounts commensurate with what
their neighbors are being charged.
Social collection of the rent of land also facilitates the
privatization of land. If every user of land is charged annually
according to the rental value of the land that he or she holds, then
it is possible to undertake a just privatization of land simply by
passing out titles to the current users of land.
No one will be disadvantaged by not receiving land. Future
generations will not be deprived by not having been awarded shares.
And the community will have a continuing income from the rent of
efficiency that is entailed in using the rent of land to
finance public activities applies to certain other sources of public
revenue as well:
1. Charges on any publicly granted privileges, such
as the exclusive right to use a portion of the frequency spectrum for
radio and TV broadcasts.
2. Payments for extractions of natural resources. Such
payments should be set at levels that yield the greatest possible
revenue of the resources, in present value terms.
3. Taxes on pollution. Every individual or enterprise that
pollutes the air, water or ground should be required to pay the
estimated cost of the pollution it generates. The effect of pollution
on the rental value of surrounding land is one possible measure of its
4. Taxes on any other activities that reduce the rental
value of surrounding land.
5. Taxes on activities such as driving or parking in
crowded streets, where one person's activities reduce opportunities for
others. The administration of such charges may be so expensive that it
is not worth implementing them, but if the administration can be
handled sufficiently cheaply, these charges are efficient to the extent
that they only charge people for costs imposed on others.
6. Taxes on activities, such as the consumption of alcohol,
which impose costs on others (e.g., higher traffic fatalities).
7. Charges for local public services, such as water,
electricity, sewer connections, etc. It is not generally desirable to
make every service completely self-financing. Rather, what is desirable
is that each user be required to pay the marginal cost of the service
he receives. Extensions of service networks are efficient when they
increase publicly collected land rents by enough to cover the costs not
covered by user charges.
8. A self-assessed tax on permanent improvements to land,
at a very low rate (perhaps 1/10 of 1% per year). With a self-assessed
tax, each possessor of land names a price at which he would be willing
to part with the land he possesses (and any immovable improvements). He
pays a tax proportional to the value he names, and anyone who wishes to
may take over possession at that price. The value of such a tax is that
it makes it much easier to assemble land for redevelopment, and to
identify appropriate compensation when land is taken for public
of the above taxes are positively beneficial and should be
collected even if the revenue is not needed for public purposes. Any
excess can be returned to the population on an equal per capita
basis. If these attractive sources of revenue do not suffice to
finance necessary public expenditures, then the least damaging
additional tax would probably be a "poll tax," a uniform charge on
all residents. If some residents are regarded to be incapable of
paying such a tax, then the next most efficient tax is a proportional
tax on income up to some specified amount. Then there is no
disincentive effect for all persons who reach the tax limit. The next
most efficient tax is a proportional tax on all income.
It is important not to tax
the profits of corporations. Capital
moves from where it is taxed to where it is not, until the same rate
of return is earned everywhere. If the city refrains from taxing
corporations they will invest more in St. Petersburg. Wages will be
higher, and the rent of land, collected by the government, will be
higher. The least damaging tax on corporations is one that provides a
complete write-off of investments, with a carry-over of tax credits
to future years. Such a tax has the effect of making the government a
partner in all new investments. With such a tax the government
provides, through tax credits, the same share of costs that it later
receives in revenues. However, the tax does diminish the incentive
for entrepreneurial activity, and it raises no revenue when
investment is expanding rapidly. Furthermore, the efficiency of such
a tax requires that everyone believe that the tax rate will never
change. Thus it is best not to tax the profits of corporations at
all. If the people of St. Petersburg want to share in the profits of
corporations, then they should invest directly in the corporations,
either privately or publicly. The residents of St. Petersburg would
be best served by refraining from taxing the profits of corporations.
Creating a place where profits are not taxed can be expected to
attract so much capital that the resulting rises in wages and in
government-collected rents will more than offset what might have been
collected by taxing profits.
The taxes that promote urban growth have at least one of two
A city that confines itself to these taxes can expect to
attract capital rapidly, and therefore to experience rapid growth,
raising the wages of its citizens and the publicly-collected rent of
its land.Read the whole article
- The first feature that a growth-promoting tax can have is
that it can serve to allocate a naturally occurring resource among
competing potential users. Charges for the use of land, for the use
of the frequency spectrum and for depleting natural resources share
- The second feature that a growth-promoting tax can have
is that of being a charge for the costs imposed on the city by the
person who pays the tax. This feature is shared by taxes on
pollution, taxes on other activities that reduce the value of
surrounding land, taxes on imposing congestion and other costs on
other residents of the city, charges for the marginal cost of
publicly provided services, and a self-assessed tax on property,
reflecting the hindrance to future growth represented by existing
Henry George: Thou Shalt Not Steal
Now, here is a desert. Here is a
caravan going along over the desert. Here is a gang of robbers. They
say: "Look! There is a rich caravan; let us go and rob it, kill the men
if necessary, take their goods from them, their camels and horses, and
walk off." But one of the robbers says: "Oh, no; that is
dangerous; besides, that would be stealing! Let us, instead of doing
that, go ahead to where there is a spring, the only spring at which
this caravan can get water in this desert. Let us put a wall around it
and call it ours, and when they come up we won’t let them have any
water until they have given us all the goods they have." That would be
more gentlemanly, more polite, and more respectable; but would it not
be theft all the same? And is it not theft of the same kind when people
go ahead in advance of population and get land they have no use
whatever for, and then, as people come into the world and population
increases, will not let this increasing population use the land until
they pay an exorbitant price? ... read
the whole article
But there is another potential inequality that needs to be addressed. What
if different communities have different amounts of land value per
person? Here a distinction in sources of land value must
be made. If a community has higher land value because it has built
itself into a wonderful place, then it should be allowed to keep
that value for itself. On the other hand, if a community has a
higher-than-average natural endowment per citizen, then it owes
something to communities with lower-than-average natural endowment
per citizen. A program of payments among communities to equalize
natural endowments per citizen will be both efficient and fair.
It will be efficient because in the absence of such a program,
people would gravitate to the communities with higher-than-average
natural endowments (like Alaska) even when it was socially uneconomic
for them to go there. It is fair because it accords with an equal
right of all to natural opportunities.
Thus just and efficient local taxation
is achieved by the combination of public collection of rent, marginal
cost charges for public services, and a program of transfers among
communities to equalize natural endowment per citizen. ... read
the whole article
Examples of taxes include excise taxes, sales taxes, income taxes,
payroll taxes, value added taxes, inheritance taxes, and property
taxes. Some payments to governments are in exchange for goods and
services that are provided by government and are not taxes. Examples
are transportation fares, telephone bills, water bills, and postage
payments. Payments of rent to the government for the value of land
in an unimproved condition should also not be regarded as taxes.
This is because the rental value of land in an unimproved condition
is not produced by the possessors of land.
There are two sources of the rental value
of unimproved land: 1) nature; 2) location value, arising from a) public
services such road, parks and transit facilities; and b) private activities
that create opportunities for surrounding land. For the rental value
that is due to nature, the proper allocation is either to the national
government or an equal division among all citizens of the nation, because
no one can claim this value by virtue of having produced it. For the
rental value that is due to public services, the proper allocation
is to the governmental organizations that provide those services. For
the rental value that is due to private activities, the proper allocation
is to those who undertake those private activities.
In the case of agricultural land, the rental value of unimproved
land is due to nature and locational factors. This revenue is properly
assigned mainly to the national government. However, in the spirit
of sharing the revenue, it would be proper to have an exemption for
some specified amount of rental value. Then farmers would pay for
the use of land only to the extent that the rental value of their
land in an unimproved condition exceeded the exemption. Such payments
would not be taxes, but only the allocation of the rent of land to
those to whom it should properly go. ... read
the whole article
Efficiency and equity can both be
achieved in a system of taxation of land by multiple jurisdictions,
if the following features are incorporated in the system:
1. A distinction should be made between sources of the rental
value of land. There is, on the one hand, the value that
land would have in the absence of local development -- the value
that it would have for agriculture, for the extraction of natural
resources, or as the site of a new town if there were no town
there. This component of the rental value of land should be regarded
as the common heritage of the largest possible collectivity.
There should be some system of compensatory payments among local
governments to equate per capita receipts of this component of
value. On the other hand, there is the addition to rental value
that comes from the growth of communities and the provision of
public services. This component of value should be regarded as
the income of the locality, which the locality may collect and
spend as it sees fit.
2. If there are two levels of government, the higher level
should collect only two kinds of taxes:
(1) levies on land for the addition to the rental value of land
that is produced by the services that are provided by the higher
level of government and
(2) appropriation of a portion of the pre-development value
of land that would otherwise be allocated among localities in
proportion to their populations.
This insures that a locality cannot reduce its obligation to the
higher level of government by acting inefficiently.
3. Citizens should not be able to oblige localities to spend
money on them by moving from one place to another. Any citizen
entitlements should be independent of migrational decisions.
If the citizens of some locality wish to support their own citizens,
or if they wish to support anyone who chooses to move to their
community, this does not entail an inefficiency. The inefficiency
arises only if localities are legally obliged to support migrants
whether they wish to do so or not. ... read
the whole article
Here, let us imagine, is an unbounded savannah,
stretching off in unbroken sameness of grass and flower, tree and rill,
tires of the monotony. Along comes the wagon of the first immigrant.
Where to settle he cannot tell — every acre seems as good as
every other acre. As to wood, as to water, as to fertility, as to
is absolutely no choice, and he is perplexed by the embarrassment
of richness. Tired out with the search for one place that is better
than another, he
stops — somewhere, anywhere — and starts to make himself
a home. The soil is virgin and rich, game is abundant, the streams
with the finest trout. Nature is at her very best. He has what, were
he in a populous district, would make him rich; but he is very poor.
nothing of the mental craving, which would lead him to welcome the
sorriest stranger, he labors under all the material disadvantages
of solitude. He
can get no temporary assistance for any work that requires a greater
union of strength than that afforded by his own family, or by such
help as he
can permanently keep. Though he has cattle, he cannot often have
fresh meat, for to get a beefsteak he must kill a bullock. He must
be his own
blacksmith, wagonmaker, carpenter, and cobbler — in short,
of all trades and master of none." He cannot have his children schooled,
for, to do so, he must himself pay and maintain a teacher. Such things
as he cannot produce himself, he must buy in quantities and keep
on hand, or else go without, for he cannot be constantly leaving
his work and
making a long journey to the verge of civilization; and when forced
to do so,
the getting of a vial of medicine or the replacement of a broken
auger may cost him the labor of himself and horses for days. Under
though nature is prolific, the man is poor. It is an easy matter
for him to get enough to eat; but beyond this, his labor will suffice
only the simplest wants in the rudest way.
Soon there comes another immigrant. Although every quarter section* of
the boundless plain is as good as every other quarter section, he is not
beset by any embarrassment as to where to settle. Though the land is the
same, there is one place that is clearly better for him than any other
place, and that is where there is already a settler and he may have a neighbor.
He settles by the side of the first comer, whose condition is at once greatly
improved, and to whom many things are now possible that were before impossible,
for two men may help each other to do things that one man could never do.
*The public prairie lands
of the United States were surveyed into sections of one mile square,
and a quarter section (160 acres) was the usual government allotment
to a settler under the Homestead Act.
Another immigrant comes, and, guided by the same attraction, settles where
there are already two. Another, and another, until around our first
comer there are a score of neighbors. Labor has now an effectiveness which,
the solitary state, it could not approach. If heavy work is to be done,
the settlers have a logrolling, and together accomplish in a day what singly
would require years. When one kills a bullock, the others take part
returning when they kill, and thus they have fresh meat all the time.
Together they hire a schoolmaster, and the children of each are taught
for a fractional
part of what similar teaching would have cost the first settler. It
becomes a comparatively easy matter to send to the nearest town, for some
always going. But there is less need for such journeys. A blacksmith
and a wheelwright soon set up shops, and our settler can have his tools
for a small part of the labor it formerly cost him. A store is opened
and he can get what he wants as he wants it; a postoffice, soon added,
him regular communication with the rest of the world. Then come a cobbler,
a carpenter, a harness maker, a doctor; and a little church soon arises.
Satisfactions become possible that in the solitary state were impossible.
gratifications for the social and the intellectual nature — for that part
of the man that rises above the animal. The power of sympathy, the sense of companionship,
the emulation of comparison and contrast, open a wider, and fuller, and more
varied life. In rejoicing, there are others to rejoice; in sorrow, the mourners
do not mourn alone. There are husking bees, and apple parings, and quilting parties.
Though the ballroom be unplastered and the orchestra but a fiddle, the notes
of the magician are yet in the strain, and Cupid dances with the dancers. At
the wedding, there are others to admire and enjoy; in the house of death, there
are watchers; by the open grave, stands human sympathy to sustain the mourners.
Occasionally, comes a straggling lecturer to open up glimpses of the world of
science, of literature, or of art; in election times, come stump speakers, and
the citizen rises to a sense of dignity and power, as the cause of empires is
tried before him in the struggle of John Doe and Richard Roe for his support
and vote. And, by and by, comes the circus, talked of months before, and opening
to children whose horizon has
been the prairie, all the realms of the imagination — princes and
princesses of fairy tale, mailclad crusaders and turbaned Moors, Cinderella's
and the giants of nursery lore; lions such as crouched before Daniel, or
in circling Roman amphitheater tore the saints of God; ostriches who recall
the sandy deserts;
camels such as stood around when the wicked brethren raised Joseph from
the well and sold him into bondage; elephants such as crossed the Alps
or felt the sword of the Maccabees; and glorious music that thrills and
builds in the chambers of the mind as rose the sunny dome
of Kubla Khan.
Go to our settler now, and say to him: "You have so many fruit trees which
you planted; so much fencing, such a well, a barn, a house — in short,
you have by your labor added so much value to this farm. Your land itself is
not quite so good. You have been cropping it, and by and by it will need manure.
I will give you the full value of all your improvements if you will give it
to me, and go again with your family beyond the verge of settlement." He would
laugh at you. His land yields no more wheat or potatoes than before, but it
does yield far more of all the necessaries and comforts of life. His labor
upon it will bring no heavier crops, and, we will suppose, no more valuable
crops, but it will bring far more of all the other things for which men work.
The presence of other settlers — the increase of population — has
added to the productiveness, in these things, of labor bestowed upon
it, and this added productiveness gives it a superiority over land of
quality where there are as yet no settlers. If no land remains to be
taken up, except such as is as far removed from population as was our
when he first went upon it, the value or rent of this land will be measured
by the whole of this added capability. If, however, as we have supposed,
there is a continuous stretch of equal land, over which population is
it will not be necessary for the new settler to go into the wilderness,
as did the first. He will settle just beyond the other settlers, and
the advantage of proximity to them. The value or rent of our settler's
land will thus depend on the advantage which it has, from being at the
population, over that on the verge. In the one case, the margin of production
will remain as before; in the other, the margin of production will be
Population still continues to increase, and as it increases so do the economies
which its increase permits, and which in effect add to the productiveness of
the land. Our first settler's land, being the center of population, the store,
the blacksmith's forge, the wheelwright's shop, are set up on it, or on its
margin, where soon arises a village, which rapidly grows into a town, the center
of exchanges for the people of the whole district. With no greater agricultural
productiveness than it had at first, this land now begins to develop a productiveness
of a higher kind. To labor expended in raising corn, or wheat, or potatoes,
it will yield no more of those things than at first; but to labor expended
in the subdivided branches of production which require proximity to other producers,
and, especially, to labor expended in that final part of production, which
consists in distribution, it will yield much larger returns. The wheatgrower
may go further on, and find land on which his labor will produce as much wheat,
and nearly as much wealth; but the artisan, the manufacturer, the storekeeper,
the professional man, find that their labor expended here, at the center of
exchanges, will yield them much more than if expended even at a little distance
away from it; and this excess of productiveness for such purposes the landowner
can claim just as he could an excess in its wheat-producing power. And so our
settler is able to sell in building lots a few of his acres for prices which
it would not bring for wheatgrowing if its fertility had been multiplied many
times. With the proceeds, he builds himself a fine house, and furnishes it
handsomely. That is to say, to reduce the transaction to its lowest terms,
the people who wish to use the land build and furnish the house for him, on
condition that he will let them avail themselves of the superior productiveness
which the increase of population has given the land.
Population still keeps on increasing, giving
greater and greater utility to the land, and more and more wealth to its
owner. The town has grown into a
city — a St. Louis, a Chicago or a San Francisco — and still
it grows. Production is here carried on upon a great scale, with the
and the most favorable facilities; the division of labor becomes extremely
minute, wonderfully multiplying efficiency; exchanges are of such volume
and rapidity that they are made with the minimum of friction and loss.
the heart, the brain, of the vast social organism that has grown up from
the germ of the first settlement; here has developed one of the great
the human world. Hither run all roads, hither set all currents, through
all the vast regions round about. Here, if you have anything to sell,
is the market;
here, if you have anything to buy, is the largest and the choicest stock.
Here intellectual activity is gathered into a focus, and here springs
which is born of the collision of mind with mind. Here are the great
libraries, the storehouses and granaries of knowledge, the learned professors,
specialists. Here are museums and art galleries, collections of philosophical
apparatus, and all things rare, and valuable, and best of their kind.
Here come great actors, and orators, and singers, from all over the world.
in short, is a center of human life, in all its varied manifestations.
So enormous are the advantages which this
land now offers for the application of labor, that instead of one man — with
a span of horses scratching over acres, you may count in places thousands
of workers to the acre, working tier
on tier, on floors raised one above the other, five, six, seven and eight
stories from the ground, while underneath the surface of the earth engines
pulsations that exert the force of thousands of horses.
All these advantages attach to the land; it is on this land and no other
that they can be utilized, for here is the center of population — the
focus of exchanges, the market place and workshop of the highest forms of
The productive powers which density of population has attached
to this land are equivalent to the multiplication of its original fertility
by the hundredfold and the thousandfold. And rent, which measures the difference
between this added productiveness and that of the least productive land in
use, has increased accordingly. Our settler, or whoever has succeeded to
his right to the land, is now a millionaire. Like another
Van Winkle, he may have lain down and slept; still he is rich — not
from anything he has done, but from the increase of population. There are
lots from which for every foot of frontage the owner may draw more than an
average mechanic can earn; there are lots that will sell for more than would
suffice to pave them with gold coin. In the principal streets are towering
buildings, of granite, marble, iron, and plate glass, finished in the most
expensive style, replete with every convenience. Yet they are not worth as
much as the land upon which they rest — the same land, in nothing
changed, which when our first settler came upon it had no value at
That this is the way in which the increase of population powerfully acts in
increasing rent, whoever, in a progressive country, will look around him, may
see for himself. The process is going on under his eyes. The increasing difference
in the productiveness of the land in use, which causes an increasing rise in
rent, results not so much from the necessities of increased population compelling
the resort to inferior land, as from the increased productiveness which increased
population gives to the lands already in use. The most valuable lands on
the globe, the lands which yield the highest rent, are not lands of surpassing
natural fertility, but lands to which a surpassing utility has been given by
the increase of population.
The increase of productiveness or utility
which increase of population gives to certain lands, in the way to which
I have been calling attention, attaches,
as it were, to the mere quality of extension. The valuable quality of
land that has become a center of population is its superficial capacity — it
makes no difference whether it is fertile, alluvial soil like that of
Philadelphia, rich bottom land like that of New Orleans; a filled-in marsh
like that of St.
Petersburg, or a sandy waste like the greater part of San Francisco.
And where value seems to arise from superior natural qualities, such as
deep water and good anchorage, rich deposits of coal and iron, or heavy timber,
observation also shows that these superior qualities are brought out, rendered
tangible, by population. The coal and iron fields of Pennsylvania, that
today  are worth enormous sums, were fifty years ago valueless. What
is the efficient cause of the difference? Simply the difference in population.
The coal and iron beds of Wyoming and Montana, which today are valueless,
will, in fifty years from now, be worth millions on millions, simply because,
in the meantime, population will have greatly increased.
It is a well-provisioned ship, this on which we sail through space. If the
bread and beef above decks seem to grow scarce, we but open a hatch and there
is a new supply, of which before we never dreamed. And very great command
over the services of others comes to those who as the hatches are opened are
permitted to say, "This is mine!" ...read the whole section of Significant