Rent of land

Book 6, Chapter 9

§1. The returns to land ownership depend on some fixed elements (e.g., sunshine or rain) as well as variable elements (e.g., effort to improve output). Taxes on the former will not affect effort as much (at all?) compared to taxes on the latter.

§2. Land use improvements will continue as long as marginal gains outpace marginal costs. They will ignore existing (sunk) gains and costs, but they can vary by crop, skill, etc.

§3. A rise in the value of the produce of land vis-a-vis labor (wages are falling) might reflect overpopulation (labor losing purchasing power) whereas a general rise (a stable relationship) due to, say, technical progress, can result in higher wages.

§4. The value of land (its producer surplus) is not due to Nature’s bounty, but land’s limited supply. An increase in production (due to, say, technology) will lower surplus by increasing supply of produce in the face of level demand. Land value also depends on distance to (or difficulty in reaching) markets. Rich land without road, rail or canal access to markets is worth less than poor but convenient land. Some land value reflects past improvements but some of those “improvements” might be subtracting value today.

§5. The “English system” of charging rents in proportion to average surplus benefits renters who are more productive (they keep more profit) and encourages less-productive renters to leave before they lose more money. This system of free enterprise encourages efficient land use, for the benefit of all English.

This post is part of a series in the Marshall 2020 Project, i.e., an excuse for me to read Alfred Marshall’s Principles of Economics (1890 first edition/1920 eighth edition), which dominated economic thinking until Van Neumann and Morgenstern’s Theory of Games and Economic Behaviour (1944) and Samuelson’s Foundations of Economic Analysis (1946) pivoted economics from institutional induction to mathematical deduction.

Author: David Zetland

I'm a political-economist from California who now lives in Amsterdam.

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