Three Sources of Land's Value
Ted Gwartney: Estimating Land
Values
THE SOURCE OF PUBLIC
REVENUE
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
Rating
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 unimproved
condition.
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
productivity.
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 create it.
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. In a 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 must 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 so at 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 market
forces.
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 rent 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 revenue 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 services 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 land is 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 land 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 revenue
do.
- 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 land, 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 land.
The 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 cost.
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
purposes.
All 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 features.
- 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 this
feature.
- 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
development.
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
Henry George: Thou Shalt
Not Steal (1887 speech)
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, till the traveler 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 situation, there 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
flash 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. To say
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, a "jack 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
such circumstances, 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 to satisfy
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, in 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 of it, 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 one is 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
repaired 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, gives 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.
There are 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 fairy coach,
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 with
Hannibal, 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 equal natural 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 settler's land 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 now
spreading, 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 will get 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 center of 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 raised.
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 best machinery 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. Here is 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 ganglia
of 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 that stimulus
which is born of the collision of mind with mind. Here
are the great libraries, the storehouses and granaries
of knowledge, the learned professors, the famous
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. Here, 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 are throbbing with 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 industry. 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 Rip 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 all.
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 [1879] 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 Paragraphs
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