Land is abundant – except when it’s not
Rothbard’s confusion in land starts very early. His first defense of the land speculator attests that there is no land shortage:
(p.297) Well, what about idle land? Should the sight of it alarm us? On the contrary, we should thank our stars for one of the great economic facts of nature: that labor is scarce relative to land. It is a fact that there is more land available in the world, even quite useful land, than there is labor to keep it employed. This is a cause for rejoicing, not lament.
As a basic statement, I’m quite happy to agree with the premise that there is not enough labour (ie people) to fully utilise the earth, and that there is some land that at the moment is better off unused. Rothbard however, then tries to first imply, then later claim outright that Land-taxers want *all* land to be used *all* the time:
Since labor is scarce relative to land, and much land must therefore remain idle, any attempt to force all land into production would bring economic disaster. Forcing all land into use would take labor and capital away from more productive uses, and compel their wasteful employment on land, a disservice to consumers.
…..(a long time later)……
(p.308) Georgists may deny that they wish to force all land into production, but they imply this when they keep referring to currently idle land that should be used, and “idling” land that should be used for more valuable things. Nowhere have I seen Georgists say that any currently-used land should be rendered idle.
As Rothbard appears to have not even read Progress & Poverty, let me point out where George says exactly this:
(Book IV, Ch. 4 Para.7) The man who sets out from the Eastern [US] in search of the margin of cultivation, where he may obtain land without paying rent, must, like the man who swam the river to get a drink, pass for long distances through half-tilled farms, and traverse vast areas of virgin soil, before he reaches the point where land can be had free of rent i.e., by homestead entry or pre-emption. He (and, with him, the margin of cultivation) is forced so much farther than he otherwise need have gone, by the speculation which is holding these unused lands in expectation of increased value in the future.
George completely understood that as land withheld from use is brought back into use, land beyond the margin that was of necessity brought into use, now no longer needs to be.
Right, so with that bogeyman out of the way, let’s go back to this idea that land is abundant. Lke I say, as a statement on it’s own, it is true, but there is a caveat that makes it useless when applying it to land speculation – a caveat that Rothbard understands as he later says:
(p.298) Land generally is abundant in relation to labor, but lands, particularly the better lands, are scarce relative to their possible uses.
All productive lands, therefore, command a price and earn rents.
He eventually makes clear what he’s talking about by referring to “very scarce locations – those in high demand”.
Some land is more useful than others. If some of that useful land is held unused, then production must move onto less useful, less *productive* land. Production thus suffers because the speculator is being idle.
The Function of the Landlord
Rothbard dsputes that LVT would not impinge on production:
(p.297) This claim rests on a fundamental assumption—the hard core of single tax doctrine: Since the site-owner performs no productive service he is, therefore, a parasite and an exploiter, and so taxing 100 percent of his income could not hamper production.
But this assumption is totally false. The owner of land does perform a very valuable productive service, a service completely separate from that of the man who builds on, and improves, the land.
So what is this function that is so vital to the well-being of an economy? It has two components:
The site owner brings sites into use
Erm…….what?! That’s the one thing the landlord does not do. It is the ‘man who builds on, and improves, the land’ that brings a site into use. A landlord cannot compel a site to be used, he can only forbid.
and allocates them to the most productive user.
Okay, this one is worth taking the time to examine. What is Rothbard’s rationale for this?
He can only earn the highest ground rents from his land by allocating the site to those users and uses that will satisfy the consumers in the best possible way. We have seen already that the site owner must decide whether or not to work a plot of land or keep it idle. He must also decide which use the land will best satisfy. In doing so, he also insures that each use is situated on its most productive location.
Now this is interesting, because Rothbard ascribes to the Landlord the great wisdom of being able to see just which use will ‘satisfy the consumers in the best possible way’, but gives no indication of just how landlords achieve this grand feat. For those of you now wondering what the secret is, all will be revealed here, but the short answer is: They grant access to whoever pays the most. The great wisdom is the ability to look at a set of numbers and determine which is the highest. Heady stuff…
Rothbard goes one better though – not only can he show the purpose of a landlord ‘bringing his site into use’, but he can also show the purpose of a landlord holding his site out of use:
What about the maligned speculator, the holder of idle land? He, too, performs an important service—a subdivision of the general site-owner function. The speculator allocates sites over time. Even if a speculator reaps an “unearned increment” of capital value by holding land as its price rises, he can gain no such increment by keeping land idle.
History shows otherwise. It’s perfectly possible for a site to increase in value when nothing is happening on it. It all depends on what is happening around it.
Rothbard however asks the right question:
Why shouldn’t he use the land and earn rents in addition to his capital gain? Idle land by itself cannot benefit him.
His answers are intriguing, as he again ascribes mystical powers to the landlord in performing a mundane task:
The reason he keeps the land apparently idle, therefore, is either that the land is still too
poor to be used by current labor and capital goods
Note that what this really means is that no-one has offered to pay him anything for the use of the land. No one actually wants to use it, and hence it has no value. In this scenario, the landlord doesn’t need to be there to prevent use, it’s not going to get used anyway. Even when land economically should be idle, the landlord is not needed to achieve this goal.
or that it is not yet clear which use for the site is best.
This is best translated as “the landlord thinks he can get more than what he is being offered”, because he certainly cannot know what the ‘best’ use is. Even if the landlord is wrong, and what he is being offered is the best he’s gonna get, the consequences to him are simply forgone revenue. There are no operational costs for being a site-owner.
The “speculative” landowner has the difficult job of deciding when to commit the site to a specific use. A wrong decision would waste the land.
Again, the landlord has no idea what would be a waste and what would not. The only information he can work with is the return he can get, and that is entirely dependent on what users are willing to pay. The demand for sites happens independent of the landlord. He cannot create demand, the only action he can take is to restrict supply.
The idea that the landlord has some special insight into an economy is hogwash. A landlord has one function and one function only – to receive the proceeds of competition over the use of his land. He doesn’t plan the economy by choosing what the best use is, he gets given money simply to allow someone else to make that determination. When a desired site is blocked from being used by the landlord, then ironically, he is refusing to do his job!