Hi Harry, I enjoyed your message but I have reservations about land being uniquely "collectible": At 00:42 02/10/01 -0700, you wrote: >Keith and Ray, > >Keith, you certainly started a fascinating exchange of ideas. It has been >fun reading them. About cities - and, if I may, a quick primer on Political >Economy - which was classical economics and dealt with people. Bear with >the length of this bit because it will connect with the WTC disaster. > >First, the neo-classical economists discarded people in favor of >mathematics. As the 20th century began, they desperately wanted to be >considered a "science" - and discussing people seemed to lead to much >complication. They preferred to make economics scientific by making it >mathematical. This is why this "science of people" has become confusing and >esoteric.
Yes, I agree that economists have been barking up several different trees in the course of the last century in an effort to develop the subject as a science. The result has been merely a succession of fashions rather than any sort of systematic development. As you say, they had ignored the fact that human instincts and decisions are also involved. This makes economics into a sort of spaghetti but it survives because gives jobs to thousands of academics, journalists and financial advisors. To some extent this attempted aping of science is understandable because the whole subject rests upon two laws which are certainly incontrovertible, even though they are often lost sight of (particularly the second one by anti-globalizers!) -- Supply & Demand and Comparative Advantage. But the effort of scientising the subject has been as silly as if we were to make the game of football into a science just because it depends upon Newton's Laws of Motion. That being so, I think that economics, rather like sociology, or politics, or history (with laws buried somewhere, but at a deep level), must always remain as a 'literary' subject, which is best written about rather than being relied upon. (HP) >To make things easier (?) the neos dumped land into the same bin as capital >and labelled the bin Capital. (They also called people "human capital" - >but we won't dwell on that nonsense now.) It's easy to see that land - >which would be here whether people were here or not - can hardly be placed >in the same bin as capital which wouldn't be here without people. They are >two dissimilar concepts melded together for everybody's confusion. > >Classical Political Economy rests its strength on clearly seen and mutually >exclusive concepts, which are then given names. Two of these concepts are >called Land (natural resources) and Capital (man-made products being used >to produce other products). > >Capital is subject to free market forces - Land isn't. Land is actually >part of the collectible market. In the collectible market, sales-price is >everything - income doesn't matter (note the similarity of the collectible >market to the top end of the stock market, where the speculators don't care >about earnings, but concentrate on price - thereby extracting bleats from >worried analysts). However, even though I think that economics is a 'literary' discipline and not primarily scientific it's reasonable to expect that an author is consistent the use of the terms he uses. However, you said two paragraphs ago that Land and Capital are mutually exclusive. You're now saying that, sometimes, Capital takes on the 'collectibility' attribute of Land. So I'd like to suggest that 'Land' and 'Capital' are useful terms when talking colloquially about economics but not having exclusive definitions in a strictly scientific or philosophical sense. Neither has the same sort of primary meaning that 'value' has (when using the two Laws of Economcs) or 'mass' has (when using the three Laws of Motion). You say that Land would exist whether humans were here or not. But it wouldn't, because it's only a concept that has meaning when talking of economic activity. As Ray Harrell might agree, 'land' itself didn't have any meaning as an entity (that is, as ownable, and separate from the flora and fauna) to the hunter-gatherer Indians when they 'sold' Manhatten to the white man for a few beads. Without humans, soil would exist, rock strata would exist, the atmosphere would exist, minerals would exist, wild-life would exist, large continents would exist, small islands would exist, but land wouldn't because it's an economic concept which has only come into existence because of man's activities. Even now we can't even define what land is exactly (what about a tidal foreshore? a cliffside? a glacier? a slab of Arctic ice? a swamp? a volcano?) unless you also have a potential economic use in mind. Immediately behind my house there are a few acres of hillside wilderness too steep for anyone to build on and which nobody owns and nobody wants to own because of the costs of keeping the trees in safe condition. Which is fine by me -- and the red deer and the badgers and the squirrels and the foxes. But it certainly isn't 'land' in any economic sense. Land is as much subject to the law of supply and demand as the other important factors of production (which are, I suggest: Capital, Labour, Energy and Information). For all practical purposes, the supply of each of these factors of production can vary between being potentially limitless and zero, and the value of them varies just as widely. The particular value of each of them depends on its availability at a precise location at a precise moment of time. Yes, land values (say in Manhatten) can be grotesque but only because the land there is also at a confluence of the other important factors of production, and thus in high demand. And, if it seems likely that land prices in Manhatten will go even higher, then of course owners will hang onto vacant lots until they're sure of the best possible price. However, the costs of some sorts of Capital, Labour, Energy and Information can also be enormous and, likewise, supply can be withheld by their owners if the price is likely to rise. They are all collectible to a greater or lesser extent. In strictly economic terms, Land doesn't have anything unique about it, compared with the other factors of production. It just has certain characteristics which make it useful, usually essential, for most economic purposes. But it's not always necessary. For example, I could run my music business from a laptop while sailing round the world. (But I suppose, in economic terms, that a sailing boat would count as a piece of [moving] land with a value. However, I'm not going to try this because I'm too comfortable where I am!) Keith >The collectible nature of land means that it's subject to intense >speculation. This is why so many valuable sites are vacant or >underimproved. The eventual sale at an ever-increasing price encourages >landholders to hang on, and on, and on. > >A New York Regional Planning Report some years ago, found 79% of the usable >land of Metropolitan New York - which covers a large area, but is a magnet >for people - was unimproved for urban use. Parks, roads, and suchlike were >improved. Lots with a billboard, or perhaps a shack, were considered >unimproved. > >Every landholder who can, hangs on - for tomorrow, or next month, or next >year, his "pension" will be bigger. > >Land speculation drives up prices (remember the collectible market adores >sales prices, but cares little about income). And - just as with other >collectibles - a rising price encourages a holder to hang on with the >expectation of yet further increases. So, prices continue to rise as land >is held from the market. > >You'll notice this is the exact opposite of the free market. There, >producers rush to market to take advantage of higher prices by being first >there. In the collectible market, everyone tries to the last to sell. > >This is the situation when someone wants to build a skyscraper. You try to >build higher to make the high land price economic. Trump wanted to build a >big one, was permitted only so many floors - but was asked over $100 >million an acre. There was no-way he could build at that price. > >Actually, there was one way. Another builder had a permit to build so many >floors, but didn't use all his allowed stories. So, Trump bought his >"unused permissions" used it to add more floors to his building - and was >able to pay the $100 million plus. > >If this sounds like something Alice brought back from Wonderland, you are >wrong. It was something that Marshall, Keynes, and the rest of them, handed >to us and called it Economics. > >High priced land drives central city buildings ever higher and makes them >ever more costly. If you can't buy "story permissions", you can cut corners >on construction - which probably leads into your thoughts on the WTC, >Keith. If you can save money by not riveting - perhaps that's the way to go. > >It's not just skyscrapers. Assessor friends of mine tell me that land >prices are often 50-70% of the costs of building homes. When a major cost >of building a home is not the materials and labor that go into the effort - >but the price that must be paid for the right to build - affordable housing >becomes a joke. > >A top appraiser friend of mine bought an old house in Orange County for >$240,000. His appraisal? The house was worth $25,000. The land was $215,000. ___________________________________________________________________ Keith Hudson, General Editor, Calus <http://www.calus.org> 6 Upper Camden Place, Bath BA1 5HX, England Tel: +44 1225 312622; Fax: +44 1225 447727; mailto:[EMAIL PROTECTED] ________________________________________________________________________
