Tuesday, February 4, 2014
Karl Smith — Not All Forms of Wealth Are Equally Pernicious
Karl Smith reflects on Thomas Picketty's Capital: Land (rent) is different from (productive) capital.
This is the tyranny of land. Ignore it at your peril.
The Financial Times — FT Alphaville
Not All Forms of Wealth Are Equally Pernicious
Karl Smith | Assistant Professor of Economics and Government at the University of North Carolina
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3 comments:
BS. Land is just a kind of capital. When a factory owner does no work but gets a return from the productive use of his factory, it is no different than if a landowner does no work but gets a return from the productive use of his land. It's exactly the same thing.
These guys are fumbling in the intellectual shadows of 19th century capitalism's apologetics for its own existence while criticizing what was left of the landed aristocracy. But it's all the same thing.
Land is just a kind of capital.
The Classical view is that land and capital are independent factors. A distinction was drawn between rent and profit.
Marx held that in the transition from feudalism to capitalism, owners of capital replaced the titled aristocracy and landed gentry as socially and politically dominant since economic infrastructure is determinative.
Alfred Marshall held in Principles, chapter four, that the "agents" of production are land, labor, capital and organization, with organization being an aspect of capital.
Land is distinguished from the other factors because it is finite. To increase it either importation or colonization are required. Labor is variable with population growth, and capital is variable with economic growth through organization including technology and innovation.
So nations and their economies are under the tyranny of land for space and material resources as population grows. This can be dealt with to some degree with effective and efficient use of capital, doing more with less.
The neoclassical view is that land and capital are both forms of capital, dropping the concept of rent.
Land is special because it comes with the legal rights of capture that don't exist in the factory. Those rights to capture resources such as the air above, water that flows over, soil itself, the timber upon the land, the minerals below land, and wildlife that grows upon the land are indeed very special economically. It is those resources that all of economic activity is built and depends.
Factories create and add value to resources. They can be built, rebuilt, and moved. Land cannot.
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