The theory behind land rent is simple. Locations and buildings (or other improvements) are not the same thing.
The value of a location depends on society: access to convenient access to the city, low levels of crime, helpful laws, nice parks, schools, hospitals, cables, and so on.
The value of a building depends on present and previous owners. Since they created that value, they should be free to keep it, sell it, or otherwise enjoy it without paying anything to society. But society created the value of the location, and so society can claim rent from anyone who uses that location.
This web site is about the simple benefits of land rent. If you want the detailed arguments about economic rent, land, labor, capital and so on, please see the links at the left. A good place to start is Fred Folvary’s articles at progress.org, or browse any of the links at the left.
The gut feeling: share the land!
Many people have the gut feeling that land belongs to everyone. We are all born naked into the world, so it seems highly unfair that some people should then be given parts of the world and other people are not. Some people are born into wealth and comfort, and others are born to be desperately poor and die of starvation, and yet there is enough in the world for everyone. These people could be creating wealth instead of scratching in the dust.
The desire for fairness and sharing goes very deep. Many people feel that God gave the land to everyone, so it is morally wrong for some to use it to the exclusion of others. Others point out that, if the lucky few are able to make others pay for natural bounty of the earth, this just encourages corruption and inefficiency
However, good intentions are not enough. We need a approach to property that is rigorous and workable.
How society creates the value of land
Some people say that land “naturally” has value and thus it belongs to nobody. In that case, society has no more claim on it than any individual, and society is wrong to claim rent. However, society does create the value of the land, as follows.
Here, society means everyone who would like to use the land, but does not own the land. Here, for convenience value means the dollar price.
First, the land would have no dollar price if there was nobody to sell it to. The market creates the price. The more that the market wants it, the higher the price.
Second, society creates the security (laws and guarantees of minimum standards of welfare) and infrastructure (roads, electricity pylons, schools, etc.). These things make the bare land more valuable. When these things are well provided, the price of the land goes up.
The value of some land may seem to be entirely natural - for example, a natural river, harbor, or beautiful scenery. But if there were no other people you could have it for free. You would only appreciate it if you previously lived in a bad place. For anything to have value it needs to be hard to obtain, and society, by competing for the same location, makes it hard to obtain. This may seem counter intuitive - something becomes more valuable when you have less of it - but that’s how life and economics works.
There are many theoretical objections, but they all disappear on closer inspection. See the Objections page for details.
A rational definition of property
Land rent is the only tax system that can be derived from a rational definition of property. In science, a “property” of something is its size, weight, temperature, etc. In other words, something that can be measured. The most important properties are those that have the most effect. For example, poison, or gold, or oxygen, have well known and important properties. In the same way, people have properties. One person may create furniture. Another may be able to organize people. Another person may create fear. Another person, by organizing trade, may create great wealth. Another person, though confined to wheelchair, may create love and harmony in a community. All these things are properties. Note that this concept of property has nothing to say about mental states or intentions. It is only concerned with what actually happens. It is about cause and effects, or responsibility.
That is the definition of property used in this web site. It is scientific, measurable, and philosophically rigorous. It allows us to assign responsibility. It also encourages the creation of wealth, and discourages crime, by giving people the results of their actions.
Property and trade
Please note that property is not just physical. If you choose to give or sell something, you have created the new kind of property: the property (or condition) that the other person can use the thing you made. If you choose to take it back, you have created a new condition (inconvenience).
Trade helps society to survive. But if you take something back after you have sold it, you harm society. If society wants to survive and flourish, it will create (and thus own) laws about fair trade and not stealing items back again.
Theoretical property and practical rules
Property involes millions of people in billions of transactios, so it can quickly become complicated. Society creates rules of legal ownership that simplify things. But we must always remember that these are just simplifications, or approximations for convenience. Ultimately, property means responsibility, even if that responsibility is complicated or difficult to trace. The more intelligent a society is, the further it can trace back responsibility, and so the more genuine are its claims to ownership, and the more incentive it has to create wealth.
Which brings us back to security. A land rent society is based on the concept of genuine ownership. Therefore it can both plan ahead and create wealth. This makes its people secure. A theft-based society, even though it uses words like property and ownership, will encourage injustice, and is thus insecure.
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