Thanks for this very thoughtful response. To be clear though, this piece was written not in ignorance of that economic thinking, but rather in respectful disagreement with it.
The mistake that some economists — of both Left and Right — have tended to make is that they have conflated Land with Capital. I’m sure this wasn’t because they were bad economists, they were just concentrating on the 20th century tensions between Capital and Labour, and didn’t spend much time looking into the real-world mechanics of how the land system works, so they didn’t realise that land is a third, distinct factor of production. The classical economists, such as Adam Smith, David Ricardo and John Stuart Mill didn’t make this mistake; they saw that land is a very different form of private property.
Why? What makes it different? First, because it is physically finite, and it is a basic universal human need. You can’t choose not to need land. As Churchill put it, “the mature conclusions of many of the greatest thinkers, have placed the tenure, transfer, and obligations of land in a wholly different category from other classes of property. The mere obvious physical distinction between land, which is a vital necessity of every human being and which at the same time is strictly limited in extent, and other property is in itself sufficient to justify a clear differentiation in its treatment”.
But there’s also another important difference, which is that nobody made land; it was just there. Its value comes either from natural resources, or from the presence of other people nearby, and from the provision of military protection, utilities and so on.
Your example of a fishing boat is actually perfect. A fishing boat really is a store of value. Because in order to make it, someone had to cut down the trees (the price of which, in a well-regulated economy, also pays for the planting of more trees), they had to learn how to design boats and they had to build the boat. It takes ingenuity, skill and labour to make a boat, and when a boat is made it adds additional net productive value to society (it allows more fish to be caught). So it is right that it should be paid for, whether by purchasing it, or by renting it. This is what Smith referred to as ‘Ordinary Rent’; and it is a very good thing. Ideally, we would tax it as little as we can, to encourage the making of boats and the catching of fish (within the limitations of a well-regulated commons). Boats, like houses, are capital. Productive assets.
But in this analogy, land is not the boat. Land is the lake. Imagine if at some point in history, someone (whomever had the most swords) had decided that they ‘own’ the lake, and that they have the monopoly right to take, say 30–50% of the market value of the fish that the fishing boat crews bring ashore each day.
These ‘Lakelords’ didn’t originally make the lake, or the fish. The only service they provide is fighting wars to keep other Lakelords off their patch. It’s the economic equivalent of ‘protection’ money. They just decided they had a taxation right. If they then enshrine that taxation right onto a piece of paper, and put that piece of paper up for sale, then yes, it has tradeable ‘stored’ value (the legal right to future rents) – but it’s not capital (stored labour) in the same way that the boat is. It’s… stored power? Unlike the boat, it does not allow people to create new value, it’s a zero sum mechanism. It gives people a right to extract / capture value that has been created by others. It’s a state-created monopoly that yields money for nothing. What Adam Smith called ‘Economic Rent’. Or as Churchill put it, it is not “Production”, but “Plunder”.
Aside from the unfairness of ‘Plunder’, what’s almost as bad is that plunder, like loss of goods to highwaymen, is a tax on the real economy of goods and services. The higher rent (tax) the Lakelords charge, the less profitable and viable it becomes to make boats, catch fish etc. All of which creates jobs, and feeds people. Every penny the fishing captains spend on rent is money they could have reinvested into better boats, more crew, better nets etc.
It is worth noting though, that although Land Ownership is a pretty unique form of property, it’s not the only form of property that works like this. Another state-created monopoly right to extract economic rent is Intellectual Property, such as copyrights and patents. But the difference is that, (with some exceptions, such as pharmaceutical patents) you can realistically choose not to use intellectual property, it is not finite, and work did go into originally creating it. Thats why patents were originally created; it’s a piece of paper — a social contract — that says ‘if you create something and publish it to everyone, in exchange we (everyone) will give you a finite term during which you can capture economic rents to recoup your original investment plus a reasonable profit’. But the way it works is basically similar, in that if (by legislation) we increase / decrease the duration of that contract, the financial value of the asset shoots up / down overnight.
And so it is with land ownership. Since its value is created by rights of tenure — terms written on a piece of paper — we can change those terms (through taxation), or more pragmatically perhaps, write new terms (through innovation), and so create a new form of private property that is more fair, more affordable, and more conducive to a successful society and economy. If we want to.
Once we can clearly see the physical and legal distinctions between these different types of property as designed contracts, we can be much more clear-headed in the way that we go about tackling some of the huge structural problems we face.
