Political Economy 6: Land Value

1. These articles in Political Economy seem plain enough. Political Economy is a very simple science, in contrast with what people generally think about it: every one of us can study it in its everyday application with some measure of observation and reflection.

One of the functions of Political Economy is to reveal straightforward principles and thus maintain the natural balance in society, or to restore this balance under the right measures. It is akin to the part played by a doctor or a dietician who with the right prescription restores the balanced state of health. Our values (our beliefs and predispositions) form the fundamental motive forces for balance or deficiency both for bodily and communal health. The land values play a decisive role in them latter.

The analogy with the wellbeing of a living organism might illuminate this point.

With a few exceptions, our organism has, most of the time, a natural balance of functions and enjoys health. When this wellbeing is upset by excess or lack of water, food, sleep or exercise, then one feels indisposition, discomfort and other unpleasant symptoms.

A raised temperature, shivers etc. indicate that there is some deficiency; the natural balance has been upset and the organism is attempting to return to equilibrium. The need for medical intervention is not uncommon.

When human activity violates the natural measure, producing imbalances in society, various deficiencies manifesting immediately as an inflated civil service, corruption, criminality, strike (“industrial”) action, demonstrations etc. All these are on the rise in our times.

The most terrifying attempts at restoring balance are revolutions, wars and now terrorist acts.

The economist should know the right treatment and the forces that motivate our actions – i.e. the values that are instilled in us from our families when we are very young and the education we receive at school.

2. Nothing in the world has an inherent value. Objects, persons, events have a value which is determined by our own desires; our own evaluation.

It is not uncommon for the value of an object to be conflated with its price. Let us clarify this.

A major mistake of Marx was believing and trying to demonstrate in the early parts of his lengthy work, The Capital, that the value of each product is determined by the necessary labour that must enter in its production. But Marx himself showed in vol. 3 that that is not true; that the price of a product is determined not only by the labour that went in it, but from supply and demand too.

The greater the supply of a product, or the smaller the demand for it, the lower the price becomes. Conversely, the greater the demand or the smaller the supply for it, the higher the price.

But price must not be confused with value. For example, no price can be placed on air, for its value to all of us is immeasurable.

3. Every price is determined by four separate values.

Let us look at an example. I go to the market to buy some eggs. They are sold as a dozen priced at £1.50, £2.00 and £3.00. I quickly dismiss the first as cheap and the third as expensive. A valuation of the three prices took place in my mind, and, according to my own values, preference for one of the prices emerged.

I trade £2.00 for a dozen eggs. There are two values in my mind; a lower one for the two pounds and a higher one for the two eggs. In other words, I value the eggs more than I value the two pounds. Were that not the case, I would not have parted with my money for the eggs.

In the mind of the salesman, the valuation made is inverse and there are, again, two values: he values the eggs lower than he values the £2. Were that not the case, he would not have parted with the eggs for that amount of money.

If we both valued the eggs as much as we valued the £2 no exchange would take place; we would simply not hand over our respective part of the trade.

Our values, our beliefs and our dispositions are founded on desires. The desires give rise to values and, ultimately, determine prices.

4. The air we breathe is valued highly since life would be impossible without it. No price can be placed on it because it exists in abundance in the atmosphere. In the deep sea, or high in the stratosphere, however, it is priceless.

The same goes for water. It has a high value because it is necessary for our survival, but it is priced low because it also exists in relative abundance. It too becomes invaluable for someone lost in the desert; they would easily part with a fortune for a mere glass of water.

Whatever is necessary for life will have be valued highly, but its price will differ in accordance with its abundance and particular circumstances.

Land, the solid surface of the Earth, is also necessary for life; its price varies from place to place and from time to time.

The presence of precious resources (gold, oil etc) increases its value further since those resources are most desirable, having great utility in society and being valued by all people.

The land has additional value depending on its location – in the centre of large cities, or, somewhat less, plots having access to the sea at a lovely coast. It is common in our time for many people to enjoy a holiday near a nice beach. Moreover, central locations are highly sought after for many businesses, since they are easy to find by a large number of customers and salesmen of all kinds. Here, too, stand the centres of government, central banks and other financial organisations, centres of transportation and innumerable other private and public services. Here lie the high courts, museums, theatres, music and dance halls, opera houses, galleries with painting and photography exhibitions, the press and publication houses, and so many other expressions of culture.

All of the above are made possible from the very existence of society, the increase in population, the progress of science and technology and the impact of cultural influences. Moreover, much is owed to the labour of past generations that go back to the nameless and unknown antiquity. (Who invented the wheel? Who tamed so many animals? Where would we and technology be without such ancient accomplishments?).

Ultimately, the value of land is due to the existence of humanity itself.

The greater the number of human needs that a certain location can satisfy, the more desirable it becomes, and the higher its price will be. It is plain that the demand for central locations is almost inexhaustible, while their number, though large perhaps, is very limited by nature. There are only four corner-sites at every cross-road, no more!

These locations are owned legally by certain people. Their value increases year by year thanks to the increase of population, the rapid advance of sciences and technology and the progression of cultural forms. These augmented values are not the product of the land-owners’ efforts, yet it is the land-owners that obtain them by virtue of their legal possession within a highly dubious system of land-tenure that ignores the fundamental and absolutely essential need of every citizen to have free access to land for residence and work, just like the fundamental and essential need for air!

And herein lies the key to understanding the fundamental aspects of Political Economy and the problems that we face today in society.

– Nikodemos

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