The Economist: Land-shackled economies

Dirk Löhr

The meaning of land as a factor of production has been disguised successfully by neoclassical economics for more than one century. Meanwhile, the concern over land has come roaring back. The issue is not overall scarcity, but scarcity in specific places—the cities responsible for a disproportionate amount of the world’s output.

The good news is that the high price of land in these places is

  • in part an unavoidable concomitant of success;
  • and largely an “artificial” problem, caused by land use regulations.

The bad news is that

  • such land use regulations are necessary in order to internalize external costs of land use;
  • the problem is a hardly soluble one. One estimate suggests that since the 1960s such distortions have reduced America’s GDP by more than 13%.

The topic is illustrated very well in the article of The Economist, published at April 4th:

The paradox of soil  (please click for download)

The article also refers to the concept of Henry George as a possible solution.

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