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> "Ricardo's law of rent shows that indeed, even without artificial scarcities imposed by regulation, rent can go up forever as long as productivity is rising."
by davidf18 10y ago
> "Ricardo's law of rent shows that indeed, even without artificial scarcities imposed by regulation, rent can go up forever as long as productivity is rising."
The rent-seeking that he established states that political regulation can artificially create a situation of scarcity thus resulting in high lands costs that benefit landowners.
Specifically, he illustrated this regarding the "Corn Laws" of Britain which were a politically induced import duty on grains of all sorts making the cost of bread more expensive for consumers. Famers could charge more for the grain they grew because of less competition but the landowners would simply charge the famers more money. Thus, the import duties raised the cost of food for consumers while indirectly directing that wealth to landowners.
The "Corn Laws" created the market inefficiency, market failure which interfered with wealth creation and David Ricardo even joined British Parliament to combat the "Corn Laws." He eventually succeeded in the repeal.
While the values might continue to increase with rising productivity, the overriding factor at least for today's environment is the "rent-seeking" and we need to reverse the local control of land which benefits wealthy landowners like President Trump over normal working people.
Rising prices are due to scarcity. The scarcity is politically induced in order to in this case benefit landowners. Reverse the scarcity, politically induced or otherwise, and prices fall.
- nwah1 10y agoThe price of gold has risen considerably over the years. There's no particular reason to suspect that this trend will stop, since it is tied in with rising levels of production. It is quite possible to create an artificial scarcity of gold, and thus gold would be higher than it should be. But it would be ridiculous to claim "gold can't go up forever" and that to achieve affordable gold we only need to remove the artificial scarcity. It may be desirable that we remove the artificial scarcity, but it is also a distraction from the core question at hand. It is ignoring the natural scarcity and the general rising level of productivity. Prime locations are prime locations. A port, for instance, only becomes more desirable as total production levels increase.
- davidf18 10y ago> "It may be desirable that we remove the artificial scarcity, but it is also a distraction from the core question at hand." I respectfully disagree and so does Harvard Economist Edward Glaeser who has written extensively about this as does FT columnist and economist Tim Harford (as explained in his book, "The Undercover Economist" as does Steve Beyer who has written about this in the NYT and Forbes as well as other places. Japan passed a federal law that overruled local restrictions and in 2014 Tokyo built 140,000 residences compared with a total of 20,000 in NYC and about 90,000 in the entire state of California. I'm speaking pragmatically. > "A port, for instance..." A port is a much greater and natural scarcity compared with, say Manhattan which is huge as well as London which is not an island, but made "an artificial one" because of the Green Belt that circles London.
- pradn 10y agoJapanese people tear down old houses and rebuild new houses to their specifications to a much greater degree than Americans, so it's hard to compare those numbers easily.
- nwah1 10y agoScarcity is a term that is relative to demand. If you have a trillion widgets, but a quadrillion customers desperately want them, you still have a major scarcity. Not all of the land in cities is desirable. Parts of Manhattan are clearly far more desirable than others. And the people who want these prime locations far outnumber the availability of them. Not everyone can own a lot in Times Square, etc.