“Buy land,” the adage goes, “they’re not making any more of it.” True enough: Land is an economic factor like no other, what economists call an “inelastic commodity.”
Demand for land goes up, yet there can be no increase in supply. According to the law of supply and demand, rising demand produces rising prices, which is offset by manufacturing more supply, which lowers prices.
In the case of land, the iron law of supply and demand is tossed out the window.
One can of course develop more land, but this does not produce more of the basic resource upon which development depends.
Control of the resource, then, is where opportunity lies, an opportunity which involves nothing more than the willingness to gamble that the value of land will continually rise. In Moab all landowners – which is to say all homeowners along with owners of undeveloped plots – know this. In places where population is increasing, where the demand for land is rising, the trick to getting rich is to buy a plot of soil, sit on it, and watch the value grow as demand for the commodity grows.
So let’s say, for example, I bought a quarter-acre plot in the city of Moab thirty years ago for $5,000. I did nothing to the plot, engineered no improvements, did no labor.
Thirty years later my plot is valued at, say, $150,000. Did I “earn” that money, in the sense of engaging in productive labor in society? Of course not.
Along with population growth, the productivity and provisioning of services in Moab – the community’s dynamism and expansion – caused the increase in value. More people, more amenities, more social investment. Society created the value of my plot.
As a kid growing up in New York City, in Brooklyn, I used to wander around the street-side gambling joints – the Off Track Betting parlors, for example. A lot of toothless degenerates in those places, slavering at the sound of the racing bell, and drinking, smoking, fighting.
“These are sick people,” my mother used to tell me. “Gamblers. They want to make money doing nothing of value.”
Which, needless to say, is the intent of land speculation. The line between the real estate investor and the degenerate in the gambling hall isn’t quite clear. The former, I suppose, has the benefit of an incestuous relationship with Chambers of Commerce everywhere.
Real estate interests of course will run home crying to their mothers at this sort of talk. Better yet they’ll go on bended knee before city governments demanding zoning variances and handouts in the form of a tax break, and afterward grouse about “socialism” and state intervention in the marketplace.
Now imagine, however, that our real estate buyer is not the parasitic creature I’ve just described but in fact a plain old American homeowner – not some corporate pig on Wall Street, not some out-of-state speculator flipping houses.
No, this is you and me, looking to settle for a good while, though maybe one day to sell and move elsewhere when conditions change and new jobs beckon – the pattern of American life.
I buy the same quarter-acre plot, but during the years of ownership I improve it. I build a house, plant trees, landscape the yard, maintain the façade, beautify it whenever I can. All of which improves the quality of life for everyone in the neighborhood.
These sorts of improvements also, as it happens, increase land value – for everyone. The point here is again that the value of land is part of a social continuum. My improvements help my neighbor’s land values; his improvements help mine. Public investment based on the shared (that is, socialized) pot of our taxes also increases land values. Better schools, better roads and sidewalks, tree-lined streets, public transit – these social investments produce an increase in the privatized value of my property.
And therein lies the problem.
Like the speculator with his bare lot, when I sell my property I get to keep for myself, barring a few taxes, the entire increase in value, an increase that resulted in part, yes, from my own labor and upkeep, but also, to a far larger degree, from communal labor and social investment (along with the simple fact of inelastic supply in the face of rising demand).
The homeowner who manages to make a killing upon selling his house minces in the mirror and says, “I earned it, I and I alone!”
Such self-delusion, needless to say, is one of the keystones of the real estate market on which so much of our economy is predicated.