How Land Disappeared from Economic Theory – Editor
Anyone who has studied economics will be familiar with the ‘factors of production’. The best known ‘are ‘capital’ (tools, machinery, computers) and ‘labour’ (physical effort, knowledge, skills). The standard neo-classical production function is a combination of these two, with capital typically substituting for labour as firms maximize their productivity via technological innovation. The theory of marginal productivity argues that under certain assumptions, including perfect competition, market equilibrium will be attained when the marginal cost of an additional unit of capital or labour is equal to its marginal revenue. But there has always been a third ‘factor’: Land. Neglected, obfuscated but never quite completely forgotten, the story of Land’s marginalization from mainstream economic theory is little known. But it has important implications. Putting it back in to economics, it
is argued in a new book, ‘Rethinking the economics of land and housing’ [1 ], could help us better understand many of today’s most pressing social and economic problems.
Thanks to Colin Cook for drawing our attention to the evonomics article on this topic by Josh Ryan-Collins: