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In economic theory, '''land''' is one of the three [[factors of production]]. The other factors are [[labour]] and [[capital (economics)|capital]].
In the categorisation adopted for didactic purposes by the classical economists, '''land''' is one of the three [[factors of production]], the others being [[labour]] and [[capital (economics)]]. It is distinguished from the other two factors by the fact that it exists independently of economic activity, and the fact that its supply  is fixed and thus  independent of economic activity.  


Alongside [[labour]] land is also recognised by most (Paul Samuelson uses the phrase ''often called'') economists as a [[Factors of production | primary factor]].<ref>Paul Samuelson and William D. Nordhaus ''Economics'', (1989) pp. 50.</ref>
A corollary of fact that its supply  is independent of economic activity is the fact that a tax on its value has no effect upon economic activity. As [[Paul Samuelson]] puts it  "A tax on rent will lead to no distortions or economic inefficiencies". <ref>Samuelson and Nordhaus, ''Economics'' (1989) pp. 668</ref>


However, the Chicago School of economic thought seems to have been founded (and funded by J. D. Rockefeller) to eliminate the notion of ''land'' altogether from economics not just make it rank equal with capital and labour.<ref>Mason Gaffney in ''The Corruption Of Economics (1994) pp. 117-112.</ref>


Closely coupled with land is the notion of rent -- [[economic rent]], to be exact. With this goes the thorny question of "who is entitled to collect the value that accrues to land in its undeveloped state?" Another related subject is property, and the distinction between private and public property.
Most classical economists from Adam Smith to J.S. Mill were explicit on this issue. In the words of Adam Smith, “Both ground-rents and the ordinary rent of land are a species of revenue which the owner, in many cases, enjoys without any care or attention of his own… (and) are, therefore, perhaps, the species of revenue which can best bear to have a peculiar tax imposed upon them.” <ref>’’The wealth of nations (1776), Book II, Ch.2, Art.1</ref>
This principle of "least bad tax" is still acknowledged by most economists today. Paul Samuelson assures us that "A tax on rent will lead to no distortions or economic inefficiencies". <ref>Samuelson and Nordhaus, ''Economics'' (1989) pp. 668</ref>
==References==
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Revision as of 16:43, 4 June 2009

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In the categorisation adopted for didactic purposes by the classical economists, land is one of the three factors of production, the others being labour and capital (economics). It is distinguished from the other two factors by the fact that it exists independently of economic activity, and the fact that its supply is fixed and thus independent of economic activity.

A corollary of fact that its supply is independent of economic activity is the fact that a tax on its value has no effect upon economic activity. As Paul Samuelson puts it "A tax on rent will lead to no distortions or economic inefficiencies". [1]


  1. ↑ Samuelson and Nordhaus, Economics (1989) pp. 668
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