Most manmade things, including houses and cars, depreciate over time. Being manmade, they do not last forever, and most start to decline in usefulness and value almost immediately.

Land, however, being both permanent and fixed in supply, does not depreciate. When demand rises — whether as a result of population increases, the attraction of natural amenities, the activity of the private sector as a whole, or public investment in infrastructure or services — the supply can't rise. So land prices rise. This translates into a lot of social ills, since we humans are by our nature highly dependent on having access to land. It isn't land's fertility that gives it the most value, but its location.

But there is a limited class of commodities whose selling price has no relation or dependence at all on the cost at which they have been produced; for example, rare wines that grow only on soils of limited extent; paintings by the old masters; statues at exquisite beauty and finish by celebrated sculptors; rare books, bronzes and medals, and provisions or articles of human food in cities during a siege, and more generally in times of scarcity and famine — these commodities are limited in quantity, and it is physically impossible in the circumstances existing to increase, multiply, or augment them further. The seller of these commodities, not being afraid of competition, can put any price he pleases on them short of the purchasers' extreme estimate of the necessity, utility, or advantage to themselves of such commodities.

Fabulous sums of money, therefore, have been expended in the purchase of such commodities — sometimes to indulge a taste for the fine arts; sometimes to satisfy a passion for the rare and the beautiful; and, sometimes, too, to gratify a feeling of vanity or ambition to be the sole proprietors of objects of antiquarian interest and curiosity. On the other hand, enormous sums of money have been paid in times of scarcity or during a siege for the commonest necessaries of life, or, failing these, for substitutes that have been requisitioned for human food, the use of which would make one shudder in circumstances of less pressing necessity.   Read the whole letter