Hoarding land

A common precaution against sticky markets is buying excess land for possible future expansion. This behavior makes markets that much more sticky. It is one of those things that necessitates and justifies itself, considered in the aggregate: it is self-aggravating and self-authenticating. When anyone buys and holds for his own future expansion, everyone has to: it is a positive feedback loop of possessiveness run wild.

The composite result of individuals' buying for future contingent need is that the market in raw land is turned to glue. It ceases to serve the median person in time of need. The effect is a species of vertical integration and, like all vertical integration, it destroys the free market in raw materials and vastly inflates the aggregate need for holding raw materials. This is because the pooling effect such as the market provides inherently. That is, the grocer obtains, stores and keeps a wide variety of food and sundries on tap for thousands of customers. Lacking a grocer, each customer would have to maintain her own stores, and the aggregate required would far exceed that in the common grocery store. A good land market would likewise keep land on tap for the contingent needs of all, greatly lowering aggregate needs. Read the whole article

Speculation. Sprawl starts at the center of the metropolis and radiates outward. Smith owns a vacant downtown site. If he builds offices or housing, he invites risks and sizeable property tax increases. He keeps his parcel in minimal use like a parking lot. Brown, seeing its potential, offers to buy it. Yet Smith who enjoys rising land values without effort asks a price so high that Brown’s venture can’t fly. Brown approaches owners of other first-class parcels, meets the same hurdle, and finally buys a cheaper second-class site. More “Browns” do the same.

Soon Jones and other enterprisers find owners of second- and third-class sites boosting their asking prices. Owners get away with this because land hoarding in the core creates an artificial scarcity of affordable sites. “Joneses” are driven farther into the hinterland. Developers, denied entry by inflated land prices to close-in sites best suited for their ventures, invade open space. This race to beat speculators to cheap land fosters leapfrog growth. ... Read the whole article

Wealth and Want
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