Three
Sources of Land's Value 
  
  
 
  
     
      Ted Gwartney:  Estimating
    Land Values     
    THE SOURCE OF PUBLIC
      REVENUE  
      What are the factors that cause land to have market value and to
      whom does this market revenue advantage properly belong? Land has
    market value for three reasons:  
    
      - the limited supply and "natural"
    productivity of the soil and natural resources, 
      
 
      - the publicly provided
    services, including planning, improvements that increase the market
    value of land and 
      
 
      - the growth of communities and peoples' competitive
    demand for the exclusive use of prime locations.
 
     
    Land rent is the price that people
      and businesses are willing to
      pay for the exclusive right to possess and use a good land site for a
      period of time. For example, people prefer to use sites of good
      location because it gives them an advantage of spending less time in
      travel by being near what they choose to do and where they work. A
      businessman can sell more goods at a site where many people pass each
    day, compared to a site where only a few people would pass. 
    
     
    The collection of land rent should
      be used as revenue, by the
      community for supplying public needs. This returns the advantage an
      individual land possessor receives from the exclusive use of a land
      site, to the balance of the people who live within the community and
      have allowed the land possessor the exclusive use of the land site
      for the period of time.  ... Read
      the whole article 
     
    Nic Tideman:  The Case for
    Site Value Rating
    The Social Justice of Site Value
      Rating 
      The Efficiency of Site Value Rating 
    How Valuations would be Made 
    Both for reasons of social justice
      and for reasons of economic
      efficiency, site value rating deserves a continued place in the
    programme of the Liberal Party. 
    The case for site value rating in
      terms of social justice is
      founded on two understandings: first, that the value of land in the
      absence of economic development is the common heritage of humanity,
      and second, that increases in the rental value of land arising from
      economic development and government expenditures should be collected
      by governments to finance those activities. What is meant by "land"
      is the unimproved value of sites and the value of extractable natural
    resources such as North Sea oil.  
    While there may someday be
      institutions capable of implementing a
      recognition of land as the heritage of all humanity on a worldwide
      basis, in the absence of such institutions each nation should
      implement a recognition that land within its boundaries is the common
      heritage of its citizens. This is accomplished not by making the
      nation a gigantic Common or by instituting government management of
      all land, but rather by requiring all persons and corporations that
      are granted the use of land to pay a fee or tax equal to what the
      rental value of the land they control would be if it were in an
    unimproved condition. 
    The case for site value rating in
      terms of economic efficiency is
      founded on the fact that a tax on resources that are not produced by
      human effort is one of the few sources of government revenue that
      does not reduce incentives for people to be productive. Two other
      revenue sources that have this virtue are taxes on other
      government-granted privileges such as exclusive use of radio
      frequencies and taxes on activities with harmful consequences, such
      as polluting the air. An economy will be more efficient if revenue
      sources that do not diminish productivity are employed to the
      greatest possible extent before any use is made of taxes that impede
    productivity. 
    What makes a tax efficient is that
      the amount of tax that is due
      cannot be reduced by reducing productive activities. When incomes are
      taxed, people can reduce the amount of taxes owed by working less.
      They do so, and the productivity of the economy falls. When houses
      are taxed, people can reduce the amount of taxes owed by building
      fewer house and smaller houses. They do so, and the housing shortage
      worsens. But when the unimproved value of land is taxed, there is no
      resulting diminution in the quantity of land. Thus taxes can be
      levied on land without diminishing the productivity of an economy.
      And shifting taxes from other, destructive bases to land will improve
    the productivity of an economy. 
    Subsequent sections explain in
      more detail these social justice
      and efficiency arguments for site value rating, describe procedures
      for implementing such a tax system, and explain why a variety of
    potential objections are without merit. ...  
    The three sources of land
      rent, the gift of nature, public
      services and community development, lead logically to the justice of
      three distinct taxes on land. The gift of nature is primarily the
      agricultural value of land, but also the value of natural resources
      and the extra value of land near rivers and harbors that arises
      because such land represents good places to put cities whether or not
      cities are presently there. This component of the rental value of
      land should be collected nationally and
      used to support a guaranteed
      income for all citizens. The part of land value that arises from
      public services is justly the income of the community that provides
      those services. When private individuals and firms undertake
      activities that raise the rental value of surrounding land, the value
      thereby created should justly be awarded to those whose actions
    create it. 
    If site value rating is used only
      to finance local public services
      and to reward private activities that raise the rental value of land,
      the resulting reductions in other taxes on commerce and housing can
      be expected to raise the rental value of land by enough that land
      will retain most of its present sale value, and there will be no
      issue of compensating the existing owners of land. On the other hand,
      if the full rental value of land is collected through site value
      rating, then the sale value of unimproved land will fall to
      approximately zero. The sale value of houses will fall to the value
      of the houses themselves. Do the owners of land deserve compensation
      for these reductions in the market value of their wealth? ... Read
      the whole article 
     
    Nic Tideman: Using Tax
      Policy to Promote Urban Growth
     
    
      Urban growth is desired because it raises peoples' incomes.
      In a
      market economy, incomes can be divided into components derived from
      four factors of production:  
      
        - the rent of land, 
 
        - the wages of labor, 
 
        - the interest received from owning capital, and 
 
        - the profits of entrepreneurship (the activity of choosing
      investments and organizing production). 
 
       
      Thus a successful urban growth strategy in a market economy
      must
      either increase the amounts of land, labor, capital and
      entrepreneurship that are used in a city or increase the payments
      that are made per unit of each factor, or both. 
      The land that a city has is fixed (or if it changes, it does
      so at
      the expense of other administrative units). Therefore, with respect
      to land, socially productive urban growth means adopting policies
      that raise the productivity of land. Labor, on the other hand, is
      reasonably mobile, and capital is highly mobile. Entrepreneurship
      springs up and fades away with the rise and fall of opportunities.
      Therefore, in a market economy, the payments that must be made to
      attract these factors are substantially outside the control of a
      city. Thus the growth of a city with respect to labor, capital and
      entrepreneurship is achieved primarily by making the city a place
      that attracts more of these factors, taking the rates of wages,
      interest and profits that must be paid to attract them as given by
      market forces. 
      Tax policy is critical for urban growth because taxes on the
      earnings of labor, capital and entrepreneurship drive these factors
      away. A city that desires to grow should refrain from taxing wages,
      interest or profits and concentrate its taxes on land, which does not
      have the option of moving away.  
      Certain other sources of public revenue, in addition to the
      rent
      of land, have the characteristic of not discouraging growth. These
      sources of revenue involve either charging people for using scarce
      opportunities that no one created, as with land, or charging people
      for the costs that their actions impose on others. 
      A city that wishes to grow should confine its search for
      revenue
      to these sources. In this way it will attract more labor, capital and
      entrepreneurship, thereby raising the rent of land, which can be
      collected publicly without discouraging growth. 
      Additions to the stock of capital are extremely important for
      urban growth, because of the impact of abundant capital on wages and
      rents. When capital is abundant, labor and land are more productive,
      and the more productive they are, the higher wages and rents are. ...  
      ... Every activity that is
      continued should pass a test of providing adequate value for money.
      Most of the worthwhile activities of local governments raise the
      rental value of the land in the vicinity of the activity by enough to
      pay a substantial fraction if not all of the costs of the activity.
      
      Thus the rental value of land is a natural first source of
      financing for local public expenditures. 
      Making the rental value
      of land a principal source of local public
      revenue has both an equity rationale and an efficiency rationale. The
      equity argument for social collection of the rent of land is founded
      on a recognition that the rental value of land has three sources.
      
 
      
        - Part of the rental value
      of land is the gift of nature--the fertility
      of soil, the value of good rivers and harbors, the depletable value
      of minerals, and so on. This part of the rental value of land should
      be collected publicly because no individual has a just claim to more
      than a proportionate share of it. Public collection is just either if
      it is followed by an equal distribution to all citizens or by
      spending on activities that provide equal benefits to all.
 
        - A second part of the
      rental value of land comes from the provision
      of public services. The local agencies that provide these
      services
      can justly claim the increase in the rental value of land that
      results from their activities.
 
        - A third part of the
      rental value of any particular site arises
      from private activities that are conducted in the vicinity of that
      site. Social collection of this part of the rental value of
      land is
      particularly appropriate if this money is used to reward those
      private activities according to how much they increase the rental
      value of land.
 
       
      The efficiency argument for social collection of the rent of
      land
      has two parts.  
      
        -  First, the rental value
      of land has the rare quality of being a source of public revenue that
      does not discourage productive activity. If people are taxed
      according to their labor earnings, they can be expected to work less,
      and to tend to move from the places that tax them. If people are taxed
      on their investments and savings, they can be expected to save and
      invest less, and to find it attractive to put their savings and
      investments in other places where they will not be taxed as much. But
      when the rental value of land is collected, no one will reduce the
      amount of land in existence, and no one will move his land elsewhere.
      Thus social collection of the rent of land does not reduce the
      productivity of an economy in the way that most other sources of public
      revenue do.
 
        - The second part of the
      efficiency argument is that social collection of the rent of land tends
      to make land more available to those who want to start new enterprises.
          When the rent of land is
      not collected publicly, those who have rights to land will tend to
      ignore the possibility of releasing it to someone who might make better
      use of it. On the other hand, if those who have rights to land
      are required to make annual payments equal to the market value of the
      rights they hold, then these continuing payments will induce people to
      ask themselves regularly whether they ought to release the land to
      someone who can make better use of it.
 
       
      To achieve the potential efficiency of public revenue from
      land,
      it is important that people not be charged more for the use of land,
      just because they happen to be using it particularly productively.
      The rental value of land should be reassessed regularly, the values
      that are determined should vary smoothly with location, and they
      should be available for public inspection so that all users of land
      can see that they are being charged amounts commensurate with what
      their neighbors are being charged. 
      Social collection of the rent of land also facilitates the
      privatization of land. If every user of land is charged annually
      according to the rental value of the land that he or she holds, then
      it is possible to undertake a just privatization of land simply by
      passing out titles to the current users of land.  
      No one will be disadvantaged by not receiving land. Future
      generations will not be deprived by not having been awarded shares.
      And the community will have a continuing income from the rent of
      land. 
      The
      efficiency that is entailed in using the rent of land to
      finance public activities applies to certain other sources of public
      revenue as well: 
      1. Charges on any publicly granted privileges, such
      as the exclusive right to use a portion of the frequency spectrum for
      radio and TV broadcasts. 
        2. Payments for extractions of natural resources. Such
      payments should be set at levels that yield the greatest possible
      revenue of the resources, in present value terms. 
         
        3. Taxes on pollution. Every individual or enterprise that
      pollutes the air, water or ground should be required to pay the
      estimated cost of the pollution it generates. The effect of pollution
      on the rental value of surrounding land is one possible measure of its
      cost. 
         
        4. Taxes on any other activities that reduce the rental
      value of surrounding land. 
         
        5. Taxes on activities such as driving or parking in
      crowded streets, where one person's activities reduce opportunities for
      others. The administration of such charges may be so expensive that it
      is not worth implementing them, but if the administration can be
      handled sufficiently cheaply, these charges are efficient to the extent
      that they only charge people for costs imposed on others. 
         
        6. Taxes on activities, such as the consumption of alcohol,
      which impose costs on others (e.g., higher traffic fatalities). 
         
        7. Charges for local public services, such as water,
      electricity, sewer connections, etc. It is not generally desirable to
      make every service completely self-financing. Rather, what is desirable
      is that each user be required to pay the marginal cost of the service
      he receives. Extensions of service networks are efficient when they
      increase publicly collected land rents by enough to cover the costs not
      covered by user charges. 
         
        8. A self-assessed tax on permanent improvements to land,
      at a very low rate (perhaps 1/10 of 1% per year). With a self-assessed
      tax, each possessor of land names a price at which he would be willing
      to part with the land he possesses (and any immovable improvements). He
      pays a tax proportional to the value he names, and anyone who wishes to
      may take over possession at that price. The value of such a tax is that
      it makes it much easier to assemble land for redevelopment, and to
      identify appropriate compensation when land is taken for public
      purposes. 
       
      All
      of the above taxes are positively beneficial and should be
      collected even if the revenue is not needed for public purposes. Any
      excess can be returned to the population on an equal per capita
      basis. If these attractive sources of revenue do not suffice to
      finance necessary public expenditures, then the least damaging
      additional tax would probably be a "poll tax," a uniform charge on
      all residents. If some residents are regarded to be incapable of
      paying such a tax, then the next most efficient tax is a proportional
      tax on income up to some specified amount. Then there is no
      disincentive effect for all persons who reach the tax limit. The next
      most efficient tax is a proportional tax on all income. 
      It is important not to tax
      the profits of corporations. Capital
      moves from where it is taxed to where it is not, until the same rate
      of return is earned everywhere. If the city refrains from taxing
      corporations they will invest more in St. Petersburg. Wages will be
      higher, and the rent of land, collected by the government, will be
      higher. The least damaging tax on corporations is one that provides a
      complete write-off of investments, with a carry-over of tax credits
      to future years. Such a tax has the effect of making the government a
      partner in all new investments. With such a tax the government
      provides, through tax credits, the same share of costs that it later
      receives in revenues. However, the tax does diminish the incentive
      for entrepreneurial activity, and it raises no revenue when
      investment is expanding rapidly. Furthermore, the efficiency of such
      a tax requires that everyone believe that the tax rate will never
      change. Thus it is best not to tax the profits of corporations at
      all. If the people of St. Petersburg want to share in the profits of
      corporations, then they should invest directly in the corporations,
      either privately or publicly. The residents of St. Petersburg would
      be best served by refraining from taxing the profits of corporations.
      Creating a place where profits are not taxed can be expected to
      attract so much capital that the resulting rises in wages and in
      government-collected rents will more than offset what might have been
      collected by taxing profits. 
      The taxes that promote urban growth have at least one of two
      features. 
       
      
        - The first feature that a growth-promoting tax can have is
      that it can serve to allocate a naturally occurring resource among
      competing potential users. Charges for the use of land, for the use
      of the frequency spectrum and for depleting natural resources share
      this feature. 
 
         
        - The second feature that a growth-promoting tax can have
      is that of being a charge for the costs imposed on the city by the
      person who pays the tax. This feature is shared by taxes on
      pollution, taxes on other activities that reduce the value of
      surrounding land, taxes on imposing congestion and other costs on
      other residents of the city, charges for the marginal cost of
      publicly provided services, and a self-assessed tax on property,
      reflecting the hindrance to future growth represented by existing
      development. 
        
 
       
      A city that confines itself to these taxes can expect to
      attract capital rapidly, and therefore to experience rapid growth,
      raising the wages of its citizens and the publicly-collected rent of
      its land.Read the whole article 
      
     
    
    Henry George:  Thou Shalt Not Steal  (1887
    speech)
     Now, here is a desert. Here is a
      caravan going along over the desert. Here is a gang of robbers. They
      say: "Look! There is a rich caravan; let us go and rob it, kill the men
      if necessary, take their goods from them, their camels and horses, and
      walk off." But one of the robbers says:  "Oh, no; that is
      dangerous; besides, that would be stealing! Let us, instead of doing
      that, go ahead to where there is a spring, the only spring at which
      this caravan can get water in this desert. Let us put a wall around it
      and call it ours, and when they come up we won’t let them have any
      water until they have given us all the goods they have." That would be
      more gentlemanly, more polite, and more respectable; but would it not
      be theft all the same? And is it not theft of the same kind when people
      go ahead in advance of population and get land they have no use
      whatever for, and then, as people come into the world and population
      increases, will not let this increasing population use the land until
      they pay an exorbitant price?  ...  read
      the whole article
     
    
    
      
        
          But there is another potential inequality that needs to be addressed. What
              if different communities have different amounts of land value per
              person? Here a distinction in sources of land value must
              be made. If a community has higher land value because it has built
              itself into a wonderful place, then it should be allowed to keep
              that value for itself. On the other hand, if a community has a
              higher-than-average natural endowment per citizen, then it owes
              something to communities with lower-than-average natural endowment
              per citizen. A program of payments among communities to equalize
              natural endowments per citizen will be both efficient and fair.
              It will be efficient because in the absence of such a program,
              people would gravitate to the communities with higher-than-average
              natural endowments (like Alaska) even when it was socially uneconomic
              for them to go there. It is fair because it accords with an equal
              right of all to natural opportunities. 
         
       
      
        Thus just and efficient local taxation
          is achieved by the combination of public collection of rent, marginal
          cost charges for public services, and a program of transfers among
          communities to equalize natural endowment per citizen. ...  read
          the whole article 
       
     
    
    
      
        
          Examples of taxes include excise taxes, sales taxes, income taxes,
            payroll taxes, value added taxes, inheritance taxes, and property
            taxes. Some payments to governments are in exchange for goods and
            services that are provided by government and are not taxes. Examples
            are transportation fares, telephone bills, water bills, and postage
            payments. Payments of rent to the government for the value of land
            in an unimproved condition should also not be regarded as taxes.
            This is because the rental value of land in an unimproved condition
            is not produced by the possessors of land. 
         
       
      
        There are two sources of the rental value
          of unimproved land: 1) nature; 2) location value, arising from a) public
          services such road, parks and transit facilities; and b) private activities
          that create opportunities for surrounding land. For the rental value
          that is due to nature, the proper allocation is either to the national
          government or an equal division among all citizens of the nation, because
          no one can claim this value by virtue of having produced it. For the
          rental value that is due to public services, the proper allocation
          is to the governmental organizations that provide those services. For
          the rental value that is due to private activities, the proper allocation
          is to those who undertake those private activities. 
       
      
        
          In the case of agricultural land, the rental value of unimproved
            land is due to nature and locational factors. This revenue is properly
            assigned mainly to the national government. However, in the spirit
            of sharing the revenue, it would be proper to have an exemption for
            some specified amount of rental value. Then farmers would pay for
            the use of land only to the extent that the rental value of their
            land in an unimproved condition exceeded the exemption. Such payments
            would not be taxes, but only the allocation of the rent of land to
            those to whom it should properly go. ... read
            the whole article 
         
       
     
    
    
      
        
          
            Efficiency and equity can both be
              achieved in a system of taxation of land by multiple jurisdictions,
              if the following features are incorporated in the system: 
           
          
            1. A distinction should be made between sources of the rental
                value of land. There is, on the one hand, the value that
                land would have in the absence of local development -- the value
                that it would have for agriculture, for the extraction of natural
                resources, or as the site of a new town if there were no town
                there. This component of the rental value of land should be regarded
                as the common heritage of the largest possible collectivity.
                There should be some system of compensatory payments among local
                governments to equate per capita receipts of this component of
                value. On the other hand, there is the addition to rental value
                that comes from the growth of communities and the provision of
                public services. This component of value should be regarded as
                the income of the locality, which the locality may collect and
                spend as it sees fit.  
            2. If there are two levels of government, the higher level
                should collect only two kinds of taxes:  
            
              (1) levies on land for the addition to the rental value of land
                that is produced by the services that are provided by the higher
                level of government and  
              (2) appropriation of a portion of the pre-development value
                of land that would otherwise be allocated among localities in
                proportion to their populations.  
             
            This insures that a locality cannot reduce its obligation to the
              higher level of government by acting inefficiently. 
            3. Citizens should not be able to oblige localities to spend
                money on them by moving from one place to another. Any citizen
                entitlements should be independent of migrational decisions.
                If the citizens of some locality wish to support their own citizens,
                or if they wish to support anyone who chooses to move to their
                community, this does not entail an inefficiency. The inefficiency
                arises only if localities are legally obliged to support migrants
                whether they wish to do so or not. ... read
                the whole article 
           
          
         
       
     
    
     
 
  
    Here, let us imagine, is an unbounded savannah,
      stretching off in unbroken sameness of grass and flower, tree and rill,
      till
            the traveler
            tires of the monotony. Along comes the wagon of the first immigrant.
            Where to settle he cannot tell — every acre seems as good as
            every other acre. As to wood, as to water, as to fertility, as to
            situation, there
            is absolutely no choice, and he is perplexed by the embarrassment
            of richness. Tired out with the search for one place that is better
            than another, he
            stops — somewhere, anywhere — and starts to make himself
            a home. The soil is virgin and rich, game is abundant, the streams
            flash
            with the finest trout. Nature is at her very best. He has what, were
            he in a populous district, would make him rich; but he is very poor.
            To say
            nothing of the mental craving, which would lead him to welcome the
            sorriest stranger, he labors under all the material disadvantages
            of solitude. He
            can get no temporary assistance for any work that requires a greater
            union of strength than that afforded by his own family, or by such
            help as he
            can permanently keep. Though he has cattle, he cannot often have
            fresh meat, for to get a beefsteak he must kill a bullock. He must
            be his own
            blacksmith, wagonmaker, carpenter, and cobbler — in short,
            a "jack
            of all trades and master of none." He cannot have his children schooled,
            for, to do so, he must himself pay and maintain a teacher. Such things
            as he cannot produce himself, he must buy in quantities and keep
            on hand, or else go without, for he cannot be constantly leaving
            his work and
            making a long journey to the verge of civilization; and when forced
            to do so,
            the getting of a vial of medicine or the replacement of a broken
            auger may cost him the labor of himself and horses for days. Under
            such circumstances,
            though nature is prolific, the man is poor. It is an easy matter
            for him to get enough to eat; but beyond this, his labor will suffice
            to
            satisfy
            only the simplest wants in the rudest way.  
   
  
    Soon there comes another immigrant. Although every quarter section* of
            the boundless plain is as good as every other quarter section, he is not
            beset by any embarrassment as to where to settle. Though the land is the
            same, there is one place that is clearly better for him than any other
            place, and that is where there is already a settler and he may have a neighbor.
            He settles by the side of the first comer, whose condition is at once greatly
            improved, and to whom many things are now possible that were before impossible,
            for two men may help each other to do things that one man could never do. 
   
  
    
      *The public prairie lands
              of the United States were surveyed into sections of one mile square,
              and a quarter section (160 acres) was the usual government allotment
              to a settler under the Homestead Act.  
           
      Another immigrant comes, and, guided by the same attraction, settles where
          there are already two. Another, and another, until around our first
      comer there are a score of neighbors. Labor has now an effectiveness which,
      in
          the solitary state, it could not approach. If heavy work is to be done,
      the settlers have a logrolling, and together accomplish in a day what singly
          would require years. When one kills a bullock, the others take part
      of it,
          returning when they kill, and thus they have fresh meat all the time.
      Together they hire a schoolmaster, and the children of each are taught
      for a fractional
          part of what similar teaching would have cost the first settler. It
      becomes a comparatively easy matter to send to the nearest town, for some
      one is
          always going. But there is less need for such journeys. A blacksmith
      and a wheelwright soon set up shops, and our settler can have his tools
      repaired
          for a small part of the labor it formerly cost him. A store is opened
      and he can get what he wants as he wants it; a postoffice, soon added,
      gives
          him regular communication with the rest of the world. Then come a cobbler,
          a carpenter, a harness maker, a doctor; and a little church soon arises.
          Satisfactions become possible that in the solitary state were impossible.
          There are
      gratifications for the social and the intellectual nature — for that part
      of the man that rises above the animal. The power of sympathy, the sense of companionship,
      the emulation of comparison and contrast, open a wider, and fuller, and more
      varied life. In rejoicing, there are others to rejoice; in sorrow, the mourners
      do not mourn alone. There are husking bees, and apple parings, and quilting parties.
      Though the ballroom be unplastered and the orchestra but a fiddle, the notes
      of the magician are yet in the strain, and Cupid dances with the dancers. At
      the wedding, there are others to admire and enjoy; in the house of death, there
      are watchers; by the open grave, stands human sympathy to sustain the mourners.
      Occasionally, comes a straggling lecturer to open up glimpses of the world of
      science, of literature, or of art; in election times, come stump speakers, and
      the citizen rises to a sense of dignity and power, as the cause of empires is
      tried before him in the struggle of John Doe and Richard Roe for his support
      and vote. And, by and by, comes the circus, talked of months before, and opening
      to children whose horizon has
      been the prairie, all the realms of the imagination — princes and
      princesses of fairy tale, mailclad crusaders and turbaned Moors, Cinderella's
      fairy coach,
      and the giants of nursery lore; lions such as crouched before Daniel, or
      in circling Roman amphitheater tore the saints of God; ostriches who recall
      the sandy deserts;
      camels such as stood around when the wicked brethren raised Joseph from
      the well and sold him into bondage; elephants such as crossed the Alps
      with Hannibal,
      or felt the sword of the Maccabees; and glorious music that thrills and
      builds in the chambers of the mind as rose the sunny dome
      of Kubla Khan.   
   
  
    Go to our settler now, and say to him: "You have so many fruit trees which
        you planted; so much fencing, such a well, a barn, a house — in short,
        you have by your labor added so much value to this farm. Your land itself is
        not quite so good. You have been cropping it, and by and by it will need manure.
        I will give you the full value of all your improvements if you will give it
        to me, and go again with your family beyond the verge of settlement." He would
        laugh at you. His land yields no more wheat or potatoes than before, but it
        does yield far more of all the necessaries and comforts of life. His labor
        upon it will bring no heavier crops, and, we will suppose, no more valuable
        crops, but it will bring far more of all the other things for which men work.
        The presence of other settlers — the increase of population — has
        added to the productiveness, in these things, of labor bestowed upon
        it, and this added productiveness gives it a superiority over land of
        equal natural
        quality where there are as yet no settlers. If no land remains to be
        taken up, except such as is as far removed from population as was our
        settler's land
        when he first went upon it, the value or rent of this land will be measured
        by the whole of this added capability. If, however, as we have supposed,
        there is a continuous stretch of equal land, over which population is
        now spreading,
        it will not be necessary for the new settler to go into the wilderness,
        as did the first. He will settle just beyond the other settlers, and
        will get
        the advantage of proximity to them. The value or rent of our settler's
        land will thus depend on the advantage which it has, from being at the
        center of
        population, over that on the verge. In the one case, the margin of production
        will remain as before; in the other, the margin of production will be
        raised. 
   
  
    Population still continues to increase, and as it increases so do the economies
        which its increase permits, and which in effect add to the productiveness of
        the land. Our first settler's land, being the center of population, the store,
        the blacksmith's forge, the wheelwright's shop, are set up on it, or on its
        margin, where soon arises a village, which rapidly grows into a town, the center
        of exchanges for the people of the whole district. With no greater agricultural
        productiveness than it had at first, this land now begins to develop a productiveness
        of a higher kind. To labor expended in raising corn, or wheat, or potatoes,
        it will yield no more of those things than at first; but to labor expended
        in the subdivided branches of production which require proximity to other producers,
        and, especially, to labor expended in that final part of production, which
        consists in distribution, it will yield much larger returns. The wheatgrower
        may go further on, and find land on which his labor will produce as much wheat,
        and nearly as much wealth; but the artisan, the manufacturer, the storekeeper,
        the professional man, find that their labor expended here, at the center of
        exchanges, will yield them much more than if expended even at a little distance
        away from it; and this excess of productiveness for such purposes the landowner
        can claim just as he could an excess in its wheat-producing power. And so our
        settler is able to sell in building lots a few of his acres for prices which
        it would not bring for wheatgrowing if its fertility had been multiplied many
        times. With the proceeds, he builds himself a fine house, and furnishes it
        handsomely. That is to say, to reduce the transaction to its lowest terms,
        the people who wish to use the land build and furnish the house for him, on
        condition that he will let them avail themselves of the superior productiveness
        which the increase of population has given the land. 
   
  
    Population still keeps on increasing, giving
      greater and greater utility to the land, and more and more wealth to its
      owner. The town has grown into a
        city — a St. Louis, a Chicago or a San Francisco — and still
        it grows. Production is here carried on upon a great scale, with the
        best machinery
        and the most favorable facilities; the division of labor becomes extremely
        minute, wonderfully multiplying efficiency; exchanges are of such volume
        and rapidity that they are made with the minimum of friction and loss.
        Here is
        the heart, the brain, of the vast social organism that has grown up from
        the germ of the first settlement; here has developed one of the great
        ganglia of
        the human world. Hither run all roads, hither set all currents, through
        all the vast regions round about. Here, if you have anything to sell,
        is the market;
        here, if you have anything to buy, is the largest and the choicest stock.
        Here intellectual activity is gathered into a focus, and here springs
        that stimulus
        which is born of the collision of mind with mind. Here are the great
        libraries, the storehouses and granaries of knowledge, the learned professors,
        the famous
        specialists. Here are museums and art galleries, collections of philosophical
        apparatus, and all things rare, and valuable, and best of their kind.
        Here come great actors, and orators, and singers, from all over the world.
        Here,
        in short, is a center of human life, in all its varied manifestations. 
   
  
     So enormous are the advantages which this
      land now offers for the application of labor, that instead of one man — with
      a span of horses scratching over acres, you may count in places thousands
      of workers to the acre, working tier
      on tier, on floors raised one above the other, five, six, seven and eight
      stories from the ground, while underneath the surface of the earth engines
      are throbbing
      with
      pulsations that exert the force of thousands of horses.  
   
  
    All these advantages attach to the land; it is on this land and no other
          that they can be utilized, for here is the center of population — the
          focus of exchanges, the market place and workshop of the highest forms of
          industry. The productive powers which density of population has attached
          to this land are equivalent to the multiplication of its original fertility
          by the hundredfold and the thousandfold. And rent, which measures the difference
          between this added productiveness and that of the least productive land in
          use, has increased accordingly. Our settler, or whoever has succeeded to
          his right to the land, is now a millionaire. Like another  Rip
          Van Winkle, he may have lain down and slept; still he is rich — not
          from anything he has done, but from the increase of population. There are
          lots from which for every foot of frontage the owner may draw more than an
          average mechanic can earn; there are lots that will sell for more than would
          suffice to pave them with gold coin. In the principal streets are towering
          buildings, of granite, marble, iron, and plate glass, finished in the most
          expensive style, replete with every convenience. Yet they are not worth as
          much as the land upon which they rest — the same land, in nothing
          changed, which when our first settler came upon it had no value at
          all.  
   
  
    That this is the way in which the increase of population powerfully acts in
        increasing rent, whoever, in a progressive country, will look around him, may
        see for himself. The process is going on under his eyes. The increasing difference
        in the productiveness of the land in use, which causes an increasing rise in
        rent, results not so much from the necessities of increased population compelling
        the resort to inferior land, as from the increased productiveness which increased
        population gives to the lands already in use. The most valuable lands on
        the globe, the lands which yield the highest rent, are not lands of surpassing
        natural fertility, but lands to which a surpassing utility has been given by
        the increase of population. 
   
  
    The increase of productiveness or utility
      which increase of population gives to certain lands, in the way to which
      I have been calling attention, attaches,
        as it were, to the mere quality of extension. The valuable quality of
      land that has become a center of population is its superficial capacity — it
        makes no difference whether it is fertile, alluvial soil like that of
      Philadelphia, rich bottom land like that of New Orleans; a filled-in marsh
      like that of St.
        Petersburg, or a sandy waste like the greater part of San Francisco. 
   
  
    And where value seems to arise from superior natural qualities, such as
          deep water and good anchorage, rich deposits of coal and iron, or heavy timber,
          observation also shows that these superior qualities are brought out, rendered
          tangible, by population. The coal and iron fields of Pennsylvania, that
          today [1879] are worth enormous sums, were fifty years ago valueless. What
          is the efficient cause of the difference? Simply the difference in population.
          The coal and iron beds of Wyoming and Montana, which today are valueless,
          will, in fifty years from now, be worth millions on millions, simply because,
          in the meantime, population will have greatly increased. 
   
  
    It is a well-provisioned ship, this on which we sail through space. If the
        bread and beef above decks seem to grow scarce, we but open a hatch and there
        is a new supply, of which before we never dreamed.  And very great command
        over the services of others comes to those who as the hatches are opened are
        permitted to say, "This is mine!" ...read the whole section of Significant
        Paragraphs 
   
 
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