On Land as a Factor of Production

Eli Heckscher

[Quotes taken from Professor Heckscher's writings, commented on by
an unnamed contributor to Land & Liberty, November-December, 1956]

The well-known Swedish economist Professor Eli Heckscher, in his book Gammal och Ny Ekonomisk Liberalism (Old and New Liberalism), has this to say :

Land or building sites of various kinds, water power, mineral deposits, etc., have a value or command a price, and in many cases a very high price. The question, however, is not whether the natural resources should command a price, but whether this price should create an income for their owners, and there is all the difference in the world between these two questions. The interest on capital is not only a necessary price but is also required as an income, because otherwise saving would be very much reduced, but nothing similar applies to the income derived from natural resources, ground rent or whatever you will call it. In other words: Saving is a result of endeavour, of conscious human acting; but land, mineral deposits, water power, etc., are not in any sense the result of human activity. If interest on capital disappears saving will, to a more or less degree, stop; but if the rent attaching to natural resources is withheld from their owners, not a single acre of land, or ton of ore, or horsepower in a waterfall, will cease to exist. Therefore, the price of natural resources as an income for their owners can never become part in a "harmonious" economic system …

It therefore seems to me that it is impossible for a new economic liberalism to reject in principle the idea of the community appropriating the rent of natural resources.

Referring to the school of thought which is called Georgeism, Professor Heckscher comments :

It is a belief sometimes met with even amongst politically educated liberals, that Georgeism more or less coincides with socialism. No mistake could be greater. Far from coinciding with socialism, Georgeism is the most pronounced old-school liberalism which now exists. It is even scarcely an exaggeration to say that the social view represented by Georgeism is that the State should collect the economic rent, but not be further concerned with economic or social life …

The appropriation of the ground rent is often proposed to take the form of land value or ground rent taxation. … Its possibilities and limitations would necessitate an extensive discussion which does not belong here. What concerns us here is only the point of principle that this programme must form part of the new economic liberalism, which cannot fulfil its mission or live up to its teaching without it.