America's Land Boom

Daniel M. Friedenberg

[Reprinted from Harper's Magazine, May, 1968]

Land is a prime buy. Year after year surveys of growth items spotlight the rise in value of a small group of steady winners: old paintings and graphic art, rare books and manuscripts, and antique furnishings. Only after these comes the stock market: rarely does the Dow-Jones average of thirty industrial issues come near the upward thrust of art objects. Invariably, however, such surveys end by pointing out that land prices equal or top the rise in all other speculative investments. In a special issue devoted to land several years ago, for instance, House and Home stated flatly that "since World War II land speculation has created more millionaires than any other form of business investment." The simplest and most obvious reason for this is that the quantity of land is fixed while the population grows and grows. The population of the United States in 1920 was 106 million; in 1960, 180 million; at present it is 200 million. According to the projections, by 1980, it will be 246 to 260 million, and by the year 2000, some 300 to 380 million. Thus within the twentieth century the number of people occupying the same number of square miles will have trebled. Actually, the amount of land being inhabited by this growing population is shrinking, because urban growth swallows a million acres a year, and highways and airports absorb still more. In addition, both the government and private corporations have been engaged in stockpiling, which, while it does not diminish the actual amount of land, removes it from the domain of speculation.

The sheer growth in affluence by itself has put great pressure on land use, for it has led to such things as early marriage, larger families, early retirement - all of which involve the spreading of people into space.

Perhaps even more significant is the social revolution through which America has been passing: that is, the accelerating flow of people from rural to urban centers.

Another feature of this revolution has been the large-scale shift in the work force from blue-collar workers to white. The U. S. Department of Labor calculates that during the 1960s with a population increase of 15 per cent, there will be a 30 per cent increase in the national clerical force and a 40 per cent increase in professional and technical personnel. Already one out of seven employees is a clerical worker. One crucial result of the revolutionary new emphasis on consumer goods and services has been the construction of larger and larger office buildings, often packed together for convenience of business. Another is the parallel construction of high-rising residences nearby for the management elite - both bringing land values up at a dizzying rate.

Despite these recent spurs to the growth in value of land, however, that growth in itself is nothing new. Indeed, in an important economic sense, the history of America can be said to be the history of the rise in land values.

An exemplary case of the land boom is, of course, Florida. Before the turn of the century, Henry M. Flagler, who was an original Rockefeller partner, made many additional millions speculating in Florida land. The islands comprising Miami Beach, however, did not even begin to assume their present condition until after World War I. In 1920, the assessed valuation of all real property on Miami Beach was only $225,000. By 1925 permits for construction had been issued amounting to over $17 million. Today there are individual estates on the small islands in Biscayne Bay - such as those of Norman Woolworth of the 5 & 10s and William McKnight of Scotch Tape - valued at a million dollars apiece.

Since World War II Florida real-estate speculation has drawn, as flies to a honey pot, the richest men in America. Arthur Vining Davis, after retiring as board chairman of Alcoa, concentrated on South Florida real estate. When he died at the age of ninety-five in 1962, he owned one-eighth of Dade County, shopping centers, and ocean-front property in Miami and Sarasota. He was considered the fifth-richest man in the U. S., with a fortune estimated at some $350 million. Davis was only one of many: John MacArthur, the Murchison brothers, John Hay Whitney, Gardner Cowles, the Mackle brothers, and William and Alfred Vanderbilt all hold or have held enormous land interests in the state. Some of the profits realized by these men make the land trading of John Jacob Astor in early Manhattan or the activities of Marshall Field in late 19th-century Chicago look petty by comparison.

Florida is only one of the more spectacular instances of a trend operating throughout the nation. Since 1945 average land prices have more than tripled. Even farmland has been booming: during the past ten years, according to the Department of Agriculture, its average value has risen 70 per cent. The greatest jump has been in states enjoying a benign climate; next have been suburban areas close to large cities; and third in rise have been the downtown areas of certain cities.

In terms of physical size, the leader is California, which once created the realty fortunes of Huntington, Stanford, Hopkins, and Crocker, and is still an El Dorado for speculators. Some one thousand persons a day stream into the state, and daily births in the young population add seven hundred more. Manufacturing jobs since 1950 have increased 80 per cent or eight times the national rate. Land prices in San Francisco are second only to New York City. Southern California, with its ideal climate, has seen the price for suburban land rising at an annual rate of about $800 an acre.

J. Paul Getty and the Tishman interests are strong in California, particularly in and around Los Angeles. There is also a new young generation of speculators. Arthur Carlsberg, not yet thirty-five, hit upon a technique to "harvest the farms" of Southern California, and at last report had made over $5 million by buying outlying farmland for subdivision. Joan Irvine, no older than Carlsberg, is an even more impressive case. She is principal heiress to over one-fifth of the Irvine Company, a ranch welded out of three Spanish land grants. The Irvine Ranch, some 138 square miles, and reaching from the Pacific Ocean to the Santa Ana Mountains south of Los Angeles, may be the world's most valuable remaining feudal fief. Dreary waste short years ago, the Irvine land, if sold intact, would probably fetch half a billion dollars - and twice that if liquidated piecemeal.

What is true for California is true for the Southwest in general. In 1962 a New Mexican real-estate broker put out a brochure asserting that over the previous twenty years Albuquerque land had increased annually in value an average of 25 per cent. Phoenix -where an estimated 30 per cent of the land within city limits is held by speculators - experienced a jump in population from 107,000 in 1950 to 439,000 in 1960; the city expects to hit the million mark by 1980. The population growth of Tucson is even more fantastic. Its population was 46,000 in 1946, 250,000 in 1961, and is slated to approach two million in the late 1970s.

Innumerable land millionaires have been the result. Perhaps the one who has received the most publicity is David H. Murdock, operating from Phoenix, whose interests extend through the Southwest and into California. Then there is Thomas E. Hull, a Californian who thought of building a hotel in the desert on the run between Salt Lake City and California, near a small town in Nevada by the name of Las Vegas, population 8,000 in 1941. He bought 57 acres at $100 an acre. This land was valued in 1961 at over $5 million. Recently the eccentric multimillionaire Howard Hughes has put down more than $40 million in cash to acquire four Las Vegas casino hotels and seems intent on buying out the rest of the city (not so coincidentally, Nevada has no state income or inheritance taxes).

An adjunct of the Southwest and California, psychologically speaking, is Hawaii. Here it is the Rockefellers* and the Kaisers who have taken hold. Like the Irvine Ranch, Hawaii more closely resembles a feudal barony than a state of the Union. Almost half of it is owned by sixty large landowners, closely knit families who preempted the best land when America took over the island group. These landowners have consistently leased rather than sold; a measure of their current worth is the fact that land around Honolulu which sold for $1,200 an acre before statehood shot up to $20,000 an acre within the decade.

Back East, too, population growth is having much the same effect. In The Great Gatsby, published in 1925, F. Scott Fitzgerald describes Long Island's Nassau County: "About halfway between West Egg and New York the motor road hastily joins the railroad and runs beside it for a quarter of a mile, so as to shrink away from a certain desolate area of land. This is a valley of ashes ..." In the ten years from 1953 to 1963, the population of this county leaped from 700,000 to 1,500,000-and the pocketbooks of men like the Levitts, Alfred L. Kaskel, and Samuel J. Lefrak swelled accordingly.

What Creates Land Values

It is essential to bear in mind that land itself is useless; what creates its value is what is done to it. Frequently land is "improved" by factors quite extraneous to it, such as the construction of nearby roads, bridges, railroad sidings, or jet airports. Staten Island was only fifteen years ago a bucolic retreat boasting no more than 3 per cent of New York's inhabitants. Now the Verrazano-Narrows Bridge which connects the island with Brooklyn, completed in 1964, has helped to double its population in less than five years. Land values have jumped a minimum of 400 per cent over the past decade, and certain large blocks of farmland have jumped even more: farms selling for $3,000 to $6,000 an acre in 1959 went up to $20,000 to $30,-000 an acre. Even the municipal government, which once owned the greater part of Staten Island, got on the bandwagon and began to sell off its holdings as fast as they could be mapped.

The same thing happens each time a major artery is added to an urban center. The taxpayers of New York State spent more than $400 million to build the New York Thruway, and the immediate effect was to add much more than that amount to the land prices along the route. The Tappan Zee Bridge - connecting the White Plains area with Nyack on the other side of the Hudson River - was first opened to traffic in 1955. It had been predicted that after twenty years the bridge would be used by some twelve million vehicles per year, but as it happened, within the first decade fifteen million vehicles were crossing annually; Rockland County, on the far side of this bridge, is now the fastest-growing area in all New York State. Yet another example is that of the Long Island Expressway, which made accessible an area in Babylon Township where land prices then tripled in four years.

The federal government has long played a major role in this sort of land improvement. The great boom in Western land after the Civil War was a direct consequence of Washington's having subsidized the transcontinental railroad. Today, the government's space program is having much the same effect on the thousand-mile crescent which stretches from Florida's Atlantic coast to the Texas panhandle. The space industry, of course, is focused on three points, Cape Kennedy, New Orleans, and Houston, but the benefits are seeping out on all sides. Washington expects to spend $2 billion a year - more than the entire $1.2-billion cost of the Tennessee Valley Authority - for twenty years on space projects. What these plans have already done to realty values will seem obvious. At Cape Kennedy, for example, the same tract was sold three times in three years: first at $500 per acre, next at $1,250 per acre; and then at $1,850 per acre. The property is worth much more today.

The major U. S. corporations are also deeply involved in the land boom. In some instances they are stockpiling against future demand in a dwindling market, in some they are purely speculators, and often they are serving as developers. Real estate has always been a side occupation of the life-insurance companies, one that follows naturally from the nature of their mortgage investment holdings. Many other companies, however, only vaguely related, or related not at all, to mortgage holding and land ownership, have come to occupy themselves with it. The railroads still own enormous tracts from their original land grants, and the Pennsylvania Railroad and the New York Central Railroad (recently merged) have both been developing their own land and cosponsoring enormous projects in various cities, especially Dallas and Atlanta. The Pennsylvania is a partner in the new $116-million Madison Square Garden Center in New York City, the Penn Center commercial development in Philadelphia, and owns a majority interest in separate operating realty corporations amounting to over $200 million. Southern Pacific and Union Pacific are also active.

The oil companies, with fat depletion allowances to invest, are becoming major land developers. Standard of California is investing many millions in 1,500 acres near Los Angeles. Humble Oil is developing 22,000 acres near Houston, already having invested $30 million. Gulf Oil has taken over the tremendous new residential community of Reston, Virginia. Sunset International Petroleum is so deep in real estate, mainly in California, that its oil business might be called secondary.

The rush into land development in fact seems to be nearly universal: Union Carbide has set aside a multimillion-dollar fund to acquire acreage in what the company defines as "strategic areas." Bethlehem Steel invested $13 million in 1964 in land near San Francisco and an undisclosed sum more recently to buy thousands of acres in Maryland. General Motors has actually established its own real-estate division, Argonaut Realty; the company is also a partner in its new headquarters building, now rising at Fifth Avenue and 59th Street in New York City. Sears, Roebuck is a heavy land investor.

Alcoa, perhaps the most deeply involved, took over the major Zeckendorf properties in Philadelphia and New York City, and has been called one of the largest landlords in America. Alcoa has a $500-million project in Los Angeles, a "city within a city" of some 180 acres. Alcoa's rival, Reynolds Metals, already has over $300 million invested in various projects in Philadelphia, Syracuse, Providence, and Hartford. Westinghouse acquired one of the largest land developers in Florida. And, as if to settle the matter once and for all, Wall Street is now entering the field, principally the banking house of Lazard Freres and the august firm of Eastman Dillon.

All of these factors have come together in a unique and yet broadly revealing way on the island of Manhattan. Unlike many other places, Manhattan has been a land investor's haven for 150 years. Being the principal port for shipping from Europe, the reception center for wave after wave of new immigrations, nerve center for the corporate life of the entire nation, and headquarters for the United Nations, Manhattan's relatively meager land supply has proven to be a never-ending source of wealth. The early speculations of the Rhinelanders, Beekmans, Phippses, Stuyvesants, Goelets, Roosevelts, and especially the Astors still keep their descendants rich. The grandchildren of the speculators of the early twentieth century - the duPonts and the Rockefellers - have enlarged their inheritance. Post-World-War-I land plungers such as the late William Randolph Hearst and Joseph P. Kennedy retain gilded properties, though the Kennedy family has sold much of its Manhattan real estate and concentrated on Chicago. And the children of the crop of the 1920s, the Tishmans, Rudins, Roses, Bursts, Minskoffs, and Urises, have now been joined by the post-World-War-II group, John Galbreath, Peter B. Ruffin, and the Fisher and Tisch brothers.

Although the city has lost actual population in the flight of the middle class to the suburbs, office space has increased by some 40 per cent during the last decade. Indeed, it is claimed that there has been more new office space built in Manhattan since the end of World War II than exists in any other city of the world. This one small island houses headquarters for thirty-eight of the top one hundred industrial corporations in America. In the five years from 1957 to 1962 the number of clerical workers in Manhattan grew by around 200,000 (thus, if you add their families, the mere increase in clerical workers is equivalent to the population of a medium-sized city). Nor do even these statistics keep pace with the tremendous daily expansion in this area.

But the boom in offices is only one side of the story. The almost equally rapid shift in the city's social and ethnic composition is the other; and the two together have created an explosive speculative compound - one that can give off large-scale failure as well as success. (The misfortunes of Louis J. Glickman, the former top realty syndi-cator, and of the by-now fabled William Zeckendorf will illustrate.) It is not generally realized, but the larger part of Manhattan's land is priced today below its value forty years ago. Much of the upper part of the island, all of Harlem, the West Side above 72nd Street, the East Side below 8th Street and above 96th Street, is decaying and/or subject to some form of subsidized urban-renewal projects.

Manhattan's Favored Enclaves

When people talk of the amazing rise in Manhattan land values, they are really referring only to four areas. The first is the mixed residential and business strip from 34th Street north to 86th Street, and at some points to 96th Street, extending east from Sixth Avenue to the East River. The second is the financial district east of Broadway and south of Fulton Street, now being extended west by the World Trade Center and north by the Brooklyn Bridge Southeast project. The third is the residential sections in Greenwich Village and around Lincoln Square, site of the new Center for the Performing Arts. And the fourth, only now coming into its own, is the area between Sixth and Eighth Avenues, from 32nd to 59th Streets. Fingers of heightened land value, of course, string out from these nuclei, but in the main they are White ghettos of apartment houses and office buildings surrounded by a setting of urban decay.

Within these favored enclaves, land values are breathtaking and seem to keep on going up. Well-located Lincoln Center land was valued at $20 to $30 a square foot when the cultural center was announced a decade ago. Though the entire project is not yet complete, the best unimproved Broadway sites today command a price close to $100 a foot. Land in that peculiar narrow belt that comprises the financial district has without question risen in value at least 50 per cent in the last ten years. As for Greenwich Village, many years ago a certain Captain Randall left $7,000 and 21 acres of land extending irregularly from 8th to 10th Streets east of Fifth Avenue to help establish a a retired sailors' home in New York City: leased out by Sailors' Snug Harbor for apartment construction, these acres have a present value of close to $100 million.

Manhattan's real gold mine, however, is in the Grand Central area. Commodore Vanderbilt by a clever bit of legerdemain acquired for his New York Central Railroad the land running on both sides of Park Avenue from 42nd to 50th Street. In 1942 this land was valued at $70 a square foot; today it leases on an equivalent basis for $500 a square foot, the highest valued land in the world. There is some evidence that all those battles waged for control of the New York Central have more to do with this real estate than with the profits from its railroad system.

Throughout the rest of this area extending north of 42nd Street and east of Sixth Avenue, fortunes have been made since World War II. The Astor estate - which for purposes of the death tax largely liquidated most of its holdings-still holds certain parcels, particularly on Sixth Avenue. And all the most aggressive builders have bought or leased land here: the Bursts on Third Avenue, the Urises on Park Avenue and Sixth Avenue, Tishman Realty on Park Avenue and Third Avenue, and the Minskoffs on Lexington Avenue.

As a result of demand, almost all the major land sites have been acquired for office buildings on these main streets, and this in turn has driven up the value of the remaining land. There now seem to be symptoms of a real-estate frenzy similar to that which seized Florida in the mid-1920s. Park Avenue, Madison Avenue, and Fifth Avenue have almost no sites available between 42nd and 57th Streets. First Avenue and Seventh Avenue, and to a lesser extent Second Avenue, are still considered fringes, though a westward movement began with the Minskoffs acquiring the old Hotel Astor on Broadway and 44th Street for a fifty-story skyscraper and the Urises' plans to build a fifty-one-story tower on the site of the Capitol Theater at Broadway and 50th Street. The result is that every storekeeper who years ago bought his small building to protect his store lease on the ground floor (usually with $5,000 cash and a string of mortgages), as well as every speculator who holds "a piece" of a decayed brownstone off these key streets, is convinced that just six months more, just holding out another year, and he will come to fortune.

Speculators vs. Homeowners

Frenzied or not, land speculation is an integral part of American economic activity. The courageous speculator is a dynamic force in our nation. Without risk capital devoted to future expansion, without daring and optimistic projection, the American people would never have conquered a continent and created a standard of living the envy of the world. But certain problems are created by this land speculation which must be dealt with in the immediate future or the very daring which created our dynamism may, in a new climate and a new age, do the reverse and paralyze national growth.

To understand why this is so, we must understand the difference between land and other commodities. Unimproved land is distinct from other private property. It has not been created by any of its owners. Moreover, as we pointed out earlier, its value is often enhanced by what others who do not own it do to it. As John Stuart Mill once remarked, "Landlords grow rich in their sleep." What he meant, of course, was precisely what we have seen: that the increase in population automatically makes land more valuable. Thus the distinction between a successful and an unsuccessful land speculator often has more to do with the ability to interpret and predict the movement of population than with sagacity about how to improve the land itself.

A further difference between unimproved land and all other commodities in our society is that it is subject to lower taxes than they. This fact has its roots in history. Present tax policy was established at a time when most Americans were farmers and when the society's foremost problem was to get the nation settled. The age-old distrust of the city dweller by the freehold farmer - in America intensified by the fact that the farmer tended to be white and Anglo-Saxon old American, while city immigrants were of different ethnic and religious backgrounds - blossomed into the kind of tax policy that could automatically be supported by rural-dominated legislatures. Nationally the result has been that, according to the last statistics, raw land is assessed at less than 20 per cent of its true market value while single-family homes are assessed at 32 per cent. The speculator thus need pay only 62 cents in real-estate taxes as compared to the dollar paid by the homeowner next door. When farmers made up the vast majority of the population, this made sense. Today, however, they are only a small minority (even among these, many are fully mechanized, big-business farmers at that). The sense - at least for the society as a whole - has departed.

Homeowners have also continued to support this policy - although for a different motive than the farmers. For even though the homeowner is at a distinct disadvantage vis-a-vis the land speculator, he is still better off in this regard than the owners of multiple dwellings and commercial structures. He is therefore afraid that any change in taxation will hurt him. Within any given community homeowners comprise a significant political bloc; their fears can be played on to muster support for tax policies whose main thrust is to serve the interests of speculators.

In 1964 Eugene Nickerson, Nassau County Executive, started a campaign to raise assessed valuations on vacant land. Mr. Nickerson pointed out that land speculators were taxed much lower than homeowners. He also showed that the value of vacant land had shot up far higher than improved land since the obsolete tax system had been put into effect many years before; to little avail -- the furor raised by whipped-up homeowners made the headlines in all the New York newspapers. Such misguided agitation on the part of home-owners very often results in the exact opposite of what they intend. Land speculators deliberately keep land idle because of the low taxes. The home-owner, along with apartment and commercial property owners, pays higher taxes on his improved land, in effect subsidizing the land speculators who simply wait for the entire community to push up the price of their land.

In fact, the political marriage of convenience between big land speculators and homeowners has, if anything, helped to reduce the proportionate weight of taxes on land. Fifty years ago land carried nearly one-half the total tax load. Today, while it constitutes one-third of our total national wealth, land carries less than 5 per cent of the total tax load. Preferential tax treatment makes land that is vacant a top investment for speculators; why shouldn't they keep this precious, dwindling commodity off the market as long as the annual increase in market value exceeds the property taxes? Particularly since, when they finally do sell the land, they are only subject to a capital gains, or 25 per cent, tax on the profits.

It should be obvious, then, that land speculation tends to price single homes out of the market-indeed, it would seem to be the largest single factor in the meteoric rise in prices of single-family dwellings. According to the latest available statistics, the proportion of land cost to total product cost rose from 10 per cent in 1950 to 23 per cent in 1962. Land values in the suburbs have tripled during the past decade - and would appear to be repeating this performance yet again - while the homeowner's average real income is estimated to have risen by no more than 30 to 40 per cent. A study conducted in 1963 indicated that the same three-bedroom house would cost about $35,000 within fifteen miles of Times Square and $14,000 fifty miles away.

The preferential treatment of speculators is also the major cause of what has been called "urban sprawl." Because land is held out of use until rising population forces the price up, developers are forced to leapfrog over large vacant tracts, creating those jumbled suburbs which are so typical of our major cities. The social costs of servicing these communities, such as bringing gas and water and electric lines to them, or creating autonomous police and fire forces, are greatly raised as well.

Within the central city, the undertaxing of land has also directly served to enhance the enrichment of slum owners. Since tax increases are mainly levied against improvements rather than land, slumlords can find it more profitable to do nothing. It pays them to let their property deteriorate and take advantage of lower assessments. Moreover, in addition to the cost in discomfort and demoralization to those who must live in them, slum buildings also cost the community a great deal more in the way of services such as fire and police protection. Thus the property least taxed costs the general taxpayer most. Slum clearance, then, is in fact cheap in the long run, paying for itself by increasing taxable sources and reducing the social cost. Current tax policy, on the other hand, tends to work just the opposite.

Municipal authorities, who are perpetually in need of money, compound the difficulty by loading more and more taxes onto improvements. And the buildings which are a credit to the city are taxed far out of proportion to its disreputable slums. This policy sometimes reaches insanity, as in the famous case of New York's Seagram Building, whose builders were taxed at an outrageous rate precisely because they had put up such a brilliant piece of architecture. Therefore it not only pays off immediately to cut corners in the design and construction of new buildings, it continues to pay off in favorable carrying charges. Making it advantageous to put up inferior structures is not exactly sound social policy for American cities.

Who Profits from the Subway?

How then can contemporary society sensibly resolve the problem of land values? The answer to this question is twofold. First, by increasing the assessment on land in proportion as its value is increased by extraneous factors, such as improvements in transportation. And second, to tax it in relation to its actual value rather than to its unimproved market value - that is, on the basis of its use when it is improved rather than standing idle. The effort to assess land in relation to local municipal improvements is an old question in America. Almost half a century ago the City Club of New York made a study of the cost of the Inter-borough subway system, completed in 1908. The study showed that the subway had cost $43 million while the rise in property values amounted to over $80 million for only the stretch from 135th Street north; in other words, property owners in the northern section of the city received a gift almost double in value to the entire cost of the subway. The City Club argued that these property owners should pay an extra assessment rather than have the entire city population taxed for their private benefit. Not surprisingly, the proposal was successfully vetoed by pressure from the interest parties. A recent study in Montreal came to the conclusion that if local landowners were required to pay the city 5 per cent interest on its investment in the improvements which increased the value their land, Montreal would be able to run government without collecting any taxes at all.

In the matter of such improvements as the Verrazano-Narrows Bridge, the Tappan 2 Bridge, the Long Island Expressway, and the New York Thruway, the entire taxpaying public subsidized the cost, with local individuals and speculators reaping great profits. If the system were changed so that those who particularly benefit from the improvement were to bear some part the cost, the beneficiaries would still come out ahead with profits and the tax burden would reduced for the rest of the community.

As to the problem of assessing land on the basis of use, there have been several intelligent attempts to deal with it, mostly in the more advanced Anglo-Saxon countries. Australia has gone furthest. In Sydney, for example, land is taxed as though fully improved in accordance with the district zoning. This drives out both land speculators and slum owners, neither of whom can afford to pay the full-use tax. A variation of this formula is used in Brisbane, which forbids taxes on improvements but has a uniform 9 per cent tax on land regardless of what is constructed on it. In addition to Australia, many provinces in New Zealand and Western Canada subscribe in one degree or another to the basic idea of "site-value taxation," which increases the tax on the unimproved land and diminishes or exempts from taxation the improvement.

The approach taken in Denmark, somewhat less radical, is obviously better suited politically to America. In Denmark both land and improvements are taxed, but land at a steeper rate. In fact, one American city, Pittsburgh, has already adopted a similar formula. Pittsburgh taxes land at value while improvements are taxed at half value. The tremendous building activity in that city, undertaken by the Mellon interests with the backing of the largest life-insurance companies, would seem to indicate that this policy encourages rather than inhibits growth. As it was intended to do, it forces the improvement of land.

Henry George, a most original nineteenth-century American economist, went so far as to propose the abolition of all taxes but land taxes. His "single tax" was intended to force land into its highest and best use, offsetting the worst effects of land speculation and obviating high profit from slums. Such an oversimplification of a very complex tax problem as George's, of course, cannot stand up as the cure-all he claimed. In an economy where leasehold arrangements, long-term tenant commitments on fixed rentals, and heavy mortgages are quite common, the introduction of a "single tax" would be discriminatory and even confiscatory to an important class of capitalistic investors.

Nevertheless, the fact that both Life (December 24, 1965), and Fortune (October 1963), highly esteemed conservative magazines, endorsed a modified approach to the "single tax" theory, would seem to be evidence enough that the call to adjust an inequitable tax policy is hardly flaming radicalism. Indeed, from an historical view it can be said that it was the narrow feudal policy of East European capitalists - holding land and refusing to permit its development - that helped to create an environment hospitable to the Communist take-over. This is even more true in Latin America today.

Any study of land value must ultimately deal with the question of what is our economic future. In a slump, everybody loses - the speculator as well as the careful investor, the corporation that behaves rapaciously as well as that which behaves prudently, and of course the municipal authority, which suffers a decline in tax revenue.

Nor is the question of the future one that can be answered with total confidence, for capitalism has not yet invented techniques to ward off depressions. We know that wise policies do serve to level off the usual cycles of boom and bust: for instance, those devices that go by the name of Keynesian economics which enable the government - through interest control, public works, and tax inhibition or relaxation - to influence the course of events. Unfortunately there is almost no such policy of control with respect to land prices. One purpose of this article is to suggest; that creating an equitable land-tax program will encourage more stable growth.

As a matter of fact there is a new stabilizing factor today in land speculation - albeit one whose contribution to the life of the greater community is highly questionable. Much idle land of consequence is in very strong hands, mainly certain rich families and corporations that hold on despite temporary fluctuations. The bite of the capital-gains tax discourages them from selling on a limited rise, and the power of their purse enables them to resist dumping when the market declines. They feel, with some reason, that rising population and the low taxes they pay (which are fully deductible as expense items) must eventually create a more favorable situation no matter how much they may initially have overpaid for the land. Though this may be pernicious in the social sense, it does at least to some extent help to inhibit the wild swings in price that formerly characterized American land speculation.

That these families and corporations can remain in their advantaged position forever is open to doubt. Even assuming that there will be no change in current land-taxation policy, the history of American capitalism offers little reason to believe that there will be an "eternal ascending plateau" of values. This theory is attractive, but historically it is, I am afraid, bunk, as can be shown by the following table.

Historic Land Price Swings

Year	Population Increase	Time Inverval	Land Bust	Time Interval
1810-1820	33%	10 years	1819	-
1830-1840	33%	10 years	1837	18 years
1850-1860	36%	10 years	1857	20 years
1870-1890	30%	10 years	1873	16 years
1890-1900	21%	10 years	1893	20 years
1920-1930	16%	20 years	1929	36 years
1950-1960	20%	20 years	no bust	38 years

If the last 150 years of land values were graphed in relation to subsequent readjustments, it would seem to indicate that intervals of land bust are merely wider apart in the twentieth century and - judging from 1929 - come with more violence as a result.

Of course, land values in the larger sense reflect the general movement of the economy both in prosperity and depression. The fact is that land seems to be a sensitive barometer, anticipating both future declines and future rises. For example, 1929 was preceded by a sharp farmland decline in 1920, a Florida land bust in 1925, and a retreat in 1927 from the highest land prices. Similarly today, the weakness of land prices in both the Southwest and Florida, and continued sluggishness in California, may anticipate a more serious contraction. But given a vigorous government which does not hesitate to enter the domestic picture with programs of aid, research, and direct capital expenditure, given the aggressive international policy of the Johnson Administration, it would be foolhardy to prophesy. Anything can, and does, happen in land prices.

*It has very recently been reported that Laurance Rockefeller (Rock Resort) has sold to Eastern Airlines an enormous package, consisting of the Dorado Beach development in Puerto Rico, Cancel Bay Plantation in St. Johns (the U.S. Virgin Islands), and his Hawaiian hotel project completed a few short years ago. Daniel M. Friedenberg's article in "Harper's" in 1961 on "The Coming Bust in the Real-estate Boom" had a rocking effect on the New York real-estate business, in which the Friedenberg family has been active for 49 years. Mr. Friedenberg received a B.S. degree at the Wharton School of Finance and Commerce, and served in the Army in World War II. He writes for many magazines, literary as well as professional, and is president of several real-estate corporations.