What Determines the Value of Land
Max Hirsch
[Original date of publication not known. Reprinted
from Progress, May-June 2005]
In the heart of the city of Melbourne is a block of land, which,
except that the trees which grew upon it have been cut down, is in
exactly the same state as when the blacks roamed over the site of the
future city. No labour has ever been expanded on it; no wealth has
ever been created there. Fifty years ago the present owner of the land
paid £29 for it to the government; lately he was offered and
refused £30,000 for the same land. What is the cause of this
increase in the value of land? It is this. When the land was
originally sold, Melbourne was a village on the outskirts of the
wilderness and no one would have given the owner more than £1-1/2
a year for the privilege of using it. Since that time the country has
been populated, the soil has been subjected to the plough, roads and
railways, centering upon Melbourne, have opened the interior of the
country, and as a consequence Melbourne has become a great trading
centre. The volume of trade has enormously increased, and with it has
increased the demand for such land as gives access to trading
facilities. Any one wanting a trading location, such as this land
presents, therefore, is compelled, and can afford, to pay at least £1,000
a year for the privilege of using it. The owner of this land has taken
no part in the activities which have resulted in the value which his
land now possesses. Even if he had he would have done so as a worker
and not as own owner, and would have earned no more title to this
land-value than any like worker who is not a landowner. For reasons
which do not concern us here the owner of this land has never made use
of his power to levy a tribute of £1,000 a year upon the industry
of the Victorian people without rendering them any service in return.
He has preferred to withhold from his fellow-citizens the privilege of
using this specially favourable opportunity to produce wealth. But he
can exact this tribute any time he chooses, and therefore he can sell
the power to do so, the annual value of land, for £30,000. This
sum of £30,000 is now considered to be part of the wealth of the
country. As a matter of fact, it is neither wealth nor capital, but
the capitalised value of the power to lew tribute from labour and
capital without rendering or having rendered any service in return.
Moreover, this power of landowners to exact tribute is not conferred
upon them by any past services of the community, but by its present
and anticipated future services and necessities. The frequently
ephemeral gold-fields of Australia illustrate one phase of this
feature. As long as the field promises well and the population
increases, the value of land in the vicinity rises, and frequently
rises enormously. As soon as its disappointing nature is ture is
ascertained, and the exodus of the population has begun, the value of
the land begins to decline again, and if the field is altogether
unremunerative, the land declines to its former grazing value.
The concentration of roads and railways upon any centre enormously
enhances the land-values there. Not, however, because they have been
built, but because they continue to be used. If, acting similarly as
Eastern despots have acted, a government were to discontinue the use
of these roads by building sapping lines to another centre to which
the traffic was directed, land-values in the old centre would decline,
and would rise in the new one. Hence it is clear that land-values are
not the result of past action, but the capitalised value of the
tribute which the present and anticipated future action of the
community enables landowners to impose upon the productive activities
of the people.
The value of all land, and not merely of that which is withheld from
use, is of exactly the same nature. To revert to the former
illustration, the great majority of the owners of Melbourne land have
made full use of their power to levy tribute. They have either
themselves built on the land, or have sold to others permission to
build upon it against payment of ground-rent. Where this has been
done, wealth and capital, represented by the value of the buildings,
has been produced, and ... the income derived from the letting of the
buildings is a legitimate return for services rendered. But apart from
the value of, and income from, such buildings, there is in every case
a value of. and an income from, the land. This land-value represents
nothing but monopoly, the right to lew tribute from labour for the
privilege of using advantages not created by the owner of the land,
but which are being created bv the community of which his tenants form
part as well as himself, if he is not an absentee, as frequently is
the case."
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