Archive for the ‘Land and Market Power’ Category

Land and Market Power

Monday, February 7th, 2011

As described in Mason Gaffney’s essay below, the current system of land markets is very distorted, which distorts the rest of the entire economy, resulting in job shortages, lower wages, homelessness, less affordable housing, less affordable products and services, and unnecessary poverty for many.

Markets only work if the distinction between the two kinds of property is addressed: products made by human effort, versus land and its natural resources, which no person produced.

That is why property in land needs to be treated somewhat differently from products made by human effort, so that there need to be clear limits on the power of landowners, as advocated in the DFC’s Principles and Platform.



Land is a Major Basis of Market Power

(excerpts from Mason Gaffney’s essay: “Land as a Distinctive Factor of Production)

“Land” in economics means all natural resources and agents, with their sites (locations and extensions in space). Land is not just the matter occupying space: it is space. …

Land is indispensable to life, hence to economic activity. The same is generally true of labor and capital, but less “absolutely”. Land can exist perfectly well without labor or capital, and support timber and wildlife, but labor and capital cannot exist at all without at least some land, and often a great deal of land. Substitution is limited. It will not do just to have 57 varieties of labor, or of capital. There must be at least some land. Remember, land includes space itself, and a time-slot in it. It includes air and water, the environment and the ecology and all original matter itself. Without land there is nothing. Coupling this with the non-reproduceability of land, and its fixity, land is distinctive.

An old limerick puts it well.

“A captious economist planned
to live without access to land.
He nearly succeeded,
but found that he needed
food, water, and somewhere to stand.”

Massed control of land is the most natural base for monopolizing markets because land is limited. Buying land always does double duty: when A expands he ipso facto preempts opportunities from B. For example, a chain of service stations with most of the best corners in a town has market power, the more so if it also holds a large share of oil sources, of refinery sites, of “offset rights” to pollute air, transmission rights of way, harbor sites, and other such limited lands.

Preemption is not always just a by-product of expansion; it may be the main point. For example, in 1993 Builders’ Emporium, a large chain of California hardware stores with large parking lots in good locations, closed down and sold out. The sites were bought up by the largest grocery chain in southern California, Vons Company. According to news reports, this is “a shut-out strategy against competitors.” Vons will convert 6-8 Emporium stores to Vons’ markets, and “hold onto the others until commercial rents rebound — then market them to non-rivals.”

Salomon Bros. analyst Jonathan Ziegler, far from being shocked, praises this as “ingenious.” “You’re controlling who’s in your market area.” Ralphs, another grocery chain, had been looking for sites and is now shut out.

Land uses that stint on labor spell unemployment. The land-surfeit of some, when unconstrained, spells homelessness for others.

Land as a Distinctive Factor of Production

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