Cyclopædia of Political Science, Political Economy, and the Political History of the United States
LAND. Considered from an economic point of view, land appears in the first rank of natural wealth susceptible of appropriation. Land is at the same time the principal deposit of capital accumulated by the labor of the generations which have preceded us in civilized life; it is in some sort but a manufactured tool, which intelligent cultivation incessantly improves instead of using. We shall not dwell upon the great economic properties of land, which have been made the object of special articles, but we must briefly point out the well-known laws that regulate the value and price of land.
—Adam Smith long since observed the relation which exists between the value of landed property and the rate of interest. When interest is high, in time and space, the price of land is low; when, on the contrary, the rate of interest is lowered, the value of land increases. The reason of this is, that land, no matter what transformation it may undergo in the possession of its owner, is always and necessarily capital intended for reproduction. The owner may diminish and almost destroy this capital by neglecting to cultivate it or by cultivating it poorly, but he can never destroy it while society retains its influence. Thus, land is always acquired to be employed in reproduction, and it can only be exchanged for capital, which its owners intend for the purposes of reproduction. Now it is the scarcity or abundance of precisely this kind of capital which raises or lowers the rate of interest. The consequence of this is that, while the usefulness of landed property varies but very little, its value and price undergo frequent and considerable changes, according as available capital for reproduction is scarce or abundant in the market, and that the price of land always follows the fluctuations of the credit market. Another result of this fact is, that the avenues open to capital which is intended for reproduction directly tend, as far as investment is concerned, to lessen the value and price of landed property. Thus, for example, when Louis XIV. established rentes in order to obtain the funds necessary to build the palace of Versailles, he certainly diminished the market demand for landed property.
—In countries whose inhabitants make no savings, because of a defective social condition, land in a manner loses its market value. It is said that there are no buyers because each one prefers to keep his land rather than to exchange it for a sum which represents two or three times the amount of its revenue. We may add that in these countries, in which saving does not lead to the accumulation of movable wealth, the means of exchange are so limited that the revenue of the land is scarcely anything. Thus the market value, and the price of the land as well as the revenue which it produces, are in exact proportion to the saved movable property which can be offered in exchange for it. Both are dependent upon the force of the tendency of the owners of movable property to save and accumulate.
—When a country has little or no foreign commerce, the accumulation of movable capital and the price of land advance very slowly, but in parallel lines. It is otherwise when the products of a country are absorbed by foreign commerce, as is the case in the Danubian provinces and southern Russia; then the revenue from the land increases, without any increase in its price, and without it being possible to insure the revenue to a farmer, because there is no security either for a farmer or for a purchaser.
—As the price of land in civilized countries is affected by the fluctuations of the credit market, it is temporarily reduced by commercial crises: it depends upon the movement of an amount of capital always very moderate, if we compare it with the total of the land in a country; a fact which causes results that seem strange at first sight, and not proportioned to their causes. By reason of this intimate relation between the price of land and the credit market, it was once possible in France to say that the country had been made poorer by twenty thousand millions, and subsequently that it had grown richer by an equal amount; overlooking the fact that, while the fortune of a private individual is specially affected by the phenomena of exchange, the wealth of a country depends above all upon the utility of the objects which it possesses.
—It has been sometimes asked if the numerous investments represented by titles which are for individuals, thanks to exchange, movable capital, tend to raise or lower the price of landed property. Considered as an investment, it is certain that the sale of titles which carry with them the right to the enjoyment of an income is a competition with land; but the judicious employment of the money obtained by this sale may have the effect of adding to the wealth of the country, that is, to its means of saving, to such an extent as to add more to the value of the land than the investment took from it.
—Adam Smith seems to suppose that the price of land is in proportion to the rate of interest, in this sense, that land would produce the same revenue for its owner as an investment in movable property. This is not exactly correct: landed property nearly always produces a revenue less than fiduciary investments, or, in other words, land is always, on an average, dearer than the titles of these investments.
—Land is, of all species of property, that whose lot is intimately united to the lot of society, considered as a collective living being, capable of enjoyment and privation, of wealth and poverty. It is in some sort the great savings bank in which is laid up the greater part of the capital which the present generation leaves to that which is to follow after it.
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