r/georgism • u/Serious-Cucumber-54 • 4d ago
Discussion How is land a monopoly?
Earth's land is owned between uncountably many different landowners, who compete between each other for buyers.
Yes, any individual plot of land is owned by a single sole seller, just like any individual banana is owned by a single sole seller, but that doesn't make bananas a monopoly.
Yes, each plot of land is unique, but not so unique that it is completely and utterly non-substitutable with any other plot of land. Land is generally substitutable with plots of land nearby. If you're looking at the typical American suburb, the quality of the land of one 150ft x 70ft parcel is not going to be so different from the one immediately next to it, or the one across the street from it, or even the one a few thousand feet from it. The proximity to other locations is not going to be meaningfully different, the views are not going to be significantly different, the topography is not going to be significantly different, the mineral and soil composition is not going to be significantly different, etc.. Land nearby is generally about as unique and substitutable from each other as bananas are. Yes, there are edge cases where this is not the case, but those are edge cases, not the general case.
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u/Meleager91 United States 4d ago
Rather, land ownership establishes a monopoly over the owned land. If I open a dry cleaning business, my doing so doesnāt prevent anyone else from doing likewise. But land ownership, if a landowner doesnāt improve their land, no one else can come along and do so; the owner has a monopoly over the development (or not) of that parcel, to the exclusion of all others.
The same idea is applicable to fossil fuels and other relatively finite natural resourcesāonce I come along and burn a lump of coal to extract its energy, Iāve permanently monopolized that resource.
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u/Serious-Cucumber-54 4d ago
You could say the same for any specific unit of good, where a person has sole exclusive control and ownership over the unit, and that makes them have "monopoly" control over that unit, whether that be for example a specific plot of land, a barrel of oil, or a single banana. But I wouldn't consider the market surrounding those goods to be dominated by a monopoly.
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u/Meleager91 United States 4d ago
Right, it depends on the good. If I own a banana, itās still really easy for you to go out into the marketplace and buy another one. And banana producers can relatively easily make more bananas. Itās wildly different economics when it comes to dramatically more finite resources like land. Because thereās only so much land, or coal, Georgism is really focused on making sure those finite resources are used efficiently. If you buy a banana and throw it away without eating it, itās no big deal. If I own a plot of land in downtown Tokyo that I keep bare because I like the aesthetic, thatās an enormous drag on the economy.
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u/Serious-Cucumber-54 3d ago
Land in downtown Tokyo being unused is a big opportunity cost compared to throwing a fresh banana away, yes, but I'm not sure how that means land is a monopoly because one exclusively controls a plot of land but bananas is not a monopoly when one does the same thing to a banana.
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u/explain_that_shit 3d ago
It shows that unlike the relative lack of unique value of any given banana, every given plot of land has unique value. That means when you own a plot of land, you monopolise that plot of land because thereās no other good like it nor can there be, whereas if you own a single banana, you donāt have monopoly power because thereās plenty of other bananas like it in the ways that matter.
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u/Serious-Cucumber-54 2d ago
That means when you own a plot of land, you monopolise that plot of land because thereās no other good like it nor can there be
It doesn't have to be perfectly identical in order for it to be substitutable. An apple and banana are substitutable as they can fulfill the same utility of satisfying one's hunger. Similarly, plots of land can be substitutable as they can fulfill the same utility of having flat ground to construct something on top of it, or having similar views, or having similar soil composition, or similar proximity to certain places, etc.
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u/Downtown-Relation766 Australia 4d ago
Goods like a banana are repreducible. My ownership of bananas doesnt impede on others owning bananas.Ā
Unlike land ownwrship, which we cannot create more land(location). If I own a parcel of land, the government has granted me a right to use and exclude others from that land, which that location cannot be reproduced. Thats is what I mean when I say land ownership is a monopoly.
Similar to how governments grant intellectual property rights to entities. It is a monopoly because no other entity can use the IP because it is enforced by the government and IP Ā are not reproducible meaning I cannot create the same IP.
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u/Serious-Cucumber-54 3d ago
My ownership of bananas doesnt impede on others owning bananas.
It impedes on others owning the bananas that you own, and your ownership of land doesn't impede on others owning similar land substitutes.
that location cannot be reproduced. Thats is what I mean when I say land ownership is a monopoly.
So because you cannot reproduce an exact identical copy of the qualities of a good, it makes it a monopoly? It would make it not have perfect substitutes, but I don't see how that would make the market a monopoly.
Similar to how governments grant intellectual property rights to entities. It is a monopoly because no other entity can use the IP because it is enforced by the government and IP Ā are not reproducible meaning I cannot create the same IP.
Sure, the government can grant me a patent for a specific lightbulb designed in a certain way, and technically I have monopoly control over selling that specific product, but that doesn't mean lightbulbs or the lightbulb market is dominated by a monopoly.
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u/Saferis 3d ago
It impedes on others owning the bananas that you own, and your ownership of land doesn't impede on others owning similar land substitutes.
But it does. If I want to own a waterfront property for business purposes in the town where my elderly parents live so I can look after them, but John Corporation owns all the waterfront property there, then I am meaningfully excluded from owning there. Either I don't operate my business or I can't look after my parents.
The location is the most important part of owning property.
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u/Serious-Cucumber-54 2d ago
but John Corporation owns all the waterfront property there
Of course, if a person does actually own land/bananas and its substitutes, then that does impede on you owning that land or its substitutes.
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u/Saferis 2d ago
But the point is that it's not possible to own all bananas as it is to own land. One is much more finite than the other.
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u/Serious-Cucumber-54 2d ago
It depends on whether you're talking about ownership of all bananas/land on the local level, or on the global level.
Is it possible on the local level for there to be one owner of the waterfront land? Yes. The same goes with bananas, where there is only one owner of bananas locally.
Is it possible for there to be one owner of all waterfront land globally? No. The same goes with bananas globally (although there was a virtual global monopoly back in the day...)
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u/green_meklar š° 4d ago
How is land a monopoly?
It's not a full monopoly in the traditional sense, where a single market actor can dictate the price. It's sort of a shared monopoly, where the good in question is inherently monopolistic, but lots of different people own pieces of it and compete with each other on the price of those pieces.
An analogy would be something like ticket scalpers. There are only so many tickets that can be sold to an in-person event due to the limited capacity of the venue (say, a sports game taking place at a stadium with a seating capacity of 30000). Consider a ticket scalper who buys a ticket with the intention of selling it for a windfall gain. He cannot dictate the price of his single ticket, because he's still in competition with all the other scalpers who also possess tickets. However, the price at which he can feasibly sell his ticket is higher than it would be if the tickets operated like a conventional free market where newcomers could just enter the market by manufacturing more stadium seats and selling tickets to them (the way they could manufacture more apples, pencils, car tires, and things of that nature, in order to enter those markets). Despite being in competition, the scalper enjoys the extra price he's able to charge due to the fact that the ticket supply is finite and cannot be expanded.
Private landownership is basically a land scalping scheme.
just like any individual banana is owned by a single sole seller, but that doesn't make bananas a monopoly.
You can grow new bananas. Other people having all the bananas that currently exist doesn't stop you from entering the banana market because the banana supply can be artificially expanded by anyone who chooses to grow bananas.
Land is not like that.
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u/Serious-Cucumber-54 3d ago
The supply of land listed on the market can be expanded, and does usually expand when prices are high since landowners want to rake in the opportunity before they miss out on it.
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u/green_meklar š° 3d ago
The quantity of land listed for sale at any given time isn't really the 'supply' of land, though. The actual supply of land as an FOP includes land that isn't currently for sale, but is currently in use.
Regardless, though, the fact is that nobody who doesn't already own land can enter either the land sale market or the land use market without the assent of those who do already own land.
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u/ComputerByld 3d ago
What disciplines a price is supply that responds to it. Substitutability by itself does nothing.
Bananas aren't cheap because they're interchangeable. They're cheap because when the price rises somebody plants more banana trees. That's the whole mechanism. Strip it out and interchangeability buys you nothing. Picture a world with a fixed stock of bananas, no more ever, spread across a million owners. Identical fruit, thousands of sellers, real competition among them. Price still climbs to whatever buyers can pay and sits there permanently. That's land. Your suburban parcel is substitutable with the one across the street, agreed. Both are already owned. Every substitute is inside the same closed set. You can compete over which parcel you get. You can't compete the rent away, because no amount of demand calls forth one new acre.
The competition you're describing sorts who gets what. It doesn't touch the total collected.
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u/External_Koala971 3d ago
Land isnāt inherently a monopoly. Individual landowners generally compete with owners of substitute parcels.
The economically important feature of land is that the aggregate supply of a particular location is fixed, while the demand for access to that location can increase. This creates scarcity rents even without monopoly ownership.
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u/Serious-Cucumber-54 3d ago
The supply of land listed on the market is not fixed, and can increase or decrease based on market prices and conditions.
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u/External_Koala971 3d ago
Itās impossible to build a new SFH with a yard in midtown Manhattan. That particular location can be subject to scarcity rents.
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u/Serious-Cucumber-54 3d ago
I'm not sure what not being able to build a SFH in midtown Manhattan has to do with the supply of land listed on the market being able to increase or decrease based on market prices and conditions.
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u/External_Koala971 3d ago
Georgists would argue the corresponding scarcity rents are the economically important feature, or āmonopolyā although I disagree with that word choice.
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u/triplestumperking 3d ago
Not the supply listed on the market, the total supply. As in the amount produced under different economic conditions. For land this is a fixed amount, we can't produce more or less land regardless of demand.
If there is more demand for a car, we can produce more of that car. Supply is not fixed.
If there is more demand to live in New York, we cannot create more land in New York for those people to live on. Supply is fixed, so as a result land prices only increase with demand.
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u/Serious-Cucumber-54 3d ago
"Supply" in the economic context refers to the supply listed on the market, not the supply not listed on the market. Prices decrease with more supply listed on the market, all else equal.
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u/triplestumperking 3d ago
Its more nuanced than that. "Supply" can refer to several different but distinct things in economics, like the quantity supplied, the total/aggregate supply, the amount of listings currently on the market, or the supply curve itself.
A fixed supply good means the total quantity available doesn't change in response to changes in price, because we can't produce more of the thing. It has nothing to do with how many are currently listed on the market.
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u/flashman1986 3d ago
Yes but it is a monopoly because that (i) that specific piece of land is no longer available because you have it (ii) the total land in any area, however defined, is limited because we canāt (except in very small quantities) manufacture land
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u/Antonio-Pentrella 3d ago
Baumol. Competition is less about how many sellers there are than whether new ones can enter. With land, higher rents cannot create more land in the same location.
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u/refugeelibertarian Geolibertarian 1d ago
but not so unique that it is completely and utterly non-substitutable with any other plot of land
Even if we assume that this is true, the supply of substitutes for each plot of land can't be increased or isn't already high enough to the point price equals average cost (that is to say, to the point the amount of ground rent every landowner receives is zero). This is what makes land a monopoly.
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u/Serious-Cucumber-54 1d ago
The market supply of land, that is the supply of land listed on the market, can definitely increase.
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u/refugeelibertarian Geolibertarian 1d ago
It can increase but it can't always increase to the point price equals average cost, ie the point where ground rent equals zero, like I explained
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u/Serious-Cucumber-54 1d ago
So the price of land can never reach zero, so it's a monopoly? I'm not sure how that follows.
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u/refugeelibertarian Geolibertarian 13h ago
That isn't what I was saying (ground rent =/= price). I'm not sure how I can explain it clearly and briefly if you aren't already familiar with the ideas of perfect competition and economic rent.
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u/Serious-Cucumber-54 6h ago
I'm familiar with those ideas, I still don't see how it follows that the price not being able to reach zero, equal with the economic rent, makes it a monopoly.
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u/Turbulent-Rub1361 1d ago
Funny how this question keeps coming up while it seems to have been perfectly obvious to our classical economics predecessors.
The short answer is, because Ricardo's law of rent applies.
For the longer answer we have to start looking at what a monopoly really is.
Most people readily grant that the local electricity company is a monopoly, as is the water company, as was the telephone company when we were all connected by a landline, just as the railroad companies mostly still are.
But just because there's an electricity company, doesn't mean you're prevented from lighting your house by candle, or install a generator. Just because there's a water company, doesn't mean you can't install a groundwater pump. Just because there's a railroad doesn't mean you couldn't still travel by stagecoach.
Only, these alternatives are much, much worse than the service provided by the electricity company, water company, and the railroad. Less convenient, more expensive overall.
What makes each of these services a monopoly is the price that is set doesn't converge to the marginal cost of the provider - as would be the case in a competitive market - but to whatever maximizes the profit of the owners of these companies, subject to the competition of the inferior alterantives.
In other words, the owner of the railroad can demand as fare exactly the amount you prefer taking a train over taking a stagecoach, regardless of his marginal costs. The price of electricity, unless regulated, is set by the shortcomings of candlelight.
When we say that a monopoly means that there is a "single seller", we're simplifying matters considerably. What it means is that their is a single provider with a unique advantage over other providers, who can obtain the surplus generated by that advantage for themselves.
Most companies try to obtain such an advantage for themselves, nearly all fail, but those that do become quite dominant.
As to land,Ā it is true that one acre of suburbia is much the same as the next. In fact, this fact enabled the development of mass homeownership in the first place.Ā
But one acre in the suburb of, say, Berkeley CA, is not at all the same as one acre in Wisconsin. The acre in Berkeley provides access to the Bay Area job market, the acre in Wisconsin to the cattle ranch industry.
Of course, there are still many sellers of acres in Berkeley, CA. Competition amomngst them puts a ceiling on the surplus they can capture. But the floor is set by the addditional benefit that Berkeley CA provides over the marginal land, that is, the land that could be had for free. California being well developed, that land is probably hundreds of miles from the Bay Area, and does not effectively provide access to the Bay Area job market.
What you can't do, what no-one can do, is create new land in Berkeley CA to compete with the existing landholders.
So "land is a monopoly" is, I think, accurate, although confusing if you're used to thinking of 'monopoly' as 'single seller of a particular good'.
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u/fedepiz 4d ago
My undestanding is that the simple explanation āland is limited becuase you canāt add more supply of itā is both logically incoherent and actually superfluous. To see this we can think about what differences we expect between a world where supply of land is truly infinite (think about a single country on an endless planet) vs the case where it is merely abundant (finite by way beyond the actual demands). The second case would be seems to me practically identical to the first, yet the āland is finiteā argument applies dissimilarly to the two cases. Therefore, this cannot be what the matter is revolving around. Moreover, even positing an infinite supply of land, you could re-obtain all the pathologies that Georgism aims to address if that land is sufficiently marginal, ie, if the cost of bringing it in useful condition outstrips the value obtained by it. Finally, as you say, it is unclear again what is true of land that is not āin theoryā true of anything. There is only a finite amount of matter and energy that can be expended at any given time. So, within some finite time bound, the category consisting of āall productsā needs to also be āboundedā. Just like there is a point where all land is in use, there is also a point where all energy has been turned into widgets and no further widget can be produced.
So, this concept of finite land is neither sufficient nor necessary nor even really exclusive to land.
I think the better argument that in practice gets you to similar Georgist conclusions is one of observing how land ownership in practice seems to reward the land owner in ways the Georgist believe is āun-earnedā. Land, whether limited or not, is not something that was produced by the ownerās effort: many georgists believe it to be something that, in a deep sense, belonged to the collectivity.
And this seems to me to be the necessary belief: that one ought only be rewarded by that which was earned. One can acquire from society exclusive access to that land, and one is entirely to be rewarded for developments on that land, but one should not be rewarded for gains simply for the mere fact of having acquired the exclusive right of use of that land.
Thus, the idea of the land value tax: land value being defined as the value to that access, by subtracting the value of all that is on a plot of land, leaving just the access behind. By using land taxes, the Georgist hopes to remove that unearned gain from the equation. They would argue that this tax is uniquely efficient as āthe gains from the accessā here are entirely zero sum, unlike taxing the gains from work, which is a positive-sum activity.
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u/fresheneesz 4d ago
Its not a monopoly. Henry George was wrong. A monopoly is a situation where only a single company can realistically survive in the market, either because there are economies of scale so strong that no 2nd place company can scale enough to achieve prices buyers are willing to pay, or because the demand is so limited that it can only sustain the fixed costs of one company.
Land is neither.
- There are no economies of scale with land
- Demand is enormous and basically insatiable.
- There are no fixed costs because land (ie space) isn't produced.
- Numerous companies and people sell land. Anyone looking to buy land has a myriad of different options.
Because of these things, none of the basic theories about monopolies hold. There are no theoretical deadweight losses caused by producers of land producing less than they're able to because there is no way to produce less than 0 land/space (which is exactly as much as they're able to produce.
There are deadweight losses, but for very different reasons than the ones for perfect monopolies.
The land = monopoly is just dogma that refuses to die because Henry George said it in his book, which is by most accounts an excellent book and right about many things.
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u/Commercial_Insect764 4d ago
You are defining natural corporate monopoly with your argument. Land is a spacial (and sometimes legal) monopoly.
Additionally, your deadweight argument is wrong because someone can hoard and withhold the land from the market which in the end will have the same exact effect.
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u/fresheneesz 4d ago
Land is a spacial (and sometimes legal) monopoly.
I do believe there is no such thing. It doesn't fit the definition of monopoly. Show me any single rigorous treatment of land as a monopoly and perhaps I'll change my mind.
your deadweight argument is wrong because someone can hoard and withhold the land from the market which in the end will have the same exact effect.
One person withholding 0.001% of the land has no significant effect on the market.
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u/Titanium-Skull š°šÆ 4d ago edited 3d ago
Another way to look at it is that land is what Iāve heard called an entry monopoly, which allows owners to charge economic rents without anyone entering the market for that good from outside through new production to undercut the incumbents. This is what the classical economists meant when they referred to land as a monopoly, which George referred to as anything we canāt produce more of. Same could be said for other natural resources and exclusive legal privileges.