A New Model of the Economy

author.

PART ONE

Principles

CHAPTER 1

Economic Freedom

ECONOMICS as a subject of serious study has grown up within modern societies that have been deeply affected by land enclosure and the industrial revolution. In Britain the work of Adam Smith, Ricardo and Malthus achieved fame during the decades when a final great wave of land enclosure gathered pace and the new industrial towns forged weapons for the Napoleonic wars and capital for the railway age. Such an origin has coloured the development of economic thought ever since. The apparent diminution in the part played by land in the economy, the accumulation and enhanced productivity of capital, the need for an expansion of financial resources and for the growth of limited liability companies, and above all the idea of labour as primarily employed rather than autonomous, all these outstanding features of the new industrial economy gave rise to concepts in the study of Economics which have become entrenched. It is time that such concepts were re-examined.

The ideas that have emerged from 200 years of intellectual advance in Economics centre upon the question of production. After an initial period, especially associated with the writings of Ricardo, when distribution of the product between economic classes or factors was the major concern, most economists accepted the conclusion that production was the key issue. How could it be measured? What inhibited its growth? What determined its composition? Why did it fluctuate in cycles? After all, both political conservatives and political radicals have finally agreed that it is better to have a bigger cake than to quarrel over much about shares in a smaller one. Production has become the yardstick by which almost every economic policy is assessed, even though science and technology have more or less solved the technical problems of how to produce. And yet economic unease remains, sometimes amounting to disease, in the economic organisms of advanced economies. Could it be that to look almost exclusively at production is to fail to understand the many-sided aspects of human economic behaviour, including non-technical ones about production itself?

To what then should economists turn as the central issue of their subject? Where better to look than to the genius of Plato, whose initial outline of the State is that of a single economy. For the theme of the Republic is justice, which is surely the touchstone for any economic study that might arrive at conclusions of permanent benefit to all.

You remember the original principle which we were always laying down as the foundation of the State, that one man should practise one thing only, the thing to which his nature was best adapted; – now justice is this principle or a part of it ...

Plato, Republic, Book IV, p.433, trans. B. Jowett,

Random House, New York, 1937

Many of the ills of modern society, extending beyond those strictly economic, flow from the disregard of this root concept of the work appropriate to each person’s nature. So accustomed have we become to the idea of work as an unfortunate necessity, as a means to earn a living, as wage-labour, that we forget its essential character as the prime means of self-expression for most people in society, whether employees, employers, unemployed or owners, men and women alike. Frustration, depression, even neurosis accompany its neglect; greed, laziness, carelessness invade the workplace; unemployment, inefficiency, loss of production beset the economy.

No one doubts that the small minority of people who are able, for whatever reason, to practise what they love doing, what they are naturally talented to do, are happy in their work and usually in their lives. Self-employed workers who are artists, craftsmen or members of a learned profession, for example, usually exhibit a degree of commitment, interest and enjoyment in their work rarely found amongst employees, especially those with little opportunity to choose the type and conditions of their employment. Few indeed are those who would claim to find a deep and lasting freedom through work. Yet such economic freedom, which is distinct from the civil freedom under laws which prevent assault, imprisonment or defamation, should be available to everyone in a well-governed society.

Were people thus free to create with hands and heart and mind whatever they choose to offer to society in return for their own share in its wealth, there would be few problems of production. The economics of society would become the economics of abundance. History abounds with examples of the much greater productivity of free labour compared with that of slaves. Freedom is the one great incentive to produce, exceeding by far the paltry ‘rewards’ offered to workers in unfree conditions in the form of overtime, bonuses, perks or promotion. Nor do men and women who find fulfilment in work usually seek to accumulate riches beyond their reasonable needs. They do not have the inclination, or even the time, to exploit others; they do not wish to live off the labour of others, for that would be to deny their own economic freedom, found in the pursuit of what they love. Devotion would characterise their work, as it does even now for some to whom service to the community transcends hard and often unrecognised effort.

The ideal of economic freedom of this kind is not a dream, though it may be a vision. Indeed, it is an economy in which people are treated as a means to others’ ends, such as profits, that is the dream. How such a state of illusion originated and grew is a matter for historians of ideas; but what conditions enable it to be perpetuated now is a proper subject for economists. Let our enquiry then be, ‘Under what conditions is economic freedom at present denied, and under what conditions may it be, in the course of time, fulfilled?’

CHAPTER 2

Natural Law

But when we Stoics say that the universe is formed and governed by nature, we do not mean that it is just stuck together mechanically, like a lump of earth or a piece of stone or something of that sort, but organically, like a tree or an animal in which there is nothing haphazard but an appearance of order which is akin to art.

Cicero, The Nature of the Gods, pp.156-7; trans. H.C.P. McGregor,

Penguin, London, 1972

IT IS A MARKED feature of the scientific culture that has emerged in the Western world since the 17th century that the physical sciences have discovered natural laws of great scope and explanatory power, whilst the social sciences have achieved less. This has led to much debate about whether they are sciences at all and to the formulation of statistical generalisations to fill the gap. Laws are both universal and necessary; statistical generalisations or correlations do not meet such strict requirements. Hence Economics in particular has become a ‘soft’ science characterised by a great deal of opinion, vagueness, and disagreement. As one American President said, he wanted a one armed economist as an adviser, because all the economists he ever met kept saying ‘on the one hand … but on the other hand …’.

Too often economists look to the outer manifestations of their subject matter, rather than to its inner qualities. Natural scientists do not so often make this mistake, as the immense growth of such subjects as nuclear physics and biochemistry demonstrates. Since natural laws are expressions of the nature of things, be they physical objects or human beings, it is to human nature that any social scientist should look in order to find the laws that govern both individual action and social phenomena. Since the investigator is a man himself, the student of human nature has the advantage of looking both within himself, as well as at the behaviour of others, for evidence.

Of course, this raises problems of subjectivity, but a detached observer is in principle able to observe both inner and outer phenomena with an impartial eye. It may be difficult to turn aside from, say, entrenched political attitudes and from deep personal feelings when investigating social phenomena, but the opportunity is there. Thus the social scientist needs to train himself to observe the concepts, beliefs and prejudices in his own mind. Thereby he may obtain at least a valid degree of objectivity. Ultimately, he relies upon the truth that Man’s nature is universal, that all men and women are fundamentally the same, so that the more he avoids identifying his own personal attitudes with objective facts, the more he penetrates towards the truth about himself and therefore about humanity. This is the greatest blessing of social science, not its greatest bane, as is often supposed. Other problems, like the impossibility of precise experiment and the inexhaustible range of variables beloved by modern social scientists, remain. Yet such problems often arise from ignoring certain fundamental and incontrovertible facts about mankind. One example illustrates clearly that this ignorance may stem from vested interests, which directly or indirectly influence economists’ investigation. It is an unquestionable fact that everyone needs land to live on and – for most people – to work on. However, the economic consequences of this fact, such as its effect upon the distribution of income, are substantially overlooked.

What then do we mean by natural laws that arise from human nature? We may begin our analysis with a brief discussion of seven examples fundamental in any economy, which enter into the discussion developed in later chapters. They concern work, land, co-operation, capital, credit, surplus and freedom.

Work

First and simplest is that people desire to express themselves through work. Every human society at all times and places exhibits this desire. The conditions under which work takes place are manifold; they range from peasant coffee bean growers of South America to the Princeton laboratory of Albert Einstein, but everywhere at all times the vast majority of people work from an inner necessity. Particularly since the industrial revolution, work has become associated with wage-labour. Even so the unemployed man or woman often becomes desperate to work again, not just for an income, but for personal satisfaction. Even those whose work is of a frustrating and unsuitable nature retain a strong desire for work itself, unless they are finally driven into a state of abject hopelessness. Modern technology may reduce hours of work and years of employment, but those who acquire more leisure time are often singularly keen to take on productive and creative activities. We all recognise how, in the film The Bridge on the River Kwai, British prisoners of the Japanese, forced to work in appalling conditions on the notorious ‘Burma Road’, became proud of the bridge they built. Except for a philosopher perhaps, it is acutely distressing to do nothing at all.

Land

Human nature also requires land. Indeed all the elements of earth, air, water and fire, in the form of sunlight, are essential. Questions now arise in modern Economics about the availability of unpolluted air and access to water, but the freedom of the latter three elements has generally been beyond dispute. It is the earth, or land, which is most contentious. As economists have long recognised, land is best defined to include both the dry surface of the earth and natural resources within, on and above it. These include such vital products as oil and metal deposits. Land in this inclusive sense is needed for all productive processes, in short for work, but equally it is needed as living space. These primary requirements of human existence – work and space – make the conditions under which land is available of fundamental significance to individuals and to society. Variations in those conditions shape the economic development of a community. If, for example, land is held under absolute private ownership, the economy usually exhibits the accumulation of vast wealth in the hands of a minority; if, on the other hand, it is held absolutely by the government authorities, as in the Soviet Union, the power of the State over individuals’ lives becomes overwhelming. These consequences are the operation of natural law. Economic historians are aware of this, as their analysis of societies like feudal Europe exhibit, but for whatever reason – vested interest is one – economists regard conditions of land tenure as legal studies or, at best, land economy, and fail to see the implications. The effect upon the distribution of income, for instance, is largely obscured by leaving capital payments for freehold land out of account, even though these are, in fact, merely the capitalisation of a series of annual rents. Similarly the differential between urban and rural land values is mainly ignored, although crucial in understanding a modern economy.

Co-operation

Work on land is the basis of every economy, but natural law extends also to the character of work. By nature people vary greatly in their inherent talents, capacity for learning, and adaptation to circumstances. Social conditions, education, training, personal wealth and much else determine what kind of work an individual may choose or be compelled to follow; yet by nature each will be urged in particular directions. As Adam Smith – or perhaps Plato – was the first to emphasise, such specialisation by ability is greatly enhanced by constant practice. Smith himself argued that an inherent desire to exchange generated the need to specialise, rather than the reverse (The Wealth of Nations, Volume I, Chapter 2, p.12, Everyman, London, 1953). Whatever the direction of causality, however, it is certain that specialisation and exchange are interdependent. Exchange is a form of co-operation, which leads to organisation in working groups, like firms and other bodies. Within organisations, as the word implies by analogy with a living body, there is an exchange of products. Human gregariousness strengthens this process. Natural sympathy and the desire for company underpin the economic phenomena of co-operation.

Capital

Human nature finds expression also in each individual’s attempt to satisfy his or her desires with the least effort. Everyone walks from A to B by the least arduous route, unless there is a special reason for choosing otherwise, such as scenic beauty; nor will someone dig a field twice when once is sufficient, or write two cheques when one is enough. Upon this principle rests the oft-quoted definition of Economics as the study of the allocation of scarce resources to alternative uses. Why not allocate them irrationally? Reason demands the most efficient use of means to given ends. Waste is unreasonable and defies the principle of least effort. Co-operation, however, gives to the desire for efficiency a special and most influential means, namely the use of capital. For mankind’s ingenuity long ago discovered the use of tools, which embody the intention to economise on effort. A spade saves the labour of hands, a telephone the labour of travelling, an atomic power station the labour of mining and transportation. Capital as the use of produced wealth in the production of further wealth is the natural progression of this principle of least effort. Roundabout ways of producing are intended to be, and often are, efficient in human labour. So the existence of capital is merely the natural consequence of a universal desire. The present day confusion of real capital with financial instruments, like shares, bonds and so on, greatly obscures this fact.

Credit

All production, of course, takes time, even if it is not roundabout. Using capital tends initially to extend the time of production, if the creation of capital goods is included in the measurement. Growing a crop takes a season; manufacturing agricultural machinery adds time to the production cycle. What follows from this is that all production of necessity requires credit. What does the producer eat and wear whilst he produces? He is fed and clothed by others, with whom he exchanges his product either directly or indirectly via the use of an intermediary like money. Exchange itself involves credit, for who hands over his product first? One must wait and trust the other party to deliver his product in return. Even the use of a stakeholder to hold the goods on behalf of both parties means that the stakeholder himself must be trusted. Giving credit indeed means extending belief that the other party will pay. Without such belief production would cease, for society depends upon exchange and all productive processes take time.

Surplus

There remains one example of natural law which concerns whole societies and not individuals as such. Except in quite exceptional periods of social distress during war, plagues or other far-reaching disasters, an economy produces a surplus over and above what individuals need to support themselves and their dependants. Even in disaster a society retains this potential creative power. The surplus does not include capital formation, since this is a cost of production attributable to the period for which the capital is in productive use. But social infrastructure may be created out of a surplus; so also may ‘non-productive’ projects like cathedrals, monasteries, works of art, space probes and nuclear weapons. Culture, religion and warfare are perhaps historically the main contenders for the use of the surplus. In Periclean Athens a large share went into the provision of public works of art; medieval Europe built huge churches; in the twentieth century many countries accumulated massive armaments.

One question, especially, arises concerning this surplus. Is it the property of the whole community or is it private property? The answer depends primarily upon each society’s beliefs about the origin of the surplus. When general belief, for example, credits private landowners with creating the value of land, then they are usually allowed to keep this part of the social surplus. Or when the belief was that God is the source of all creation, including economic output, the surplus was used to construct great cathedrals to his glory. In every case beliefs about how the surplus arises and to what use it should be put are fundamental tests of the values and quality of life of that society. A recent newspaper article highlighted the question of the respective claims of individuals and the community upon the use of the surplus.

What is still lacking, even in the highest political circles, is a fair conceptual understanding of the difference between the public and private sectors … it [the public sector] is concerned with the universal ends of society rather than with the particular ends of individuals.

Michael Prowse in the The Financial Times (weekend) 26/27 May 2001, p.xxii

And as a recent book by two leading American economists says:

It is the legitimacy of the public sector within capitalism that lies at the core of the contemporary crisis of vision.

R. Heilbroner and W. Milberg, The Crisis of Vision in Modern Economic Thought,

p.120, CUP, 1995

Freedom

Finally, let us return to economic freedom. Freedom of self-expression, or freedom to be creative, is a gift of nature and of God. It is not the privilege of a few. The ‘dismal science’ that has followed the teaching of Malthus, and which emphasises the concept of scarcity, would have us believe that only a minority can find fulfilment in rich and rewarding work. Human nature speaks otherwise when it commands men and women to search within for the source of their creativity, and to ask from one another and from those who govern them that they be ruled, not by power or opinion but by justice. Ideals are not unrealistic, though illusions are. One of the greatest idealists of the Florentine Renaissance, Marsilio Ficino, grounded his beliefs upon an understanding of human nature, which offers a vision to economists of the new millennium:

It was not for small things but for great that God created men, who, knowing the great, are not satisfied with small things. Indeed it was for the limitless alone that He created men, who are the only beings on earth to have rediscovered their infinite nature and who are not fully satisfied by anything limited, however, great that thing.

The Letters of Marsilio Ficino, Vol. 4, p.10,

trans. School of Economic Science, Shepheard-Walwyn, London 1988

To search for the unlimited within oneself is to plumb the depths of one’s own capacity. The craftsman who seeks perfection in wood carving, the nurse who tends her patient with love and care, the manager who aims at efficiency with benefit for customers and workers alike, all find freedom through work. For to realise the potential of one’s nature is freedom. The recognition of that law is essential to a well-founded science of Economics.

These seven examples of natural law, concerning work, land, co-operation, capital, credit, economic surplus and freedom are not selected at random. All lie at the core of the subject of Economics. They are, needless to say, in no way a definitive list of natural laws pertaining to the subject. Others are perhaps as fundamental, such as the long established laws of diminishing returns and supply and demand, and more contentious ones concerning rent, the role of money and the level of wages. The formulation of natural law is fraught with difficulties. Counter examples are evident, which on examination are in fact law-like, as in physical science when a change in conditions leads to quite different observation of effects. For all laws operate within sets of conditions. Citing cases of men not working, living in outer space, failing to co-operate and so on is a challenge to explain why.

Nor are laws known directly by sense perception or by superficial introspection, for their force is derived from an inner power, inherent in nature. Hence they are a potential, a necessity to act rationally in ways which may be outwardly inhibited or obstructed, but which remain potent and effective. The twentieth century, influenced both by Freud and by a narrow concept of consciousness as immediate awareness, has generally thought of inner powers as irrational and even brutish. But perhaps they are in truth rational, creative and even divine. Perhaps, like St Paul, we should all come to see ourselves, not as prisoners, but as free men and women. For freedom is found, not in opposition to natural law, but in recognition of it.

CHAPTER 3

The Significance of Land

This earth is pushan (he who nourishes), for it feeds everything everywhere.

Brihadaranyaka Upanishad I, iv, 13, in Ten Principal Upanishads, p.122, trans. Shree Purohit Swami and W.B. Yeats

Land is the factor of production that nature supplies …

Begg, Fischer and Dornbusch, Economics, p.200, McGraw-Hill, UK, 1997

THIS DEFINITION by modern economists is very comprehensive, for it includes all that nature offers in the form of the earth, whatever is found on it, growing and living upon it in a wild state and even what is above it in the form of water, air and light. In short, it includes the natural elements of earth, air, water and sunshine; in other words, our whole natural environment. The dependence of humanity upon these is, of course, absolute. What matters for the subject of Economics is the question of access to them, which is in practice a matter of access to the dry surface of the earth, where people live for more or less the whole of their lives. Indeed, it could be said that Economics is especially concerned with a fifth element, namely space itself.

Plato was well aware of the primary importance of laws regarding land to the welfare of the State:

But they to whom God has given, as He has to us, to be the founders of a new State as yet free from enmity – that they should create themselves enmities by their mode of distributing lands and houses, would be superhuman folly and wickedness.

Plato, Laws, Book V, 737, trans. B. Jowett, Random House, New York, 1937

Nor did he abandon hope for States which had allowed such enmities to develop. The way of escape, the only way, he warned, was to hold to ‘freedom from avarice and a sense of justice’ (Plato, ibid., Book V, 737).

No one can reasonably argue that land is unimportant. Without land a nation cannot exist. Individuals of necessity use land for their work and homes. Man is a territorial animal. So much is indisputable. What is less obvious is the emphasis given by Plato to ‘the mode of distributing lands’. Intuitively it may be evident that the method of distribution of such an essential requirement for human life is bound to have serious implications for society. Equally an intuitive ‘sense of justice’ may tell us that some distributions will be just and others unjust. Some obvious examples confirm what intuition tells us.

In the Soviet Union the State, under Communist Party control, owned and administered almost all land, including collective farms, which nominally were vested in the collective farmers. Effectively this meant that virtually all workers were under State control. Soviet power was not just a matter of political dictatorship; it demonstrated also how economic freedom is denied if land monopoly exists, even if exercised by the State in the name of the people. For the ownership of land carries with it the right to deny access to it; hence if the State, or an individual, or a class or group, own all or much of the land the majority of the people may be excluded from its use or benefit.

Nearer home, vast areas of Scotland are owned by a small minority of landowners, many of whose claims arose from the breaking up of the clan system after 1745 and from the vast enclosures, largely for sheep pasturing, forced through with violence and suffering in the following century. The resulting huge concentrations of population in Glasgow and other cities are now accepted as a normal state of affairs. The associated problems of housing, employment, public services and crime are rarely related to the question of the ‘mode of distributing lands’, yet this indeed is their origin.

The huge expansion of London in the past 200 years has the same basic cause, although, of course, as the metropolis it was bound to grow. Land enclosure, associated with the agrarian revolution, especially from about 1760 to 1850, was responsible for the mass migration of population from the rural areas, as in Scotland. Today the present state of this land distribution has a constant effect of profound significance. Urban land values have risen in real terms by very large amounts since the Second World War. Whoever owns freehold property in London has grown relatively rich compared to non-owners. Often this means that the older generation has grown very much richer than the younger. Whatever the age or class distribution of ownership the fact is that there has been an immense shift in favour of owners. Housing the non-owners, mortgage problems, the inability of essential workers, like nurses, to afford homes, and many related issues are consequences of this land distribution. So is the problem of land needed for public services, like transport and recreation. The high cost of urban roads is also a direct function of land prices.

Conditions of Land Ownership

Such examples demonstrate the importance of the distribution of land in terms of who owns it. Are the shares of land owned by individuals or institutions, including the State, fairly equal or not in quantity and, more pertinently, in value? But distribution of land involves much more than the issue of who owns it. To ask who does, or should, own land assumes that the whole matter concerns ownership, whereas the conditions under which ownership is exercised have an even greater impact on society. Unconditional, or absolute, ownership of land is very different from ownership subject to duties to others.

As a recent writer has put it;

Land owners became increasingly hostile to constraints upon their exclusive use of property; they wished to reduce ownership to a single, pre-eminent right to the use of the property which would allow them to exploit ‘their’ land without restraint …

M.J. Daunton, Progress and Poverty, pp.69-70, OUP, 1995

Moreover, an analysis of the concept of ownership soon makes clear that the rights which constitute it each have separate effects. For example, the right to hold valuable land out of use for long periods is socially damaging. Further discussion of these complex questions of principle is best left until later. Meanwhile they serve to illustrate that Plato’s assertion about the mode of distribution of lands is fully justified. Exactly how land is distributed lies at the centre of any worthwhile study of Economics. Without it the subject becomes merely a set of variations played upon the theme of the status quo, analogous to the study of epicycles in Ptolemaic astronomy, where the overriding principle of an earth-centred universe was left unquestioned. Let us question the existing ‘mode of distributing lands’.

Land as a Factor of Production

Reference to almost any modern text book on Economics reveals a serious neglect of land as a factor of production. Economics by Begg, Fischer and Dornbusch devotes 8 pages out of 605 to the subject. Such an enormously influential book as Keynes’ General Theory of Employment, Interest and Money refers to land briefly four times. Moreover, information concerning the value of the land and, in particular, its rental value is seriously deficient. In the United Kingdom national accounts (Office for National Statistics, The Blue Book) rent is greatly undervalued for a range of reasons. It does not include the value of the beneficial rent of owner/occupiers, both householders and commercial. Firms that hold freehold or leasehold property may be receiving a large part of their income in rent, which is disguised in their turnover. In addition, when freehold or leasehold land changes hands for a capital payment, this does not appear as rent in the national accounts, because of accounting conventions about measuring income, yet in economic terms the capital payment is a once and for all premium paid for the right to receive all or some future rent. Hence, for the seller of the freehold or lease it is simply an advance payment of rent. In short, accountants, including national accountants in government service, generally measure money flows and not economic categories. Text books are quick to point this out in principle – for example, see Begg, etc. Economics, p.94 – but rarely include rent of land as a separate category in their subsequent analysis.

In modern economic theory land is more or less excluded, though its importance in early theorists, like Ricardo, is acknowledged. It is usually taken initially to be a distinct factor of production alongside labour, capital and, sometimes, entrepreneurship; but then largely drops out of the analysis. This is justified on two grounds: that it is no longer a major factor in production, and that it can be subsumed in theory under capital. The misleading consequences of both of these assumptions are discussed in detail later, but a few indications are given now.

‘Investment’ in the theory of income determination is defined as ‘the purchase of new capital goods by firms’ (Begg, ibid., p.326). This item then enters the circular flow chart and plays a crucial role in the analysis which demonstrates equilibrium when savings equal investment, or when all withdrawals equals all injections in models that include foreign and government sectors. Expenditure by firms on land is thus effectively ignored. Yet when a firm buys a new office or factory the cost of the land often exceeds the capital cost of the buildings. This would not matter greatly if expenditure on land had the same effect as that on capital, but since land is not produced, its purchase does not create a stream of income payments to workers. Hence there is a dissimilar multiplier effect. Furthermore, expenditure on land tends to raise land prices, since land has an inelastic supply. Further implications arise if one considers that borrowing to finance ‘investment’ may be for land or for capital purchase. Money created by the banking system to finance land purchases may be highly inflationary.

Land in the Theory of the Firm

The whole subject of micro-economics also suffers from a failure to include a rigorous analysis of the role of land. It is usually assumed that firms operate in a non-spatial economy, where differences of location are excluded from the analysis. Yet location may be the most important influence on costs and/or revenues. Economists, for example, recognise that the perfect competition model is rarely applicable, whilst not often noticing that differential location is what commonly invalidates it. Similarly the theory of monopolistic competition is careful to include differentials arising from branded goods, advertising etc. and careless about locational differences.¹ Likewise, oligopoly in practice often arises from causes related to land, as in the case of markets controlled by a few multi-national companies or of supermarkets dominating a retail market. As for monopoly itself, many monopolists are directly in control of the source of production, like a mine, or have acquired sites possessing monopoly power, such as the freehold land of a housing estate. As Eaton and Lipsey say:

Our general conclusions then are that space matters; that space matters a great deal; that many phenomena that appear inexplicable when inserted into a spaceless model are explicable in a spatial model; that space deserves a central rather than a peripheral position (the metaphor is conscious) in neo-classical value theory …

Ibid, p.65

Land and Factor Incomes

A third area of modern theory where confusion arises over land is in the analysis of factor incomes. Land is frequently treated as an homogenous factor, when in fact its non-homogeneity is both apparent and far reaching. ‘Homogenous land requires that all natural resources be available in the same proportions in all land in the economy’ (Eaton and Lipsey, ibid., n.8, p.65), an utterly impossible condition. Land values reflect the huge degree to which land is heterogeneous. Central urban land in the UK may be valued at 100,000% of agricultural land. To treat land as homogenous in an analysis that allocates land between competing uses is therefore grossly misleading (Begg, ibid., p.212).

At best such an analysis should refer only to marginal land,