Why pick on Pratt anyway?



Letters to the Editor
THE AGE
April 29, 2009
Dr Gavin Putland

The supply of land is fixed; they’re not making any more of it. Therefore the owners of land automatically constitute a cartel, even if they don’t bother organising themselves. And because access to land is essential, the rents and prices of land are competed upward to absorb the economy’s capacity to pay. That’s why the first home owners’ boost went straight into land values.

Any policy that would weaken the power of the land cartel — e.g. letting land tax rise with land values, so that absentee landowners have to seek tenants or buyers to cover the tax bill — is condemned as an assault on property rights.

And woe to any producers of any other essential commodity, such as cardboard packaging, who organise themselves as a cartel, making their product land-like and thus obtaining a share of the profits that would otherwise accrue to landowners. Yes, producers’ cartels make their unearned profits not at the expense of other producers and consumers, but at the expense of landowners. So they’re treated as criminal conspiracies, and only death will rescue the perpetrators from the prosecutors.

But landowners, whose unearned profits really do come at the expense of producers and consumers, are treated as pillars of society.

2 Comments

  1. lee vardi04-05-2009

    Land and house prices DO NOT move upward because they reflect the economy’s capacity to pay. They move upward because of a deliberate collusive arrangement between state and federal governments and the banking industry which constrain land release and provide artificial incentives such as the “first homeowners grant” which simply inflate prices as they are doing now. The result is Austalia’s Herengracht index being around 6.2 which is incredibly high compared with other western countries. Extremely clever marketing and manipulation ensuring huge revenue streams for banks and governments[through taxes and stamp duty] is the end result. Australians DO NOT live in a lucky country when it comes to putting a roof over their heads…….if they only realized it. Eventually the bubble will burst….when?…..when the consumer becomes “better informed” and wiser.

  2. Gavin R. Putland06-05-2009

    Dear “lee vardi”,

    In the letter rejected by the AGE, I merely affirmed that rents and prices of land “absorb the economy’s capacity to pay.” I did not deny that they can absorb more than that — although if they do, this is obviously not sustainable in the long term.

    So if you are suggesting that land prices absorb not only the ACTUAL capacity to pay, but also the APPARENT capacity due to loose credit and government subsidies, and that such artificial inflation of the market must eventually lead to a crash, I agree.

    But for better or worse, that’s not what the letter was about.

    And if you are claiming that there are too many constraints on land release, I also agree, provided that the constraints include not only boundaries on horizontal growth, but also tax policies that make it too easy for developers and speculators to hoard land, building-height limits that needlessly restrict the use of the vertical dimension, and building-approval processes that restrict the supply of housing for those who can only afford to rent, and who therefore cannot use land or space unless someone else has already built on it or into it.

    But again that’s not what the letter was about.

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