Land (economics)

Land (economics)

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In economics
Economics
Economics is the social science that analyzes the production, distribution, and consumption of goods and services. The term economics comes from the Ancient Greek from + , hence "rules of the house"...

, land comprises all naturally occurring resources
Natural resource
Natural resources occur naturally within environments that exist relatively undisturbed by mankind, in a natural form. A natural resource is often characterized by amounts of biodiversity and geodiversity existent in various ecosystems....

 whose supply is inherently fixed. Examples are any and all particular geographical locations, mineral deposits, and even geostationary orbit
Geostationary orbit
A geostationary orbit is a geosynchronous orbit directly above the Earth's equator , with a period equal to the Earth's rotational period and an orbital eccentricity of approximately zero. An object in a geostationary orbit appears motionless, at a fixed position in the sky, to ground observers...

 locations and portions of the electromagnetic spectrum
Electromagnetic spectrum
The electromagnetic spectrum is the range of all possible frequencies of electromagnetic radiation. The "electromagnetic spectrum" of an object is the characteristic distribution of electromagnetic radiation emitted or absorbed by that particular object....

. Natural resources are fundamental to the production
Production theory basics
Production refers to the economic process of converting of inputs into outputs. Production uses resources to create a good or service that is suitable for use, gift-giving in a gift economy, or exchange in a market economy. This can include manufacturing, storing, shipping, and packaging. Some...

 of all goods, including capital goods. Location values must not be confused with values imparted by fixed capital improvements. In classical economics
Classical economics
Classical economics is widely regarded as the first modern school of economic thought. Its major developers include Adam Smith, Jean-Baptiste Say, David Ricardo, Thomas Malthus and John Stuart Mill....

, land is considered one of the three factors of production
Factors of production
In economics, factors of production means inputs and finished goods means output. Input determines the quantity of output i.e. output depends upon input. Input is the starting point and output is the end point of production process and such input-output relationship is called a production function...

 (along with capital
Capital (economics)
In economics, capital, capital goods, or real capital refers to already-produced durable goods used in production of goods or services. The capital goods are not significantly consumed, though they may depreciate in the production process...

, and labor). Income derived from ownership or control of natural resources
Natural Resources
Natural Resources is a soul album released by Motown girl group Martha Reeves and the Vandellas in 1970 on the Gordy label. The album is significant for the Vietnam War ballad "I Should Be Proud" and the slow jam, "Love Guess Who"...

 is referred to as rent
Economic rent
Economic rent is typically defined by economists as payment for goods and services beyond the amount needed to bring the required factors of production into a production process and sustain supply. A recipient of economic rent is a rentier....

.

Land was sometimes defined in classical and neoclassical economics
Neoclassical economics
Neoclassical economics is a term variously used for approaches to economics focusing on the determination of prices, outputs, and income distributions in markets through supply and demand, often mediated through a hypothesized maximization of utility by income-constrained individuals and of profits...

 as the "original and indestructible powers of the soil." Georgists
Georgism
Georgism is an economic philosophy and ideology that holds that people own what they create, but that things found in nature, most importantly land, belong equally to all...

 hold that this implies a perfectly inelastic
Elasticity (economics)
In economics, elasticity is the measurement of how changing one economic variable affects others. For example:* "If I lower the price of my product, how much more will I sell?"* "If I raise the price, how much less will I sell?"...

 supply curve (i.e., zero elasticity), suggesting that a land value tax
Land value tax
A land value tax is a levy on the unimproved value of land. It is an ad valorem tax on land that disregards the value of buildings, personal property and other improvements...

 that recovers the rent of land for public purposes would not affect the opportunity cost
Opportunity cost
Opportunity cost is the cost of any activity measured in terms of the value of the best alternative that is not chosen . It is the sacrifice related to the second best choice available to someone, or group, who has picked among several mutually exclusive choices. The opportunity cost is also the...

 of using land, but would instead only decrease the value of owning it. This view is supported by evidence that although land can come on and off the market, market inventories of land show if anything an inverse relationship to price (i.e., negative elasticity).

As a tangible asset
Asset
In financial accounting, assets are economic resources. Anything tangible or intangible that is capable of being owned or controlled to produce value and that is held to have positive economic value is considered an asset...

 land is represented in accounting as a fixed asset
Fixed asset
Fixed assets, also known as a non-current asset or as property, plant, and equipment , is a term used in accounting for assets and property which cannot easily be converted into cash. This can be compared with current assets such as cash or bank accounts, which are described as liquid assets...

 or a capital asset
Capital asset
The term capital asset has three unrelated technical definitions, and is also used in a variety of non-technical ways.*In financial economics, it refers to any asset used to make money, as opposed to assets used for personal enjoyment or consumption...

.

Land, particularly geographic locations and mineral desposits, has historically been the cause of much conflict and dispute; land reform
Land reform
[Image:Jakarta farmers protest23.jpg|300px|thumb|right|Farmers protesting for Land Reform in Indonesia]Land reform involves the changing of laws, regulations or customs regarding land ownership. Land reform may consist of a government-initiated or government-backed property redistribution,...

 programs, which are designed to redistribute possession and/or use of geographic land, are often the cause of much controversy, and conflicts over the economic rent of mineral deposits have contributed to many civil wars, particularly in Africa
Africa
Africa is the world's second largest and second most populous continent, after Asia. At about 30.2 million km² including adjacent islands, it covers 6% of the Earth's total surface area and 20.4% of the total land area...

.