Neoclassical and neoliberal economists have to prevaricate in order to justify the economic status quo.
A. LAND PRICES
Economists say that land prices are a function of supply and demand. They’re not. Population, infrastructure, zoning, size, shape, topography, location, supply and demand all affect a site’s rent, but its price is determined by:-
(a) how little the government taxes its rent
(b) to what extent banks are prepared to advance credit against the site’s price, and
(c) to what level interest rates are manipulated by central banks.
So, the price of a piece of land actually represents the private capitalisation of its rent, net of public charges, as with the valuation of any developed piece of real estate. So pervasive has become the counterfactual, even real estate valuers are loath to engage with economists on this mainstream myth that land prices are simply a matter of supply, demand and zoning,.
So, if sufficient land rent is captured publicly, the ‘price’ of land will fall. Were the full land rent to be taxed away, land prices would actually decline to zero, because there remains nothing to be capitalised into a price. This case has gone absent from neoclassical economics.
If land and has no cost of production and its price would be zero if we were to pay its rent, what of those who might ask “No cost of production? What about, the cost of provision of roads, footpaths, water, sewerage, gas, electricity, electromagnetic spectrum?” These are a number of the externalities which give the parcel of land its value, not its price, however.
So, perhaps it’s not curious this principle never gets a mention when communities become solicitous about the high cost of ‘housing’ (read ‘land prices’). Banking, monopolies and other rent-seeking entities are quite comfortable to keep reaping unearned reward from this pathological arrangement.
B. THE ‘FIGHT’ BETWEEN LABOUR AND CAPITAL
Nup, this is contrived, too. Once you’ve seen that GDP is distributed between land, labour and capital as rent, wages and interest, and that rent has the first claim upon GDP, you’ll be able to conclude along with Henry George that wages and earned incomes rise and fall together, inversely to land prices (privatised land rent).
But banking, monopolies and other rent-seeking entities are delighted to keep promoting the contrived industrial relations canard that rather than being complementary, labour and capital’s interests are antithetical to each other. This is the case behind which rent-seekers hide, much to the financial distress of individuals and society.
If these misguided economic concoctions could be resolved and productivity untaxed, an economy of abundance arises from which a living wage universal income would be distributable, instead of letting land rent continue to leak upward, particularly to the 0.1%.
This would be a win/win for people and businesses, insofar as businesses would only have to pay some amount additional to the UBI in order to attract employees.
The lack of education on a workable economics reinforces this currently madly awry status quo.