More on the Use of Terms
in Political Economy

Harry Pollard

[Reprinted from a Land-Theory online discussion, 25 September 2003]

LAND, LABOR AND CAPITAL

Wages are not the share of the production that goes to the labor.

Wages are the sole reason for production. Rent and interest are no more than the expenses of production. The results of Labor's exertion are entirely his, less such expenses as he may have to pay.

We are inclined to fall into a mindset where labor is scratching around looking for a job, anxious to take any job at any wage. [The curse of reality!] So, we begin to believe that labor is no more than a vassal of management and the owners of capital.

I suppose we ended a discussion of wealth with a kind of tacit agreement that we will each use our own terms to mean the same concept. In any event, let's move along to some other changes I've found useful.

I first learned the Factors of Production with a simple story where we remove Man and his Products from the Earth. What was left we called Natural Resources. We then gave the name Land to this concept of Natural Resources. We gave products a different name -- Wealth and we now had three terms, Man, Land, and Wealth. So, we then changed Man to Labor perhaps to emphasize Man's exertion.

We then pointed out that some wealth is used to produce more Wealth. This Wealth used to produce more Wealth we called Capital.

As "time" is involved in all production within the scope of Political Economy and time is the primary characteristic of Capital, I decided to call the product on its way to that consumer "Capital".

I then ran into trouble with the concept of "Land" as a replacement name for Natural Resources. It's quite true that Labor uses Land for production, but this is a broad description when we need a narrow one.

The farmer doesn't grow crops on land. He grows his crops on the North 40. The builder doesn't erect a house on land. He puts it on Lot 40 of parcel 20, shown on Page 73 of Map book 4. You don't live on land, you live at 36 Petticoat Lane.

In other words, our general term Land - synonymous with Natural Resources - isn't very practical. Labor needs a definite location if he is to produce anything. He must have a location with an address.

So I used to the term "Land" as the term for "a location with an address".

This is a particularly useful change as Rent doesn't attach to Natural Resources. Rent attaches specifically to a particular location.

I've described the two values that make "Land-Value. I call them intrinsic and extrinsic values. You may not like my use of these words, but I think they say what I mean. And intrinsic value refers to something within the location. Extrinsic value refers to something that comes from outside the location.

For example, the value we place on a gold mine is related directly to the gold that is within the mine. The value is intrinsic. If we remove the gold from the mine, the value is gone.

The value we place on Times Square arises from the presence of the community around Times Square. The value is extrinsic. This value cannot be removed. It will disappear only when the community around it disappears, leaving no extrinsic value to attach to Times Square.

Of course any location may be a mixture of the two values. A gold mine next to the railway is likely to be more valuable than the same mine 14,000 ft up on the side of a mountain.

MORE ON LAND

I separate Land and Natural Resources. Thus, mountains are Natural Resources, but Mount Everest is Land.

Land, is a location with an address.

In similar fashion, the electromagnetic spectrum is Natural Resources, while Channel 2 is Land.

It can be argued that no-one has more right to Natural Resources than another - that we have a common right of ownership.

In order to work Natural Resources, it is important that we cut them up into lots, or fields, or forests. In other words, effectively to use Natural Resources, we must know exactly what place we are to use.

So, one person will need 10 acres of Manhattan, another will want a particular acre of Texas, yet another must have a corner with 50ft of frontage and a depth of 40ft.

If someone wants more Natural Resources than his "equal right" would allow, he can have it. However, it seems proper that he compensate the rest of the common owners for his advantage.

We cut the electromagnetic spectrum into "lots" - such as FM 90, or Channel 2. These channels are land and they can be very valuable. Anyone should be able to have one - providing they compensate the rest of us for their advantage.

As the value of the channel depends on the community served by it, the continuing value is Rent. ("The extrinsic community created value that attaches to a location.")

However, this Rent is best measured by auction - using a limited time contract of (say) 4 or 5 years.