"From there to here, and here to there, stunning things are everywhere." — after Dr. Seuss
Both the measure and the measuring of “rent”—outrageous. Ask one simple question—how much do we as America spend for the land and resources we use? Doing so raises many more that someone prefers remain unanswered.
A Magic Number?
We humans are pushovers for size, for big numbers, too. Like … the world’s richest person who, if spending over $1,000 every hour, every day, awake or asleep, even if retired, would have to live over 10,000 years to spend it all.
Another big number you should be able to drop into casual conversation is the worth of Earth in America. It has to be immense, plus it could serve as an economic indicator. And it’s a useful surplus, an unintended byproduct, like wild mushrooms.
While Earth’s worth is hefty, producing Earth is effortless. It was already here. You don’t have to pay anyone to create nature. That’s why economists refer to payments for land as a surplus. Nobody has to be paid to pour oil in the ground, pull up Manhattan island, etc. Receiving “rent”, as the Dire Straits sang, “money for nothing, chicks for free.”
Further, the value of a location results from the presence of society. And this value keeps getting bigger, automatically, as society grows. Who sometimes tap it. Alaska, Aspen CO, and Singapore use it to pay residents dividends. Imagine getting an extra thou per year just for being a citizen.
Maybe not as useful as cash in hand, but reliable forecasts are welcome. In America, a handful of observers called the 2000’s bubble bursting which devastated millions of citizens. They did so by keeping an eye on the rising value of land (see Ch 28).
Off the Charts
However, it is a number. Many of us are not especially fond of math, some suffer “math phobia”. Nor of statistics. “Stories change people; statistics give them something to argue about.” — Bernie Siegel, an American writer last century.
Still, how much does our spending for our natural inheritance total? Throw in downtown locations, farmland, forests, oil and other minerals, the electromagnetic spectrum, ecosystem services, etc. I’d guess several trillions in the US annually.
Trillions. After a while, they all sound alike—million, billion, trillion. But the difference is huge. A stack of a million dollars reaches as high as a 35-story building. Shimmy up a trillion dollars and you’re over a quarter of the way to the moon.
Ignoring -illions, many of us missed the news. In the 1980s when Japan was booming, if you could afford to buy the center of Tokyo—the grounds of the royal palace—you could afford to buy California four times. Back then, most media failed to report that Tokyo’s land value rested on a bubble that could not last long (it didn’t).
Hindering the Counting
Finding out this total is no easy task. Agencies that deal in statistics—both public and private agencies—tally up anything but. “Consumer confidence." Corporate earnings. Tax collections. Spending on vacations. But not the worth of local Earth. That those who can, don’t, makes me even more curious.
Peer review pressures economists to conform. When Gregory Mankiw, a Harvard prof, later a president’s advisor on economics, published a paper predicting the last recession, his colleagues roasted him. Instead of praising his attempt to be scientific—which cited the 18-year period in demographics—others highly credentialed upbraided him. Not even the guys at the top can escape criticism.
That chastisement was for forecasting, not for measuring the value of land. For measuring, the penalty is not ridicule but being ignored. Colleagues don’t express interest, and being isolated is not healthy for one’s career.
Why did this line of inquiry never develop? Political pressure is plausible. Those who now receive the lion’s share of our spending for land—wealthy lenders and speculators—don’t lack for power and usually get what they want. Have they shaped data gathering? So other governments don’t emulate Aspen?
Spendy lots, pushing up housing cost, is what motivated Aspen to recover some location value to fund housing assistance. When other towns in Colorado considered the reform, the lobbied legislature outlawed it. As the police say, the obvious explanation is usually the right one.
Since almost everybody hopes to buy low and sell high, almost everybody has a vested interest in pretending land value is like any other value. Hence focusing on such “rent” creates controversy. A PhD examining the flow of “rents” is as rude as would be a male glancing at a female’s leg back in the Victorian Era when chaste matrons put skirts on the legs of their pianos.
So unearthing Earth’s worth (pardon the pun) doesn’t look easy. Yet being hard to know makes knowing it all the more worth the effort. Knowledge is power, eh?
This article is Part 1 of a series highlighting the forthcoming book, “Bounty Hunter: a gadfly’s quest to know the worth of Earth”, by Jeffery J. Smith. To date, the experts have not risen to meet the challenge. Indeed, some have even stood in the way. Yet the payoff for knowing this datum is huge.
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