The old joke goes: A scientist is somebody who tries to figure out how to make theory conform to reality. An economist is somebody who lays awake at night trying to figure out how to make reality conform to theory.

It’s easy to poke fun at economists but also easy to feel sorry for them. What interests them is money and wealth and those are always controversial. And instead of being useful economists are usually boring, since the main way they could help society would be to predict where the economy is headed, and most can’t do that—not even close.

One of the few exceptions is our own Dr. Fred Foldvary, Ph.D. If you follow him, he would’ve warned you well in advance of the last recession (as did yours truly). Then you could’ve shifted around your savings and portfolio so you would’ve been safe. Heck, you could even had made money.

But it didn’t happen that way. Millions lost billions. And mainstream economists were as dumbfounded as anybody.

One reason economists can’t predict is that they abhor natural law. Imagine trying to predict the intersection of the Juno probe with the planet Jupiter while ignoring the law of gravity. It can’t be done. And you can’t predict the business cycle while remaining antagonistic toward Ricardo’s Law of Rent. That can’t be done, either.

David Ricardo was a very successful investor. He did his profound thinking at the dawn of the Industrial Revolution but still during the Agrarian Age. Economies were staid then, compared to how dynamic they are now, making it easier to figure out what was going on.

Ricardo noticed that competing workers had their wages set by those among them earning the least, which they did where the land yielded the least. We can still see that phenomenon today when immigrants accept lower wages. (Note those immigrants don’t have to be from other countries, they can be from other states, poor ones like Mississippi and Arkansas.)

Ricardo noticed that competing workers had their wages set by those among them earning the least, which they did where the land yielded the least. We can still see that phenomenon today when immigrants accept lower wages. (Note those immigrants don’t have to be from other countries, they can be from other states, poor ones like Mississippi and Arkansas.)

While working on poor locations does set wages, is there anything else determining wages? Yes, it seem there is: rich locations.

Walk around any city. Open your eyes and take note of all the vacant lots. Martin Luther King Boulevard in my erstwhile hometown of Portland is a necklace of vacant lots, choking the impoverished part of town. How many jobs exist on vacant lots? None. How much do people get paid on vacant lots? Zero. Vacant lots are a massively accurate indicator of unemployment, poverty, and crime.

Yet oddly enough, nobody notices them. You really have to be paying attention to see them. Or they have to have goats. Two huge lots—two entire city blocks—only came to people’s attention because the owner kept the weeds down by grazing goats there.

Why so many vacant lots? Especially in a growing city? That growth is part of the problem. Speculators are waiting for the price to go up before they sell. Those owners are not the only culprits. Many vacant lots are held by local government which is too confused to know what to do with them.

Vacant lots are a massively accurate indicator of unemployment, poverty, and crime.

Now go downtown, where the most prime location is. Why is it the most prime? That’s where people can make the most money.

So what happens when a prime lot is kept vacant? Or used for a parking lot? Or left with an old one- or two- story derelict when its neighbors are new skyscrapers? Then producers must use sub-prime locations, where people can not make the most money possible. There employers make less money and so can only pay employees less money. Then the ripple effect drives down wages thru-out the metro region.

Compare that phenomenon to what Ricardo passed on to us. He noted the margin, the worst possible site. We’re noting the prime, the best possible site. His arena was rural, ours is urban. For the margin to set wages, it had to be in use. For the prime to set wages, it must be kept out of use. His margin in use pulled down wages, our prime un-used pushes down wages. Same result, but two opposite sets of causes, like heading off in opposite directions, circling the globe, and meeting in the same place.

Why does it matter? Getting theory right always matters. Especially if you’re in the business of predicting, explaining things like urban poverty amidst urban plenty.

Why does it matter? Getting theory right always matters. Especially if you’re in the business of predicting, explaining things like urban poverty amidst urban plenty.

And marketing wise, it matters because a vast majority now lives in cities and simply can not fathom that bad farmland could have anything to do with their paltry paychecks. If you want to open urban eyes and to win the support of city dwellers, you must explain Jeffery J. Smith’s Law of Prime Rent—the crippling effect of wasted land in the heart of cities.

You’ll make sense, people will buy into applying geonomic reform to motivate efficient use of metro land, and two centuries later economics will no longer be a laughingstock, rescued by the paradigm-shifting new field of geonomics.

© Text Copyright Jeffery J. Smith rights reserved.
Click here to participate in a community survey and enter a raffle.