The Dog in the Manger
The expression “dog in the manger” from Aesop’s fables, where a dog refused to let other animals eat, is an apt description of land speculators in economics.
June 10, 2018
Lindy Davies

The expression “dog in the manger” refers to one of Aesop’s fables, in which a dog, who didn’t want hay, nevertheless commandeered a manger, refusing to let the other animals eat. That’s an apt description of the economic role of land speculators. Not ready, or willing, to use the land they hold, they deny its use to others, and the whole community suffers. Students who are eager to solve social problems might be inclined to seize on the land speculator as a villain to go after!

Who Are the Land Speculators?

Land speculation was an explicit “occupation” in the early days of the United States, and the vast North American continent was being emptied of native peoples and opened for settlement. Nowadays, though, land speculation so thoroughly pervades our economy that it’s just about meaningless to try to identify “land speculators” as a group. Because land is necessary for all production, land’s tendency to increase in value bears on many, many economic decisions. As Prof. Mason Gaffney asks, “How do investors react to a set of incentives where expected changes in land value are made part of the overall return on investment — and land price is part of the investment on which return is figured?”

Probably the largest overall set of participants in today’s land speculation game are the roughly 65% of US families who own their homes. (Of course, when we say “own”, we understand that to mean “hold some equity in” and “are making mortgage payments on”.) Homeowners make interest payments far in excess of the selling price of their real estate. They are encouraged by Federal tax policy to do this, for mortgage interest is tax deductible, whereas rent payments are not. However, the only reason people are willing to take out a mortgage is that they expect their real estate value to increase over time. Most Americans do little or no saving (and have done progressively less saving in recent years). Some 65% of US households, then, are counting on land speculation for their retirement nest-egg.

Corporations are also major land speculators. Land makes up a significant portion of corporate assets, and land rent is a big part of corporate profits. Corporations own concentrations of pricey urban land, as well as vast acreages of farm, timber and mineral lands. This is not usually emphasized, but it is a huge part of doing business. It comes into clear focus in the case of corporate buyouts financed by high-interest “junk bonds”. How could such deals be profitable? Easy — when the buyer liquidates the bought-out company’s under-valued real estate, suddenly there’s plenty of cash!

Corporate control of land is not just the province of the super-rich. Many citizens don’t put all their retirement eggs in the real-estate basket; they invest, either singly or via pension funds, in stock markets (such investment, if used to save for retirement, also receives favorable tax treatment). Thus, the majority of people in the United States, and in other modern economies, have a personal stake in the economic status quo. Whether they realize it or not, they are all playing the land speculation game! (Undoubtedly this has something to do with why a widespread appreciation of Henry George’s insight has been so hard to achieve.)

What Does Land Speculation Do?

Although the effects of land speculation on our economy and society are dramatic, they are so much a part of the normal state of affairs that they are sometimes hard to identify. Like the old “cat picture” that Georgists refer to, the economic role of land is profoundly obvious, if only one can see it at all. Examples abound. For now, it will suffice to mention the four main types of effect that land speculation has: 1) on economic efficiency; 2) on the environment; 3) on community; and 4) on poverty.

Economic Inefficiency

The land speculator stands to benefit from long-term increase in land value — but all the while, labor and capital must go elsewhere, farther from the centers of population and exchange. This decreases overall production every single time it happens.

Not only does a systemic bias toward land speculation cause valuable land sites to be wasted — it also causes huge amounts of capital to be cast into forms that reduce overall productivity. This insight springs from the capital theory of Austrian Economics.

All capital goods, being the material product of labor, are subject to deterioration. But, their useful life-spans fall along a very wide spectrum. Fresh fish exemplifies the sort of capital that has the shortest life — just a single day. A large building or bridge has a useful life of many decades — with proper maintenance, such capital can essentially last forever. Thus, some capital turns over quickly (in other words, is sold and replaced), while other capital turns over much more slowly. Labor is what does the turning-over of capital goods; therefore, the same value of capital in rapid-turnover form will demand more workers than it will in slow-turnover form.

The bigger a role land speculation plays in an economy, the more investment will be skewed toward slow-turnover capital goods. For land to keep rising in value, there must be new construction of buildings and infrastructure — this helps to create the increasing demand for land. As the speculative bubble grows, people borrow more money to buy the more-expensive land, and even more money to build larger buildings (which will keep land values rising). This means that more loans go toward long-term capital, making less credit available for businesses who need it for quick-turnover items, such as inventory. These factors contribute to an economy-wide bias toward large capital investments.

Consider the example of farming: farms expand, and employ fewer workers, as farmers invest in ever-larger equipment (and in proprietary high-yield seeds that demand large acreages for profitability). Even though people prefer sustainably-grown local farm products, such products have a tough time competing against food grown on huge, capital-intensive farms. This widespread tendency to substitute capital for labor adds to unemployment.

Environmental Damage

The most visible effect of land speculation is the epidemic of suburban sprawl. High rents and poor public services in urban centers lead to the syndrome of “urban blight, suburban flight”.

Public infrastructure decays in cities, while new tax revenues must be raised to provide it to ever-wider areas. The overall number of highways and vehicle-miles increase, along with all the concomitant pollution. Many people are concerned about the problem of climate change, and seek ways to reduce our overall consumption of fossil fuels — but there is little chance of doing so in an economy characterized by sprawl, and dependence on personal automobiles. Improved public transportation could greatly reduce overall pollution — but when cities are strapped for revenue, and taxpayers are fleeing to the suburbs, who is going to pay for it?

Degraded Communities

The suburban sprawl/freeway commute lifestyle is also felt by many to be stultifying. People lament the loss of “community”, of ways of living that seemed friendlier and more connected with neighbors, schools, hometowns, etc. Some move away from the megalopolis to rural areas that seem “unspoiled” — yet these migrations bring on sprawl pressures of their own, and soon new freeways, beltways and shopping malls spring up to serve the influx.

The apparent “inhumanity” and “dysfunction” of modern communities has led to a movement for “smart growth” and “new urbanism”. Advocates seek to design communities for mixed uses, with homes located close to employers and shopping areas. Streets are designed to be pedestrian-friendly, green and welcoming; local services are provisioned to facilitate civic pride and involvement. When such places are established, they often become highly desirable places to live. When that happens, their land values skyrocket, and they become exclusive enclaves! It begins to seem as though our economy can only provide clean, sensible human-scale community to those who can pay premium prices.


As we pointed out above, a large segment of the people in a modern economy have some stake in the economic status quo, and therefore, indirectly, participate in land speculation themselves. But, of course, a larger — and growing — segment of the people do not. It is, perhaps, part of the genius of modern “mixed” economies that the benefits of land and its rent have come to be enjoyed by many more than just a tiny elite (as is still the case in less-developed countries). Through the widespread availability of home mortgages, and participation in stock markets, the unearned income from land has been spread around among a large group in society. Their benefits, however, have come at the expense of the people who do not have access to land and its rent. In Progress and Poverty, Henry George wrote of “an immense wedge …being forced, not underneath society, but through society. Those who are above the point of separation are elevated, but those who are below are crushed down.”

Consider the widespread availability of home mortgages, which are actually subsidized in various ways by the Federal government. If more people are able to buy land, then land prices go up — raising the rent for people who cannot afford to buy real estate. When the market for individually-owned homes is strong, the market for rental housing is depressed, decreasing its supply and further increasing rents for those who have no other choice.

This example from housing markets is, of course, only a part of the overall tendency for private land-withholding to create poverty. Its most important effect is still to lower the margin of production, denying labor and capital an alternative place to produce wealth, forcing them to come to market for whatever they can get.

It is also important to realize that land need not be held entirely vacant for it to contribute to the ill effects of land speculation. Most real estate in developed economies bears some property tax. Therefore, even vacant land has some holding cost, though this tax burden is far lower than the land’s potential rent. Because of this, much more land in today’s cities is underused than is actually vacant. Examples include surface parking lots, gas stations on highly valuable city corners, fast-food restaurants, dialpidated tenements and buildings with a commercial storefront on the ground level while the upper floors stand empty. Such “taxpayer” real estate parcels are a fixture of every modern city, and they cause the majority of the overall economic damage that is due to land speculation.

This article was reprinted from the Henry George Institute's Understanding Economics website.

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Lindy Davies

LINDY DAVIES was Program Director of the Henry George Institute and Editor of the Georgist Journal. He was the author of The Alodia Scrapbook, the fictitious story of how a struggling African nation used Geoism to set itself on the path to prosperity, and of the novel The Sassafras Crossing. He managed a successful campaign to get the Henry George Institute's distance-learning program approved by the National College Credit Recommendation Service. He passed away in 2019, and is lovingly remembered by the many people whose lives he touched.