A Closer Look at the Law of Rent

Adding a few specific factors can help us to understand how land speculation works. Here is a model with five different grades of land. Workers are more productive on the better land - they can produce more units of wealth. And, on the better grades of land, more workers can be employed on each plot. The cost of public services (infrastructure) is higher on the better land. (Note that the infrastructure cost per worker is the same, in this simple model -- in the real world, public infrastructure is more efficient where population is more concerntrated.)

Let's say that there are four plots of each grade of land in our model, and one of each has been held out of use, for speculation.

4 plots of each grade of land	5 units per worker/day; 50 workers per plot	4 units per worker/day; 40 workers per plot	3 units per worker/day; 30 workers per plot	2 units per worker/day; 20 workers per plot	1 unit per worker/day; 10 workers per plot
1.	50 x 5	40 x 4	30 x 3	20 x 2	10 x 1
2.	50 x 5	40 x 4	30 x 3	20 x 2	10 x 1
3.	50 x 5	40 x 4	30 x 3	20 x 2	10 x 1
4.	0	0	0	0	0	Totals
# of workers	150	120	90	60	30	450
wealth output	750	480	270	120	30	1650
infrastructure cost	200	160	120	80	40	600

Now let's see what happens if we employ the same number of workers, but without land speculation:

	5 units per worker/day; 50 workers per plot	4 units per worker/day; 40 workers per plot	3 units per worker/day; 30 workers per plot	2 units per worker/day; 20 workers per plot	1 unit per worker/day; 10 workers per plot
1.	50 x 5	40 x 4	30 x 3	free	free
2.	50 x 5	40 x 4	30 x 3	free	free
3.	50 x 5	40 x 4	30 x 3	free	free
4.	50 x 5	40 x 4	free	free	free
# of workers	200	160	90	-	-	450
wealth output	1000	640	270	-	-	1910
infrastructure cost	200	160	120	-	-	480

So we see that by eliminating wasteful hoarding of land by speculators, we can increase production, reduce infrasctructure costs, and raise wages!

Now, let's take an even deeper look, and factor unemployment and social welfare into out chart.

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