Who *Should* Own Your Land?
An allegory about scarce resources
Let me introduce you to George. George just inherited a bunch of stuff from his grandfather. In addition to leaving him a nice real property estate and a lot of cash, his grandfather collected a wide variety of things all of which are now George’s to deal with.1 It is with these collections that we are interested.
Some of these items have marketable value—precious coins, paintings and sculptures, silver platters and dinnerware, etc.—some of which George is planning to sell and some of which George will hold on to.
Many, many other items have limited to no obvious marketability—travel trinkets like matchbooks, rocks and minerals, a version of every nail and screw imaginable, and among the piles and stashes a bunch of this interesting sand. George researches to find that this sand is called “roxite”.2
Roxite is alluringly strange. It is very dense making it heavy to hold. It is also very smooth almost like the toy “magic sand” that kids play with.
Although fascinating to touch and hold, it is rather ordinary otherwise. It is nontoxic (fortunately), but it is also not useful (unfortunately) in any discovered way. This is doubly unfortunate for George because he literally has tons of the stuff. His grandfather constructed an 2-acre pit to hold it all. Seems he had found it on one of his expeditions across land he once own but long ago sold. Before selling the land, he extracted all the roxite he could easily get hoping one day to find a use for it.
At one point he tried to sell it as a kid’s toy, but the uselessness and weight proved it unprofitable. Still, the kids who live nearby do like to get some for their own enjoyment. George’s grandfather always let them come take buckets of it as they wished. Seems they love the way it runs through their fingers. In fact it is a bit soothing for adults too kind of like a worry stone or other tactile device. Yet again the weight and the mess left no room for a market.
George has continued this generous allowance for the neighborhood kids, and he himself much enjoys seeing them smile as they walk away with their new heavy sand. In fact from time to time he too will take a clump to feel the weight. There is something comforting about it.
Roxite has always been curious but worthless . . . until now. One of the kids who regularly plays with it had a small clump in his pocket when visiting his dad’s work one Saturday. The young child didn’t think twice about adding a pinch into one of his dad’s beakers in his lab. The father fortunately didn’t notice.
It was only through a protracted retracing of steps that the father discovered long after the fact that the added roxite turned out to be the magic ingredient making his long failing attempts to cure cancer actually work! By combining the roxite in the right proportion and at the right point of the process with the other chemicals arduously processed does a gel emerge. When applied to the skin, this gel melts away skin cancers leaving the rest of the body unharmed. When injected arthroscopically to a cancerous tumor, the same magnificent effect results. To top it all, putting a very diluted amount slowly and consistently into the bloodstream allows the human body to seek and destroy all cancerous occurrences.
George now possesses a ready supply of what is pound-for-pound the most valuable raw material in the world. Everything is different and overall enormously better.
Roxite is priced at $100,000 per ounce. It should be obvious, but here are the implications:
The world through the market through the price system is screaming, demanding, pleading for George to give up his resource.
The cost of George doing nothing and keeping roxite for himself is billions of dollars.3
George cannot practically afford to let neighborhood kids take even a pinch of the heavy sand any longer. Policing that is impossible—how would he know if it was really a gift to the kid to play with? Besides he can now afford to give them anything else they could possibly want. Which is fine because . . .
The kids themselves cannot afford to have roxite as a toy. Their own opportunity cost is way too high to not sell it. This is besides the point that possessing it is an extreme risk to them due to its theft value—the opportunity cost to thieves would be quite low.
It is less obvious, but here are still more implications:
It is not just wrong from a property rights perspective to force or even expect George to donate his supply to science. It is wrong from a science and progress perspective.
A society that does not reward owners of resources for those resources encourages poor uses of those resources. Buyers of roxite should compete so we find the highest and best use of it. We need and want to know who best can develop cancer-fighting gels not to mention alternative uses both medical and otherwise that might be highly desirable.
A society that does not reward owners of resources for those resources discourages discovery of those and other resources. Remember that George’s grandfather discovered this sand on his land. It came from somewhere, and there likely is more out there. Why would a current landowner or business bother looking for roxite, et al. if it will only be taken from them? In fact they would likely do the opposite in many cases hiding the otherwise super valuable commodity.
The kids who had not yet possessed roxite do not get a direct benefit. They effectively are losing out as they otherwise would have had this benefit.
Conclusion
I chose the elements of the story (inheritance, a substance that goes from novelty/nuisance to valuable resource, owners and users, emotionally-attractive benefit) carefully. I wanted to make it stark. Most economic tradeoffs are not so easily understood. The same principles, implications, and lessons should be drawn if we replace roxite with any other resource that can be owned. My aim specifically is to have us understand land under this framework.
To a much lesser but still true degree when a property owner refuses to sell their home, farmland, acreage that has become vastly more valuable than it was originally, they are making the world worse than it could otherwise be. Perhaps they get more enjoyment than the alternative users, but that generally is not an argument made supporting their case. And it breaks down when reversed to ask if they would and could purchase the property at that high price they refuse to sell it at.
People who are not owners but only users like renters are unfortunately displaced by development. Perhaps they should in a moral sense be given some compensation for their loss. Yet this has dangerous implications encouraging resource-destroying rent-seeking behavior along with being very difficult to appropriately administer. It is probably better for everyone including renters to be in a society where it is known and practiced that renting has the risk of displacement.
As an aside, a maxim of mine is that you cannot bequeath/inherit hobbies. More to the point, you cannot force someone to like the thing you liked. And one should not feel compelled to attempt to be as interested in something as the person who left it to you was interested in it when they were alive. There is a fine line between honoring someone’s memory and being a slave to their passions at the expense of yourself.
In case you need to be told, this is a fictional substance for the purpose of this post.
The true cost is always the opportunity cost.