Austrian Economics Wiki

In production, man needs to combine other factors (capital and labor) with the nonhuman elements provided by nature, called land.[1]

Land and Capital[]

Land is used together with labor and time (and possibly capital) to create capital and consumer goods. In theory, one could trace everything man has created back to land and labor, up to the world of primitive men, who began to produce capital with their bare hands.

The concept of land ("economic land") is entirely different from the popular concept of land ("geographic land"). The economic con­cept includes all nature-given sources of value: what is usually known as natural resources, land, water, and air in so far as they are not free goods. On the other hand, a large part of the value of what is generally considered "land" — i.e., that part that has to be maintained with the use of labor — is really a capital good. In agriculture, soil needs to be maintained. But the physical space itself - "land as standing room" - is permanent and nonreproducible.

Some economists point to the fact that present-day land has many varieties and amounts of past labor "mixed" with it: canals have been dug, forests cleared, basic improvements have been made in the soil, etc. They assert that practically nothing is pure "land" anymore and therefore that the concept has become an empty one.

But land are not simply original, nature­-given factors. Whether or not a piece of land is "originally" pure land is eco­nomically immaterial, so long as any changes have been made are permanent — or rather, so long as these alterations do not have to be reproduced or replaced. Land that has been irrigated by canals or altered through the chopping down of forests has become a present, permanent given, because it is not worn out in the process of production, and does not need to be replaced.

Capital goods are those which are continually wearing out in the process of production and which labor and land must work to replace.[2]


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