[OPE] US national wealth 2007 - land values

From: Jurriaan Bendien <adsl675281@tiscali.nl>
Date: Mon Dec 08 2008 - 06:39:43 EST

Just briefly (I've got the 'flu), the data I provided from the Budget document suggests that, in aggregate, the value of US land increased 164% in real terms across 1980-2007 or about 6% per year in real terms, but I do not know how they arrive at the estimates. My hunch is - based on other evidence - that these valuations are conservative, i.e. below real market value. I cited the estimates only to provide an approximate indication of asset proportions, the main idea being just to illustrate that production capital (capital invested in means of production) is only a fraction of the total social capital.

A limitation in BEA and SNA-type economic statistics is that "gross fixed capital formation" and "fixed assets" normally exclude land values (except the value of land improvements). The original Kuznetzian reasoning behind that was that if seller A sells land to purchaser B, this is a transfer of property, which does not constitute value-added, and does not constitute production. In other words, a land transaction as such does not generate net new wealth in aggregate - the land is already there, and you don't "produce" more land by buying or selling it. Such a transaction can be called "economic activity" but it isn't economic activity which generates new value. It's a capital gain which is a transfer of value. That aside, it is difficult to estimate land values, if the land is not even being traded, or if only a small portion of it is being bought and sold, or if the land is sold together with what's built on it, and also land values vary according to the income yield or economic rent of the land.

BEA has constructed satellite accounts for environmental resources, but no comprehensive national statistics on average prices for all types of US land exist, to my knowledge, and there are no official land price indexes by type of land. However USDA does provide farmland values data.

In general, land prices have risen in real terms almost everywhere in the world across the last three decades, and even if prices taper off considerably in a recession (they're likely to drop at least until 2010), average land values are still far above their former level in real terms. The most basic reason for that is simply population growth - a continuously growing demand for land, even regardless of its productivity or yield. Added to that is nowadays is a group of large corporations and wealthy individuals who have such large capital resources, that they can buy up very large tracts of land.

As regards the US, it has 2,423,884,160 acres (roughly two and a half billion acres) of land, distributed as follows:

Farmland 938m acres (38.7%)
Forest land 747m acres (30.8%) (of which 430m privately owned and 67m industry owned)
Urban land 60m acres (2.5%)
Other land 679m acres (28%)

(Source: Kevin Cahill, Who owns the world, Mainstream 2006, p. 414). For comparison, only about 7% of Russia's land is arable land.

If the total US land value according to budget data is $16.9 trillion, this suggests a grand average land price of about $6972 per acre if I am not much mistaken. Urban land is of course the most expensive. The grand average price of US farmland would be around $2000 per acre (about $1000-$1200 for pasture, and nearly $3000 for cropland, see further e.g. http://www.nass.usda.gov/Charts_and_Maps/Land_Values_and_Cash_Rents/index.asp and http://www.ers.usda.gov/Briefing/landuse/aglandvaluechapter.htm). It's difficult to get any data on US urban land prices, presumably because the buildings and the land are sold together.

There's an American song "This land is my land, this land is your land" etc. but in reality US land ownership is highly concentrated, so that the government and a few hundred thousand individuals and companies own the bulk of the land.


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