IMO the law of rent is a good example of an archaic theoretical model. The Law of Rent states that the rent of a land site is equal to the economic advantage obtained by using the site in its most productive use, relative to the advantage obtained by using marginal (i.e., the best rent-free) land for the same purpose, given the same inputs of labor and capital[2] https://en.wikipedia.org/wiki/Law_of_Rent 1. The best use of any land is highly subjective and relative. 2. Even if we stipulate to a theoretically most productive use if that is not the actual use in recent practice how can we calculate that theoretical use with any accuracy? The :comparables used in real estate market valuation, tax assessment, etc. are often very arbitrary and subjective. 3. Rent free land for comparison no longer exists in any practical sense. In theory the idea of taxing an area of land based on its highest and best use is appealing. In practice it seems like a quixotic project fraught with opportunities for corruption and favoritism.
Posted on: Tue, 22 Jul 2014 21:00:59 +0000