Rent accrues to the owner of the more productive land as a residual, so gains from improvement flow to scarcity rather than effort.
Ricardo's 1817 argument. Its political consequence, drawn by Henry George, is that improvements in productivity flow to landowners rather than to labour or capital, which is the case for land value taxation.
In practice
- A farmer on good land pays more rent and ends with the same income as one on poor land, and the difference goes to the landlord.
- A town that gets a new station finds the gain capitalised into house prices within two years, and the commuters are no better off.