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The marginalists who confronted land
American Journal of Economics and Sociology, The, Jan, 2008 by Fred E. Foldvary
Regarding land, Gossen proposed that the state buy land and rent it out. The state, with better credit, would be able to buy land at favorable terms. As described by Walras (1990: 229), Gossen's policy was that ownership of land would eventually belong entirely to the community, and that the community would lease plots to whomever offered to pay the highest rent. Gossen justified the collection of ground rent from efficiency rather than justice. He recognized that the highest land rent is generated by the most productive use of land. Gossen's work was ignored by economists other than Jevons and Walras. Walras (1990: 231-232) lamented that Gossen's ideas were ignored even in Germany. Although Gossen's work has become recognized in the history of thought, his ideas about land and public finance continue to be ignored.
III
Friedrich von Wieser (1851-1926)
CARL MENGER'S brief writing on land has been mentioned above. Another Austrian, Freidrich yon Wieser, paid considerable attention to land and rent. A student of Menger, Wieser developed the concept of opportunity cost, and was the first economist to use the term "marginal utility" (Grenznutzen). In Natural Value (1889), he developed the theory of the imputation (Zurechnung) of value to factors from the values of the goods they produce. Ricardo had already analyzed that the rent of farmland is determined by the price of corn rather than the other way around.
As a forerunner of Mises and Hayek in the calculation debate regarding socialism, Wieser found that the prices of factors and goods play a fundamental role in determining the optimal allocation of scarce resources. Even a communist state had land rent and should account for it.
Regarding land rent, Wieser (1927: 340) recognized that: "Urban rent is that part of the rental which is paid as a premium for the advantages of the better location." Joseph Schumpeter (1954: 935) says of Wieser's (1909) work on urban rent that it:
reads like an application of Ricardo's theory of rural ground rent, Ricardo's marginal land being replaced by the "peripherical" urban land that yields no higher rent when used for building than it would in its optimal agrarian use.
Moreover, Wieser (1889: 62-63) stated:
The rent of land is probably the formation of value most often attacked in today's economy. However, I think I shall demonstrate that even in a communist state, there must be a rent of land. This type of state, in certain circumstances, must calculate the output of land and must calculate in certain portions of land a larger output than in other ones: the circumstances on which such calculation is dependent are essentially the same that fix the magnitude and existence of the rent. The only difference is that in the current circumstances, rent goes to the private owner of the land which in a communist state would go to the whole community. (quoted in Ekelund and Hebert 1992: 352)
As Ekelund and Hebert (1992: 352) point out:
