ȁȀǿ Partʺ: EconomicsĻis is Rothbard’s main explanation of what the landowner does. It is
true that elsewhere (vol.ŕŕ: pp.ȄǿȂ,ȄǿȈ) he briefly likens rental returns on
land values to interest, but he does not develop this comparison and appar-
ently either does not see its full significance or considers its significance
too obvious to need spelling out.
A fuller account recognizes that landowners, like owners of capital
goods, stocks, and bonds, are performing the service ofwaiting, as Gus-
tav Cassel (ȀȈǿȂ/ȀȈȄȅ) called it, insightfully interpreting it as an indepen-
dent factor of production. Instead of selling their assets and spending the
proceeds on consumption or other current purposes and instead of never
accumulating savings in these forms in the first place, the owners are tying
up wealth over time and are waiting for the future incomes and maturity
or sale values that their assets will yield. So doing, they free resources
otherwise allocated to consumption for construction and maintenance of
machines, buildings, and other capital goods (and for formation of human
capital); they thereby contribute to productivity and economic growth.
Landowners are performing essentially the same service as recipients of
interest in the strict sense of the term.
Arbitrage of various kinds tends to press annual net rents, expressed
as percentages of land values, and interest rates on loans toward equal-
ity (subject to standard qualifications about differences in risk, maturity,
liquidity, and so forth).ȁĻe uniform rate toward which these tendencies
press may be seen as the reward or price of waiting in general, waiting per-
formed in various ways by delaying consumption, tying up one’s savings
in claims or assets, and so freeing resources for capital formation.
But just how does waiting through acquiring and holding land oper-
ate? Suppose that people become more thrifty and devote their thrift to
buying land. Ļeir purchases tend to raise land prices and reduce percent-
age yields on land and, through arbitrage, to raise asset prices and reduce
percentage yields generally, including the interest rate. Ļe decline in tar-
get yields encourages business firms to invest the freed resources in real
capital formation, and the rise in real investment contributes to the gen-
eral decline in rates of return. Ļe increased investment embodies the
increased thrift.
Conversely, a decline in thrift restrains real investment. If landowners,
becoming less thrifty, decide to sell their holdings and spend the proceeds
ȁBut these different rates of yield are not identical just because they tend to be equal in
equilibrium. Explaining this equality is part of the economist’s job, which is only impeded
by making rent returns conceptually identical to the interest rate narrowly defined.