<blockquote>
<p>Why is land considered fixed if the supply of land for a particular use is not fixed?</p>
</blockquote>
<p>Land is not considered always fixed. You are making overgeneralization. In many 101 textbooks land will be considered fixed because it useful to show how markets operate when supply is perfectly inelastic. But these textbooks do not argue that this is 100% realistic description of real life.</p>
<p>In fact for example, Mankiw's Principles of Microeconomics 5th edition pp 407 shows land as almost, but not perfectly fixed, precisely because it talks about land available for some practical use, not land in abstract as the surface area of planet earth.</p>
<p>Hence it is simply incorrect to state that economists generally consider supply of land fixed. Even on undergraduate level high quality textbooks will mention distinction between land for use and abstract concept of land (like Mankiw's textbook example illustrates).</p>
<blockquote>
<p>Why is it the aggregate land that matters?</p>
</blockquote>
<p>It doesn't. Most economists agree its important to make that distinction as attested by inclusion of these in popular and widely used micro textbooks. If you thought economists only cared about total aggregate land, it was a misconception you might have picked up from worse textbook, or at a course from someone who didn't explore the topic in sufficient depth, but that is not generally true.</p>
<blockquote>
<p>Isn't it the available land that developers and potential land owners actually deal with?</p>
</blockquote>
<p>Yes this is correct and widely acknowledged by economists.</p>
<blockquote>
<p>If municipalities continuously make new land available for development through rezoning, doesn't that imply non-fixed land?</p>
</blockquote>
<p>Yes hence why many papers or textbooks dealing with land also just use highly inelastic but flexible supply. When supply is assumed to be fixed it is done for simplification (in some cases it might simplify mathematically complex model) or didactic reasons.</p>
<blockquote>
<p>If a government makes less land available for development, that would mean higher economic rent, right?</p>
</blockquote>
<p>That would lead to higher price of land. Precisely because supply of land is not perfectly fixed the return to lands are not pure economic rents. However, depending on what model we use portion of the price could still be rent (or also quasi rent, in fact often papers that deal with quasi rents just call them rents). It's reasonable to assume this would lead to more economic rents but there are other issues such as that different municipalities compete against each other and so on. I can imagine that there could exist a model where economic rents do not change. Ultimately this would have to be looked at empirically.</p>

CC BY-SA 4.0
2024-06-07T20:52:30.307Z
What about countries, where all land is owned? Like the Netherlands.
Victor Nielsen
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2024-06-07T21:46:07.650Z
@VictorNielsen But this is not about ownership. Technically all land in the world is owned, just not privately. Just because the land is owned by someone does not mean its  available for use. Also coincidentally, I live in the Netherlands. I can assure you that there is a plenty of non-developed land that could be made available for use by government. In Zulen part of Utrecht where I live there is enough green space to probably double if not triple the number of housing units (assuming they have same high as current construction). This land could be brought to the market if municipality
1muflon1
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2024-06-07T21:48:01.637Z
would want to. Moreover, I know people who inherited farmland but they do not yet know what they want to do with it so they keep it of the market. If the price of it would increase at some point they would for sure put it on the market. Hence, even though technically, the amount of land in the Utrecht province is fixed the supply is not perfectly inelastic. Supply of land becomes perfectly inelastic only at the quantity when the amount of land in economic use or at market together equals total amount of land. That is true maybe in places like Manhattan but most places where humans live are
1muflon1
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2024-06-07T21:51:20.873Z
nowhere close to that. PS: Here in the Netherlands we are masters at increasing supply of land google Flevoland ;P
1muflon1
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2024-06-08T09:56:46.023Z
Isn't the rate at which a municipality makes land available for development dependent on the total land? Could it be that even though in practise, land is not fixed, that it is still the total land that matters, because it influences all the decisions involved with the use of land?
And isn't flevoland and improvement of land (water is also land technically). So reclaiming it, is similar to improving marshland or removing jungle. Just more expensive.
Victor Nielsen
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2024-06-08T17:02:21.077Z
@VictorNielsen No, even if the municipality’s decision would be a function of the total land that does not change the fact supply is no longer vertical. For example, technically there is a limited amount of oil on earth. So a production of each oil well and oil company is also a function of this limit in a broad sense that this maximum cannot exceed (and for every well it cannot exceed the amount of oil in the well). That doesn’t make the supply of oil or even a single well inelastic in general. Supply would only become inelastic once the capacity is reached. I am not sure if water would
1muflon1
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2024-06-08T17:04:29.920Z
Be counted as land. But the point which you yourself by the way raised in the question, is that what matters is supply of land that can be useful. Going back to the oil example. Technically a supply of **unextracted** crude oil is fixed. However, that doesn’t mean supply of extracted crude oil is fixed. Similarly what matters is whether supply of land available for some commercial use is fixed or not, not whether sum total of earth’s surface is fixed
1muflon1
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2024-06-09T11:42:57.857Z
I think the oil example is different because we are very unlikely to run out of oil, but I don't believe we are far from running out of land that is habitable or arable in many countries. Not to mention the need to preserve some of it as nature. 
Well according to Henry George, water is counted as land. 
Wouldn't the price of extraded crude oil depend on how much unextracted crude oil there is left? What if there was only a supply left for 40 years?
Victor Nielsen
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2024-06-09T13:19:43.220Z
@VictorNielsen 1. He may have defined it that way but I don’t think that’s what modern literature is doing. 2. We are talking about whether the supply is fixed or not. The point is supply won’t be fixed and will be upward sloping.
1muflon1
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2024-06-10T22:16:13.263Z
I was discussing this with my supervisor. He said that if you tax labour or capital, you will get less of it, but if you tax land based on market value, you will not get less land. Even for a particular use.
Victor Nielsen
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2024-06-11T04:59:27.100Z
@VictorNielsen that statement is not true for the land for particular use. 1. It’s not what economists generally believe (eg see Mankiw) 2. Even empirically supply elasticity of land for  use is very low but not zero Eg see the estimates from Saez (2010) for US metropolitan area, particularly for Netherlands you can see Needleman (2000) who estimated the supply elasticity of land in NL was about 0.01 which is very low and close to zero but not actually zero. So the claim by your supervisor is empirically not true. To be clear it’s ok first approximation since it’s almost zero but almost zero
1muflon1
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2024-06-11T05:01:20.260Z
Is not zero. Moreover there is a lot of research that shows land value taxes increase intensity of land use (eg developers build taller buildings) If it would not affect supply of land at all, and you would have the scenario with completely inelastic supply this should not happen
1muflon1
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2024-06-17T09:24:13.107Z
Why would it not happen that developers build taller if land is inelastic in supply? LVT creates an incentive to use land more intensively. If you have a plot of land without an LVT, you can own that land and earn money from its increasing value over time. If you similarly own a plot of land with a low density building you can also just rent it out and earn money from its increasing value. If there is an LVT, you can no longer earn money from purely owning it, so you have to get more revenue from building and renting out. This revenue is dependent on the demand of the location, which in turn
Victor Nielsen
CC BY-SA 4.0
2024-06-17T09:25:22.750Z
raises the LVT that is levied. So in order for a developer to make money on a plot, they have to build higher when LVT (i.e. demand) is higher.
Victor Nielsen
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2024-06-17T12:40:01.957Z
Based on what you base that? If supply is inelastic LVT should not affect price/rent nor should affect demand. Demand should stay the same and tax should come out of rent. If there are any changes in amount of land being brought to market it shows empirically that we are not dealing fixed supply. Even in case it increases as you argue, even thought that’s not really borne by empirical evidence since that shows that less land is being brought to the market
1muflon1
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2024-06-17T15:26:26.917Z
I think you misunderstand. I am not saying that the demand changes. I'm saying that the development response (in terms of housing) to demand changes. It's entirely possible for people to be a landlord and wait for land values to increase in value and still earn wealth from the increased value. Land values typically increase more than inflation. Similarly if there is low density housing even in locations where demand is high, it's possible to just rent it out and seeing their wealth increase from rising land values. As this is no longer possible with land value taxes, the only way to earn
Victor Nielsen
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2024-06-17T15:31:13.467Z
profit for landowner in an empty lot with rising demand or a lot with demand far higher than what the lot supplies due to the lot density is to (re)develop the lot or sell it to someone who will. So there is a development incentive from LVT, but I don't understand why you say that this incentive would only occur under "elastic" supply of land.
Victor Nielsen
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2024-06-17T18:29:35.857Z
Btw, I'm having trouble finding the Saez (2010) and Needleman (2000) papers. Can you help me out?
Victor Nielsen
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2024-06-17T19:55:26.720Z
But that can’t be an explanation since those studies with land intensity already control for demand factors. Moreover, again as mentioned above for example Needleman estimates the elasticity of **supply**is non-zero. Sure, Saez paper is called the geographic determinant of housing supply. The supply elasticities for land use are an auxiliary result you can dig from the paper. The Needleman paper is called Land taxation, development charges, and the effects on land use there supply elasticity is one of the main results so it’s easy to find
1muflon1
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2024-06-18T13:52:08.743Z
Ah, they are called Saiz and Needham. Thanks for sharing. Needhams study seems to look at supply for a particular use. And he is interested in whether a land value tax would affect what the land is used for. Doesn't seem to be about supply of land in general or about raising revenue. Interestingly, my supervisor actually wrote a book with Needham. I should ask him to connect so I can ask about this further. Gaffney 1995 holds that land is fixed because you cannot get more land without someone else getting less, the planet is finite, and it's immobile.
Victor Nielsen
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2024-06-18T14:48:51.027Z
Again we are talking about land available for commercial use not some abstract notion of land that includes water surface. Also sorry for mistyping the names I was referring to them from memory
1muflon1
CC BY-SA 4.0
2024-06-19T16:00:15.910Z
Well the definition of land supply seems to be different based on which economists you ask. If you ask Wyatt 1995, Needham 2000 and Ely 1920, they say that land supply is not perfectly inelastic in a practical sense, but if you ask Henry George, Stiglitz (2016), Dwyer (2014), Ryan-Collins et al. (2022), Gaffney (1995) and more I have found, then land supply is fixed. So what I am wondering under what condition is land not fixed in supply and which conditions are important for long term economic analysis.
Victor Nielsen
CC BY-SA 4.0
2024-06-19T17:29:45.227Z
1. This is not about definition of land supply. Being fixed is not a definition, it’s a property. Any supply could be fixed. Fixed supply is just a special case of supply where elasticity of supply is exactly equal to zero. 

2. You have to distinguish between theoretical models and empirics. Let’s for a moment put land aside because it seems that for some reason you are really invested/emotional about the idea of fixed land supply. Consider model of perfect competition. In the model it is assumed the number of firms goes to infinity. In real life you clearly cannot have infinity
1muflon1
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2024-06-19T17:38:28.787Z
As the number of firms. That is used in theoretical model as a simplification. So then when the models are applied to real world a model of perfect competition would be generally applicable to situation with very large number of firms and where empirically estimates for market power are zero/almost zero. In empirical research such market would be considered perfectly competitive even though it’s not pure as in theory. The reason why theory doesn’t work with let’s say endogenous interaction of 1000 is that it would be extremely difficult to solve that kind of model mathematically.
1muflon1
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2024-06-19T17:42:39.093Z
Similarly the authors you cite worked on theory. George’s work was theoretical, Stieglitz’s work is theoretical, I don’t know the other 3 authors you mention but         best guess is they are also working on theoretical models. In theoretical model it’s often convenient to work with edge cases for elasticity (either 0 or infinity or some neat constant) all other cases are often difficult to work with in most models. In such work it thus makes sense to assume supply elasticity of land is 0. As long as you understand this is theoretical approximation there is no harm in it.
1muflon1
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2024-06-19T17:50:42.083Z
The papers I cited were empirical papers that do not make such simplification because they are not solving model but just statistically estimate the relationship out there so it’s not necessary to have neat numbers that simplify the analytics. However, you should avoid into trap of taking a model (which is supposed to be abstraction like a map) for perfect description of reality. Just because model assumes elasticity is $\infty$ or $0$ does not mean it’s that also in reality. In reality it might be close to zero or very large. As long as results are not very sensitive to this it’s completely
1muflon1
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2024-06-19T17:51:19.620Z
Fine to have model with simplifying assumption, as long as you are aware it’s a simplifying assumption.
1muflon1
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2024-06-21T10:10:52.223Z
I guess what I am curious about then is to what degree these theoretical models hold in reality. Not about whether the assumption of fixed supply holds, but whether it matters significantly for the results trying to estimate welfare effects for example. Because Wyatt seems to argue that because the fixed supply assumption doesn't hold, the idea that a shift from property taxes (or other taxes) to LVT is not true.
Victor Nielsen
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2024-06-21T12:50:34.313Z
ok but that is then completely separate question form the question you posed in your post. Some results might still hold others won't. The literal interpretation of Georgist idea that you can eliminate all DWL definitely doesn't hold, and this is why most mainstream economists do not consider themselves to be georgists, but the idea that on margin taxing land more and on margin reducing some other taxes can yield the same revenue with lower efficiency losses likely still translates. Its still efficient to tax inelastic supply/demand more than elastic supply/demand
1muflon1
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2024-06-21T13:41:06.053Z
* "the idea that a shift from property taxes (or other taxes) to LVT would be efficient is not true"
Victor Nielsen
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2024-06-21T13:44:58.620Z
Yes, as per the Ramsey idea. But some Georgists hold that LVT themselves are welfare improving through the incentive for more efficient use of space and deincentivising speculation (inducing an increase in supply elasticity of housing for example). Stiglitz also argue that wealth gained from holding land does not contribute to growth and it would be better if people owning land would divert those investments into capital instead. So I think there is more to the story than just looking at elasticities, but I wish we knew more about how much.
Victor Nielsen
CC BY-SA 4.0
2024-06-21T14:27:54.397Z
1. I was talking just about other taxes in general like consumption taxes. 2. That was an example of something that would translate and something that wouldn’t I didn’t claim for it to be exclusive list of all examples.
1muflon1
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2024-06-24T09:37:41.167Z
Well in any case, thank you for reflecting on this with me and bringing arguments from the mainstream economics perspective.
Victor Nielsen
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2024-06-07T20:37:10.570Z
2024-06-07T20:42:38.567Z
2024-06-07T20:42:38.567Z
1muflon1
<p>There is a very strong consensus that the supply of land is fixed or perfectly inelastic. However, I found this article by Wyatt (<a href="https://gwern.net/doc/economics/georgism/1994-wyatt.pdf" rel="nofollow noreferrer">1994</a>) that contests this view:</p>
<blockquote>
<p>To begin with, the conventional wisdom of LVT adherents relies heavily on a seldom-questioned assumption from traditional economics, namely, that the supply of land is fixed (it cannot be increased), and therefore a land tax cannot be shifted to renters. A common inference from this is that the unshifted tax increment must be borne by landowners as a class. Once incorporated into the expectations of prospective landowners, LVT adherents reason that this would result in a bargaining down of the price of land in subsequent transactions. Yet Roger Smith, a supporter of LVT, points out that &quot;the supply of land which will be made available for development at any point in time is not fixed&quot; (Smith 1978: 60).
The idea that the supply of land is fixed is untrue for all practical purposes, and true only in an aggregate sense. In terms of any specific land market, or'any specific land use, or any given geographic area, the supply of land is always changing(Goldberg and Chinloy 1984: 123; Skouras 1978: 115). Rezoning of land, annexation, demolition, closure and relocation of businesses, changes of ownership, conflicting nearby uses, environmental hazards and nuisances, transportation and other public improvements, and a varietyof other linkage factors can all change the effective supply of land in an area for any given use or market type. Moreover, if landowners could not themselves alter the supply of land for any given use, then there would never be any phenomenon of speculative withholding of land for development, which changes the price of the land. Clearly, speculative withholding of land does occur; LVT proponents themselves attest to this, by invoking a shift to LVT as a way of correcting land speculation. So the assumption of a fixed land supply is inaccurate.
If the assumption of a fixed land supply is abandoned, then it can no
longer be assumed that any tax capitalization effect would occur.</p>
</blockquote>
<p>Why is it the aggregate land that matters? Isn't it the available land that developers and potential land owners actually deal with? If municipalities continuously make new land available for development through rezoning, doesn't that imply non-fixed land?</p>
<p>My main answer to those questions are that the total supply of land is what guides the land that would be made available, but I can't exactly articulate this clearly and I have a hard time understanding the relationship between the two. Cause if economic rent arises from the fixed supply of land doesn't that mean that if a government withheld land available for development or made it available slower that there would be no impact on economic rent, but that isn't the case is it? <strong>If a government makes less land available for development, that would mean higher economic rent, right?</strong></p>
<p>I tried to make an analogy to natural resources and how there may be a varying level of extraction that impacts the prices, but over time in the long run, you will always see the prices being affected by how much is left of that resource.</p>
<p>Any help is greatly appreciated.</p>

<microeconomics><elasticity><political-economy><land><rent>
Why is land considered fixed if the supply of land for a particular use is not fixed?
Victor Nielsen
# Why is land considered fixed if the supply of land for a particular use is not fixed?

(Asked by: username_0 on 2024-06-07)

There is a very strong consensus that the supply of land is fixed or perfectly inelastic. However, I found this article by Wyatt ([1994](https://gwern.net/doc/economics/georgism/1994-wyatt.pdf)) that contests this view:

> To begin with, the conventional wisdom of LVT adherents relies heavily on a seldom-questioned assumption from traditional economics, namely, that the supply of land is fixed (it cannot be increased), and therefore a land tax cannot be shifted to renters. A common inference from this is that the unshifted tax increment must be borne by landowners as a class. Once incorporated into the expectations of prospective landowners, LVT adherents reason that this would result in a bargaining down of the price of land in subsequent transactions. Yet Roger Smith, a supporter of LVT, points out that "the supply of land which will be made available for development at any point in time is not fixed" (Smith 1978: 60).
> The idea that the supply of land is fixed is untrue for all practical purposes, and true only in an aggregate sense. In terms of any specific land market, or'any specific land use, or any given geographic area, the supply of land is always changing(Goldberg and Chinloy 1984: 123; Skouras 1978: 115). Rezoning of land, annexation, demolition, closure and relocation of businesses, changes of ownership, conflicting nearby uses, environmental hazards and nuisances, transportation and other public improvements, and a varietyof other linkage factors can all change the effective supply of land in an area for any given use or market type. Moreover, if landowners could not themselves alter the supply of land for any given use, then there would never be any phenomenon of speculative withholding of land for development, which changes the price of the land. Clearly, speculative withholding of land does occur; LVT proponents themselves attest to this, by invoking a shift to LVT as a way of correcting land speculation. So the assumption of a fixed land supply is inaccurate.
> If the assumption of a fixed land supply is abandoned, then it can no
> longer be assumed that any tax capitalization effect would occur.

Why is it the aggregate land that matters? Isn't it the available land that developers and potential land owners actually deal with? If municipalities continuously make new land available for development through rezoning, doesn't that imply non-fixed land?

My main answer to those questions are that the total supply of land is what guides the land that would be made available, but I can't exactly articulate this clearly and I have a hard time understanding the relationship between the two. Cause if economic rent arises from the fixed supply of land doesn't that mean that if a government withheld land available for development or made it available slower that there would be no impact on economic rent, but that isn't the case is it? **If a government makes less land available for development, that would mean higher economic rent, right?**

I tried to make an analogy to natural resources and how there may be a varying level of extraction that impacts the prices, but over time in the long run, you will always see the prices being affected by how much is left of that resource.

Any help is greatly appreciated.

**Tags:** microeconomics, elasticity, political-economy, land, rent


---

## 1 answers

### Answer by username_1 on 2024-06-07. Score: 1

> Why is land considered fixed if the supply of land for a particular use is not fixed?

Land is not considered always fixed. You are making overgeneralization. In many 101 textbooks land will be considered fixed because it useful to show how markets operate when supply is perfectly inelastic. But these textbooks do not argue that this is 100% realistic description of real life.

In fact for example, Mankiw's Principles of Microeconomics 5th edition pp 407 shows land as almost, but not perfectly fixed, precisely because it talks about land available for some practical use, not land in abstract as the surface area of planet earth.

Hence it is simply incorrect to state that economists generally consider supply of land fixed. Even on undergraduate level high quality textbooks will mention distinction between land for use and abstract concept of land (like Mankiw's textbook example illustrates).

> Why is it the aggregate land that matters?

It doesn't. Most economists agree its important to make that distinction as attested by inclusion of these in popular and widely used micro textbooks. If you thought economists only cared about total aggregate land, it was a misconception you might have picked up from worse textbook, or at a course from someone who didn't explore the topic in sufficient depth, but that is not generally true.

> Isn't it the available land that developers and potential land owners actually deal with?

Yes this is correct and widely acknowledged by economists.

> If municipalities continuously make new land available for development through rezoning, doesn't that imply non-fixed land?

Yes hence why many papers or textbooks dealing with land also just use highly inelastic but flexible supply. When supply is assumed to be fixed it is done for simplification (in some cases it might simplify mathematically complex model) or didactic reasons.

> If a government makes less land available for development, that would mean higher economic rent, right?

That would lead to higher price of land. Precisely because supply of land is not perfectly fixed the return to lands are not pure economic rents. However, depending on what model we use portion of the price could still be rent (or also quasi rent, in fact often papers that deal with quasi rents just call them rents). It's reasonable to assume this would lead to more economic rents but there are other issues such as that different municipalities compete against each other and so on. I can imagine that there could exist a model where economic rents do not change. Ultimately this would have to be looked at empirically.

> **Comments:**
> **username_0**: What about countries, where all land is owned? Like the Netherlands.  
> **username_1**: @VictorNielsen But this is not about ownership. Technically all land in the world is owned, just not privately. Just because the land is owned by someone does not mean its  available for use. Also coincidentally, I live in the Netherlands. I can assure you that there is a plenty of non-developed land that could be made available for use by government. In Zulen part of Utrecht where I live there is enough green space to probably double if not triple the number of housing units (assuming they have same high as current construction). This land could be brought to the market if municipality  
> **username_1**: would want to. Moreover, I know people who inherited farmland but they do not yet know what they want to do with it so they keep it of the market. If the price of it would increase at some point they would for sure put it on the market. Hence, even though technically, the amount of land in the Utrecht province is fixed the supply is not perfectly inelastic. Supply of land becomes perfectly inelastic only at the quantity when the amount of land in economic use or at market together equals total amount of land. That is true maybe in places like Manhattan but most places where humans live are  
> **username_1**: nowhere close to that. PS: Here in the Netherlands we are masters at increasing supply of land google Flevoland ;P  
> **username_0**: Isn't the rate at which a municipality makes land available for development dependent on the total land? Could it be that even though in practise, land is not fixed, that it is still the total land that matters, because it influences all the decisions involved with the use of land? And isn't flevoland and improvement of land (water is also land technically). So reclaiming it, is similar to improving marshland or removing jungle. Just more expensive.  
> **username_1**: @VictorNielsen No, even if the municipality’s decision would be a function of the total land that does not change the fact supply is no longer vertical. For example, technically there is a limited amount of oil on earth. So a production of each oil well and oil company is also a function of this limit in a broad sense that this maximum cannot exceed (and for every well it cannot exceed the amount of oil in the well). That doesn’t make the supply of oil or even a single well inelastic in general. Supply would only become inelastic once the capacity is reached. I am not sure if water would  
> **username_1**: Be counted as land. But the point which you yourself by the way raised in the question, is that what matters is supply of land that can be useful. Going back to the oil example. Technically a supply of **unextracted** crude oil is fixed. However, that doesn’t mean supply of extracted crude oil is fixed. Similarly what matters is whether supply of land available for some commercial use is fixed or not, not whether sum total of earth’s surface is fixed  
> **username_0**: I think the oil example is different because we are very unlikely to run out of oil, but I don't believe we are far from running out of land that is habitable or arable in many countries. Not to mention the need to preserve some of it as nature.  Well according to Henry George, water is counted as land.  Wouldn't the price of extraded crude oil depend on how much unextracted crude oil there is left? What if there was only a supply left for 40 years?  
> **username_1**: @VictorNielsen 1. He may have defined it that way but I don’t think that’s what modern literature is doing. 2. We are talking about whether the supply is fixed or not. The point is supply won’t be fixed and will be upward sloping.  
> **username_0**: I was discussing this with my supervisor. He said that if you tax labour or capital, you will get less of it, but if you tax land based on market value, you will not get less land. Even for a particular use.  
> **username_1**: @VictorNielsen that statement is not true for the land for particular use. 1. It’s not what economists generally believe (eg see Mankiw) 2. Even empirically supply elasticity of land for  use is very low but not zero Eg see the estimates from Saez (2010) for US metropolitan area, particularly for Netherlands you can see Needleman (2000) who estimated the supply elasticity of land in NL was about 0.01 which is very low and close to zero but not actually zero. So the claim by your supervisor is empirically not true. To be clear it’s ok first approximation since it’s almost zero but almost zero  
> **username_1**: Is not zero. Moreover there is a lot of research that shows land value taxes increase intensity of land use (eg developers build taller buildings) If it would not affect supply of land at all, and you would have the scenario with completely inelastic supply this should not happen  
> **username_0**: Why would it not happen that developers build taller if land is inelastic in supply? LVT creates an incentive to use land more intensively. If you have a plot of land without an LVT, you can own that land and earn money from its increasing value over time. If you similarly own a plot of land with a low density building you can also just rent it out and earn money from its increasing value. If there is an LVT, you can no longer earn money from purely owning it, so you have to get more revenue from building and renting out. This revenue is dependent on the demand of the location, which in turn  
> **username_0**: raises the LVT that is levied. So in order for a developer to make money on a plot, they have to build higher when LVT (i.e. demand) is higher.  
> **username_1**: Based on what you base that? If supply is inelastic LVT should not affect price/rent nor should affect demand. Demand should stay the same and tax should come out of rent. If there are any changes in amount of land being brought to market it shows empirically that we are not dealing fixed supply. Even in case it increases as you argue, even thought that’s not really borne by empirical evidence since that shows that less land is being brought to the market  
> **username_0**: I think you misunderstand. I am not saying that the demand changes. I'm saying that the development response (in terms of housing) to demand changes. It's entirely possible for people to be a landlord and wait for land values to increase in value and still earn wealth from the increased value. Land values typically increase more than inflation. Similarly if there is low density housing even in locations where demand is high, it's possible to just rent it out and seeing their wealth increase from rising land values. As this is no longer possible with land value taxes, the only way to earn  
> **username_0**: profit for landowner in an empty lot with rising demand or a lot with demand far higher than what the lot supplies due to the lot density is to (re)develop the lot or sell it to someone who will. So there is a development incentive from LVT, but I don't understand why you say that this incentive would only occur under "elastic" supply of land.  
> **username_0**: Btw, I'm having trouble finding the Saez (2010) and Needleman (2000) papers. Can you help me out?  
> **username_1**: But that can’t be an explanation since those studies with land intensity already control for demand factors. Moreover, again as mentioned above for example Needleman estimates the elasticity of **supply**is non-zero. Sure, Saez paper is called the geographic determinant of housing supply. The supply elasticities for land use are an auxiliary result you can dig from the paper. The Needleman paper is called Land taxation, development charges, and the effects on land use there supply elasticity is one of the main results so it’s easy to find  
> **username_0**: Ah, they are called Saiz and Needham. Thanks for sharing. Needhams study seems to look at supply for a particular use. And he is interested in whether a land value tax would affect what the land is used for. Doesn't seem to be about supply of land in general or about raising revenue. Interestingly, my supervisor actually wrote a book with Needham. I should ask him to connect so I can ask about this further. Gaffney 1995 holds that land is fixed because you cannot get more land without someone else getting less, the planet is finite, and it's immobile.  
> **username_1**: Again we are talking about land available for commercial use not some abstract notion of land that includes water surface. Also sorry for mistyping the names I was referring to them from memory  
> **username_0**: Well the definition of land supply seems to be different based on which economists you ask. If you ask Wyatt 1995, Needham 2000 and Ely 1920, they say that land supply is not perfectly inelastic in a practical sense, but if you ask Henry George, Stiglitz (2016), Dwyer (2014), Ryan-Collins et al. (2022), Gaffney (1995) and more I have found, then land supply is fixed. So what I am wondering under what condition is land not fixed in supply and which conditions are important for long term economic analysis.  
> **username_1**: 1. This is not about definition of land supply. Being fixed is not a definition, it’s a property. Any supply could be fixed. Fixed supply is just a special case of supply where elasticity of supply is exactly equal to zero.   2. You have to distinguish between theoretical models and empirics. Let’s for a moment put land aside because it seems that for some reason you are really invested/emotional about the idea of fixed land supply. Consider model of perfect competition. In the model it is assumed the number of firms goes to infinity. In real life you clearly cannot have infinity  
> **username_1**: As the number of firms. That is used in theoretical model as a simplification. So then when the models are applied to real world a model of perfect competition would be generally applicable to situation with very large number of firms and where empirically estimates for market power are zero/almost zero. In empirical research such market would be considered perfectly competitive even though it’s not pure as in theory. The reason why theory doesn’t work with let’s say endogenous interaction of 1000 is that it would be extremely difficult to solve that kind of model mathematically.  
> **username_1**: Similarly the authors you cite worked on theory. George’s work was theoretical, Stieglitz’s work is theoretical, I don’t know the other 3 authors you mention but         best guess is they are also working on theoretical models. In theoretical model it’s often convenient to work with edge cases for elasticity (either 0 or infinity or some neat constant) all other cases are often difficult to work with in most models. In such work it thus makes sense to assume supply elasticity of land is 0. As long as you understand this is theoretical approximation there is no harm in it.  
> **username_1**: The papers I cited were empirical papers that do not make such simplification because they are not solving model but just statistically estimate the relationship out there so it’s not necessary to have neat numbers that simplify the analytics. However, you should avoid into trap of taking a model (which is supposed to be abstraction like a map) for perfect description of reality. Just because model assumes elasticity is $\infty$ or $0$ does not mean it’s that also in reality. In reality it might be close to zero or very large. As long as results are not very sensitive to this it’s completely  
> **username_1**: Fine to have model with simplifying assumption, as long as you are aware it’s a simplifying assumption.  
> **username_0**: I guess what I am curious about then is to what degree these theoretical models hold in reality. Not about whether the assumption of fixed supply holds, but whether it matters significantly for the results trying to estimate welfare effects for example. Because Wyatt seems to argue that because the fixed supply assumption doesn't hold, the idea that a shift from property taxes (or other taxes) to LVT is not true.  
> **username_1**: ok but that is then completely separate question form the question you posed in your post. Some results might still hold others won't. The literal interpretation of Georgist idea that you can eliminate all DWL definitely doesn't hold, and this is why most mainstream economists do not consider themselves to be georgists, but the idea that on margin taxing land more and on margin reducing some other taxes can yield the same revenue with lower efficiency losses likely still translates. Its still efficient to tax inelastic supply/demand more than elastic supply/demand  
> **username_0**: * "the idea that a shift from property taxes (or other taxes) to LVT would be efficient is not true"  
> **username_0**: Yes, as per the Ramsey idea. But some Georgists hold that LVT themselves are welfare improving through the incentive for more efficient use of space and deincentivising speculation (inducing an increase in supply elasticity of housing for example). Stiglitz also argue that wealth gained from holding land does not contribute to growth and it would be better if people owning land would divert those investments into capital instead. So I think there is more to the story than just looking at elasticities, but I wish we knew more about how much.  
> **username_1**: 1. I was talking just about other taxes in general like consumption taxes. 2. That was an example of something that would translate and something that wouldn’t I didn’t claim for it to be exclusive list of all examples.  
> **username_0**: Well in any case, thank you for reflecting on this with me and bringing arguments from the mainstream economics perspective.  

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