An Even Deeper Look at the Law of Rent

Now let's suppose (as is entirely likely) unemployment is a part of our economic model here -- and that society uses some of its tax revenues to ease the burden of poverty. Let's assume that instead of 450 workers as in our earlier chart, there are 500 workers in this economy, but 50 of them can't find jobs. Let's further assume that the return to labor and capital at the lowest-quality land in the chart (1 per day) equals the payment to "welfare" recipients. Thus, 50 units per day will have to be taken in taxation and redistributed to the unemployed.

(Does this raise further questions? Click here for a few of them.)

4 plots
of each
grade
of land
5 units per worker/day;
50 workers
per plot
4 units per worker/day;
40 workers
per plot
3 units per worker/day;
30 workers
per plot
2 units per worker/day;
20 workers
per plot
1 unit per worker/day;
10 workers
per plot
Unemployed
workers:

50

1. 50 x 5 40 x 4 30 x 3 20 x 2 10 x 1
2. 50 x 5 40 x 4 30 x 3 20 x 2 10 x 1
3. 50 x 5 40 x 4 30 x 3 20 x 2 10 x 1
4. 0 0 0 0 0Totals
workers
employed
150 120 90 60 30450
wealth
output
750 480 270 120 30 Welfare
cost
1650
infrastructure
cost
200 160 120 80 4050650

Now let's see what happens if we put those unemployed workers to work -- but without land speculation:

5 units per worker/day;
50 workers
per plot
4 units per worker/day;
40 workers
per plot
3 units per worker/day;
30 workers
per plot
2 units per worker/day;
20 workers
per plot
1 unit per worker/day;
10 workers
per plot
1. 50 x 5 40 x 4 30 x 3 20 x 2 free
2. 50 x 5 40 x 4 30 x 3 free free
3. 50 x 5 40 x 4 30 x 3 free free
4. 50 x 5 40 x 4 30 x 3 free free Totals Change
workers
employed
200 160 120 20 -500 + 50
wealth
output
1000 640 270 40 -1950 + 300
infrastructure
cost
200 160 120 80 -560 - 90

Notice that by using the land efficiently and eliminating unemployment, the community can afford to provide infrastructure and services where the land is free, even while spending less public revenue than before!


| Back to "The Law of Rent" | Site Map |