Summary
Full transcript of Josh Ryan-Collins’ UCL Bartlett lecture on “Rethinking the Economics of Land and Housing” (co-authored with Toby Lloyd and Laurie Macfarlane). Ryan-Collins presents the case that house price dynamics in advanced economies are fundamentally driven by land values, not construction costs — land values accounted for 80% of house price changes across 14 economies since the 1950s. He traces how classical political economists (Ricardo, Mill, Smith, Henry George) understood economic rent, how neoclassical economics erased this through the land/capital conflation, and how the resulting neglect explains financial instability, rising inequality, and falling productivity.
Key Claims
- UK land values rose dramatically vs. house prices since 1945 — in real terms, land shoots up in late 1960s, late 1980s, and 2000s — these explain UK house price volatility — confidence: high [Source: Ryan-Collins, BSP Lecture, 2019]
- 80% of house price changes across 14 advanced economies (1950s–present) explained by rising land values — remaining 20% by construction costs — confidence: high [Source: Ryan-Collins, BSP Lecture, 2019]
- Classical economists (Ricardo, Smith, Mill) distinguished land from capital because: land is fixed, immobile, permanent, and appreciates rather than depreciates — confidence: high [Source: Ryan-Collins, BSP Lecture, 2019]
- Ricardo’s economic rent: “Determined by the cost to the laborer of farming the next most desirable unknown plot of land” — land rent is a monopoly price, unrelated to landlord effort — confidence: high [Source: Ryan-Collins, BSP Lecture, 2019]
- Classical economists proposed taxing land rents as the primary source of national revenue — later developed by Henry George — confidence: high [Source: Ryan-Collins, BSP Lecture, 2019]
- Neoclassical economics conflated land with capital (removing a distinct factor of production) — erasing economic rent from mainstream analysis — consequence: inability to explain rising house prices or financial instability — confidence: high [Source: Ryan-Collins, BSP Lecture, 2019]
- Post-financial-crisis: house price-to-income ratio did not return to long-run equilibrium — has been rising again since 2012 across advanced economies — unlike previous crises — confidence: high [Source: Ryan-Collins, BSP Lecture, 2019]
- Martin Wolf (FT): listed “Rethinking the Economics of Land and Housing” as book of the year — “The removal of land from the canonical neoclassical model of the economy was an intellectual blunder… has led to dreadful outcomes.” — confidence: high [Source: Ryan-Collins, BSP Lecture, 2019]
Notable Quotes
“Land has unique properties which mean it’s impossible to understand it through the narrow lens of neoclassical economics.”
“Our basic idea is that the fundamental reason is that land house prices are driven by land values and land values in fact are the real driver of both the volatility.”
“The neglect of land in economic theory not only explains this affordability crisis but also some of the other major challenges we’re facing including financial instability, growing inequalities particularly wealth inequalities and falling investment and productivity levels.”