[The Economics of Curbing Home Prices] Land Is Private Property

Many people say that real estate such as land or housing should be subject to public ownership. But just because many people support it does not make it right. In a capitalist society, making something government-owned requires proof that, if left to the private sector, it would not be supplied properly. But housing can be supplied better by private firms than by the government, and in the case of land, government ownership neither increases its quantity nor makes it more efficiently used. There is no reason to make housing or land subject to public ownership.

Some also argue that land or housing should be owned or managed by the government because they are indispensable to people’s lives, but that too is a leap in logic. Drinking water is essential to sustaining human life, yet private firms supply it very well. If the government were put in charge of supplying bottled spring water, competition would disappear, costs would rise above current levels, and quality would decline. The more essential a good is to daily life, the more efficient it is to leave it to a market in which consumer choice and competition operate. The same is true of land and housing.

Of course, unlike pencils or clothing, land use requires things such as urban planning. But there is no need to make land or housing government-owned or government-managed for the sake of urban planning. Land should, in principle, remain privately owned, while the government need only introduce planning to the extent necessary for harmonious use.

Calling for real estate to be subject to public ownership is in some ways akin to calling for a return to primitive society. Even today, indigenous tribes in the Amazon probably hold land as collective tribal property because the production and consumption of food are carried out jointly. But in a society where production and consumption take place on the level of individual families, it is reasonable for land and housing ownership to be individual as well. The increase in privately owned land in Ulaanbaatar, Mongolia, where private landownership did not previously exist, is due to the fact that the old system of communal landholding could not adapt to newly emerging industrialization.

Real estate such as land and housing should, in principle, be private property. Public intervention should rightly be limited to such measures as urban planning or the imposition of property taxes to finance city budgets.

* This article is part of an Op-Ed contributed by Director Jungho Kim to JoongAng Ilbo on December 6, 2006.

Original title: [집값잡기의 경제학 ] 토지, 사유재산이다

Author: Center for Free Enterprise (CFE)

Date: 2006-12-14

Source: https://www.cfe.org/bbs/bbsDetail.php?cid=column&pn=20&idx=10688