Economic essays

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Monograph

Identifikator:: 1753623200

URN:: urn:nbn:de:zbw-retromon-136107

Document type:: Monograph

Title:: Economic essays

Place of publication:: New York

Publisher:: Macmillan

Year of publication:: 1927

Scope:: viii, 368 S.; Ill., graph. Darst.

Digitisation:: 2021

Collection:: Economics Books

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Document type:: Monograph

Structure type:: Chapter

Title:: Land economics / Richard T. Ely

Collection:: Economics Books

130 ECONOMIC ESSAYS IN HONOR OF JOHN BATES CLARK ily, Wise Normally all costs are expected to be paid eventually out of he income from the use of land. With land, however, we observe hat many people are induced to meet the ripening costs by the xpectation of recoupment out of an increment in land value. Do this observation is formulated the so-called law of ripening costs in land utilization. The costs falling upon the holder of land during a period of ripening use are soctally mecessary and are properly chargeable to the increment in land value resulting rom the change in use.* = Valuation of Land. The valuation of land implies the making of an estimate of the expected net income from the use of land over a period of years. In England the value of land is often expressed as “twenty or twenty-five years purchase” of an annual income. In the United States the expected series of annual incomes is summarized in one figure which represents the present alue of the succession of incomes and is called the capital value or selling value of the land. This process of capitalizing land income into a capital value is considered the heart of the problem f land valuation. he value of land is the sum of the present worth of future ncomes. Since men are so constituted that they are impatient or income, these future incomes are less desirable than a present one, and consequently are discounted. The rate of discount or rate of impatience for the community is usually the prevailing rate of interest. However, the rate of impatience may vary with practically every individual. Usually complicated methods of calculation are dispensed with and the annual income is divided by the rate of discount, the quotient being the capital or selling alue of the land. urther complications in the valuation process are introduced hen the future incomes or the rate of discount are expected to increase or decrease as time goes on. Moreover, it is recognized that market values do not always coincide with values determined by this method of capitalizing the net income, because various ersonal and psychological factors sometimes disturb the cal- A parallel in public utility economics is found in the “net deficit theory” by which losses sustained during the period of developing a going usiness are capitalized into the rate base. e should examine also whether the recoupment of ripening costs out of value increments is not merely another way of saying that the common practice is to discount income expectations in order to meet the heavy expenses of developing the services of land into a going business

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