3. Land-linking capital, like canals and rails and city streets.
4. Land-capturing (rent-seeking) capital, like squatters' improvements, and canal and rail lines built to secure land grants, and dams and canals built to secure water rights. These land-seizing investments are never optimal for society, and always waste capital. Land-seizing investments are laid out by self-seeking individuals ("rational economic agents") with no expectation of ever recovering the capital invested because the payoff comes as title to land, which never wears out. Canal, rail, traction, water supply, freeway and other such promoters are always mainly in the business of selling lands.
5. Rent-leading capital. In urban growth, an example is overimproving land today, expecting higher demand tomorrow. This is "forcing the future." It occurs because there are "economies of simultaneity" in building. It is hardly ever economical to add stories to buildngs one at a time. If you are going to build to four stories, you have to do it all at once. Suppose today's demand is high enough to justify a two-story building, but you see the demand rising steadily over the 60-year life of the building. You build a four-story building today, and absorb early losses on the upper two stories, as an investment for future years. A city builds a four-lane street, where two would do today, anticipating higher future usage. It puts excess capacity in its water and sewer lines, for future growth. Such examples are legion.
Economies of simultaneity are related to economies of scale. Building higher, taken by itself, suffers diseconomies, aka increasing costs. On the other hand, building larger, with horizontal expansion, evinces economies of scale. It also requires more land, meaning more land rent. It comes into style during periods of rent-leading capital building.
II. Land-saving capital and economic instability.
In a speculative land boom, land prices go prematurely high. Premature high land values profoundly distort the character of capital investment. High land prices stimulate land-saving, land-enhancing and land-linking investments. This is a rational economic response when and if the market is sending the right signals. Ideally, an optimally high level of land rents and values serves as a community synchronizer, causing everyone to build as though others were going to build complementarily in sync.
However, in the frenzy of a speculative boom the market sends the wrong signals. Land is peculiarly subject to inefficient, random speculative pricing in booms because it has no cost of production, so its pricing is entirely subjective, i.e. based solely on forecasts of future rents and resale prices, with no firm cap based on cost.
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