1. What Determines Land Values
Comprehending the nature of the forces at work, helps to anticipate effects of economic and social changes
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2. Objectives Economic forces form land values
Land receives residual from production
Location determines land values
Productivity ultimately sets value
Anticipate effects of changes on value
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3. Basic Ingredients of Land Value
Economic concepts of land
Land underlies all human activities
Economic rent
Potential of the land
Contract rent
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4. Land, Takes What is Left Labor and capital with land
Varied employment opportunities
Sales of agricultural products
1970’s - Profits to farmers soared
Production-based land values
Pattern of land values and uses
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5. Prisoner of Its Location
Unique Characteristics of environment
Locations endows unique capabilities
Transportation costs
Familiarity with local area
Market value potential
Regional element of land value
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6. Group Discussion
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7. Endowment of natural resources
Module 2 - Review
Understand the economic forces that form land values and establish observed patterns of land use
Endowment of natural resources
Economic rent is net return or quantified summary of productive potential
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8. Module 2 - Review
Explain why land receives the residual revenue after other factors are paid
Can migrate to other uses
Farmers and ranchers must pay the going wage and market cost
Land is immobile
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9. Module 2 - Review Understand how location influences land values
Transportation costs
Rent declines with distance from market
Communities compete
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10. Module 2 - Review
Explain why productivity ultimately sets the value of truly agricultural land
Depends on value of activity or
marketed products less all costs
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11. Module 2 - Review
Anticipate how social and economic changes will affect land values
By understanding economic forces
economic shifts can be rigorously analyzed
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12. Self-Assessment Questions
Economic rent is
Location affects land value because
The extent of the stock of marginal land in production
In the 1970’s, previously submarginal land was broken out of grazing and put into crop reduction. This occurred because
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