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Efficiently using the land

  • Published at 09:27 pm February 9th, 2019
The economics of land

How can we save our remaining wild areas?

It will sound strange to insist that the plight of the Rohingya shows us the necessity of economic efficiency, but it is so. This newspaper details the manner in which they and the elephants of the locality are in -- currently mild -- competition with each other for the same patch of forest. Necessitating an elephant watch to make sure that clashes between the two uses don't cause deaths. On either side of course, although, we clearly and rightly value a human life above an elephant one.

But think this through with the slight squint that economists always give to things. We have this scarce resource here. And note that economics is the study of the allocation of scarce resources, so the economic way of thinking is the right one here. We have got those two groups each wanting to use that same resource to do different things. 

Or even the same thing for each group -- live there. We need to try to work out how to use that scarcity as effectively as we can so that the maximum amount of living can be done by all users.

That is, we have a problem here of economic efficiency. If we humans can do our living on less land then there’s more forest available for the elephants to live in.

So far, this is so obvious. Well, of course. If we cut down the forest to build houses -- there is no forest for elephants to live in. If elephants maraud in every corner of it, then there’s no room for the Rohingya. Obvious, and we don’t really need an economist to tell us this.

Yet, this applies to every scarce resource there is. Anything at all which is an economic item is scarce. If it’s not scarce, if there’s an unlimited supply, then economics doesn’t apply.

And pretty much everything is a scarce good. Those things that are not public goods like invention, say, we have to make special rules about, because they are different -- we can treat them differently. But all those which are, we have to promote efficiency in the use. Simply because the less of whatever it is we use to do one thing then the more of it we can use to do another.

So, imagine we can make our computers with 1g of gold, or we can make them with one-tenth of 1g. That’s not far off from what we have done in recent decades as the gold plating on the boards inside becomes thinner. By doing this, we can either make ten times as many computers from our same one gram of gold or, perhaps, we can use the gold saved to make fillings for teeth, or in the electronics for a baby monitor, or, well, pay for imports of natural gas maybe?

Or labour -- despite what it might seem like with so many unemployed. It is still true that human labour is a scarce resource. So, we want to use the least of it possible to achieve our task. Say, we might use a tractor out in the paddy field rather than hand labour. Or a train instead of rickshaws. By doing so, that means we’ve more labour to do other things -- make garments, or work in hospitals, or maybe just play with children. For who doesn’t think that happy children are an increase in wealth?

Or perhaps we should stick with our example of land and the environment. If we humans use less land then that leaves more for the elephants. And we do think that it’s a good idea to have elephants around, we value their existence. But this applies more generally to our use of land. The less of it we use for human activities then the more there is left for everything else, including the Mother Nature that we do indeed applaud.

This being the argument in favour of efficiency in farming. We want to produce the most food we can from each acre of land. Simply because this means that we can use more land for other things. Like, just being nature. This is also the argument against organic farming and in favour of industrial, chemical-fed agriculture.

Yes, it can indeed be true that modern, industrial agriculture can get out of hand. Too much fertilizer use can leach into rivers and even the sea, causing dead zones and the like. Nitrogen emissions do add to climate change. And yet, the one thing that is simply true, absolutely so, is that organic agriculture requires more land for the same level of output than industrial farming. And the more land we’d like to have for nature to thrive in, then the less we might want to use for our farming.

All of which leads to a slightly odd conclusion. Yet one that is true. We all agree that we’d like to save the Sundarbans. The way to do this is to make the rest of Bangladeshi agriculture more efficient in its use of the scarce resource, land, so that we neither need nor want to go and farm the Sundarbans. That is, industrial agriculture will, through its land efficiency, save the remaining wild areas.

Tim Worstall is a Senior Fellow at the Adam Smith Institute in London.