Land "Scarcity" and the Secondary Market Effect

Land scarcity in David Ricardo's time was quite real, due to existing constraints in food production. Prior to the technological gains which greatly reduced the land needed for cultivation, more rent would continually accrue to landlords who didn't need to do anything, to improve their original land holdings. While a similar process continues to play out today, land scarcity in terms of food production is no longer a problem in the same sense. Meanwhile, the "scarcities" of desirable real estate, are merely a portion of the captured rents of the present.

Earlier land scarcities - in terms of feeding growing populations - have been replaced by land scarcities which reflect problems in the replication of local economic complexity, for important facets of knowledge use. Unlike the primary markets that are capable of creating decentralized locations for new wealth, secondary markets are especially reliant on national and state redistribution of already existing wealth.

This secondary market factor is aggravated, by the degree of core knowledge use in society which remains dependent on primary market wealth. Consequently, excessive secondary market dependence means arbitrary caps on overall growth, and caps on new formation of organizational capacity. Hence the scarcity of affordable land or housing by which to live close to one's work - particularly in the most dynamic areas where secondary markets exist alongside primary markets. Another way to think about this scarcity, is in terms of serendipitous agglomeration effects which are so important for wealth creation.

Unlike the primary market (tradable sector) of food production, knowledge use as a secondary market has not been particularly amenable to innovation. This inability for knowledge based services to provide growth through internal or decentralized means, is all the more problematic in times of economic stagnation. It's a form of organizational capacity which also encourages low populations densities, in the cities most reliant on captured knowledge rents. One could say that the artificial scarcity of property availability in the most desirable cities, parallels the artificial scarcity of knowledge based property, given the secondary market origins of so much present day knowledge use.

Interestingly enough, different incentives exist for the density of cities, according to the degree to which their economic activity is more closely linked to primary or secondary market formation. While plenty of services may also be found in more dense cities with a greater degree of primary market formation, the high density cities of some nations generate secondary market formation on more informal terms (less monetary compensation), than cities where knowledge based service providers have the political power to sway local leaders to maintain lower population densities.

The same population limits that apply between local citizens, are in turn reflected in attitudes regarding immigrants. Developed nations often welcomed both immigrants and high city population densities in the past, when city growth was comprised of a large degree of expansive primary market formation. But present day limits in secondary market growth, make it appear as though immigrants are competing for both production and consumption of budget driven services.