2. Resource Rents

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“no-one can own the fish of the sea” — Mr Justice Cranston, in a high court ruling on fish quotas, 10.7.13 (1)

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Amongst economists it is generally understood that the term ‘land’ includes all natural resources – all gifts of nature; natural forests, wildlife, minerals in the ground, fish in the sea etc.   This definition raises the question of ownership, exploitation rights and also the concept of  ‘resource rents’.  Justice Cranston’s ruling could apply equally to all natural resources.

The overriding principle here is that no individual or organisation has the right to appropriate or exercise control over any gift of nature (including land) without recognising the debt to society, in the form of an appropriate payment.  Such payment may be described as a Resource Rent.  A land value tax is a similar payment, known by economists as the economic rent.

Urban land however should be distinguished from other natural resources, and the distinction between agrarian and urban land emphasised.  Agrarian land may have value already due to natural circumstances, and this may be increased through directly applied work.  Urban land however requires no such work; it simply has to be there.  The three dimensional resources of coal, oil, fish etc. are tangible physical resources that require work to convert them into tangible wealth.  With urban land, what is being considered is a two dimensional area on the surface that only has value because of its location within an agglomeration.  All other natural resources require work directly applied to the resource to realise its value.  Where tangible natural resources are concerned the increase of land value due to agglomeration does not apply; the natural resource may be remote from the land that benefits from its exploitation; as explained in item 3, Industrial Land Values.

In the explanation of part 2 the increase in value of the sites is due to direct occupation or work applied on the site in question.  This does not apply where natural resource exploitation is concerned.  The increased land values in Aberdeen are due to remote ‘work on land’ a hundred miles away in the North Sea.

For all these reasons it is more appropriate for the wealth derived from natural resources to be ‘taxed’ through a licensing or leasing system, whereby a private entrepreneur is granted a lease to exploit the natural resource for an agreed return over an agreed period to the controlling government.

Another option is for the government to invite companies to bid for a contract to carry out the extraction.  Who ever came in with the highest bid and the best terms and conditions would get the contract for a fixed period.

(1) http://www.theguardian.com/environment/2013/jul/10/fishing-quotas-smaller-vessels-court