Land speculation: does it have real economic consequences? [speculative booms in property values]

IN GENERAL, THE MAIN IMPLICATIONS OF A RISE IN THE PRICE OF LAND ARE INDIRECT AND ARE QUITE DISTINCT FROM THE EFFECTS COMMONLY ASSUMED. TO IDENTIFY THE EFFECTS OF LAND SPECULATION ON OUTPUT AND GROWTH, ONE MUST IDENTIFY THE IMPACT OF SHORT-TERM INCREASES IN THE PRICE OF LAND ON AGGREGATE SAVINGS AND ON THE INVESTMENT OF SAVINGS IN ADDITIONAL PRODUCTIVE CAPITAL. THE EFFECTS ON DISTRIBUTION OF INCOME AND ON AGGREGATE SAVINGS, INVESTMENT, AND OUTPUT IN AN ECONOMY AS A RESULT OF A RAPID BIDDING-UP OF LAND VALUES ARE DIFFUSED, TEND TO BE FELT ONLY WITH THE PASSAGE OF TIME, AND MAY IN ANY EVENT BE OVERSHADOWED BY OTHER FACTORS AND EVENTS. THE PROBLEM OF THE CYCLICAL NATURE OF AN UNUSUALLY RAPID BIDDING-UP OF LAND VALUES IS WHAT USUALLY PROMPTS MOST GOVERNMENTS TO TAKE ACTION AGAINST LAND SPECULATION.