Capital: "The tyranny of land"

Thank goodness a real journalist took on this subject matter. I was going to stitch something together after I saw Ryan Avent's piece at The Economist, trying to time it with the next bungee jump in natural gas but seeing how Izabella was actually talking about the topic over the course of the last couple years, gentle reader is in much more capable hands.
From Dizzynomics:

The fantastic Karl Smith is blogging on FT Alphaville at the moment, and I just wanted to direct everyone’s attention to one of his most recent posts.

It’s really good.

He jumps off the work of Piketty, to make the argument that land capital is capital but of an entirely different order. This is mostly due to its non reproducibility.

Smith argues — and I fully agree — that a key attribute of capital is that it tends to increase over time. What’s more, as the quantity of capital increases, the return to capital is driven down.

It is all about the return on capital vs. the growth rate of the economy. When capital returns fall below the growth rate of the economy, the economy adapts to diminish the capital stock. So capital stock expands for as long as returns are outperform the growth rate of the economy, but declines once they stop doing so.
He uses the dotcom boom to illustrate the phenomenon. As the value of tech stocks rose, the economy responded by producing ever more tech stocks — until of course there were too many, and it became clear not all of them could be winners in a crowded space that depended on scaleability, popularity and economies of scale.

Infinite value went to zero value very quickly — unless you were in the lucky position of being the best of the best — as the system reordered itself to diminish the oversupply of idle or unnecessary capital in the system.
Two key pars:

This automatic correction mechanism is not an anomaly but a fundamental feature of capital. Because capital is reproducible, high valuations invite competitors. Competitors soak up the oxygen and drive the valuations back down. Land does not have this correction mechanism and, as Piketty shows, land in the Ancien Regime of France was twice as valuable — relative to the economy — as capital ever has been.
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In the wake of the subprime crisis, I understand the temptation to rally against big banks and global finance. However, Lehman Brothers is dead. Sam Zell, founder and CEO of Equity Residential, is still alive. This is not an accident. The future does not belong to high flying titans. It belongs to dogged men and women who squirrel away rent checks when times are good, and buy your home when times are tight. This is the tyranny of land. Ignore it at your peril.

Ultimately, the value of land is two fold: productive (i.e. how it can be used to produce a crop yield) or access-based (who is allowed to occupy or build on it)....MORE

Here are the backround links:
Smith:  Piketty and the case for land capital
Avent on Smith: Inequality: Capital and land
Smith responds: Not All Forms of Wealth Are Equally Pernicious

And if you'll excuse me, the natural gas market appears to be completely off its meds today, $5.084 after trading above $5.70 a few hours ago: