LONDON – A recent report revealed that the five richest families in Britain are worth more than the country’s poorest 20% combined. Some of the wealth comes from new business ventures; but two of the five are a duke and an earl whose ancestors owned the fields across which London expanded in the nineteenth century.
Urban land wealth is not just a London phenomenon. As Thomas Piketty’s recent book Capital in the Twenty-First Century shows, accumulated wealth has grown rapidly relative to income across the advanced economies over the last 40 years. In many countries, the majority of that wealth – and the lion’s share of the increase – is accounted for by housing and commercial real estate, and most of that wealth resides not in the value of the buildings, but in the value of the urban land on which it sits.
That might seem odd. Though we live in the hi-tech virtual world of the Internet, the value of the most physical thing – land – is rising relentlessly. But there is no contradiction: The price of land is rising because of rapid technological progress. In an age of information and communication technology (ICT), it is inevitable that we value what an ICT-intensive economy cannot create.
ICT has already delivered remarkable new products and services; but, as MIT’s Erik Brynjolfsson and Andrew McAfee argue persuasively in their recent book The Second Machine Age, the really dramatic changes are yet to come, with robots and software bound to automate out of existence a huge number of jobs.