Reader's letter of the day

From the FT:

Sir, Asset price bubbles in financial markets undoubtedly show that money capital as a factor of production does not behave like consumer goods in a free market ("Capitalism and the credit crunch", Samuel Brittan, September 12). Nor does land, as the present housing crisis so manifestly proves.

Since land is not produced, its price is almost entirely demand determined; hence demand changes act almost entirely on price without affecting supply. The disastrous effect of this in the housing market is only too evident, for it is the land price element in "house" prices that fluctuates so much, not the cost of the building.

How much more evidence is needed that a tax on land values to reduce land prices permanently and, at the same time, to relieve taxes on things that really are produced, such as consumer goods and real capital, is the right way to make competitive capitalism work?

Brian Hodgkinson, Oxford, UK