No, no and thrice no.

Adam Collyer left a new comment on Ricardo's Law Of Rent in action:

"Rental values for land will clearly be higher as the economy grows."

Good. Glad we're agreed on that.

"However, it does not follow that rent will represent an ever-increasing proportion of the economy."

Well it quite clearly does, however imperceptibly. Rents soak up the difference between an individual's earnings capacity and the bare minimum he needs to live on, hence the observation that net incomes, after tax and notional housing costs (i.e. 'the bare minimum')are pretty uniform across the UK, see e.g. The Daily Mail. This 'bare minimum' expectation has increased over time and I do not dispute for one second that we are, on the whole, a lot better off than fifty or a hundred years ago.

"The whole theory rests on the assumption that each unit of production requires a fixed quantity of land, and that quantity will only change as economic efficiency improves. That isn't true because land can be substituted by other inputs. For example, if land is too expensive, it can be partially substituted with capital e.g. by building a high rise building instead of single storey..."

It is quite obvious that the UK economy is not 'land based' in the sense that it is an agricultural society. We do not need a fixed quantity of physical land per unit of production.

But it is very much 'location based' - factories and offices need to be near where people live; people have to live near where the factories and offices are; shops need to be near where people are and people like to live near shops etc. Building better transport links improves location values, because employers have more potential employees; employees have more potential employers; shops have more potential customers and consumers have a greater choice of retail outlets, pubs, cinemas etc.

Even the mythical journalist who says he doesn't need land as he works from home on his lap-top needs a broadband connection (which has much the same effect as transport infrastructure) and the newspaper for which he writes has to be printed and distributed and sold like any other manufactured product.

Of course, you can build a ten-storey building in place of a single-storey building. 'Location value' has been magicked out of thin air, but the rental value of the underlying plot of land goes up by a factor of (nearly) ten as well.

"Land is actually no different from any other fixed asset."

Location values, like any state-protected monopoly are quite different from any other fixed asset (but very similar to things like radio spectrum, airport landing slots etc). The location is just there, it was always there, and will always be there. There was always a 51 deg North and 0 deg west, it just happens that this street happens to have had a massive conurbation built round it and has a Tube station at each end and one in the middle. That is what drives the location value, and then you multiply it up by planning permission to get your land value*.

Other fixed assets cars, machines, computers or buildings have to be created by human effort. Their value (in a free market) is the cost of manufacturing them plus a profit margin minus depreciation (any less than that, the manufacturer goes out of business; any more than that an new entrants will compete the price down).

You cannot (significantly) increase the price you can sell a car for by selling it in Central London rather than by selling it anywhere else in the country. Slightly different rules apply to things consumed-at-point-of-use, like a hotel stay or a cup of coffee - these are more expensive in town centres because the value includes a rental element.

"It is bought with money and therefore acts as a store of value."

Cars, machines, computers and buildings are bought with money. They depreciate over time and end up being scrapped and replaced. The value of a location may change, but overall, the tendency is for them to increase.

"Its value depends on supply and demand like any other asset. And although the quantity of land in the economy is (mostly) fixed, the supply of land is not fixed (in economic terms), because it depends on people's desire or willingness to sell it."

The supply of land is fixed. The supply of 'location' is not quite so fixed (we can always build more buildings, or build more transport infrastructure) but that merely pushes up the rental value of the land on which that building stands or the areas that are now near stations or a motorway junction.

"In actual fact, over the last couple of centuries, the proportion of output devoted to wages has increased enormously."

I wasn't talking about 'wages'. I was talking about the share of the rental value of land as a proportion of the whole economy. And that does tend to go up over time, it is an observable fact. Conversely, during a downturn, rents and land prices tend to fall faster than anything else, that is also an observable fact.

How the total profits of the productive sector are split between "employer" and "employee" is an entirely separate issue, and this split appears to be fairly consistent over time (if too many people think that they are underpaid and that profits are too high, they will set up their own business and compete away the differential).

"To suggest that the decline in the nuclear family (more divorce, more single parents, longer lifespans, better education etc etc) is caused by increases in land values, is questionable. Surely it is the other way around."

It's a bit of both, and the rise in the number of single people is of course driven by cultural things (more divorce), longer life expectancy etc. In any event, it is the rise in selling prices of houses prices which has helped to drive these changes and NOT increases in rents, which have risen far more slowly. There was and still is a huge bubble in house prices; there was no bubble in rents (how could there be?).

As Adam C himself has said, we could prevent house price bubbles by allowing more houses to be built. That would indeed help keep average selling prices down (demand being price inelastic - a ten per cent increase in quantity = a twenty per cent fall in selling prices), but it would in fact increase the total rents that could be collected from all existing houses (demand being price elastic - a ten per cent increase in quantity = a five per cent fall in rents), which is what I was talking about.

* Lest ye think otherwise, I do not indulge in bashing of commercial landlords, as they bear the bulk of the Business Rates and pay income tax or corporation tax on what's left; and their gross rents are depressed by all the VAT, PAYE and corporation tax that their tenants pay. If we replaced all taxes on economic activity with Land Value Tax, it is quite possible that a lot of them would end up with higher post-tax incomes - but there's only one way to find out...