How to Ensure That Land is Used in a Profitable Way

One of the challenges that government policymakers in many parts of the world face is that of ensuring that land is used in a profitable way. This is particularly hard in nations where land is individually owned: meaning that most of the parcels of the land are in private individuals’ hands, and they are at liberty to do with them whatever they want. The challenge then arises when you find individuals leaving parcels of land that would otherwise have been productive idle. You also have a challenge where even individuals who do use their land don’t seem to be utilizing it in the most profitable way. So the challenge is that of seeing to it that the individuals get to use their land properly (keeping it in mind that land is the first factor of production).

All said and done, there are several practical steps that can be taken to ensure that land is used in a profitable way:

  1. Land should ideally be allocated to individuals who have the capacity to develop it. In case the current land owners are unable to develop it, they should be encouraged to lease it out/rent it or even sell it to individuals who have capacity to put the land into profitable use.
  2. Proper land utilization laws should be put in place. In the absence of proper land utilization laws everyone does whatever they want with their land, often leading to sub-optimal productivity.
  3. Idle land should be heavily taxed. This is likely to force the individuals whose land is lying idle to put it into productive use (to avoid the ‘idle land tax’) or sell it to individuals who are able to use it profitably.
  4. It should be easy for individuals who want to develop their land to access capital. You realize that it many cases, individuals are unable to use their land profitably not because they prefer it that way, but because they lack the capital to develop the land. Therefore easy access to capital is critical.

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