When you start learning about economics, one of the first things you are taught is there are four “factors of production” — the things an economy uses to make stuff. These are labour, capital, innovation or entrepreneurship and land. As you learn more about economics, you will hear plenty about capital, labour and (hopefully) innovation, but there’s a decent chance you won’t think much about land again, expect perhaps to note that oil comes out of the land. Economics seems to have forgotten about it. But land has made a big comeback in our lives — it is central to the environment, to the housing crisis and to a big slice of our national wealth. And if we want to understand what land means to the economy, we can look at the land-based economy of the middle ages.
It’s well known that most people in the middle ages worked on the land. They mostly lived in villages organised around farmland. They grew crops and kept animals, produced wool and leather for clothes, cut wood to keep themselves warm and dry, and extracted metals and stone to make tools and buildings. Most of what they produced and consumed came from the land, or was relatively straightforward to manufacture from natural resources.
Land was the bedrock of the economy, and the key source of wealth and power. To be rich in medieval Britain mostly did not mean having money in the bank — it meant owning or controlling land. The richest people in the middle ages were royals and aristocrats — the people who inherited the land.
This land-based economy made life a lot easier for the monarch and nobles. It is a lot easier to control land than other forms of wealth. You can’t hide land down the back of the sofa when the tax collector comes round, and you can’t move it to another country if you don’t like the way your current one is going. When William the Conqueror wanted to find out how much his conquest was worth, he didn’t need to make any fancy GDP calculations. He just sent his men out to count the land, the animals and the people — and they wrote it down in the Domesday Book. It was the first log of the English economy, almost all of it based on land.
This isn’t to say that people didn’t have money — there are plenty of medieval coins left in the ground to be dug up by archaeologists and detectorists — but the money would mostly be used to trade in the fruits of the land, in place of bartering. There were merchants, manufacturers and networks of international trade, but they were a small part of the economy, and much of what they traded in was natural resources.
We can see just how important the land was to people’s livelihoods by looking again at the impact of the Black Death. We saw last time how the Black Death caused the population to almost halve in a few years, a tragedy for almost every town and village in the land. It also shrank the overall size of the economy dramatically, a disaster for the King which meant less tax and fewer men to fight.
But for those who survived, the Black Death improved their standard of living, in material terms at least. It increased GDP per capita from around £800 per year to over £1000 per year (in today’s prices). The total size of the economy may have shrunk dramatically along with population, but each surviving person’s share of it was greater. An extra £200 doesn’t sound like much, but it’s a 25% increase in income, a huge change. Today, our GDP per capita has risen by 25% since 1997 — just think how much stuff we have now that we didn’t have in 1997.
The main reason for this jump in income was that fewer people meant more land to go round. The amount of arable farmland per person increased from 2.7 acres in the 1340s to 3.8 acres in the 1350s. An extra acre of land per person! And that’s only for land with crops grown; there was more land for pasture, and more animals to go round. The average number of sheep per person went from under 3 to just under 6 — because the Black Death killed people, not animals. So with an extra acre of arable land and twice as many sheep, the average survivor of the Black Death could, with their labour, produce more food, more wool and presumably more wood. They could trade some of the extra produce for other things as well — perhaps more pottery, materials for a nicer house, better tools or weapons. More land per person meant, overall, more money per person. You can see this very clearly in the chart below — just look at how GDP per person and land per person follow each other in lockstep*.
But is it really that simple? Surely the devastation of the Black Death must have weakened the economy in other ways? Surely people’s labour mattered as well? After all, the land doesn’t farm itself.
Well, yes, that is true. There was a decline in the overall amount of land planted with crops — about 2.8 million acres of land, 9% of all the land in England, was taken out of arable production after the Black Death. People presumably had a limit to how much they could each farm using the methods of the time, and some land went out of use. (In fact, the amount of arable land in England took 500 years, until the Victorian era to recover to 1340s levels). The crop yields from arable land — the amount produced per acre of land — also dropped sharply in the 30 years after the Black Death. Perhaps this was because people had less time to farm each acre thoroughly (too few people to collect the full harvest for example); perhaps it was some other form of devastation (the plague recurred repeatedly over those decades, while a lot of farming know-how would have died out after 1348). You can see both of these shifts in the graph below — watch for the big dip after 1349**.
These losses in arable farming did reduce the size of the economy — although pastoral farming did not suffer the same immediate drop. But the drop in the amount of farming was less than the drop in number of people — which is why, per person, the Black Death made people better off.
The lesson is clear — to an individual person, land was by far the most important thing in the medieval economy. It was the only economic asset really worth having, besides your own labour. If you wanted to get rich, your best bet was to get hold of land — by conquest, by marriage, by courting favour with royalty, by whatever means you could.
Unfortunately, there is a big downside to having an economy based on land: you can’t make any more of it. England today has roughly 32 million acres of land; England in the Middle Ages had roughly 32 million acres of land. So if the amount you can produce per acre of land stays constant (as it did roughly through the middle ages), your economy doesn’t grow. You might transfer the wealth around between different people, but there is a fairly tight limit on how much the economy can expand. That, in a nutshell, is why most countries spent most of history before the industrial revolution in a pre-growth survival mode.
This also means that, in a land-based economy, people see everything as a zero-sum game. The only way to get richer is to take control of land from someone else. That’s why Kings and Queens focused so much on conquering new lands. That’s why mercantilism was the dominant philosophy among merchants for a long time after the middle ages was over (more on this in a future blog hopefully). And it’s a big factor in why many European nations began colonising other parts of the world after 1492 — because they thought the only way to get richer was to control more land.
So why does land matter to the modern British economy? Today, we still use 70% of the land in the UK for farming, but it makes up less than 1% of our economy. Our economy is definitely no longer based on the land.
First and most important is that, in economics at least, land is almost synonymous with the environment. The way we use our land has a huge bearing on the environment — whether it pollutes or cleans our water, whether it protects or exposes people to deadly air pollution, whether it emits or absorbs carbon. Climate change has a large and ever-growing impact on the land — whether our towns and cities are built in the path of floods and tidal surges, whether wildfires will make parts of the world uninhabitable, whether there will be enough water to sustain human life and support food production across vast swathes of the planet. Climate change and environmental breakdown may not be caused by the land alone, but they are primarily land- and water-based problems. Until too recently, economics largely forgot to count the impact that land and the environment has on the economy, and on the viability of life in many parts of the world. There has been some recent progress — with ideas like Natural Capital and far more serious thought around tackling climate change — but the scale of the problem is far outpacing the solution.
Second is the role land plays in housing. Many parts of the UK have housing shortages, which leads to house prices which are very high relative to people’s incomes. As a result, houses in the Britain are worth a total of £5 trillion — which makes up 35% of the country’s total wealth, not far below the value of all private pensions. And a big share of this wealth is based on the value of the land, not the buildings themselves.
The shortage of housing is not down to any problem with building homes themselves; it is down to a shortage of land available for housing. Although there is a lot of land in Britain — around 12% of land is developed — the planning system limits how much of this can be used for housing, in the interests of improving the quality of the nation’s towns and countryside. But this leads us to a surprising situation: land in Britain, the same land we had in the middle ages, is now worth trillions of pounds, despite not producing anything directly. There may be some rationale for this remarkable change in value — people place a very high value on living in certain places, especially around cities — but it also suggests some significant inefficiencies in how the land is used.
These problems — climate change and the housing crisis — are now well understood and analysed by economics. But it is surprising how little we factor land into analysing how economies succeed. Land now plays a major role in how successful and prosperous different economies around the world — in terms of how exposed the land is to climate change, and how much of it is available to support housing and economic activity. We may have moved on from the land-based economy of the middle ages, but we must not lose sight of the crucial role land still plays in our lives.
* All three series in this chart are indexed so that the value in the year 1270 is 100
** The yield figure in this chart is an average of 5 crops (wheat, rye, barley, oats, pulses) each indexed to their average yields between 1270 and 1400.
The data here is sourced from the Bank of England “Millennium of Macro” dataset. In particular, the agricultural data is drawn from Broadberry, Stephen, Bruce M.S. Campbell, Alexander Klein, Mark Overton and Bas van Leeuwen (2015), British Economic Growth, 1270–1870, Cambridge: Cambridge University Press http://www.cambridge.org/gb/academic/subjects/history/economic-history/british-economic-growth-12701870?format=PB