Chapter 9b

Land Reform Principles of Adam Smith Icon

August 2, 2022

In Book 3, Chap 2, Adam Smith writes that people should own land only as they can productively use:

A great proprietor is seldom a great improver. In the disorderly times which created those barbarous institutions, the great proprietor was employed in defending his own territories and extending his jurisdiction over his neighbours. He did not have time to cultivate and improve the land. When law and order was established and afforded him this leisure, he often did not have the inclination nor the needed abilities. He frequently had no stock to improve his lands because his expences frequently exceeded his revenue. If he was an economist, he generally found it more profitable to use his savings on new purchases than in improving his old estate.
To improve land with profit, like all other commercial projects, requires an exact attention to small savings and small gains. A man born to a great fortune is seldom capable of this attention.. He would rather focus on ornaments which please his fancy.. He embellishes perhaps 400-500 acres near his house, at 10 times the cost of the land after all his improvements. He finds that if he improved his whole estate in the same way, he would be bankrupt before he finished 10% of it. The Simple Wealth of Nations
There are still some great estates in the United Kingdom which have continued without interruption in the hands of the same family since feudal times. Compare the present condition of those estates with the possessions of the small proprietors near them, and you will see how unfavourable such extensive property is to improvement. The Simple Wealth of Nations

To Smith, the land should be broken up in order to:

  • spread the risk of loss
  • increased productivity and cost-efficiency by letting the owners micro-manage their land better

The problem is that, nowadays, land is distributed to anyone regardless of their ability to farm or to make the land productive. This is especially common in socialist countries such as Venezuela wherein its leader, Hugo Chavez, gave land to poor people who didn’t know how to farm or maintain irrigation equipment. This policy backfired and led to decreased agricultural production, which then led to hyperinflation.