Land is everywhere that man is; most men get their living from the land, directly or indirectly. Even those who live by or from the sea need a shore base or terminus. However, man is not ordinarily everywhere that there is land; a few deserts and the polar regions are too inhospitable to support men.

We use the word “land” to include all the characteristics and qualities of the earth, of what is popularly known as land; we do not limit it to soil, many more especially no one unable to reproduce.

Land may take many physical forms: plains, swamps, hills, mountains, or valleys; it may have many kinds of vegetation, such as forest, prairie, or tundra; and it may have one of many kinds of climate, from hot to cold, from humid to dry. It may also vary in numerous other ways. Space would not permit even a modest listing of the numerous kinds of land, in the physical sense; and our concern is more with its economic and social aspects. Land is useful to man in many ways: as a source of food, for wood for many purposes, for hunting, as a place to play, as a place to live, as a place to work. The uses of land are as many and varied as the whole range of human culture based on the earth.

Land has also often been the basis of political power. In the simplest relationship, this was because the franchise was extended only to landowners. But the same societies that gave high social position to landownership were likely also to give large political power to it. In colonial Virginia, it was the landed proprietors who governed the colony. Again, in many Latin American countries today, or at least until a few decades ago, political power rested heavily with the larger landowners. In modern United States, rural areas still have much more political power than do urban areas in proportion to their respective populations; while this is no longer directly tied to ownership of land, it largely arose from it.

Because land has been, and to a degree still is, owned for purposes other than to produce income, it is logical that goals other than maximization of income, especially of money income, should be uppermost in the minds of some landowners. It is frequently stated that much land is held in Latin America by owners who do not seek a maximum income from it. The argument goes that they are content with an income sufficient to meet their needs but that they own land for sentimental, historical, family, prestige, political, and other reasons. In some parts of Africa, ownership of cattle confers prestige, and land is valued in proportion to its ability to keep cattle alive, not in terms of income from it. Even within the United States, much land is held for consumption reasons, or as a hobby, or as a hedge against inflation, or for other reasons that are not connected with maximum current income.

The traditional economic factors of production are labor, capital, and land. In this broad classification, land is defined to include all natural properties but to exclude invested capital.

Land, if defined as the properties of nature without admixture of capital, has no reproduction cost because it is not capable of reproduction, and hence it has no supply cost or price. However, land, so defined, can and often does earn income when combined with other productive factors. If the others are paid at their reproduction costs or at their current prices—which over the long run tend to coincide—then the remaining surplus becomes rent.

Where rent exists, particularly where a monetary price is well known, it serves as a rationing device for land use. Only that use or those uses which can pay the rent can be undertaken. The most productive uses of land may have to bid the needed land away from somewhat less profitable uses. As in many aspects of economics, the next best alternative sets limits. However, something of the same result is sometimes achieved even when rent is fixed at artificially low levels.

The relation between inputs—of current production materials, such as fertilizer, and of labor and capital in various forms, into cropland or other land —and the resulting output is known as a production function. At a given stage in technological development, there is a more or less specific relationship between the inputs and the outputs. This does not preclude the use of additional inputs of fertilizer or any other productive factor, but says instead that the response will follow a known and defined path. The production function differs according to many factors, including climate and soil.

Modern science and technology have resulted in a vast array of new production functions, which have in large measure transformed the productivity and use of land. Much land not previously usable by man for agriculture, forestry, grazing, or recreation, for example, is today usable for one or more of these things because new technology has enabled man to overcome earlier critical deficiencies.

Man can place improvements on land by erecting buildings, constructing roads and fences, planting and improving forests, and so on. Before the improvements are actually made, the money they will cost is capital which might be used elsewhere. But once the improvement is constructed, it can ordinarily be used only jointly with the land; it is likely to have little salvage value apart from the land, if in fact it can be separated at all. For a long period of time, often for decades, these improvements are to all intents and purposes land itself.