An economic case for land reform

Land reform is concerned with intervention in the prevailing pattern of land ownership, control, and usage. In the case of land, which is freely traded in the open market, the UK Treasury supports government intervention when some form of market failure has been diagnosed, and if measures to correct for market failure can be shown to be cost-effective. Although market failure has been the subject of intense research effort in the field of environmental and health economics, its potential role in land markets has not been examined. With the prospect of new land reform legislation following closely on the creation of the Scottish Parliament, there is therefore, a need to explore the economic case for intervention in the land market based on market failure. The conclusions, based on the four case studies, are first that market failure is found to be present in the ownership and management of land, and second, that much could be accomplished without the need for new legislation or significant public financing. Although this paper has focused on Scotland and the context for land reform demands differs throughout the world, one conclusion of global relevance is that market failure, rather than the free-market per se is a more likely cause of social unrest over land. This can perhaps be best illustrated by local land monopolies and the barriers that they can create for poorer members of society seeking access to the land resource.