Data on the distribution of wealth shows that standard neo-classical models of economic growth cannot account for observed facts. Some scholars argue that rents (e.g. on land) are crucial in explaining what we see.
In a Ricardian world, we work with land in the extensive margin. Land is a factor of production, and rent determines cost and exchange value. Urban economists like von Thunen coupled land with transportation costs. This influenced William Alonso in the 1960s to develop a concentric land use model, in which land rent is determined as a residual from a fitted bid-rent curve. It seems that all these scientific works have to be integrated into a macro model to enhance the input of land in the creation and distribution of wealth.
Coming to Marshallian world, national wealth (dividend) is defined as an aggregate of wealth produced by labour and capital acting upon "natural reosurces"......That measn, land plays an important hand in macrodynamics/economics. As rightly said, (Prof Ramrattan), these works need to be integrated into a well designed macro model rather than be confined to price theory per se.
I think that land is very important production factor. It is essential in agriculture and natural resource harvesting. I agree that land was used already in economic models of the 19th century but does not appear in modern macroeconomic textbooks (although is present in regional science, urban economics and agricultural economics). it happened for about a century that land was combined with capital in macro models, although they are not full substitutes. Land is finite and heterogeneous in productivity, also location specific, while financial capital has none of those properties. I suggest an interesting book of Brian Czech "Supply shock" published in 2013, where he discusses the history of land concept in economic theory.
To my view, land must be used separately from capital. Yuri well said that land have diverse productivity depending upon type of soil and so varies the variable cost. An other reason is that most of the time land appreciate over time while capital depreciate.
Land, i.e. natural resources, are needed to produce goods and services, but they don't need to be owned. There are examples of wealthy nations and areas that do not have many natural resources at all. Bill Gates had a garage. So, there should not necessarily be a strong correlation with growth and land. However, some particular goods such as oil or foods obviously require land and are one reason that there can be at least some correlation.
Growth requires significant infrastructure and a proper mix of laws but without heavy regulation. Evidently the right mix is hard to find.
In my model of macroeconomics, (see Wikimedia, Commons, Macroeconomics,: DiagFuncMacroSyst.pdf which should be enlarged to see all of the factors and flows) which incidentally is a unique way of including all of our macroeconomics or social system of a country (no other model does it properly), the 6 entities include the landlord and his various activities. Thus the effect of land on our social system is properly included, as a necessary effect. Land is not durable capital (nor wealth) since it is not the result of labor and its value is mostly dependent on the surrounding population and their ability for access to it.
This model is designed to be fully comprehensive yet as simple as possible, without being oversimple, as per Einstein's criterion for a good scientific theory. When land is included with capital, as in many past theories, the results do not allow for the way that the dynamic changes affect land in a different way to how they affect durable capital, thus from a functional way land is unique and must be separately included.
Speculation in land values is the single worst cause of failure for a national economy to progress, due to the opportunities the land bestows being withheld. It causes the land in use to become more scarce and costly to use, and the result is that production and dwelling costs are unreasonably high, demand is not met and many people are poorly paid or out of work and living in poverty.
I should have mentioned that the development in our social scientific knowledge about land that resulted in Henry George's book "Progress and Poverty" of 1879 was cut short when John Bates Clark and his political supporters, who were the monopolistic owners and speculators of valuable sites, caused this nascent macroeconomics theory to be distorted, by combining land with capital. George went on to propose a "single tax" on land values which would have turned our present social system into a more natural and successful one. Practical examples of these kinds of benefits are still visible today in such places as Hong Kong and Denmark.
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