A large share of the gains from economic progress are captured by higher land rents, as opposed to higher wages or capital yields, such that landlords capture an outsized share of development through charging higher rents.

“Much of the gains from economic expansion and greater productivity are captured by higher land rent more so than higher wages or capital yields. If entrepreneurial profits in a competitive industry are greater than in other fields, firms enter and expand the supply, which reduces the product prices and brings profits down to normal. Likewise, if wages in an industry are higher than in others, entry expands the labour and reduces the wage to normal. But when economic progress raises land rents, the supply cannot expand, and rent rises. Where land is lightly taxed relative to wages, goods, and enterprise profits, the income of landowners rises while workers are tax-penalized. The resulting level of inequality is excessive in the sense of being more than is needed to provide incentives to enterprise and employment. Optimal inequality can be regarded as that which is generated by a pure market, having neither subsidies nor market-hampering taxation.”