The land issue is strategically important for any country, and countries like Georgia it is vitally important. In the work below we concentrate attention around the issue of putting agricultural land in the international free market. The problem is analyzed in condition of land price, land rent, demographic situation, agricultural subsidies and so on. As conclusion we represent opinion that, it is unacceptable to put Georgian agricultural land in international free turnover, because country can lose significant part of agricultural land and the possibility of development profitable agricultural sector.

Introduction

There has long been a discussion on land legislation in Georgia. The idea of placing agricultural land on the free international market is still valid, which is allegedly justified by the economic arguments. Proponents of this approach state that the sale of agricultural land to foreign nationals will increase its value and consequently, will increase the capitalization of agricultural enterprises that in turn, will make it easier for farmers to search for resources and will contribute to the growth of economic activity. In classical economic sense, the higher the demand for goods, the higher is the price, although this seemingly doubtless truth, only partially and within certain limits reflects the mechanism of pricing on agriculture land and the justification of rise in prices of Georgian agricultural lands only by this argument is just economic primitivism. In the article, the authors indicate the absurdity of the abovementioned position and, on the basis of a clear economic logic, assert that the placement of agricultural land on the free international market will not promote the development of agriculture in Georgia. In agricultural land pricing, a number of factors should be taken into consideration, of which the most important is the land rent and legislative regulations related to agricultural lands. It is not by accident that the land rent is an important component of the land price determining formula. On the other hand, the essential part of the rent of agricultural land is land capacity. The universally recognized formula for determining land price is as follows: Land price = Rent ir X100% , (1) where rent is an annual rental value of land, but ir is a real average bank interest rate. Rental value of agricultural land is directly linked to land capacity, its quality, proximity to markets and means ♯а communication. As David Ricardo once noted, the land price is determined by the value of grown products, and not the other way around [1]. This finding of the great classicist of economics will be used during our subsequent discussions. At the beginning of article, the authors criticize the allegation that the growing demand for agriculture land is permanently causing an increase in land price. They believe that there is a certain ceiling in this case, after reaching of which, the land actually loses the agricultural status. In order to prove that, first of all, they use precisely the analysis of the land price formula. Rent = Land priceX ir 100% (2) From formula (2), which is a transformed version of formula (1), it follows that in case of a permanent rise in land price, the rent rate should also be increased. However, the basis for agricultural land rent is land capacity, and the value of products grown on this land determines land price, and not vice versa, when the value of agricultural products is determined by land price. Land capacity, as well as the yield, has an upper limit, and these qualities are restricted by the rates of technological development. For more detailed and specific judgment, let’s consider the following example: let’s just say that the land price has increased significantly due to increased demand.