Abstract: The current chaos of knowledge and practice in land issues come from various unrealistic institutional designing of increase-decrease policy issued for saving the intensively-used land and protecting farming land. This article probes the misunderstanding induced by this policy by discussing the origin and practice of increase-decrease policy. The author holds that, in a practical view, such a system brings about an enormous waste of resources, while theoretically, such a system adopted as a basic system for designing the reformation of land system causes a serious error in cognition. While the nature of increase-decrease policy belongs to the virtual market, it can only transfer wealth but not produce wealth, which should be taken as a premise for the basic knowledge of understanding the increase-decrease land system.