obtainable for its annual rental, would bear the same ratio of percentage as the profits or interest obtainable for capital invested with equal security, and ease of return, bear to the sum invested.

The reasons why land bears its value, the causes which control its rise and fall in value; the proportion in which the value of products, produced upon land, is divided, between the cost of the labor expended upon them (wages), the cost of the capital loaned for their production (interest), the cost of occupying the working space (rent), and the residue (profit) remaining to the undertaker of the industry (entrepreneur) are supposed, by some, to constitute the very substance of the science of political economy. The current of English discussion, from Ricardo to Mill, has connected rent with fertility, or the inherent productiveness of the soil, and has almost confined the discussion to agricultural land.* Rent, however, has almost nothing to do with

*Adam Smith ("Wealth of Nations," Bk. i. Ch. xi., p. 67) says: "The rent of land not only varies with its fertility, whatever be its produce, but with its situation, whatever be its fertility." Dr. Smith scemed to hold that whatever the land produced more than was required to replace the stock (capital) employed in working it by a farmer and the ordinary rate of profit on capital, would go in rent to the landlord. But the notion that there is such a thing as an ordinary rate of profit on capital, is essentially visionary where some farmers will be losing their capital while others double it. But if there was an ordinary rate of profit on capital, then the capital invested by the landlord in the purchase of the land, and the capital invested by the tenant in working it, ought both to produce the same ordinary rate. But, in fact, such an "ordinary rate" nowhere exists. Dr. Smith again says (ibid.): "Such parts only of the produce of land can commonly be brought to market, of which the ordinary price is sufficient to replace the stock which must be employed in bringing them, together with its ordinary profits. If the ordinary price is more than this, the surplus part of it will naturally go to the rent of the land. If it is not more, though the commodity may be brought to market, it can afford no rent to the landlord. Whether the price is or is not more depends upon the demand."

If it was, in Dr. Smith's mind, a satisfactory solution of the reasons of the price of corn (wheat), to say that it depends upon the demand, why should it not have been an equally satisfactory explanation of the rate of rent of land to say that it depends on demand, and that the demand depends on the rate of profits on capital which the tenant expects to make by working it? The rent is evidently that sum which the landlord will take for the use of land rather than run the risk of getting a less sum, and which the tenant will pay rather than forego the use of the land. Its average rate may depend on considerations connected with security from enemies in war, its healthfulness, its nearness to forts, mills, schools, commons, churches, fairs, factories, game, fish, stores, rivers, towns, forests, its improvements, its newness or oldness, its deposits of guano, gold dust, sea shells, coal, marl, lime, etc., or its availability for manufacture or exchange, its salt licks for cattle, its nests for birds, its sightly view, or the form in which the landlord will take his rent, whether in service, crops, or money, and even on the sentimental attachment the tenant may feel for it as his home, and the fact that his ancestors are buried there.

Mc Culloch (note to "Wealth of Nations ") says: "The truth is that rent is entirely a consequence of the decreasing productiveness of the soils successively brought under

HOW RENT ARISES.

239

fertility, even in the case of agricultural land. In the case of residence, manufacturing, and commercial rents, the stars or the tides, the weather or the fashions, might claim an influence greater than fertility.

If a pageant will pass down Broadway at 1 P. M., continuing until five, a window fronting on Broadway, and previously of no value, will rent for perhaps $5 for the brief period while the

cultivation as society advances, or rather of the decreasing productiveness of the capitals successively applied to them."

The last statement is particularly unfortunate, as rent of land diminishes as we approach the frontier of civilization and of cultivation, yet the productiveness of the capitals applied to them increases, measured by the percentage along these frontiers, as the fact is that no one will there apply capital to cultivation at all, except where a high rate of return can be obtained on the small capital he usually applies. Moreover, a "decreasing productiveness of the soils successively brought under cultivation" is a totally unlike fact to the "decreasing productiveness of the capitals successively brought to bear on them." McCulloch, therefore, contradicts in the last half of the sentence the criterion laid down in the first half.

Ricardo says: "Rent is that portion of the produce of the earth which is paid to the landlord for the use of the original and indestructible powers of the soil. On the first settling of a country in which there is an abundance of rich and fertile land, a very small proportion of which is required to be cultivated for the support of the actual population, or indeed can be cultivated with the capital which the population can command, there will be no rent ; for no one would pay for the use of the land where there was an abundant quantity not yet appropriated, and therefore at the disposal of whoever might choose to cultivate it." Ricardo's Works, by McCulloch, pp. 38-39.

Even this statement is not true in principle, since, however small the population might be, if it contained only two persons there would be a liability that these two might both desire the same spot, and if so it would have a value for which the person out of possession might be willing to pay, and this payment would be a price paid for space, of which rent is the annual equivalent. In the fairs held in savage lands the booths acquire a rent value. The fact that abundance of unoccupied land exists does not preclude a competition for the possession of the occupied, and this gives rise to rent. Ricardo further says (ibid.):

"On the common principles of supply and demand, no rent could be paid for such land, for the reason stated why nothing is given for the use of air and water, or for any other of the gifts of nature which exist in boundless quantity."

This also is an error, since land having a particular location never exists except in one limited quantity. It can not be duplicated. Suppose the very simple case of two savages fishing on adjoining rocks, one of which is only large enough for one person to stand upon. The savage standing on this rock is catching fish as fast as he can take them from the hook. The other can take none whatever. After enduring this several hours and taking no fish, the savage on the inferior location says to the savage on the superior location, "If you will surrender your rock to me, I will give you half the fish I catch while there." The offer is accepted and fish are caught there by the new man. The fish he pays for the rock are rent. Hence the presence of a continent of unappropriated land is utterly futile to prevent a payment for appropriated land.

Ricardo continues: "If all land had the same properties, if it were unlimited in quantity and uniform in quality, no charge could be made for its use, unless where it possessed peculiar advantaegs of situation."

pageant is passing. The principle which governs the price of the window exactly defines all economic rent. It is a payment for space, which is competed for actively, because of its nearness to the societary movement, in which the tenant desires to participate. It is the pageant going down Broadway, and the competition between the many desirous to see it, that puts a rent on the window. Fertility is like the placing of chairs at the window. If

Precisely as Karl Marx, in treating of the cause of value, sets out by affirming that it is labor only, and then introduces the qualification of “ socially necessary" labor, which changes the cause of value from labor to demand, so by a similar shift Ricardo, in the midst of his argument that fertility causes rent, qualifies it by saying, except where location causes it." This really gives away his whole point. For if it depends on location relatively to the demand for its products, then it can not depend on fertility, since land having the right location can have its fertility supplied; but land, whatever its fertility, can not have its location changed relatively to pɔpulation, except by changing the movement of population.

Ricardo further says (p. 36 ibid.):

"Thus suppose land-No. 1, 2, 3-to yield, with an equal employment of capital and labor, a net produce of 100, 90, and 80 quarters of corn. In a new country where there is an abundance of fertile land compared with the population, and where, therefore, it is only necessary to cultivate No. 1, the whole net produce will belong to the cultivator, and will be the profits of the stock which he advances."

What a bold assumption! The cultivator may give half his crop to some man with a lance or on horseback who protects him from savages. The first cultivators were nonfighting serfs and villeins, who paid rent in service chiefly that they might be protected by the military power of their lord from marauders and robbers, or at least might escape his own power to rob. They paid rent to power for security, and may have chosen, as Mr. Carey points out, the poor and thin lands near the baronial castle rather than the more fertile lands where less facilities would exist for safety. Future," by H. C. Carey.

Past, Present, and

Ricardo continues: "As Foon as population had so far increased as to make it necessary to cultivate No. 2, from which ninety quarters only can be obtained after supporting the laborers, rent would commence on No. 1, for either there must be two rates of profit on agricultural capital, or ten quarters or the value of ten quarters must be withdrawn from the produce of No. 1 for some other purpose."

Here it will be seen Ricardo bases his whole notion of rent on the sublimely stupid generalization that there can not be two rates of profit on agricultural capital, whereas the truth would be more nearly that of the many capitals employed in agricultural production in any country no two derive the same rate of profit. Of course but one average rate can be arrived at by striking an equation among all the rates of profit on agricultural capitals, just as one average height for all men might be reached by dividing the aggregated height of all men among the total number of men. But thus having arrived at an average stature for all men, how absurd would it be to argue that "either there must be two grades of stature among men," or, etc. There are as many rates of profit among agricultural capitals as there are grades of stature among men, and hence through the vent furnished by Ricardo's own exception to his theory of rent the entire theory escapes.

Roscher, like Adam Smith, blends the two causes of rent, viz., fertility and favorable situation. He says ("Political Economy," by Lawler, Vol. ii. p. 14): "Rent is that portion of the regular net product of a piece of land which remains after deducting the wages of labor, and the interest on the capital usual in the country, incorporated into it. Hence it is the price paid for the using of the land itself, or what Ricardo calls the

LOCATION AND RENT.

241

the location is satisfactory, the seats will be brought there. If poor land has the right location, relatively to large populations, it will be so tilled as to make it fertile. In the hanging gardens of Babylon, soil, subsoil, and strata must all have been carried to the suspended structures. The land itself was brought to the location. The indestructible property of the soil, on which English economists have laid so much stress, was brought to the point where it was demanded, and there created.

97. True Cause of Rent.-MacLeod well says:

"The only

original inexhaustible forces of the soil, which are capable of being appropriated. This price also depends, of course, on the relation between demand and supply; the demand in turn on the wants and means of payment of buyers, but the supply by no means on cost of production, which from the definitions above given is here unthinkable. However, land has this in common with other means of production, that its price (value) is mainly determined by that (aggregate value per acre) of its products." Again (p. 18) he says: "The favorable situation of a piece of land operates in almost every politico-economical respect in the same manner as its fertility. If a market to be fully supplied needs to be fed from a circuit of ten miles, the price must be sufficient to make good not only the other cost of production, but the freight over ten miles. Hence, therefore, all producers living nearer to the market, who have to obtain a smaller outlay for transportation, and yet obtain the same market price for their produce, make a profit exactly corresponding to the advantage of their situation."

The degree of stagnation in the European land-market, and especially the infrequency of sales of the estates of the great land-holders in England, seems to have wholly obscured to the European economists the view which makes land an investment of capital, as it is so generally regarded in America. As an investment of capital, rent is the effort of the owner to get a return on his investment, and it represents the sum the tenant is willing to pay for leave to use it as an implement of his industry.

Bastiat ("Harmonies Economiques," Ch. 9) considers rent as the interest on the capital laid out in bringing land under cultivation, and Hamilton in his report to the Congress on the manufactures of the United States, 1793, treats rent as the result of the capital employed in the purchase of land to produce an interest.

It is very certain that in the United States Hamilton's view, though deemed a vulgar error by Roscher (“Political Economy," Vol. ii. p. 21, note), is in harmony with the fact that rents of real estate, after deducting taxes, insurance, and charges for trouble of superintending real estate, conform very exactly to rates of interest on money-so exactly that there is no substantial difference economically between being the mortga gee to the full or nearly the full value of land, collecting interest on the loan, and being the landlord collecting the rent. The rate in both cases would be the same-showing that the principle which governs rents of real estate is the interest and profit which the capital invested in them would earn in other modes of investment. So MacLeod says

(Vol. ii. "Econ. Phil." p. 21) that rent of land in England rarely exceeds 2% to 3 per cent, on the value of land, whereas in the United States it is usually from 7 to 10 per cent. in newer and 3 to 6 in older communities.

Locke ("Considerations on the Lowering of Interest," Works, ii. 17, ff) maintains the close parallel between rent and interest. This may be truer, however, where land is freely exchanged into money, and vice versa, as in America, than where it is not.

John Stuart Mill ("Principles," Vol. i. p. 516) says: "The land is the principal of the natural agents which are capable of being appropriated, and the consideration paid for its use is called rent. Landed proprietors are the only class of any numbers or importance who have a claim to a share in the distribution of the produce, through

original and indestructible power the earth has is that of extent."* Fertility is as variable a property in soil, as health is in man. Soils in England which once produced five bushels of wheat per acre now produce fifty-five. Some in Indiana which once produced thirty bushels produce but seven. Location, with reference to the societary movement, is also a variable quantity, changing with every change in the societary movement. When the societary movement centred in Nineveh and Babylon, real estate was their ownership of something which neither they nor any one else have produced. It is at once evident that rent is the effect of a monopoly-though the monopoly is a natural one which may be regulated, which may even be held as a trust for the community generally, but which cannot be prevented from existing. The reason why landholders are able to require rent for their land is that it is a commodity which many want, and which no one can obtain but from them."

This is not giving a definition of economic rent, but of private title or appropriation, which is the condition precedent to rent, as we have seen, and which rests in seizure or monopoly, and is not rent itself. To define rent, Mr. Mill should have explained why men pay high prices for the monopolized portion of land, when there is always at some place an unmonopolized supply in vast quantities to be had for nothing. Evidently, because they want not merely land, but land in a certain location. But why do they want land in this location? Because food when there produced can be sold at a profit on its cost of production. But why could it not in Patagonia or Siberia? Because of cost of transportation. Men pay rent then chiefly to avoid transportation on persons, goods, or customers. Mr. Mill's view of rent is crude and tinctured by his socialistic tendencies. To him rent is despotism, which may be mitigated in degree or amount, but when mitigated ever so much what remains is despotism.

A French writer, M. de Fontenay (“Du Revenu Foncier," p. 260) says: "It may be as well to say something here of one of the most striking instances of the advantages of position. I mean the high price paid for buying or hiring spaces in a great city. Some economists have thought they see in that the rent of land. They have let themselves be duped by a word, as Montaigne would say. To think that it is really for a piece of land that one pays in Paris two or three hundred francs the meter, is as if one were to think that in buying the number of a hackney coach, it is for three yellow num. bers that he pays six to eight thousand francs-and that when a notary sells his practice, it is a double knob of gilt copper, twenty paper cases or so, five or six shabby tables, and a bad earthenware stove, that he sells for 500,000 francs. The space of ground, like the number, the practice, is only a representative sign of the acquired rights, a title to advantages and profits, which may be discounted. What one pays for, in the price of the space of ground, is a share in the enjoyment of innumerable improvements of an advanced civilization; it is an immense opportunity to exert oneself and to shine, to know and be known. It is a powerful agglomeration of rich consumers, if one is a producer; of producers and products of all kinds, if one is more especially a consumer. It is a multitude of free enjoyments-the pavement, the trottoirs, gas, water, fetes, theaters, palaces, walks, museums, shops, libraries, marts of all kinds of wealth, material and intellectual. The inhabitant of Paris, who gives up to a stranger his share in these advantages, has the perfect right to sell them to him at a good price. For it is he, or they, whose right he represents, the citizens of a great city who have gradually made it what it is. It is they who by their labor, their sacrifices, their struggles of every kind, by their gold as by their blood, have acquired and paid for these rights, this security, this progress, this public luxury, these works of general utility,

* "Principles of Economical Philosophy."