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ly be abandoned. If the superior mines or fisheries, with the addition of the one newly opened, produce as much of the commodity as is required at the lower value corresponding to their lower cost of production, the fall of value will be permanent, and there will be a corresponding fall in the rents of those mines or fisheries which are not abandoned. In this case, when things have permanently adjusted themselves, the result will be, that the scale of qualities which supply the market will have been cut short at the lower end, while a new insertion will have been made in the scale at some point higher up; and the worst mine or fishery in use—the one which regulates the rents of the superior qualities and the value of the commodity—will be a mine or fishery of better quality than that by which they were previously regulated.
Land is used for other purposes than agriculture, especially for residence; and when so used, yields a rent, determined by principles similar to those already laid down. The ground rent of a building, and the rent of a garden or park attached to it, will not be less than the rent which the same land would afford in agriculture : but may be greater than this to an indefinite amount; the surplus being either in consideration of beauty or of convenience, the convenience often consisting in superior facilities for pecuniary gain. Sites of remarkable beauty are generally limited in supply, and therefore, if in great demand, are at a scarcity value. Sites superior only in convenience are governed as to their value by the ordinary principles of rent. The ground rent of a house in a small village is but little higher than the rent of a similar patch of ground in the open fields : but that of a shop in Cheapside will exceed these, by the whole amount at which people estimate the superior facilities of money-making in the more crowded place. The rents of wharfage, dock and harbour rooin, water-power, and many other privileges, may be analysed on similar principles.
§ 4. Cases of extra profit analogous to rent, are more
frequent in the transactions of industry than is sometimes supposed. Take the case, for example, of a patent, or exclusive privilege for the use of a process by which cost of production is lessened. If the value of the product continues to be regulated by what it costs to those who are obliged to persist in the old process, the patentee will inake an extra profit equal to the advantage which his process possesses over theirs. This extra profit is essentially similar to rent, and sometimes even assumes the form of it; the patentee allowing to other producers the use of his privilege, in consideration of an annual payment. So long as he, and those whom he associates in the privilege, do not produce enough to supply the whole market, so long the original cost of production, being the necessary condition of producing a part, will regulate the value of the whole; and the patentee will be enabled to keep up his rent to a full equivalent for the advantage which his process gives him. In the commencement indeed he will probably forego a part of this advantage for the sake of underselling others : the increased supply which he brings forward will lower the value, and make the trade a bad one for those who do not share in the privilege: many of whom therefore will gradually retire, or restrict their operations, or enter into arrangements with the patentee: as his supply increases theirs will diminish, the value meanwhile continuing slightly depressed. But if he stops short in his operations before the market is wholly supplied by the new process, things will again adjust themselves to what was the natural value be. fore the invention was made, and the benefit of the improve ment will accrue solely to the patentee.
The extra gains which any producer or dealer obtains through superior talents for business, or superior business arrangements, are very much of a similar kind. If all his competitors had the same advantages, and used them, the benefit would be transferred to their customers, through the diminished value of the article: he only retains it for him: self because he is able to bring his commodity to market at a lower cost, while its value is determined by a higher. All advantages, in fact, which one competitor has over another, whether natural or acquired, whether personal or the result of social arrangements, bring the commodity, so far, into the Third Class, and assimilate the possessor of the advantage to a receiver of rent. Wages and profits represent the universal elements in production, while rent may be taken to represent the differential and peculiar: any difference in favour of certain producers, or in favour of production in certain circumstances, being the source of a gain, which, though not called rent unless paid periodically by one person to another, is governed by laws entirely the same with it. The price paid for a differential advantage in producing a commodity, cannot enter into the general cost of production of the commodity.
A commodity may, no doubt, in some contingencies, yield a rent even under the most disadvantageous circumstances of its production ; but only when it is, for the time, in the condition of those commodities which are absolutely limited in supply, and is therefore selling at a scarcity value; which never is, nor has been, nor can be, a permanent condition of any of the great rent-yielding commodities : unless through their approaching exhaustion, if they are mineral products (coal, for example), or through an increase of population, continuing after a further increase of production becomes impossible; a contingency, which the almost inevitable progress of human culture and improvement in the long interval which has first to elapse, forbids us to consider as probable.
SUMMARY OF THE THEORY OF VALUE.
§ 1. We have now attained a favourable point for looking back, and taking a simultaneous view of the space which we have traversed since the commencement of the present Book. The following are the principles of the theory of Value, so far as we have yet ascertained them.
I. Value is a relative term. The value of a thing means the quantity of some other thing, or of things in general, which it exchanges for. The values of all things can never, therefore, rise or fall simultaneously. There is no such thing as a general rise or a general fall of values. Every rise of value supposes a fall, and every fall a rise.
II.) The temporary or market value of a thing, depends on the demand and supply ; rising as the demand rises, and falling as the supply rises. The demand, however, varies with the value, being generally greater when the thing is cheap than when it is dear; and the value always adjusts itself in such a manner, that the demand is equal to the supply.
III. Besides their temporary value, things have also a permanent, or as it may be called, a Natural Value, to which the market value, after every variation, always tends to return; and the oscillations compensate for one another, so that, on the average, commodities exchange at about their natural value.
IV. The natural value of some things is a scarcity value: but most things naturally exchange for one another in the ratio of their cost of production, or at what may be termed their Cost Value.
V. The things which are naturally and permanently at a scarcity value, are those of which the supply cannot be increased at all, or not sufficiently to satisfy the whole of the demand which would exist for them at their cost value.
VI, A monopoly value means a scarcity value. Monopoly cannot give a value to anything, except through a limitation of the supply.
VII. Every commodity of which the supply can be indefinitely increased by labour and capital, exchanges for other things proportionally to the cost necessary for producing and bringing to market the most costly portion of the supply required. The natural value is synonymous with the Cost Value, and the cost value of a thing, means the cost value of the most costly portion of it.
VIII. Cost of Production consists of several elements, some of which are constant and universal, others occasional. The universal elements of cost of production are, the wages of the labour, and the profits of the capital. The occasional elements are, taxes, and any extra cost occasioned by a scarcity value of some of the requisites. · IX. Rent is not an element in the cost of production of the commodity which yields it; except in the case (rather conceivable than actually existing) in which it results from, and represents, a scarcity value. But when land capable of yielding rent in agriculture is applied to some other purpose, the rent which it would have yielded is an element in the cost of production of the commodity which it is employed to produce.
X. Omitting the occasional elements ; things which admit of indefinite increase, naturally and permanently exchange for each other according to the comparative amount of wages which must be paid for producing them, and the comparative amount of profits which must be obtained by the capitalists who pay those wages.
XI. The comparative amount of wages does not depend