the sooner is this point reached. Hence, it necessarily happens that, with an increase in the aggregate want of agricultural products, greater and greater amounts of labor and capital are employed in the further fertilization of land, and that there comes to be a greater difference between the fertility of the worst and better lands, in consequence of which the rent of the latter rises.

SECTION CLI.

THEORY OF RENT.-LAND FAVORABLY SITUATED.

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. Here, therefore, all producers living nearer to the market, who have to make a smaller outlay for transportation and yet obtain the same market price for their produce, make

Ricardo had, in every case in which outlay of capital and labor of different degrees of productiveness had to be used on the same land, to suppose a price of the products the cost of the least productive outlay. See the tables in Ricardo's work, On the Influence of a low Price of Corn on the Profits of Stock, 1815, 14 seq. Schmoller, on the other hand, rightly applies the principle of united costs of production in as far as the usual amount of profit of the producer is added to the cost of the commodity with the highest cost of production. Mittheilungen des Landwirthsch. Instituts zu Halle, 1865, 128. Compare supra, §§ 106, 110.

1 L'éloignement équivaut à la stérilité. (J. B. Say.) If we imagine with A. Walker an entirely uncultivated country, equally fertile in every part, settled only on the coast, and divided into shares of equal breadth, equally accessible at all points, so that every settler has unlimited space to extend his possessions from the coast into the interior, the shares situated in the middle of the coast strip would be most eagerly sought after; since in its vicinity, prospectively, all the institutions of the country would come together. The colonist, therefore, who should obtain that share as his, would, unquestionably, be in a condition to pay a price for this preference, that is a rent. (Science of Wealth, 296.)

a profit exactly corresponding to the advantage of their situation. 2

The situation of individual pieces of land relatively to farm buildings etc., operates in a similar way.3

SECTION CLII.

THE THEORY OF RENT.

[CONTINUED.]

From what we have said, it follows that the rent of the land of a country is equal at least to the sum of all the differences between the product of the least productive portions of capital which have been necessarily laid out in the cultivation of the soil and the product of the other portions more productively laid out by other husbandmen. It may rise higher than this on account of a coalition among land owners or immoderate competition among farmers, who may thereby be forced to surrrender a portion of their wages and interest on capital to the former; but it can never lastingly fall below this amount. If the land owners themselves were to surrender all claim to rent, the price of agricultural products would not sink if the market was kept fully supplied; and the excess obtained from the better land over and above the cost of production would go, but only in the nature of a gift, to the farmers, corn dealers and individual consumers.1 Normal rent is not to

It is a consequence both of their difference of situation and of their fertility that in the Himalaya the farmers low down on the sides pay 50 per cent. of the gross product as farm rent, and higher up, 20 per cent. less. (Ritter, Erdkunde, III, 878.) Both influences may be traced most accurately in East Friesland, and in similar places: marsh land, sandy land, heath land, and high moor land.

Its situation influences especially the money rent of land, and its quality the amount of produce. (McCulloch, Principles, III, 5.)

We need only mention the hauling of the crops and of manure. According to the instructions of the royal Saxon commission, above mentioned, the cost is assumed to be 10 per cent. higher for a distance of 250 rods, and 20 per cent. higher for a distance of 500 rods.

'Compare J. Anderson, An Inquiry into the Nature of the Corn Laws,

be explained by any mysterious or peculiar productiveness of the land that yields it, but on the contrary, by the fact that even material forces unexhaustible in themselves, but which can be productive only in combination with given parcels of land, uniformly oppose even successively greater difficulties to every successive and additional improvement.3

1777. Extracts from the same in the Edinburgh Review, LIV, 91 ff. On the other hand, Buchanan, on Adam Smith, IV, 134, thinks that rent arises exclusively from the monopoly of the owners, and that without it the price of corn would be lower. It is certain, however, that if the land of a country be considered as one great piece of property, and under one great system of husbandry, the products of the soil might be offered permanently at a price corresponding to the average cost of production, on the better and worse pieces of land. (Umpfenbach, N. Œk., 191.)

2 Malthus, On the Policy of restricting the Importation of foreign Corn, 1815. Additions, 1817, to the Essay on the Principle of Population, III, ch. 8-12; Principles, 217 ff.

Ricardo says that if air, water, elasticity and steam were of different quali ties, and might be made objects of exclusive possession; and that if each kind could be had only in a moderate supply, they would, like land, produce a rent, according as they were brought into use, one kind after another. In the class of natural forces, also, the possession of a secret of production or of inimitable skill, or a legal right to its exclusive use, may produce. something similar to rent. (Senior, Outlines, 91.) Hermann, Staatswirthsch. Unters., 163 ff., had already laid the foundation of this doctrine, and earlier yet, Canard, 17 seq., and Hufeland. I, 303 ff. See supra, § 120. Hence v. Mangoldt uses the word rent to designate all rarity-premiums. John Stuart Mill, III, ch. 5, 4. Schäffle speaks of the universal existence of a surplus; that is, of the factor of rent (Nat. Oek., I, Aufl., 140 ff.), and has recently developed this into a theory thoroughly systematic and detailed. (Nationalökonomische Theorie der ausschliessenden Absatzverhältnisse, 1867.)

According to him, rent is "the premium paid for the most economic course taken in the interest of society in general;" and hence he finds rent as much in superior labor and in a very advantageous outlay of capital. Yet he grants, that "exclusive custom (Kundschaft) on the basis of natural advantages occurs only in the case of land-rent." (59.) And even granting that he is right, that no rent is by itself forever secure (74 seq.), and that much rent is a premium paid for a search after and the appropriation of the best land, divination of the best situations etc. (60 ff., 74 ff.), there still remains the great difference between rent and the extra income from labor and capital; that here the very transitory nature of the substratum, or basis, and the personal merit of the recipient, is the rule, while in the former case it is a rare exception. Willingly, therefore, as I recognize the possibility and fruit

Moreover, the capital which becomes a part of the land to such an extent that it cannot be separated from it, and perhaps not even distinguished from it at sight, such for instance as has been laid out for purposes of drainage or in the purchase of material intended to modify the nature of the soil, partakes of the character of the land itself, and its yield obeys the laws of rent. How frequently it happens that such improvements made by the farmer without the least assistance from the owner of the land permanently contribute to an increase of the rent. (§ 181.)*

fulness of Schäffle's way of conceiving this subject (the latter, especially, for monographic purposes), I prefer, so far as the entire system is concerned, the keeping apart of the three branches of income corresponding to the three factors of production as has been usual since Adam Smith's time.

4

* John Stuart Mill, ch. 16, § 5. An example in Fawcett, Manual, 149 seq. This explains many objections to Ricardo's laws, which are the result of misconception. Thus, for instance, in Schmalz, Staatswirthschaftslehre, I, 81, Quarterly Review, XXXVI, 412 ff. Bastiat, Harmonies économiques, ch. 9, where rent is considered the interest on the capital laid out in bringing land under cultivation and improving it. If, however, we imagine an island to emerge suddenly from the waves in the vicinity of Naples, in consequence of an earthquake, no one can doubt that its land would sell at a very high rate and pay a very good rent. And yet no capital or labor has been laid out on it. A similar lesson is taught by the fact, that, in Scotland, rocks which are covered twice a day by the waves are leased for the sake of the sea-weed left on them. (Adam Smith, Wealth of Nations, I, ch. 11.) Also by the fact, that in Poulopinang, a cavity in which many edible swallows' nests are found, pays £500 a year rent. (Geogr. Ephemeriden, Oct., 1805, 134.) However, Bastiat, abstractly speaking, is right when he says, that every one by the importation of agricultural products from quarters which pay no rent, and still more by emigrating thither, may deprive the owners of land of the tribute imminent in rent.

But how would it be if the cost of transportation and emigration amounted to more than the rent? The case theoretically so important, in which all the land in the world is supposed to have been appropriated as private property, this writer, generally so lucid, treats in a surprisingly blind way (275 ff). It is remarkable that A. Walker, Science of Wealth, spite of his prejudices in favor of Bastiat's doctrines on the gratuitous nature of all natural forces, nevertheless follows, essentially, Ricardo's theory of rent, 294 ff.

A much more vulgar error yet is, that rent is the result of the capacity of the capital employed in the purchase of the land to produce some interest.

SECTION CLIII.

THEORY OF RENT.
(CONTINUED.)

Ricardo says that rent can never, not even in the slightest degree, constitute an element in the price of corn. This is certainly not a very happy way of expressing the truth, that a high rent is not the cause, but the effect, of a relatively high price of corn. Ricardo would have been nearer right had he said that rent was not a component part of the price of every portion of the supply of corn brought to market.

1

Is rent an addition to national income? Ricardo (ch. 31) answers this question in the negative, and says that it takes from the consumers what it gives to the owners of the land, and that it increases only the value in exchange of the national wealth. It is evident that as thus stated, the question is not properly put. Neither interest on capital nor wages are any

2

Thus Hamilton, Reports to the Congress on the Manufactures of the United States, 1793, and Canard, Principes, sec. 5. Per contra, compare Turgot's view, supra, § 42, note 1. Even Locke, Considerations on the Lowering of Interest, Works, II, 17 ff., maintained the closest parallel between rent and interest to be possible, with this difference only, that money was all of a kind but pieces of land of different degrees of fertility. Similarly Sir D. North, Discourse upon Trade, 1791, with his parallel of landlord and stocklord.

To be met with in this form even in Adam Smith, Wealth of Nations, I, ch. 11, pr. John Stuart Mill, Principles II, ch. 16, § 6, thus states the matter: "Whoever cultivates land, paying a rent for it, gets in return for his rent an instrument of superior power to other instruments of the same kind for which no rent is paid. The superiority of the instrument is in exact proportion to the rent paid for it." According to v. Jacob, Grundsätze der Nat.Oek., I, 187, rent constitutes a much larger portion of the price of commodities than is generally supposed, in as much as wages depend so largely on the price of the means of subsistence. Per contra, Baudrillart, Manuel, 391 ff., who maintains that rent is practically insignificant.

2 Similarly Buchanan, loc. cit., and Sismondi, Richesse commerciale, I, 49. Compare contra, Malthus, Inquiry into the Nature and Progress of Rent, 15. I would call attention en passant to the absurdity that there may be an increase in the value in exchange of a nation's entire resources without any increase in its value in use. (Supra, § 8.)