Chapter VII: Section CL: Theory of Rent. (continued.)

Agricultural products of equal quantity and quality are produced on pieces of land of unequal fertility, even when the same amount of skill is displayed by the husbandman, with very different outlays of capital and labor.[150-1] And yet the price of these products in the same market is uniformly the same. This price must, on the supposition of free and intelligent competition, be, in the long run, at least high enough to cover the cost of production on even the worst soil (the margin of cultivation according to Fawcett), which must be brought under cultivation in order to satisfy the aggregate want. (See § 110.) This worst land need yield no rent.[150-2] The better land which, with an equal outlay of labor and capital, produces a greater yield, furnishes an excess over the cost of production.[150-3] This excess is rent, which, as a rule, is obviously higher in proportion as the difference in fertility between the worst and the better land is greater. The person who cultivates the land of a stranger may unhesitatingly turn this rent over to the owner; since, notwithstanding his so doing, all that he has himself contributed to production in labor and capital of his own, returns to him entire in the product.[150-4]

According to § 34, a continual increase in the amount of labor and capital lavished on the fertilization of land, agricultural science remaining the same, leads, sooner or later to this, that every new addition of capital or labor becomes relatively less remunerative than the preceding.[150-5] The worse the land is, 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.[150-6]

[Footnote 150-1: _Flotow_, Anleitung zur Abschätzung der
Grundstücke nach Klassen, 1820, 50 ff., estimates the cost
of production of a _scheffel_ of rye on land of the first
class, at scarcely 1½ thalers; on land of the tenth class,
at 3 thalers. In Hanover, it is estimated that about 60 per
cent. of the land devoted to gardening and agricultural
products produces only from 2 to 4 times the quantity of
seed sown; over 35 per cent. from 5 to 8 times, and 4.5 per
cent. from 9 to 12 times. (_Marcard_, Zur Beurtheilung des
Nat. Wohlstandes im Königreich Hanover, Tab. 3.) In Prussia,
the rates of net produce adopted by the central commission
in 1862 vary from 3 to 420 silver groschens per _morgen_, in
the case of agricultural land; from 6 to 420 in the case of
meadow land; in the case of pasturage, from 1 to 360. (_v.
Viebahn_, Statist. des Zollvereins, II, 966.) In England,
parliamentary investigations (1821) have shown that the best
land produces from 32 to 40, and the worst from 8 to 12
bushels per acre of wheat. (Edinburgh Review, XL, 21.) As to
the influence of the elevation of land, the royal Saxon
commission for the assessment of the value of land,
estimated that the net product of an acre _of_ land at a
height above the level of the sea,

In the case of 2d class land--
Of 500 feet, 55 per cent.
Of 800 " 52-1/2 "
Of 1600 " 48 "
Of 2400 " 43.8 "

In the case of 11th class land--
42.9 per cent. of the gross yield.
39-1/2 " " " "
34 " " " "
26 " " " "]

[Footnote 150-2: The English are very fond of assuming that
the worst land for the time being under cultivation pays no
rent. (_Ricardo_, Principles, II, 2.) This fact is
frequently obscured by the aggregation into one economic
whole of land that pays no rent and land that is able to pay
rent. (_John Stuart Mill_, Principles, II, ch. 16, § 3.)
True it is that there is a great deal of land which cannot
be farmed out, but which can be used only by its owners.
Compare _Salfeld_, in the Landwirthsch. Centralb., 1871, II,
182 ff. On land near Wetzlar which, notwithstanding the high
price of land in the neighborhood, could not be farmed out
at auction, because no one was desirous to lease it, and
which was therefore turned over to the highest bidder for
the preceding piece, see _Stöckhardt_, Zeitschr. für
deutsche Landwirthe, 1861, 237. Where, however, all the land
has its own proprietors, the competition of farmers may
easily produce a rent for the worst land. It is a matter of
complete indifference to the theory of rent, whether the
worst land when possessed only by right of occupation or
used as pasturage for cattle previous to its cultivation,
had value or not. Compare _Nebenius_, Oeff. Credit, I, 29;
_Hermann_, Staatswirthsch. Unters., 170 seq.]

[Footnote 150-3: The analogous gradation in mining may make
this clearer.]

[Footnote 150-4: _Ricardo_ illustrated this by the following
example. An uncultivated tract of country is settled by a
small colony. As long as there is here an excess of land of
the best quality, and everyone may take possession of it
without paying anything therefor, no rent of the land which
is merely occupied is possible. But if all the first class
land is under cultivation--land which perhaps with the
employment of a small amount of capital yields 5 quarters an
acre per annum; and the increasing population necessitates
the cultivation of land of the second class, which with the
same outlay of capital yields only 4 quarters an acre per
annum, there arises a rent of 1 quarter an acre per annum
for land of the first class. For the price, 4 quarters is
now high enough to cover the cost of production per acre,
and it must be a matter of complete indifference (complete
indifference?) to a new comer whether he obtains 5 quarters
from land of the first class as a farmer and pays out 1
quarter, or whether he harvests 4 quarters from second class
land as proprietor. If there is a further increase of
population, so that land of the third class also, which
yields only 3 quarters per acre per annum, must be brought
under cultivation, the price of corn rises again because the
cost of production has now to be covered by three quarters.
Land of the first class now pays a rent of 2 quarters and
second class land of 1 quarter. (Ch. 2.)]

[Footnote 150-5: _von Thünen_, der isolirte Staat, II, I,
179, estimates that a bed of manure 1/3 of an inch thick on
an acre of ground, increases the production by 1/2; that a
second 1/2 inch of manure increases the yield only by a + of
5/8 corn; the third of 1/4 corn, etc. _Geyer_ is of opinion
that, in Saxony, land of the average quality will yield a
gross product of 60 thalers per acre, and 14 thalers net
product per acre, in case it is managed with the greatest
intelligence and the employment of a large amount of
capital; when managed in a very ordinary way, it would yield
20 thalers gross, and 7-1/2 thalers net product. _Thünen_
gives the following formula determining when it is more
advantageous to cultivate the old land with more
_intensiveness_ (higher farming) than to begin the
cultivation of new: As long as p - _a_q is less than
sqrt(ap), so long is an increase of the outlay of capital on
the same land more profitable than the cultivation of new
land, and _vice versa_. Here p = aggregate product obtained
by a workman in a year from the amount of capital used by
him; a = sum of his necessary yearly wants; _a_ = the
interest per annum of a capital = p; q = the amount of
capital given to assist the individual workman.]

[Footnote 150-6: _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.]