Chapter IX: 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 landowners or immoderate competition among farmers, who may thereby be forced to surrender a portion of their wages and interest on capital to the former; but it can never lastingly fall below this amount. If the landowners 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.[152-1] Normal rent is not to be explained by any mysterious or peculiar productiveness[152-2] 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.[152-3]

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.)[152-4]

[Footnote 152-1: Compare _J. Anderson_, An Inquiry into the
Nature of the Corn Laws, 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. (_Umpfenback_, N. Oek.,
191.)]

[Footnote 152-2: _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.]

[Footnote 152-3: _Ricardo_ says that if air, water,
elasticity and steam were of different qualities, 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 fruitfulness
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.]

[Footnote 152-4: _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 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.]