[1176] Stuart Mill, Principles, Book III, chap. 5, § 1.
[1177] Such was the argument employed by J. B. Say in the course of a controversy with Ricardo. “It is perfectly obvious that if the needs of society raise the price of corn to such a level as to permit of the cultivation of inferior lands which yield nothing beyond wages for the workmen and profits on the capital, then that demand on the part of society, coupled with the price which it can afford to pay for the corn, allows of a profit on the most fertile or best situated lands.” (Traité, 6th edition, p. 410.) Continuing, he remarks: “David Ricardo in the same chapter clearly shows that the profit from land is not the cause but the effect of the demand for corn, and the reasons which he adduces in support of this view may be turned against him to prove that other items in cost of production, notably the wages of labour, are not the cause but the effect of the current price of goods.” Ricardo himself seemed on the point of being converted to this view. See [p. 554, note 2].
[1178] The theory of economic equilibrium enables us to give a still better demonstration of the general nature of this theory of rent. On this point we may refer to Pareto’s Cours and Sensi’s La Teoria della Rendita (Rome, 1912).
[1179] Cf. supra, [p. 555, note 2].
[1180] Hermann, Staatswirtschaftliche Untersuchungen, Part V: Vom Gewinn. Even in the preface he declares that the doctrine of the rent of land must be regarded as a particular instance in the exposition of the law governing the returns from fixed capital in general.
[1181] Mangoldt, Die Lehre vom Unternehmergewinn (Leipzig, 1855), pp. 109 et seq.
[1182] Die nationalökonomische Theorie der ausschliessenden Absatzverhältnisse (Tübingen)—a work in which he attempts a justification of rents in general and of the rent of land in particular. Rent he regards as the reward offered to anyone who knows how to utilise either his personal capacity or his capital or land in a way that is particularly advantageous to society. It supplies an allurement that acts as the source of all progress and of all economic activity, a sort of natural right of ownership which society spontaneously confers upon those individuals who know how to serve society, and which competition causes to disappear at the opportune moment. The rent of land can be justified on this ground wherever legislation has not made an abuse of it. This new claim on behalf of rent is very interesting, and those who regard rent as exclusively unearned increment may ponder over this new characteristic of unearned incomes.
[1183] P. 148.
[1184] “The sum paid for the use of land differs in no material respect from the sum paid for the use of other kinds of capital—a machine, for example. Although the land or the machine has to be returned to its rightful owner in the same condition as it was received, one ought to pay something just because such capitals are economically scarce; in other words, the amount existing at any one time or place is not greater than the demand. What differentiates land from machinery is that savings might easily be employed in turning out new machinery, but cannot very well increase the quantity of land in existence, or at any rate cannot transform existing soils in a manner that is profitable.” (Pareto, Cours d’Économie politique, vol. ii, § 759.) Marshall makes use of analogous terms: “If the supply of any factor of production is limited, and incapable of much increase by man’s effort in any given period of time, then the income to be derived from it is to be regarded as of the nature of rent rather than profits in inquiries as to the action of economic causes during that period; although for longer periods it may rightly be regarded as profits which are required to cover part of the expenses of production and which therefore directly enter into those expenses.” (Principles, 1st ed., Book VI, chap. 3, § 1.)
[1185] Ibid., Book VI, chap. 3, § 7.