CHAPTER IV.
EFFECT OF THE EXPECTATION RAISED BY MATERIAL PROGRESS.
We have now seen that while advancing population tends to advance rent, so all the causes that in a progressive state of society operate to increase the productive power of labor tend, also, to advance rent, and not to advance wages or interest. The increased production of wealth goes ultimately to the owners of land in increased rent; and, although, as improvement goes on, advantages may accrue to individuals not land holders, which concentrate in their hands considerable portions of the increased produce, yet there is in all this improvement nothing which tends to increase the general return either to labor or to capital.
But there is a cause, not yet adverted to, which must be taken into consideration fully to explain the influence of material progress upon the distribution of wealth.
That cause is the confident expectation of the future enhancement of land values, which arises in all progressive countries from the steady increase of rent, and which leads to speculation, or the holding of land for a higher price than it would then otherwise bring.
We have hitherto assumed, as is generally assumed in elucidations of the theory of rent, that the actual margin of cultivation always coincides with what may be termed the necessary margin of cultivation—that is to say, we have assumed that cultivation extends to less productive points only as it becomes necessary from the fact that natural opportunities are at the more productive points fully utilized.
This, probably, is the case in stationary or very slowly progressing communities, but in rapidly progressing communities, where the swift and steady increase of rent gives confidence to calculations of further increase, it is not the case. In such communities, the confident expectation of increased prices produces, to a greater or less extent, the effects of a combination among land holders, and tends to the withholding of land from use, in expectation of higher prices, thus forcing the margin of cultivation farther than required by the necessities of production.
This cause must operate to some extent in all progressive communities, though in such countries as England, where the tenant system prevails in agriculture, it may be shown more in the selling price of land than in the agricultural margin of cultivation, or actual rent. But in communities like the United States, where the user of land generally prefers, if he can, to own it, and where there is a great extent of land to overrun, it operates with enormous power.
The immense area over which the population of the United States is scattered shows this. The man who sets out from the Eastern seaboard in search of the margin of cultivation, where he may obtain land without paying rent, must, like the man who swam the river to get a drink, pass for long distances through half-tilled farms, and traverse vast areas of virgin soil, before he reaches the point where land can be had free of rent—i.e., by homestead entry or pre-emption. He (and, with him, the margin of cultivation) is forced so much farther than he otherwise need have gone, by the speculation which is holding these unused lands in expectation of increased value in the future. And when he settles, he will, in his turn, take up, if he can, more land than he can use, in the belief that it will soon become valuable; and so those who follow him are again forced farther on than the necessities of production require, carrying the margin of cultivation to still less productive, because still more remote points.
The same thing may be seen in every rapidly growing city. If the land of superior quality as to location were always fully used before land of inferior quality were resorted to, no vacant lots would be left as a city extended, nor would we find miserable shanties in the midst of costly buildings. These lots, some of them extremely valuable, are withheld from use, or from the full use to which they might be put, because their owners, not being able or not wishing to improve them, prefer, in expectation of the advance of land values, to hold them for a higher rate than could now be obtained from those willing to improve them. And, in consequence of this land being withheld from use, or from the full use of which it is capable, the margin of the city is pushed away so much farther from the center.
But when we reach the limits of the growing city—the actual margin of building, which corresponds to the margin of cultivation in agriculture—we shall not find the land purchasable at its value for agricultural purposes, as it would be were rent determined simply by present requirements; but we shall find that for a long distance beyond the city land bears a speculative value, based upon the belief that it will be required in the future for urban purposes, and that to reach the point at which land can be purchased at a price not based upon urban rent, we must go very far beyond the actual margin of urban use.