Malthus and his work

by James Bonar

There is a certain portion of a landlord’s income and of a peasant proprietor’s earnings that has an origin and character distinct from the rest, and demands the economist’s separate attention, whether it alone receives the name of rent or not;—this is, the excess of the produce of land beyond the cost of production and the current rate of profits. Represent these in money; and suppose the current profit five per cent. Suppose that a tenant lays out £500 on his farm, and gets by the harvest and farm produce not only £500 plus £25, but £600; the additional £75, which would if retained by him be over or extra profits as compared with the rate usual among farmers and men of like business, is the value of his rent; and the landlord can take that from him without impoverishing him. Rent is that portion of the produce which remains, after all the outlay of the cultivator has been repaid him together with the current profits. From accidental or temporary causes the money rents of land may be more or less than this; but this is the point to which actual rents will gravitate.[^[519]]

So far as this account goes, it might seem that Malthus’ description is too general; it would include the extra profits, for example, of any monopoly or a royalty for the use of a patent; and Ricardo’s definition, “the price paid for the indestructible powers of the soil,” might seem more definite. But Malthus is rather too specific than too general. He is thinking of agricultural land only, and that mainly as producing food for man. If his description of the Nature of rent adds little to that of Adam Smith,[^[520]] his account of its Causes, which he himself was the first to grasp, is characteristic and peculiar.

First, he says, fertile[^[521]] soils yield a produce that more than feeds the producer. This may be put more generally than Malthus has put it. If rent is to be paid, there must be wherewithal to pay it; and there cannot be so if production does no more than repay cost. There may, however, be a production beyond mere repayment of cost, not only in farming but in all trades. The very principle of the division of labour and the separation of trades implies that devotion to one occupation makes men so dexterous in production that, besides providing for themselves, they have an overplus wherewith to supply their other wants and the wants of others.[^[522]] This overplus, where the facilities for trading were specially good, might be so much above the overplus of an ordinary profit that the granter of the facilities, who is usually the ground landlord, might get the lion’s share of it, and still leave the user of the facilities as thriving as his neighbours. On the other hand, if no such overplus can be earned, no such rent can be paid. Rent, in short, when it is paid by men of business, either in town or in country, means over-profits, and ground-rents mean advantage of situation.

The second cause of rent, according to Malthus, who is considering, be it remembered, the cause of the Progress of rents as well as of their actual volume at any given time,[^[523]] is the peculiarity belonging to agricultural land, that the demand increases with the supply; in other cases the demand is external to the supply, but in this case[^[524]] the supply creates its demand. Where there is food there will be mouths. In the supply of food no over-production is possible.[^[525]]

It is here that the Essay on Rent is connected with the Essay on Population. By the law of population the tendency is that where food enough for six is being produced by two, the other four will soon make their appearance; and so, thinks Malthus, the farmer makes his customers by simply making his wares. Something like this, we might add, would happen in a completely developed co-operative society, where the makers would sell to each other and buy from each other. It is even true, in a sense, of all manufacturers as things now are, in proportion as their articles come near to being necessaries;—if they supply that without which people cannot live, they go far to bring people into being. Malthus, however, regarded it as much more true of agricultural production than of any other. He regarded food as the chief necessary, and thought with Adam Smith, that “when food is provided it is comparatively easy to find the necessary clothing and lodging.”[^[526]] Against this we need only remember, how the Essay on Population showed that it was only in the lower stages of existence that increase of mere food involved increase of population; and so the tendency of the supply to create its own demand was, on the author’s own showing, nothing more than a tendency.[^[527]] His economical reasoning was swayed a little by his circumstances. The insularity of English life in his days prevented him from conceiving how a nation could safely derive half its food from abroad; what Adam Smith had thought too good to be likely,[^[528]] he thought too dangerous to be desirable. Good or bad, it is our position now, and the result is, first, that the supply of food does not, in the same degree or way, produce its own demand as formerly, and, second, that our other productions are, even more truly than the agricultural, the supply that creates its own demand, for they give the power of buying the food that feeds new demanders. The production carried on, on the surface of the land, has come in this way to be a more potent cause of the Progress of rents than production from the soil itself. With this restatement the second of Malthus’ causes of rent becomes perhaps a little more intelligible.

His third cause is that good land is scarce. Lands differ in fertility, and there is not, as in a new country, enough of the most fertile to supply all our wants. When the produce of the inferior begins to be absolutely necessary, the inferior will be cultivated at a price enough to repay cost and give ordinary profits to the farmer. But what is simply enough to do that for him will do much more than that for all the holders of superior lands, and all that is much more can be taken by a landlord as rent without placing the tenant at any disadvantage as compared with his neighbours. As soon as this happens in a country, the extra profits, which are called by economists rent, will appear in it; and the growth of population, by leading to an increased demand for food and to an increased price of it, will cause the cultivation of inferior lands, or else a more expensive cultivation of the old ones; and again, since the necessary new supplies cannot be permanently kept up without one or other of these two resources, the price, and with it the rent, will, in the absence of inventions, remain permanently higher. In other words, this third cause is the “law of diminishing returns.”

It is this law of diminishing returns which bulks most largely in the tract of Sir Edward West, written in the same year as that of Malthus. West’s theory of rent is simply, “that in the progress of the improvement of cultivation the raising of rude produce becomes progressively more expensive, or in other words, the ratio of the net produce of land to the gross produce is continually diminishing.”[^[529]] He sees how near Adam Smith came to it when he said, that in the progress of cultivation the total amount of rent increased, but the proportion of it to the produce diminished, so that from being e. g. half the produce it became one-third.[^[530]] He sees, as even in 1798 Malthus had seen,[^[531]] that but for this law population might increase indefinitely on a few fertile lands instead of spreading over the globe (West, p. 13), whereas because of this law inventions in agriculture are not able to remove “the necessity of having recourse to inferior land, and of bestowing capital with diminished advantage on land already in tillage” (p. 50). He pushes the principle so far as to say broadly that whatever increases agricultural production increases cost, while whatever increases manufacturing production diminishes cost (p. 48), inferring that the former must tend abroad and the latter at home to prevent the displacement of English agriculture by foreign competition. As he had little or no influence on Malthus, his tract need not be noticed in detail; it is enough to say that, while West is superior in style and arrangement, Malthus is the more comprehensive. West is clearer and simpler because he includes less.

Looking at the three causes together, we see that the first and last relate to the statics, and the second to the dynamics of the subject. We need to remember that Malthus is having regard in the first instance not to the value but to the quantity of the produce. Now, apart from questions of value, it is possible there might be, in a country, land yielding to the sower more than he sowed; but it might be an ordinary excess, secured by all producers in that country, for the land might be all equally fertile, and production from land might be the most fertile of industries. In that case, even if the land was a State monopoly and the producer’s gains could be taken from him by a tax, there would be nothing corresponding to rent, in the received sense. But, as soon as there were differences in the fertility, and therefore differences in the quantity produced at the same cost, the farmer who had the difference on his side could be said to have a rent. It is this surplus, conjoined with the institution of private property, that, according to Malthus, makes leisure and mental progress, and even great material prosperity, possible.[^[532]] The rent is properly the extra profits, and not the equivalent paid over for them to a landlord; rent can easily exist without a landlord. “It may be laid down, therefore, as an incontrovertible truth, that, as a nation reaches any considerable degree of wealth, and any considerable fulness of population, which of course cannot take place without a great fall both in the profits of stock and the wages of labour, the separation of rents, as a kind of fixture upon lands of a certain quality, is a law as invariable as the action of the principle of gravity. And that rents are neither a mere nominal value, nor a value unnecessarily and injuriously transferred from one set of people to another, but a most real and essential part of the whole value of the national property, and placed by the laws of nature where they are, on the land, by whomsoever possessed, whether the landlord, the crown, or the actual cultivator.”[^[533]]

It is the second cause that brings the first and third into operation in such a way as to produce the rents that we actually know in an old country. The fertility which secures a produce beyond cost makes extra profits possible; the growing population, which gives the produce a value, makes them actual; and the gradations in fertility, whereby a uniform increase in the value of produce creates far from uniform extra profits to different cultivators, give the extra profits the peculiar graduated character, which is characteristic of rent in the economical sense of the word.

Malthus believed himself to have included, in this theory of rent, what truth there was in the view of the French economists and of Adam Smith, when they spoke of rent as due to the qualities of the soil and not to an ordinary monopoly. His contemporaries admitted him to have been the first clear expounder of the subject. But his most eminent brother economist found general agreement quite consistent with emphatic divergence in details,[^[534]] not wonderful in a writer who regarded every economical question as a particular case of the problem of value rather than of wealth.