If the first hundred quarters were all raised at the same expense (only the best land being cultivated), and if that expense would be remunerated with the ordinary profit by a price of 20s. the quarter, the natural price of wheat, so long as no more than that quantity was required, would be 20s.; and it could only rise above or fall below that price from vicissitudes of seasons, or other casual variations in supply. But if the population of the district advanced, a time would arrive when more than a hundred quarters would be necessary to feed it. We must suppose that there is no access to any foreign supply. By the hypothesis, no more than a hundred quarters can be produced in the district, unless by either bringing worse land into cultivation, or altering the system of culture to a more expensive one. Neither of these things will be done without a rise in price. This rise of price will gradually be brought about by the increasing demand. So long as the price has risen, but not risen enough to repay with the ordinary profit the cost of producing an additional quantity, the increased value of the limited supply partakes of the nature of a scarcity value. Suppose that it will not answer to cultivate the second best land, or land of the second degree of remoteness, for a less return than 25s. the quarter; and that this price is also necessary to remunerate the expensive operations by which an increased produce might be raised from land of the first quality. If so, the price will rise, through the increased demand, until it reaches 25s. That will now be the natural price; being the price without which the quantity, for which society has a demand at that price, will not be produced. At that price, however, society can go on for some time longer; could go on perhaps forever, if population did not increase. The price, having attained that point, will not again permanently recede (though it may fall temporarily from accidental abundance); nor will it advance further, so long as society can obtain the supply it requires without a second increase of the cost of production.
In the case supposed, different portions of the supply of [pg 279] corn have different costs of production. Though the twenty, or fifty, or one hundred and fifty quarters additional have been produced at a cost proportional to 25s., the original hundred quarters per annum are still produced at a cost only proportional to 20s. This is self-evident, if the original and the additional supply are produced on different qualities of land. It is equally true if they are produced on the same land. Suppose that land of the best quality, which produced one hundred quarters at 20s., has been made to produce one hundred and fifty by an expensive process, which it would not answer to undertake without a price of 25s. The cost which requires 25s. is incurred for the sake of fifty quarters alone: the first hundred might have continued forever to be produced at the original cost, and with the benefit, on that quantity, of the whole rise of price caused by the increased demand: no one, therefore, will incur the additional expense for the sake of the additional fifty, unless they alone will pay for the whole of it. The fifty, therefore, will be produced at their natural price, proportioned to the cost of their production; while the other hundred will now bring in 5s. a quarter more than their natural price—than the price corresponding to, and sufficing to remunerate, their lower cost of production.
If the production of any, even the smallest, portion of the supply requires as a necessary condition a certain price, that price will be obtained for all the rest. We are not able to buy one loaf cheaper than another because the corn from which it was made, being grown on a richer soil, has cost less to the grower. The value, therefore, of an article (meaning its natural, which is the same with its average value) is determined by the cost of that portion of the supply which is produced and brought to market at the greatest expense. This is the Law of Value of the third of the three classes into which all commodities are divided.
§ 2. Such commodities, when Produced in circumstances more favorable, yield a Rent equal to the difference of Cost.
If the portion of produce raised in the most unfavorable circumstances obtains a value proportioned to its cost of production; all the portions raised in more favorable circumstances, [pg 280] selling as they must do at the same value, obtain a value more than proportioned to their cost of production.
The owners, however, of those portions of the produce enjoy a privilege; they obtain a value which yields them more than the ordinary profit. The advantage depends on the possession of a natural agent of peculiar quality, as, for instance, of more fertile land than that which determines the general value of the commodity; and when this natural agent is not owned by themselves, the person who does own it is able to exact from them, in the form of rent, the whole extra gain derived from its use. We are thus brought by another road to the Law of Rent, investigated in the concluding chapter of the Second Book. Rent, we again see, is the difference between the unequal returns to different parts of the capital employed on the soil. Whatever surplus any portion of agricultural capital produces, beyond what is produced by the same amount of capital on the worst soil, or under the most expensive mode of cultivation, which the existing demands of society compel a recourse to, that surplus will naturally be paid as rent from that capital, to the owner of the land on which it is employed.
The discussion of rent is here followed wholly from the point of view of value, while before ([Book II, Chap. VI]) the law of rent was reached through a limitation of the quantity of land due to the influence of population. In the former case the rent and produce were stated in bushels. By introducing price now (as the convenient symbol of value), instead of the separate increased demands of population in our illustration than used (p. [240]), it will be seen how the same operation, looking at it solely in respect to value, brings us to the same law:
| Price per Bushel. | A | B | C | D | |||
| 24 bushels | 18 bushels | 12 bushels | 6 bushels | ||||
| Total value of product. | Rent. | Total value of product. | Rent. | Total value of product. | Rent. | Total value of product. | |
| $1.00 | $24.00 | $0.00 | .... | .... | .... | .... | .... |
| $1.33 | $32.00 | $8.00 | $24.00 | $0.00 | .... | .... | .... |
| $2.00 | $48.00 | $24.00 | $36.00 | $12.00 | $24.00 | $0.00 | .... |
| $4.00 | $96.00 | $72.00 | $72.00 | $48.00 | $48.00 | $24.00 | $24.00 |
It was long thought by political economists, among the rest even by Adam Smith, that the produce of land is always at a monopoly value, because (they said), in addition to the ordinary rate of profit, it always yields something further for rent. This we now see to be erroneous. A thing can not be at a monopoly value when its supply can be increased to an indefinite extent if we are only willing to incur the cost. As long as there is any land fit for cultivation, which at the existing price can not be profitably cultivated at all, there must be some land a little better, which will yield the ordinary profit, but allow nothing for rent: and that land, if within the boundary of a farm, will be cultivated by the farmer; if not so, probably by the proprietor, or by some other person on sufferance. Some such land at least, under cultivation, there can scarcely fail to be.