CHAPTER II.
THE RENT OF LAND.
THEORY OF RENT.
Rent is that portion of the regular net product of a piece of land which remains after deducting the wages of labor and the interest on the capital usual in the country, incorporated into it.[149-1] Hence it is the price paid for the using of the land itself, or for what Ricardo calls the original inexhaustible forces of the soil which are capable of being appropriated.[149-2] This price also depends, of course, on the relation between demand and supply; the demand in turn, on the wants and means of payment of buyers, but the supply by no means on cost of production, which, from the definitions above given, is here unthinkable. However, land has this in common with other means of production, that its price is mainly determined by that of its products.
[149-1] According to von Thünen, Der isolirte Staat. in Beziehung auf Landwirthschaft und Nat. Oek, 1850, I, 14: "what remains of the revenue of an estate after deducting the interest on all the objects of value which may be separated from the soil." According to Whately, it is surplus profit. The expression "regular product" supposes, among other things, an average skillfulness of the economic individual. Thus, for instance, the farm-rent of a piece of land generally includes besides the real rent of the land, interest on much capital which is more or less firmly fixed in the soil. The importance of the latter may be approximately determined from the fact that in the electorate of Hesse, for instance, the value of all meadow lands, woods, and agricultural lands is estimated at from 205 to 206 millions of thalers, and the value of all the houses at 100 millions. (Hildebrand, Statist. Mittheil. über die volkswirthschaftlichen Zustände Kurhessens, 1852, 37.) In the English income tax of 1843, the annual value of all lands in Great Britain was estimated at over 45 millions sterling, that of all houses at over 38 millions. However the farm-rent of a piece of land does not by any means always embrace the entire rent. A part of the rent is paid to the state in the form of taxes, and another portion to the payment of tithes. Short leasehold terms, frequent land sales, the comparatively great difficulty of disengaging capital invested in the cultivation of land, the union of landed proprietor, capitalist and laborer in one person easily obscure the law of rent.
[149-2] The stores of immediate plant food in a piece of land, of minerals in a mine, of salt in a salt mine, etc., are subject to the law of rent only in so far as they may be considered inexhaustible; that is, they are not, strictly speaking, subject to it. Our definition applies all the more to the capacity for cultivation, and of support or bearing capacity mentioned in § 35; and hence it is easier to follow the law of rent in the case of land used for building purposes than for agriculture. When v. Mangoldt claims that the exhaustibility or inexhaustibility of the soil has nothing to do with rent so long as it flows evenly (so lange sie eben fliesst) he is in harmony with his own general conception of rarity-premiums (Seltenheitsprämien).
THEORY OF RENT.
(CONTINUED.)
Agricultural products of equal quantity and quality are produced on pieces of land of unequal fertility, even when the same amount of skill is displayed by the husbandman, with very different outlays of capital and labor.[150-1] And yet the price of these products in the same market is uniformly the same. This price must, on the supposition of free and intelligent competition, be, in the long run, at least high enough to cover the cost of production on even the worst soil (the margin of cultivation according to Fawcett), which must be brought under cultivation in order to satisfy the aggregate want. (See § 110.) This worst land need yield no rent.[150-2] The better land which, with an equal outlay of labor and capital, produces a greater yield, furnishes an excess over the cost of production.[150-3] This excess is rent, which, as a rule, is obviously higher in proportion as the difference in fertility between the worst and the better land is greater. The person who cultivates the land of a stranger may unhesitatingly turn this rent over to the owner; since, notwithstanding his so doing, all that he has himself contributed to production in labor and capital of his own, returns to him entire in the product.[150-4]