Is rent an addition to national income? Ricardo (ch. 31) answers this question in the negative, and says that it takes from the consumers what it gives to the owners of the land, and that it increases only the value in exchange of the national wealth.[153-2] It is evident that as thus stated, the question is not properly put. Neither interest on capital nor wages are any addition to a nation's income, but, like rent, only forms of trade, by means of which that income is distributed among the individuals constituting the nation. (§ 201.)
The special kind of product obtained from a piece of land influences its rent only in so far as the growth of that kind of product is exclusively confined either by nature, privilege or prejudice to certain land.[153-3] Adam Smith is of opinion that the rent of agricultural land is ordinarily (!) one-third of the gross product; that of coal mines, from one tenth to a maximum of one-fifth; of good lead and tin mines, one sixth (with the dues paid the state of twenty-one and two-thirds per cent.); of Peruvian silver mines, scarcely one-tenth; of gold mines, one-twentieth. And he thinks that rent grows less certain for every succeeding article. [153-4]
So far as this is based on facts, it may be explained as follows: The greater capacity an article has for transportation from one place to another, the less important is advantage of situation, which is generally one of the chief elements of rent. The more indispensable the commodity is, the more readily is the consumer induced to pay a price for it greater than the cost of production; that is, to pay a rent. This again is enhanced by the difficulty of the preservation of the commodity. Lastly, the more it is a mere product of nature,[153-5] the more difficult it is to simultaneously employ several portions of capital of different grades of productiveness in its production.
[153-1] To be met with in this form even in Adam Smith, Wealth of Nations, I, ch. 11, pr. John Stuart Mill, Principles II, ch. 16, § 6, thus states the matter: "Whoever cultivates land, paying a rent for it, gets in return for his rent an instrument of superior power to other instruments of the same kind for which no rent is paid. The superiority of the instrument is in exact proportion to the rent paid for it." According to v. Jacob, Grundsätze der Nat. Oek., I, 187, rent constitutes a much larger portion of the price of commodities than is generally supposed, in as much as wages depend so largely on the price of the means of subsistence. Per contra, Baudrillart, Manuel, 391 ff., who maintains that rent is practically insignificant.
[153-2] Similarly Buchanan, loc. cit., and Sismondi, Richesse commerciale, I, 49. Compare contra, Malthus, Inquiry into the Nature and Progress of Rent, 15. I would call attention en passant to the absurdity that there may be an increase in the value in exchange of a nation's entire resources without any increase in its value in use. (Supra, § 8.)
[153-3] Thus Adam Smith remarks that corn fields and rice fields pay very different rents, because it is not always possible to convert one into the other. (Wealth of Nat., I, ch. 11, 1.) Compare the tabular statistical view of the rent of land used for vineyards, gardens, meadows, pasturages, wood and farming purposes, in Rau, Lehrbuch, I, § 218. For a general theory of the rent of wooded land, see Hermann, Staatsw. Unters., 177 ff.; of vineyards, 181 seq.
[153-4] Adam Smith, Wealth of Nat., I, ch. 11, 3.
[153-5] It is hereby rendered akin to those low stages of civilization in which no rent is paid.
THEORY OF RENT.
(CONTINUED.)