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CHAPTER II.: RENT. - Francis Amasa Walker, Political Economy 
Political Economy (London: Macmillan, 1892) 3rd revised and enlarged edition.
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253. Definition of Rent.—Rent is the term applied to the remuneration received by the land-owning class for the use of the native and indestructible powers of the soil, or, as it might be expressed, for the use of natural agents.
That remuneration may be paid in money or in produce. The term land, or natural agents, must be understood to include not only arable land, but pasture, timber lands, mineral deposits, water privileges and building sites. For the present discussion, however, it will be best to take our illustrations from the occupancy and cultivation of arable land.
254. The Origin of Rent Illustrated.—Let us suppose a community, isolated from all others, to occupy a circular tract of land divided, as in the following diagram, into four sectors equal in extent but so differing in fertility that one piece will, with so many days' labor in the year given to plowing, cultivating and harvesting, yield 24 bushels of wheat per acre, while the second will yield, with the same amount of labor, but 22 bushels, the third but 20 bushels, and the fourth but 18. Now the assumption we have made as to differing degrees of fertility in the soil of the several tracts, is not an extravagant one. On the contrary, we might reasonably have assumed the degrees of fertility to differ far more widely. “A quarter of wheat,” says Mr. McCulloch, “may be raised in Kent, or Essex, or in the Carse of Gowrie, for a fourth or fifth part, perhaps, of the expense necessary to raise it on the worst soils under cultivation in the least fertile parts of the kingdom.”
In order to further simplify the problem, we will suppose that all the inhabitants of this community reside in a village at the center.
255. The Ante-Rent Stage of Cultivation.—Let the first case taken be when the village is yet so small that all the wheat required for the subsistence of the population can be raised upon a portion only of what we will call the 24-bushel tract. If the tract be held by a number of competing owners,∗ each acting for himself, seeking his individual in terest, no rent will be paid, or only a rent so small that for purposes of economic reasoning we may disregard it. Each owner of land in this tract will be desirous of securing for himself whatever compensation, if any, is to be paid for the use of land. But as the entire tract is not required for cultivation, and, as, consequently, only a part of the owners can receive any compensation for their land, an active competition will set in, each man offering the use of his land for less and less, in order to get something, until rent falls to a minimum, or disappears altogether.
256. Relation of Waste to Rent.—And it is here we see the significance of the word, “indestructible,” in par. 253. All scientific reasoning about rent is based on the assumption that the tenant will leave the soil in as good condition as it was in when he took it. Now, it is possible for a tenant to impair the fertility of land, first, by intentional abuse, or, secondly, by taking away its productive essences, in the crops of successive years, without returning any thing to it in the shape of manures or other fertilizers.
It is only upon the above assumption that it would be true that each owner of land in the twenty-four bushel tract would prefer to lease it for a very small rent, approaching nothing, rather than not lease it at all. Unless he could be protected, by law or contract, against exhaustion of the soil, he might prefer to let his land go unoccupied. But on the assumption stated, the proposition is true that, in the situation described, no portion of the twenty-four bushel tract would bring so large a rent that it might not, for purposes of economic reasoning, be treated as nil.
257. Rent Emerges.—Let us now advance to the second stage. We will suppose that the population of the village has increased to such an extent that the whole of the twenty-four bushel tract will no longer raise, when cultivated as it has heretofore been, all the wheat required for the subsistence of the community. Cultivation will then be driven down to an inferior grade of soils. A part of the second tract, the twenty-two bushel tract, will be taken up.
Do you ask, why not increase the amount of labor upon the twenty-four bushel tract, and so raise more wheat to the acre? I answer, because of the great fact of Diminishing Returns in Agriculture, which was set forth in Part II., with so much particularity. We shall now see the whole theory of rent built upon it. The fact itself is undeniable. In every country of the world, and in every parish or township of every country, cultivation is seen descending to grades of soils below the best, because the yield from the highest grades can not be increased proportionally to an increase of labor expended thereon.
Cultivation having, in the case of the community whose industrial history we have traced so far, been driven down to the twenty-two bushel tract, rent will at once emerge. Not that rent will be paid for any portion of the latter tract, which will all be in the same condition, as regards compensation for its use, as was the first tract, when that alone was cultivated; but for the twenty-four bushel tract, and for each portion of it, rent will now be paid. Why? Because any person desiring to raise wheat may better, may he not? pay something for cultivating a portion of that tract, than cultivate a portion of the new lands for nothing.
How much will he pay? Exactly the difference between the crops to be grown on the two soils, with the same application of labor, i. e., two bushels, since he can afford to pay this rent rather than move to the less productive soil. As some must so move, the landlord will be able to exact the maximum rent from the present cultivator: if not, from some other.
Let us now advance another stage, and suppose the increase of population to require the cultivation of the twenty-bushel tract. The effect of this downward movement of the limit of cultivation will be two-fold:
First, the twenty-two bushel tract will begin to bear a rent, since any cultivator can better afford to pay a certain rent for the privilege than occupy a portion of the new land for nothing. The amount of that rent will be determined by the difference in productiveness between the two tracts, being, in the case supposed, two bushels, an acre.
Secondly, the tract first cultivated now brings its owner a rent (24—20=4), not of two bushels, but of four. It is no better land than it was before; it produces no more wheat under the same application of labor and capital; yet it yields its owner a rent twice as great as before cultivation descended to the third grade of soils. That increase of rent takes place simply and solely because cultivation has so descended.
If, again, we suppose that the increasing needs of the community require the cultivation of the eighteen-bushel tract, even the twenty-bushel tract will begin to bear a rent, viz., two bushels, while the rent of the next tract will rise to four bushels, and that of the most productive land to six bushels, or three times the original amount.
258. The Law of Rent.—If we have correctly traced the course of self-interest, in dealing with the occupation of land, under the necessity of a resort to inferior soils, we are prepared to state the law of rent.
259. Cost of Transportation.—By productiveness throughout the foregoing discussion, has been intended net productiveness, the cost of transportation to market being first deducted.
In the illustration as thus far given, the cost of transportation has been left out of account. Let us now, however, suppose a tract to be brought under cultivation for the purpose of supplying this market, situated at so great a distance as to make the cost of transportation a considerable element in the problem of rent.
If the reader will recur to the diagram, he will see that we have marked out a tract, at some distance from our village, the path thereto bearing the legend —2, by which we have intended to signify that the cattle and men taking the grain to market will eat, going and returning, two bushels out of the produce of each acre. The net productiveness of the tract will then be, for the purpose of determining its rental, not 23 bushels, but 21. It will not be cultivated until after the first two tracts have been completely occupied. It will then be cultivated, but will bear no rent so long as its produce, combined with that of those two tracts, suffices for the sustentation of the community. But when the increasing needs of population drive cultivation down to the 20-bushel tract, the tract in question will bear a rent of one bushel, which will rise to three when cultivation seeks the 18-bushel tract.
260. A New Continent.—The reader will further note that we have connected the same community with the projecting edge of a continent, which we have named America, by a dotted line, to which we have attached the sign and figure —8. These represent that portion of the crop of the year which is given to railway companies and the owners of vessels, as a consideration for transporting the grain to the English market. The net produce of these lands is, then, 20 bushels. Though they actually yield 28 bushels to the acre, with the given application of labor, they will bear no rent till the 18-bushel tract of English land is brought under cultivation, when they will yield two bushels rent, an acre, the same as the 20-bushel English tract, the net productiveness being the same.
But suppose this American land is of vast extent, and upon it can be raised all the grain which this, or any, market requires, what will be the effect upon rents? Why this: no one will now cultivate the English 18-bushel tract. Why should one, since a greater net produce can be obtained by the same labor elsewhere? This lowest grade of soils, therefore, falls out of cultivation. With what effect upon the rent of other parcels of land? To answer this, let us recur to our formula. The rent of any piece of land is determined by the difference between its annual yield and that of the least productive land under cultivation for the purpose of supplying the same market. The 24-bushel English tract has been bringing its owner 6 bushels, an acre, rent, because, and only because, the 18-bushel tract was necessarily brought under cultivation. Now, however, that American land, with a net productiveness of 20 bushels, an acre (28—8=20) is found in unlimited amount, the margin of cultivation is pushed backwards, and the best of the English tracts brings but four bushels rent; the next best but two; the 20-bushel tract now bears no rent, as it is in competition with free American land of indefinite extent.
Again, assume that the introduction of Bessemer steel rails and various improvements in ocean navigation reduce the cost of transportation of American grain to seven bushels out of every 28, what will be the effect on English rents? Clearly the American land now has a net productiveness represented by 21 bushels, and, as it is of unlimited extent, all the English 20-bushel land is thrown out of cultivation—for who would wish to cultivate it? and the rent of the best English land is reduced to three bushels, and that of the second grade to one.
The foregoing illustration accounts sufficiently for the great economic, and, by consequence, great social change, which has been going on in the British Islands within the last few years. The reduction in the cost of transportation from the American wheat fields beyond the Mississippi to the seaboard, and from the seaboard to Liverpool, has increased the net productiveness of those fields to a degree equal to the addition of several bushels an acre to the crop. This has thrown out of cultivation much of the poorer English land, and, by lifting upward the limit of cultivation, has decreased the normal rent of all English lands, cutting deeply, in prospect, into the incomes of the land-owning class. The first effects, however, have been most severely felt by the cultivators of the soil, who, holding their farms by lease, find themselves still bound to pay the stipulated rents.
261. Relation of Rent to the Price of Land.—We have stated the economic doctrine of rent. The price of land and its rental value stand in a certain necessary relation to each other. Land has its price because, and only because, it can command a rent. But while the relation between the two is a necessary one, being no less direct than that of cause and effect, the ratio between the rent of land and the price of land, expressed in terms of produce or of money, varies widely. In some countries, where the amount of accumulated capital is large; where a high degree of civil security exists; where the rights of property are respected, and where the ownership of land carries with it social distinction and perhaps political influence, the price of land may be twenty, twenty-five or even thirty times the annual rental. In other countries, from the failure of one or all of the conditions indicated, land may not sell for more than fifteen or even ten times its rental.
262. Rent forms no part of the Price of Agricultural Produce.—From the law of rent, as it has been stated, we deduce the very important conclusion that rent forms no part of the price of agricultural produce.
No proposition which the political economist has occasion to announce is so startling, at the first hearing, as this; nor does any other contend against such persistent incredulity. And yet, no proposition can be more clearly established. We have seen (par. 132) that in the same market, at the same time, there is but one price for different equal portions of any commodity. We have also seen (par. 137) that normal price is fixed by the cost of producing that portion of the supply which is produced at the greatest disadvantage.
Apply these principles to the case in hand. England does not raise all the wheat needed for the subsistence of her population. Besides cultivating the most fertile of her own fields, she makes heavy draughts upon the United States, France, Egypt, Hungary, and the Black Sea region. For the wheat of all these countries, however, so far as it is of the same quality, there is but one price. That price is fixed by the cost of raising the million, say, of bushels which are raised at the greatest disadvantage, which means, in this case, at the greatest distance, viz., on the plains of Dakota. This wheat the English must have: the proof of which is found in the fact that they do have it. Now, if they will have it, they must pay the cost of raising it, that is, must pay enough to induce men to go to that far-off country, undergo the privations of a frontier life, undertake all the risks of pioneer agriculture, and submit to enormous charges for the transportation of their product by land two thousand miles to the seaboard, and, then, three thousand miles, by sea. If the English will not pay this price, they can not have the wheat. That they get the wheat is proof that they pay this price, which, in turn, sets the price for all the wheat raised in England, and for all the wheat brought thither, whether from France, from Egypt or from the Black Sea. Wheat may be raised in Middlesex at an actual cost not exceeding two shillings a bushel; but the Middlesex farmer will not, on that account, sell his wheat below the market price, say six shillings, which price is fixed, as we have seen, by the wheat from America. The difference, four shillings, is to be profit for somebody; and we will now proceed to show that this body must be either the landlord, or the tenant, not the agricultural laborer, and not the consumer of flour.
263. What Would Happen if Rents Were Remitted?—We shall best make this appear by means of an illustration. Let us suppose that a philanthropic gentleman, whose rent roll is £20,000, being greatly moved by tales of distress, knowing that the quartern loaf is very dear, and believing this to be due to the large rents paid for the use of land, calls his tenants together, and tells them that, in consideration of the hard times and the great suffering of the poor, he has determined to remit one-half of the rent of all his farms. What would be the consequence? Doubtless all the tenants would accept the proffered terms cheerfully, and humbly thank his honor. But would they sell the wheat at any lower price? Not at all; why should they? They can get the market price for it. That price is not fixed by the cost of raising wheat on their farms, or any farms for which rent is paid. It is the no-rent land that raises that last portion of the necessary supply of wheat which fixes the price of all wheat.
But suppose, to imagine a most improbable case, that some one out of the fifty tenants on this estate were to go to the dealer in grain to whom he was accustomed to sell his crop, and say: “Mr. B., inasmuch as my landlord has remitted half my rent this year, I offer you my wheat a shilling less a bushel, in order that you may sell it at a corresponding reduction to the baker.” What would the grain-dealer do? Clearly he would take the wheat, at the reduced price offered; but would he sell it to the baker for any less? Or, if he did, would the baker, getting his flour a shilling “off,” put down the price of the loaf? Not if he were of the sort of baker that you and I know.
But perhaps it is said, we concede that the farmers will not sell their wheat at any lower price, on account of the remission of rent, but they will raise the wages of their laborers. Why should they? They can make presents to their laborers, just as they could make presents to grain dealers or bakers, but we are talking now about business, and, as a matter of business, why should these fifty persons raise the wages of their laborers, in consequence of the generosity of their own landlord? The laborers were willing to work, before, for the wages that were stipulated, the same wages, it may be assumed, which other laborers in the county were receiving. Why should the laborers now be unwilling to work at the same wages? And if the laborers are willing to work at the same wages, why should the farmers pay more?
264. Resume of the Subject.—These illustrations may seem very elementary, but I have known so many persons, after a complete demonstration of the proposition we are considering, go away, showing, by look or by remark, that they still clung to the notion that rent has, somehow, something to do with the price of agricultural produce, that I have thought it worth the space required to repeat the demonstration and fully illustrate the argument. I trust it has been shown, to the conviction of every reader, that rent is a matter between the landowner and the tenant, not between the landlord and the agricultural laborer, or between the landlord and the consumer of agricultural produce.
Rent is the surplus of the crop above the cost of cultivation on the least productive lands contributing to the supply of the market. Admitting the private ownership of land (pars. 493-505), that surplus, necessarily, so far as economic forces are concerned, is left in the hands of the landlord. There, so far as economic forces are concerned, it must remain. The landlord can give it away, if he pleases, just as he can give away his horse, or his house, or any thing that is his. He can give it to his tenant, just as he could give to any one else. But if he does, it becomes a pure gratuity to the tenant, who, under the operation of the principle of self-interest, will transmit it neither to the agricultural laborer nor to the consumer of food, but will retain it entire for his own enrichment.
265. Attacks on the Doctrine of Rent.—Such is the economic doctrine of wealth, which is generally known by the name of David Ricardo, though, in truth, it was announced by Anderson, a Scotch economist, who wrote at an earlier date.∗
I postpone to Part VI. the consideration of attacks upon the doctrine of Rent, by certain American and French writers.
266. The Doctrine of Rent: How Far Applicable to Actual Conditions?—The law of rent which has been expounded, is true only hypothetically, that is, upon the condition assumed, viz., that the owners and the occupiers of land, each for himself, fully understand their own pecuniary interests, and will unflinchingly seek and unfailingly find their best market.
How much does this mean? A great deal; more than ever was realized in any country, at any time, though it has been far more nearly approached in some than in others. Just what is implied in the above assumption?
On the landlord's part that (1) he would as soon take a new tenant as retain one whose family had been on the soil for centuries; that (2) he will entertain no other consideration than the realization of the largest possible rent; that (3) he knows all the facts which in any way bear upon the highest rate that could be charged for the use of the land without driving away all would-be tenants.
On the tenant's part, that (1) he has the means to place himself elsewhere; that (2) he could carry with him the value of his stock and fixtures, and of any improvements made during his tenancy; that (3) he knows and can intelligently canvass the varying advantages of a sufficient number of localities to make his choice practically indefinite; and that (4) neither indolence, nor inertia, nor dread of change, nor love of home, friends or country, will intervene to keep him from his best market: that is, where he can rent land, of a given degree of productiveness, at the lowest annual rate.
The recital of the foregoing conditions shows that Ricardo's law does not furnish a formula by which the rent of a single piece of land can be determined in advance. The doctrine is true only hypothetically, and the conditions assumed exist nowhere.
267. Yet this hypothetical doctrine of rent is by no means to be regarded as vain and illusory. It is, on the contrary, of vast importance. It must be fundamental in any correct theory of the distribution of wealth. No projectile ever describes a perfect parabola, since the resistance of the air and the force of the wind will interfere to prevent an absolute compliance with the law of the projectile. Yet the artillerist must always have reference to that law in pointing his piece, making such allowance for disturbing influences as existing conditions may seem to require. Any attempt to explain the partition of the product of industry which should leave Economic Rent out of account, would be either futile or deceptive.
In some countries, notably in the United States and in England, Ricardo's law furnishes the great underlying principle according to which, with more or less of divergence from general or from local and individual causes, actual rents are primarily determined. In other countries, like those of continental Europe generally, where custom operates powerfully upon the rental of land, the doctrine is still of importance; first, as clearly furnishing the outside limit of rent; secondly, as establishing the proposition that the question of rent or no rent, of high rent or low rent, is purely a question between landlord and tenant, not between the employer and the employed, and not between the producer and the consumer of food.
268. Rents in the United States.—We have said that in some countries the economic doctrine of rent furnishes the principle which primarily determines actual rents. The United States offer the most striking illustration of this. So completely is the American mind imbued with the feeling that a thing is worth what it will bring; so little sympathy is here found for the notion of classes which, by reason of weakness, must be hedged in from competition with outside forces; so vast are the tracts of arable land not yet occupied; so freely do our people move from place to place; so slight are their attachments to locality, that no prejudice whatever would be created by a landlord's demanding the utmost rent which the tenant could, and in the result, would, pay. The fact that the tenant actually paid the rent demanded would be proof sufficient that he ought to pay it; that the land was worth it, and that the landlord showed only a proper sense of his own interest in advancing the price.
Nay, should the tenant refuse to pay the increased rent and give way to another, I know not an American community where odium would attach to the landlord. It would be felt, it would be freely said: If the tenant is not willing to pay the price of the land, let some one take it who is. And what is true of the United States in this particular, is true probably in nearly equal degree of Canada and Australia, new countries exhibiting the same general conditions of social life.
Here we see the unrestrained operation of the principle of competition, with a wholly beneficial result. The tenant and landlord, being substantially on an equality as to intelligence, enterprise and freedom of movement, seek each his own interest, yet without injury to the other.
269. English Rents.—When, however, we reach England, we find a new force entering actively to influence rents, all on the side of the tenant. Here the sentiment is universal that there are classes which, by reason of wealth, education, and social position, are bound to do and to forbear much, out of regard to the interests of classes deemed to be permanently and hopelessly weak.
The gentleman must never forget, in dealing with his servants, his laborers, his tenants, and even in some degree his trades' people, that he is dealing with inferiors and dependents, who are, in a sense, under his protection, who can not easily defend themselves against encroachment or fully assert their own interests, and that, in consequence, he is bound to act somewhat differently, it may be very differently, from what he would were he dealing with his equals.
But it is in regard to land that this sentiment operates with the greatest force. It would be impossible for an English landed proprietor to feel that freedom in regard to raising rents which characterizes the action of an American land-owner. A gentleman there who should undertake to force up rents, acting on the principle that, if his present tenants could not or would not pay his price, he would find others to do it, would feel the lash of public indignation descend on his back till life was made a burden to him. Instead of gaining increase of style and state through an enlargement of his rent-roll thus obtained, his social standing would be destroyed.
With public sentiment thus acting strongly and steadily in restraint of the natural impulses of the landholding class, we should look to see a divergence of actual from theoretical rents, all on the side of the tenant's interest; and such, indeed, we find to have been the case down to the time when, perhaps ten years ago, American competition began to operate with prodigious and altogether unprecedented force. “The rent of agricultural land,” wrote Prof. Thorold Rogers, “is seldom the maximum annual value of the occupancy; in many cases is considerably below such an amount.”
270. Customary Rents on the Continent of Europe.—On the Continent of Europe, rents are, in general, not determined by competition, but by custom, to which Mr. Mill has assigned the same beneficent function in economics it has always performed in the sphere of politics, as “the most powerful protector of the weak against the strong.” In Switzerland, France and Italy, rents were formerly fixed almost universally by the custom of the country, at a certain definite portion of the produce of the land. This species of tenure, known as the Metayer tenancy, has been fully recognized as giving to the peasantry the use of land at less than the maximum rents, as determined by the application of the purely economic formula. So strong is custom in protecting the tenant's interest, in these countries, that oftentimes it happens that, where cities have sprung up during the continuance of a family upon the soil, giving a local market for produce, and, by consequence, raising prices, the landlord, even in admitting a new family to the estate, does not attempt to exact a larger share of the produce.
“A proprietor,” says Sismondi, writing of Tuscany, “would not dare to impose conditions unusual in the country; and, even in changing one metayer for another, he alters nothing of the terms of the engagement.”
271. Rents in Ireland.—We have seen how far actual may be made to diverge from theoretical rents, all on the side of the tenant's interest, by the force of public sentiment. Let us now turn to a country where, in the time of which we are to speak, the population was not homogeneous; where prejudices of race and religion had engendered animosities that descended from generation to generation; where no friendly public opinion stood guard over the interests of a peasantry whose improvidence concurred with the greed of the landlord class in exciting a fierce and unremitting competition for the occupancy of the soil.
The story of the wrongs done to Ireland is so familiar that it is needless to enter into details to show why it was that in Ireland nothing intervened between landlord and tenant to break the force of competition. It was not merely that the two classes were of different races, of different religions, and in some degree also of different speech. The confiscations and colonizations of Elizabeth, the wars of Cromwell, and lastly the Penal Code, of which the temperate Hallam says, “to have exterminated the Catholics by the sword, or expelled them, like the Moriscoes of Spain, would have been little more repugnant to justice and humanity, but incomparably more politic”—these were the prime causes which had engendered antagonisms and animosities such as have rarely, in modern times, divided the population of any land.
272. In addition hereto another and most potent cause contributed to the severity with which rents were exacted. This was absenteeism, a great part of the soil being owned by landlords who resided in England and transacted their business through local agents, or through “middlemen,” who assumed the estimated rental of large estates and wrung from the peasantry whatever they could.
By a kind of natural selection, out of these agents and middlemen came to be developed a distinct species of social animal, peculiarly fierce and cunning, of preternatural acuteness to search out every possible occasion for fresh exactions, with heart of flint and face of brass. Only men with a natural aptitude for exaction, distraint and eviction were selected for such a work; years of practice made them perfect in the arts of extortion, while the consciousness of being despised and hated to the point of frenzy choked every casual thought of pity, and made absolute heartlessness both a professional virtue and a condition of self-preservation.
Such was the situation in Ireland, on the part of the landlord class, furnishing all the conditions necessary to a rigid and relentless enforcement of rent, up to the economic maximum —i. e., to the extent of giving to the owner of the land the entire surplus produce above the cost of cultivation on the poorest soils.
273. How was it on the side of the peasantry? Were they prepared to supply the conditions which should prevent competition from becoming disastrous, destructive? Unfortunately, the peasantry of no country in Europe were less fitted to enter upon such a struggle with the landlord class. Sanguine, improvident even to recklessness, the Irish people clung the more closely to the land the more miserable their lot; multiplied at a rate inconsistent with the capacity of the soil for providing subsistence, and competed among themselves for the occupancy of smaller and continually smaller parcels with a passionate eagerness. Had it been a stationary population, like that of France, which entered on this struggle for the fruits of the soil, the peasantry might have had some chance; but, with a population at least fifty per cent. beyond the capabilities of the soil to support, as the art of agriculture was then practiced, while every year largely increased the number of eager, penniless competitors, misery could hardly fail to result.
In the situation described, it was a matter of course that rents were advanced to the full limit allowed by the law we have stated. But there was more than this and worse than this. Rents were demanded by the agent, or middleman, rents were even offered by the peasantry in the eagerness of their competition, in excess of the economic maximum; in excess of what could possibly be paid; in many cases in excess, incredible as it may seem, of the whole annual produce of the soil.∗
274. But, it may be asked, if the tenants could not pay the rents, what harm to promise them? The landlords clearly would be disappointed; but how would the tenants suffer?
The injury done to the peasantry through this cause was threefold.
First. The whole possible produce above the bare necessities of subsistence, belonging to the landlord, the tenant had little interest in the crop or in keeping up the productiveness of the land. Having nothing to hope for, and being in so bad a plight that there was nothing but eviction to fear, all inspiration died out of the cultivation of the soil. What was done was always the least and the meanest that could be done.
Secondly. The promise of excessive, and indeed impossible, rents kept the tenant always in debt to his landlord. Hopeless debt differs little from slavery. The Irish cottier lived by the breath of the agent or the middleman.
Thirdly. The joint effect of the causes described was continually to lower the standard of living, and consequently the cost of cultivating the no-rent land, or lowest grade of soils, by making the peasantry reckless regarding the increase of their numbers.
275. Effects of Unequal Competition.—In the foregoing description of the state of the Irish tenantry prior to 1844, we have an illustration of the results of an unequal competition. That same force which in the United States, operating upon an intelligent, alert, active, aggressive population, under equal laws, produces effects only beneficial, in Ireland, under the conditions recited, produced disaster.
276. Actual vs. Theoretical Rents.—We see, then, that practically there may be three classes of cases in respect to rent.
First. Where, under active competition, with both parties substantially on an equality in respect to intelligence, alertness and freedom of movement, with no laws or habits or sentiments opposing the exaction of all which any thing that is the subject of bargain and sale may be worth, rents, as in the United States, conform nearly to the Ricardian formula.
Second. Where, among a population presenting wide differences of wealth and intelligence, and perhaps, also, of rank and political power, sentiments of personal kindliness and mutual regard between landlord and tenant, and a strong authoritative opinion throughout the community respecting the obligations imposed by the ownership of property, especially of landed property, serve, as in England, and in many countries of the continent of Europe, to reduce the pressure of the landowning upon the tenant class; making the landlord slow to seek occasions for raising rent; reluctant in forcing matters with the tenant to extremity, and altogether unwilling to proceed, in the case of a decent, well-meaning tenant, to distraint and eviction. Hence it comes about that rents vary widely from the Ricardian formula, always on the side of the tenantry.
Third. Where, with a tenantry ignorant, improvident, perhaps reckless in respect to family increase, and by consequence unable to offer effective resistance to an acquisitive, aggressive treatment of the question of rents, little in the way of sentiments of personal kindness on the part of landlords, and nothing in the way of an authoritative public opinion, enters to restrain the impulses which tend to advance rents. Here we have a result of ultimate injury to the economic interests of both parties and of the entire community.
277. The Rent of Pastures.—We have thus far spoken only of the rent of arable land. We have taken this first, not only because it is most important, so far as the mere amount involved is concerned, but also because the principles governing rent can be here most easily discerned. If we have done our work well, there will be little difficulty in applying the principles discovered to the rent of pastures, water privileges, building lots, mines and wood lots.
We have, throughout the foregoing extended illustration, assumed the existence of a considerable body of no-rent, arable lands, furnishing the base-line from which the rentals of the superior lands are respectively measured. To a certain extent this assumption corresponds to the facts of agriculture. More commonly, however, those lands whose net productiveness is so low that they could only be cultivated on the condition of paying no rent, are turned into pasture or grazing land. We might, therefore, say that, in many agricultural regions, the base-line for ascertaining rents, is furnished by a certain grade of pasture-lands, large tracts of which would yield but a scanty subsistence to a few cattle or sheep. Then come the more valuable pastures, which pay an appreciable rent, and, parallel with these, arable lands of moderate fertility, paying, also, an appreciable rent.
As we go upward in the scale of fertility, lands may be transferred from grazing to tillage, or from tillage to grazing, according to the demand for animal as compared with the demand for vegetable productions, at the time prevailing in the local market, or according to other conditions which we need not enter into here. Arable land is, also, often turned into pasture for the purpose of allowing it to recuperate in respect to certain properties of the soil which have been unduly drawn upon by the crops of previous years.
While, thus, a large part of the lands of any agricultural district may be used interchangeably for tillage and for grazing, it seldom happens that the best lands are used at all, or, at any rate, for more than the briefest period, as pasture. Generally speaking, the poorest lands are always used as pasture, the richest lands are always cultivated excepting, only, during intervals required for recuperation. It is in respect to the intermediate grades of soil that the alternation referred to takes place. The principle which determines the rent of pasture lands is the same as that with which we have already become familiar through our discussion of rent in its application to arable lands.
278. The Rent of Water Privileges.—Water privileges have three uses: first, for power, in connection with saw-mills, grist-mills, cotton-factories, etc.; secondly, for the supply of water, for drinking, washing, and other domestic purposes, to cities and towns; thirdly, for the irrigation of land, for the purposes of agriculture. The volume of water, the convenience of its application to the purpose for which water is, in the specific instance, required; proximity to the market, that is, the place where the water is to be used, these are the principal considerations which determine the productiveness of water-privileges for the purposes of rent. For the supply of cities and towns, the quality of the water also becomes an element of importance.
Productiveness being thus estimated, there are all degrees of productiveness among water privileges. There are the no-rent privileges, which, by reason of distance, or inconvenience of application, or of insufficient or irregular flow, are not used at all, or only used on condition that no compensation is exacted therefor. Above these, are found low-rent privileges and high-rent privileges, the measure of rent being the degree of productiveness.
279. An instructive illustration of the relation of monopoly to value is often afforded by the action of water-power companies, in regulating the prices they charge for power, according to the price of coal. In, for example, a given textile manufacturing city of New England, if coal can be delivered at four dollars a ton, the water-power company sells to a cotton or woolen-mill the right to take water sufficient to create (by its fall through a given number of feet), one-horse power, for, say, %24 a year, that amount representing the estimated cost of maintaining one-horse power, throughout a year, by the consumption of coal, at four dollars a ton. Should the price of coal fall to, say, three dollars, the water-power company would readjust its charge to meet the changed conditions of competition with steam.
Within the limits thus determined, the price of water-power is a monopoly price, being entirely irrespective of what it cost the company to acquire its rights and construct its works, and of what it may cost to keep up its service. To that monopoly, however, a limit is set by possible competition with steam-power.
280. The Rent of Building Lots.—The rent of building lots is determined by the principles already set forth. There are no-rent building lots in abundance. Every township has its squatters whose cabins, placed out of the way, on worthless land, pay no rent. Even in the neighborhood of large cities, shanties are perched on the rocks without objection from owners of land which, in another twenty or fifty years, may bear a high rent.
But something more is wanted in the case of a building, than ground to stand upon. The building must be placed with reference to its uses; and it is the productiveness of the lot in that respect which determines the rent. Among building lots that bear a rent, the minimum may be said to be determined by the value of land for the purposes of agriculture. A man leases a hundred acres of arable land, of uniform quality, for %500, a year, and places his house upon some convenient spot, occupying, with barns and sheds, half an acre of ground. The rent of this building lot is %2.50 a year. If he were a market gardener near a large city, the rent of the lot so occupied might be %25. If, on the other hand, he were a market man instead of a market gardener, he might pay %50 for the rent of the ground on which to build his cottage in the suburbs of the city, and five times that sum as the ground rent of his little shop in the heart of the city. If a banker, he could better afford to pay %2,000 or perhaps %5,000 ground rent on State Street, or Wall Street, or Lombard Street, than occupy premises half a mile away were he permitted to do so for nothing.
The productiveness of land occupied for the purposes of manufacture or trade, has reference to the number of persons passing through the street, or to the proximity of water-privileges, or wharf-privileges, or railroad stations, or to various other facilities for either doing a greater amount of business with the same capital, or for saving expenditure upon a given amount of business. Such lots being limited in number, yet held by competing owners, their rent conforms closely to the Ricardian formula. In regard to this kind of rent, competition is, if not perfect, at least very active on both sides. No favor is shown or asked; the two parties to the bargain are regarded as equal. The landlord gets all the land will bring, if not from one tenant, then from another. The tenant expects to pay all that any man will be willing to give for the commercial advantages of occupying the ground.
281. The Rent of Mines.—The rent of mines is not governed wholly by the economic law of rent which, as stated (par. 253), has reference to the native and indestructible powers of the soil. Under proper care and husbandry, cultivation does not exhaust the soil. With rotation of crops, with annual manuring and an occasional season of rest, such as are provided for in most English leases, the land returns to its owner, or his representative, after 30, or 50, or 99 years, with unimpaired virtue. The enjoyment of water privileges does not exhaust the capacity of the river. The occupation of the ground for a generation does not contract the surface available for the same or a different use by another generation.
By the very nature of such deposits, the enjoyment of mining privileges diminishes the sum of the mineral in existence. The mine may be “worked out” in ten years or in twenty or in fifty, and nothing but an ugly pit be returned to the owner, at the expiry of the lease. The rent of such properties is not, therefore, regulated by the Ricardian formula, without modification. The rent must be increased sufficiently to compensate for the ultimate exhaustion of the deposits: the destruction of the value of the estate. Otherwise, the rule of rent for these properties is the same as in the case of other natural agents. The chief elements, here, in determining productiveness for the purposes of rent, are the quality of the product, the extent of the deposits, the depth of working, the distance from a market.
There are, in the United States, vast deposits of coal, for instance, near the surface, not far from a market, which will not pay for working, even if no rent be exacted, because the quality is poor, though the coal will burn, will give out light and heat, and, if delivered at the furnace free of cost, would be worth using.
There are other deposits of coal, of excellent quality, which will not pay for working by reason of the thinness of seams, or their narrow extent laterally. There are, again, vast deposits of good coal, which, by reason of their depth below the surface, are not sought by productive industry and perhaps never will be. There are still others which, by reason of distance from market are not now worth taking up at the government rates, which may in another century supply great manufacturing cities with power. These and other mines, a little more fortunate in character or location, which will just pay for working, furnish the no-rent mines. Above these are mines which pay rent, the degree of productiveness rising until the rental of a single mine becomes the income of a prince.
282. The Rent of Woodlots.—Woodlots and timber lands are, in fact, seldom rented in the United States and other new countries; first, on account of the difficulty which would be experienced in preventing waste and abuse by a tenant; and, secondly, because it is generally more profitable to cut off the whole body of wood or timber at once, than to pick from it, year by year, a certain proportion of what is standing. For these reasons, woodlots, when they reach the right condition for cutting, are commonly sold to large operators, at prices determined by the “net productiveness” of the individual tracts, reference being had to the amount and quality of timber and other wood, to the distance from market, facilities for transportation, etc.
The price at which an individual woodlot may sell, once in thirty or fifty years, may properly be conceived of as related to an annual rental, not collected at the time, but allowed to accumulate against the day of sale.
In old countries, where the value of wood and timber bears a much higher proportion to the wages of labor, than in new countries, and where the tracts so occupied are generally surrounded by dense populations, woodlots and forests are more commonly culled from year to year, instead of being cut off all at once. In such a condition, the Ricardian formula of rent would strictly apply to the several tracts supplying any given market, although, as a matter of fact, an owner would be likely to conduct the cutting of the wood and timber himself, or through his paid agents, on account of the difficulty, above referred to, of preventing waste and abuse on the part of a tenant.
283. The Rent of Buildings and of Permanent Improvements on the Land.—The so-called rent of buildings, exclusive of ground rent, is not governed at all by the economic law of rent, but by the principles which regulate the Interest on Capital, of which we are next to speak. A man owns a building lot, for which he could obtain a ground rent, that is, rent proper. Being also a capitalist, he erects a building thereon. Why does he so? Because he believes that, in addition to the rent of the ground, he can also obtain, for the occupation of the house erected thereon, a fair remuneration for the use of his capital, a remuneration equal (damage, trouble and risk of loss being taken into account) to what he would receive were he to put his capital into the form of live stock or rail-road shares, or government bonds. The building is an investment of capital. If his investment has been shrewdly made, he will receive from his tenants a sum which, in the view of the economist, consists of two parts, rent proper — ground rent—and interest. We shall see, in the next chapter, that these two elements of that remuneration are governed by widely different laws.
284. The Unearned Increment of Land.—We have seen how rent arises, under the private ownership of land, and what principles govern its amount and economic direction. We have seen that rent is purely a question between landlord and tenant, not between employer and employed, not between the producer and the consumer of agricultural produce. We have seen that, conceding the private ownership of land, rent must, so far as economic forces are concerned, remain in the hands of the owner of land; that it can only get into the hands of the tenant as a gift; that if it reaches the hands of the tenant, no economic forces will carry it into the hands of the agricultural laborer or of the consumer of food. It can only get there by a further gift or series of gifts.
We have also seen that, whenever the limit of cultivation is lowered, that is, whenever a less productive grade of soils is, by the increasing demands of population for subsistence, brought under cultivation, the rents of all previously cultivated lands are correspondingly raised, to the enrichment of their owners, not by reason of any increase in the yield of such lands, or by reason of any greater exertions put forth by the owners, but solely by reason of the necessity of cultivating a lower grade of soils.
Upon this view of rent, has arisen the question, Why should the private ownership of land be permitted to exist? at any rate, why should this incident of private ownership, the aggrandizement of the owner through the growth of the community, be longer permitted to exist? Why should not this “unearned increment of land,” to use Mr. Mill's phrase, go to the community, and not to any individual?
This demand has been made very vigorously, of late years, by a school of writers which embraces more than one economist of reputation. As the elements of the question are not purely economic, but embrace considerations of political equity and political expediency, I shall reserve all remark concerning it till we reach Part VI.
[∗]If the tract were held by one person, or by several persons acting in concert, a monopoly would be established, and a rent might be exacted. What would be the limit of that rent? Two bushels an acre, inasmuch as one would do better for himself to take up for cultivation a portion of the 22-bushel tract, paying no rent, than give more than two bushels for the use of an acre of the more productive land.
[∗]It is not, however, wholly inappropriate to join the name of Ricardo to this doctrine, on account of the great force and clearness with which he expounded and defended it. Anderson's statement of the same principle, though perfectly correct, was so made as to attract no attention, and it was not till long after Ricardo made the doctrine famous, that it became popularly known that the substance of it was contained in Anderson's work.
[∗]Cottier rents are nominal in pecuniary amount, because these rents are fixed so high that it is impossible for the cottiers ever to pay them. The nominal amount of the rent far exceeds the whole produce which the land would yield.—H. Fawcett, “Pol. Economy.” This statement is probably somewhat too sweeping.