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• Editor's Preface
• Author's Preface
• Book I: The Elementary Theory of Value
• Chapter I: The Origin of Value
• Chapter II: The Value of Satisfactions of Want
• Chapter III: Gossen's Law of the Satiation of Want
• Chapter IV: The Scales of Satiation
• Chapter V: Marginal Utility
• Chapter VI: The Value of Future Satisfactions of Want
• Chapter VII: The Value of Goods
• Chapter VIII: The Valuation of a Single Commodity
• Chapter IX: The Valuation of Goods In Stocks. the Law of Marginal Utility the General Law of Value
• Chapter X: The Paradox of Value
• Chapter XI: The Antinomy of Value and the Service of Value
• Book II: Exchange Value and Natural Value
• Chapter I: Price
• Chapter II: Exchange Value In the Subjective Sense
• Chapter III: Exchange Value In the Objective Sense
• Chapter IV: The Antinomy of Exchange Value
• Chapter V: The Service of Exchange Value In General Economy
• Chapter VI: Natural Value
• Chapter VII: The Socialist Theory of Value
• Book III: The Natural Imputation of the Return From Production
• Part I: The General Principles of Imputation
• Chapter I: Return Value
• Chapter II: The Problem of Imputation
• Chapter III: The Socialist Reading of the Problem. the Claim of the Labourer to the Entire Return
• Chapter IV: Previous Attempts At Solution
• Chapter V: The Principle of Solution. the Productive Contribution
• Chapter VI: The Principle of Solution (continued) . Contribution and Co-operation
• Chapter VII: The Principle of Solution (continued) . the Economic Service of Imputation
• Chapter VIII: The Principle of Solution (continued) . Imputation and the Marginal Law
• Chapter IX: The Individual Factors of Imputation. I.—SUPPLY
• Chapter X: The Individual Factors of Imputation ( Continued ). II. — Demand and Complementary Goods
• Chapter XI: The Individual Factors of Imputation ( Continued ). III. — Technique
• Chapter XII: The Individual Factors of Imputation ( Continued ). IV. — the Imputation to Cost Goods and to Monopoly Goods
• Chapter XIII: The Individual Factors of Imputation ( Continued ). V. — the Imputation to Productive Factors of Preferable Quality
• Part II: Natural Land Rent
• Chapter XIV: Ricardo's Differential Rent: the First Part
• Chapter XV: Ricardo's Differential Rent: the Second Part
• Chapter XVI: Criticism of Ricardo's Theory
• Part III: The Natural Return to Capital
• Chapter XVII: The Productivity of Capital
• Chapter XVIII: The Calculation of Return to Capital In Primitiive and In Developed Economies
• Chapter XIX: The Imputation of Gross Return and of Net Return
• Book IV: The Natural Value of Land, Capital, and Labour
• Chapter I: Introduction
• Chapter II: The Value of Capital and the Interest On Capital I.—DISCOUNTING
• Chapter III: The Value of Capital and the Interest On Capital (continued) . II.—THE Rate of Interest
• Chapter IV: The Value of Capital and the Interest On Capital (continued). III.— The Law of the Uniform Calculation of the Interest Rate
• Chapter V: The Value of Capital and the Interest On Capital (continued.) IV.—CHANGE In the Rate of Interest
• Chapter VI: The Value of Capital and the Interest On Capital (continued) . V.—THE Valuation of Fixed Capital
• Chapter VII: The Value of Capital and the Interest On Capital ( Continued ) VI.— Capitalisation
• Chapter VIII: Interest On the Consumption Loan. House Rent
• Chapter IX: The Value of Land
• Chapter X: The Value of Labour
• Chapter XI.: The Value of Production Goods, With Reference to the Competition Between Present and Future Interests
• Book V: The Natural Cost Value of Products
• Chapter I: The Law of Costs
• Chapter II: The Conception of Costs
• Chapter III: Foundation of the Law of Costs
• Chapter IV: Conditions Under Which the Law of Costs Obtains
• Chapter V: The Determining Amount of Costs
• Chapter VI: The Law of Costs and the General Law of Value
• Chapter VII: The So-called Costs of Production of Labour
• Chapter VIII: The Cost Theories
• Chapter IX: The Cost Theories ( Continued ). Labour As an Element In Cost
• Chapter X: The Cost Theories ( Continued ). Capital As an Element In Cost
• Chapter XI: The Cost Theories (continued) . Interest As an Element In Cost
• Chapter XII: The Cost Theories (continued) . Land Rent As an Element In Cost
• Chapter XIII: The Service of Individual Economic Value In National Economy 1
• Book VI: Value In the Economy of the State
• Chapter I: Introduction
• Chapter II: The Province of a State Economy
• Chapter III: Value In the Natural Economy of the State
• Chapter IV: Value In the Present-day Economy of the State
• Chapter V: The Fundamental Law of Collective Valuation

CHAPTER XV

ricardo's differential rent: the second part

There is a second part to Ricardo's theory which is frequently overlooked although it is really the more important From the very nature of land every piece of it has powers of different quality. Just as only the best lands are at first taken up, so are only the best powers in each piece of land Of these powers the poorest class-—so long as this class is in excess of the demand—-gives no rent, and the better classes give a net differential rent.

In this second part of Ricardo's theory also, the natural principles of imputation are found to be in perfect agreement with the rules he has laid down for the formation of contract rent. This may be best shown, by an example. Say, as before, that the quarter of wheat brings 40s. Then a certain piece of land, according as it is cultivated at a greater or smaller outlay in capital and labour, will produce the following returns:—

Under these circumstances a private owner will find it advantageous to expend only £400. He gains thereby a return of £40; and, instead of sinking the third £200 in his land and gaining a return of only £160, he will do better to employ it in some other direction, where it may give its full possible return of £200. From the £440 return thus obtained, he reckons £400 as the costs; the remaining £40 he can claim, and the tenant can pay, as rent. Just so must the communistic state make its calculations according to these natural principles of valuation There, too, natural principles will demand that only £400 be sunk in the land, and that the surplus of £ 40 thus earned be imputed to the land as rent.1

The differential rent received from preferable powers of the soil may be called the “Intensity Rent,” because it emerges and rises according as the land is cultivated intensively. This “intensity rent,” according as Ricardo conceives of it, might quite well be a universal rent for all the lands of a country, or of the whole world, supposing them to be all cultivated with sufficient intensity. Ricardo's differential theory in no way requires—as is often said—the existence of no rent land. It is sufficient if there are no rent powers in the soil.

It need scarcely be said that “ intensity rents ” must receive as exact consideration from the economist as the rent of better lands. It is perhaps unnecessary to say anything further on this point.

[1]If £ 600 were sunk a total of £600 would indeed be received in return, but none the less would there be a loss of £40 on the third two hundred. If only £400 were sunk, and the surplus of £40 were imputed not to the land, but to the capital or to the labour, we should make two mistakes, each contradicting the other. Firstly, the land, as such, would be declared to yield no return. The practical conclusion would be that it ought not to be cultivated, and that the capital and labour should be otherwise employed, in which case the whole £40 would be lost. Seoondly, this application of capital and labour would be shown to be peculiarly profitable— the practical conclusion of which would be that it would appear permissible to sink even more capital in the land. But this ought not to be done, as £400 is the highest expenditure economically permissible. The land rent of £40 is, therefore, the rational expression of the most advantageous disposition of production.