Economic rent

“ The condition of the labourer would not be a whit improved. If landlords were prohibited from asking an increase of rent from their tenants and from ejecting a tenant so long as the fixed rent was paid, the body of the producers would gain nothing. Economic rent would still increase, and would still steadily lessen the proportion of the produce going to labour and capital. ”

“ The answer would seem to be that inasmuch as all Wealth is produced by Labor from and upon Land, and as the Rent allocation of Wealth attaches to Land-ownership—Land itself making no claim to compensation,—Government might with Economic consistency exact its Wages as a factor in Production from the receivers, actual and potential, of Rent, whose ownership of the Land, valueless without Governmental protection, rises in Value with Economic progress and falls in Value with Economic decline. ”

“ In technical discussion the term rent is usually confined to the compensation secured from appropriation of space, peculiar location, natural fertility, mineral deposits, water privileges, or any natural advantage to be used in production. In this limited meaning rent is confined to the advantage gained by the owner of wealth in any form so affected by the law of supply and demand as to gain a scarcity value. ”

“ In common speech we speak of rent only when owner and user are distinct persons. But in the economic sense there is also rent where the same person is both owner and user. Where owner and user are thus the same person, whatever part of his income he might obtain by letting the land to another is rent, while the return for his labor and capital are that part of his166 income which they would yield him did he hire instead of owning the land. ”

“ It must form an adequate reward for all the effort and expenditure which have been devoted to the undertaking. It must furnish sufficient earnings of labour and interest of capital. So much as this it must yield in the case of those producers, who are placed under the greatest disadvantages, and furnish the last, or, as it may be called, the 'marginal' part, of the supply for which there is a demand; and it is the surplus above this amount which competition transfers to the landlords as rent.
All this reasoning, then, rests on the assumption of competition. ”

“ The land or the capital most unfavourably circumstanced among those actually employed, pays no rent; and that land or capital determines the cost of production which regulates the value of the whole produce. Thus rent is, as we have already seen, no cause of value, but the price of the privilege which the inequality of the returns to different portions of agricultural produce confers on all except the least favoured portions. ”

“ Thus wages and interest depend not upon the produce of labour and capital but upon what is left after rent is taken out, or upon the produce which they could obtain without paying rent - that is, from the poorest land in use. Hence, no matter what be the increase in productive power, if the increase in rent keeps pace with it, neither wages nor interest can increase. ”

“ Thus, the unsatisfied desire for wealth, the competition of labor and capital for employment, would insure the extension of the margin of production, we will say to 18, and thus rent would be increased by the difference between 18 and 20, while wages and interest, in quantity, would be no more than before, and, in proportion to the whole produce, would be less. There would be a greater production of wealth, but land owners would get the whole benefit, subject to temporary deductions, which will be hereafter stated. ”

“ We have been hitherto considering the effects of the natural progress of wealth and population on rent, in a country in which the68 land is of variously productive powers; and we have seen, that with every portion of additional capital which it becomes necessary to employ on the land with a less productive return, rent would rise. It follows from the same principles, that any circumstances in the society which should make it unnecessary to employ the same amount of capital on the land, and which should therefore make the portion last employed more productive, would lower rent. ”

“ The real expenses of production are those incurred on the worst land, or by the capital employed in the least favorable circumstances. This land or capital pays, as we have seen, no rent, but the expenses to which it is subject cause all other land or agricultural capital to be subjected to an equivalent expense in the form of rent. Whoever does pay rent gets back its full value in extra advantages, and the rent which he pays does not place him in a worse position than, but only in the same position as, his fellow-producer who pays no rent, but whose instrument is one of inferior efficiency. ”

“ If then good land existed in a quantity much more abundant than the production of food for an increasing population required, or if capital could be indefinitely employed without a diminished return on the old land, there could be no rise of rent; for rent invariably proceeds from the employment of an additional quantity of labour with a proportionally less return. ”

“ When from the progress of population, land of the same quality as before should be taken into cultivation, to produce the food required, and the same number of men should471 be employed in producing it, the landlord would have not only the same proportion of the produce as before, but that proportion would also be of the same value as before. Rent then would be the same as before; profits, however, would be much higher, because the price of food, and consequently of wages, would be much lower. ”

“ If wages fall, profits, and not rent, would rise. If wages rose, profits, and not rent, would fall. The rise of rent and wages, and the fall of profits, are generally the inevitable effects of the same cause—the increasing demand for food, the increased quantity of labour required to produce it, and its consequently high price. If the landlord were to forego his whole rent, the labourers would not be in the least benefited. ”

“ This is the real cost to the community, which attaches to the products of any industry, in virtue of the land which it occupies; not any human labors or sacrifices required to produce the land itself, but the curtailment of the natural resources available for productive use elsewhere. This is the real cost of which rent is the money measure, and generally speaking an accurate measure at the margin of transference between one occupation and another. ”

“ We are not now so much concerned with the practical conclusions which they deduce respecting the real incidence of taxation, as with the fact that the distinction involves a point of fundamental importance in the theory of rent. Rent, broadly defined as a payment for differential advantages, is measured upwards from a minimum level where, it is assumed, no rent is paid. The producers on the 'margin' of production clear their expenses, but have no surplus in hand to transfer to the landlords. ”

“ Inasmuch as, in point of fact, B never gets the start of A, but follows along with A, the general result will be that which we found true under A—a rise of rents (3) , and increased cost of labor to the capitalist, arising from an increased cost of laborers' subsistence and a fall of profits (2) . The effect of a more rapid advance of improvements, at any one time, will temporarily better the condition of the laborers and also raise profits; but, if it is followed immediately by an increase of population, the land-owners will reap the benefits of the improvement in the rise of rent. ”

“ If the surplus produce which land affords64 in the form of rent be an advantage, it is desirable that, every year, the machinery newly constructed should be less efficient than the old, as that would undoubtedly give a greater exchangeable value to the goods manufactured, not only by that machinery, but by all the other machinery in the kingdom; and a rent would be paid to all those who possessed the most productive machinery.7
65The rise of rent is always the effect of the increasing wealth of the country, and of the 66difficulty of providing food for its augmented population. ”

“ A farmer, in making his present contract for rent, does not concern himself with the past history of the causes of the fertility or situation of the land, but with its present advantages, and he makes no attempt to draw the distinction between the earned and the unearned. And, in the future, he and his landlord may allow the nominal rent to remain unaltered in spite of increased prosperity or intensified depression in agriculture, in consideration simply of lessened expenditure or added liberality in the matter of improvements. ”

“ Allowing, as I most fully do, that no pressure can destroy rents, yet as the last portions of capital employed on the land pay no rent, it is to me inconceivable that there would be no inducement to employ more labourers whilst their average production should be three times more food than they could themselves consume. ”

“ He says, that "land, in almost any situation, produces a greater quantity of food than what is sufficient to maintain all the labour necessary for bringing it to market, in the most liberal way in which that labour is ever maintained. The surplus too is always more than sufficient to replace the stock which employed that labour, together with its profits. Something, therefore, always remains for a rent to the landlord." ”

“ The rent which a manufacturer or farmer has to pay for his land he naturally includes in his cost of production. But does this money cost to the individual correspond to, and measure, any real cost to the community as a whole? Here let us note in the first place that if only we could disregard the variety of uses to which land is put, if we could suppose that all industry was agriculture, and that agriculture was a single industry with a single product, we could argue that rent does not enter into marginal costs at all. ”

“ The cause which limits speculation in commodities, the tendency of increasing price to draw forth additional supplies, cannot limit the speculative advance in land values, as land is a fixed quantity, which human agency258 can neither increase nor diminish; but there is nevertheless a limit to the price of land, in the minimum required by labor and capital as the condition of engaging in production. If it were possible continuously to reduce wages until zero were reached, it would be possible continuously to increase rent until it swallowed up the whole produce. ”

“ Whether we formulate it as an extension of the margin257 of production, or as a carrying of the rent line beyond the margin of production, the influence of speculation in land in increasing rent is a great fact which cannot be ignored in any complete theory of the distribution of wealth in progressive countries. It is the force, evolved by material progress, which tends constantly to increase rent in a greater ratio than progress increases production, and thus constantly tends, as material progress goes on and productive power increases, to reduce wages, not merely relatively, but absolutely. ”

“ Whether the surplus of Production or possible Production be called Rent for Land, or deductions from Wages for superior opportunities to Labor, or be otherwise distinguished from Wages for Labor, it none the less exists as a distinct and natural allocation of Wealth produced from and upon Land by Labor. Although Rent depends wholly upon Labor for its Production it is a differential gain in Wealth which is due not to superior productiveness of Labor but to relative superiority of different kinds and locations of Land. ”

“ Now rent, when paid for the land itself, and not for improvements made in it by labour, is not a productive expenditure. It is not an outlay for the support of labour, or for the provision of implements or materials the produce of labour. It is the price paid for the use of an appropriated natural agent. ”

“ And thus to say that rent will be the excess in productiveness over the yield at the margin or lowest point of cultivation is the same thing as to say that it will be the excess of produce over what the same amount of labour and capital obtains in the least remunerative occupation. ”

“ Although Rent reduces the proportion of Wages to Wealth it does not necessarily reduce the aggregate of Wages. On the contrary, Wages may be more in quantity when normal Rent is deducted from aggregate Wealth than before Rent arises. The reason is that Rent takes of Wealth only a surplus which is measured by degrees of superiority of the better over the poorest Land in demand. ”

“ It is, therefore, like steam-engines, mills, or ships, to be considered as capital, the interest upon which is called rent, and it is subject to the same laws as capital in any other form. With the growth of wealth and population, the landlord is shown to be receiving a constantly decreasing proportion of the product of labor applied to cultivation, but a constantly increasing quantity, because of the rapid increase in the amount of the return as cultivation is improved and extended. ”