Rent (economics)

“ 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. ”

“ 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. ”

“ 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. ”

“ 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. ”

“ Rent, therefore, forms no part of the cost of production which determines the value of agricultural produce. The land or the capital most unfavorably 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 favored portion. ”

“ If I buy land for a small price and hold it until I can sell it for a large price, I have become rich, not by wages for my labour or by interest upon my capital, but by the increase of rent. Rent, in short, is the share in the wealth produced which the exclusive right to the use of natural resources gives to the owner. Wherever any land has an exchange value there is rent in the economic meaning of the term. Wherever land having a value is used, either by owner or hirer, there is rent actual; wherever it is not used, but still has a value, there is rent potential. ”

“ 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. ”

“ Once more, the cost of conveyance to the market may differ according to the market in view, and lands favourably situated for one market may be disadvantageously placed for another, and vice versâ. And lastly, as rent is the surplus above the expenses of production, or, as it is sometimes termed, the 'leavings' of wages and profits, the differential advantages of different lands as instruments of production may vary as the rates of wages and profits themselves vary. ”

“ 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. ”

“ 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. ”

“ 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. ”

“ 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. ”

“ Rent is a much smaller proportion of the gross produce of the country than it was, and wages are not only in their aggregate a larger proportion of the aggregate produce of the country, but in their average a larger proportion of the per capita production. ”

“ But in the economic meaning of rent, payments for the use of any of the products of human exertion are excluded, and of the lumped payments for the use of houses, farms, etc., only that part is rent which constitutes the consideration for the use of the land. The part that is paid for the use of buildings or other improvements is properly interest, as it is a consideration for the use of capital. ”

“ The farmer then, although he pays no part of his landlord's rent, that being always regulated by the price of produce, and invariably falling on the consumers, has however a very decided interest in keeping rent low, or rather in keeping the natural price of produce low. ”

“ 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. ”

“ 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. ”

“ It requires rent to be low, for without that there cannot be a great surplus produce to divide between the two other classes, after satisfying the landlord. You will always make me say that profits depend on the [Pg 205] low price of corn. I never do say so; I contend that they depend on wages, and, although in my opinion wages will be mainly regulated by the facility of obtaining necessaries, they do not entirely depend on such facility. ”

“ When I say that wages fall as rent rises, I do not mean that the quantity of wealth obtained by labourers as wages is normally less, but that the proportion which it bears to the whole produce is necessarily less. ”

“ 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. ”

“ 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 labour and capital is that part of his income which they would yield him did he hire the land instead of working it. ”

“ In the case of the working classes the rent absorbs, at the lowest possible estimate, about one third of their total earnings, for it must be remembered that the rent is an expense that goes on all the time, whether they are employed or not. If they get into arrears when out of work, they have to pay double when they get employment again. ”

“ 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 the ordinary price is more than this, the surplus part will naturally go to the rent of the land. If it is not more, though the commodity may be brought to market, it can afford no rent to the landlord. Whether the price is or is not more depends on the demand.” “Rent, therefore, enters into the price of commodities in a different way from wages and profits. High or low wages and profit are the causes of high or low price ; high or low rent is the effect of it.” ”

“ A century ago, as I know very well, house-rent, even in London, took a small part of the workman's scanty earnings; now his earnings are sometimes very little better than they were a century ago, and his rent absorbs from a fourth to a half of what he earns in poorly paid labour. ”

“ Chapter XI The effect of material progress on the distribution of wealth To say that wages remain low because rent advances is like saying that a steam-boat moves because its wheels turn round. The further question is, what causes rent to advance? What is the force or necessity that, as productive power increases, distributes a greater and greater proportion of the produce as rent? ”

“ And all the world is not only asserting this truth every day, but is also acting on it; for these extra loaves, produced by the qualities peculiar to superior soils, are neither more nor less than Rent. Rent is the amount of produce which a given amount of exertion obtains from rich land, beyond what it obtains from poor land. Such is the account of rent [102] in which all economists agree ”

“ Now, while it is unquestionably true that the increasing pressure of population which compels a resort to inferior points of production will raise rents, and does raise rents, I do not think that all the deductions commonly made from this principle are valid, nor yet that it fully accounts for the increase of rent as material progress goes on. ”

“ It is true that all tenant farmers, and many other classes of producers, pay rent. But we have now seen, that 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. ”