truth as such a law can possibly be; though of course modified or disturbed, in individual cases, by pending contracts, individual miscalculations, the influence of habit, and even the particular feelings and dispositions of the persons concerned.

The law of rent, in the economic sense, operates in the United States as truly as elsewhere, although there is no separate class of landlords here. With us, almost all land is owned by the cultivator; so that two functions, those of the landlord and farmer, are both united in one person. Although one payment is made, it is still just as distinctly made up of two parts, one of which is a payment to the owner for the superior quality of his soil, and the other a payment (to the same person, if the owner is the cultivator) of profit on the farmer's working capital. Land which in the United States will only return enough to pay a profit on this capital can not pay any rent. And land which can pay more than a profit on this working capital, returns that excess as rent, even if the farmer is also the owner and landlord. The principle which regulates the amount of that excess-which is the essential point-is the principle which determines the amount of economic rent, and it holds true in the United States or Finland, provided only that different grades of land are called into cultivation. The governing principle is the same, no matter whether a payment is made to one man as profit and to another as rent, or whether the two payments are made to the same man in two capacities. It has been urged that the law of rent does not hold in the United States, because "the price of grain and other agricultural produce has not risen in proportion to the increase of our numbers, as it ought to have done if Ricardo's theory were true, but has fallen, since 1830, though since that time our population has been more than tripled." This overlooks the fact that we have not even yet taken up all our best agricultural lands, so that for some products the law of diminishing productiveness has not yet shown itself. The reason is, that the extension of our railway system has only of late years brought the really good grain-lands into cultivation. The fact that there has been no rise in agricultural products is due to the enormous extent of marvelously fertile grain-lands in the West, and to the cheapness of transportation from those districts to the seaboard.

For a general understanding of the law of rent the following table will show how, under constant increase of population (represented by four different advances of population, in the

1 "American Political Economy," p. 164.

first column), first the best and then the poorer lands are brought into cultivation. We will suppose (1) that the most fertile land, A, at first pays no rent; then (2), when more food is wanted than land A can supply, it will be profitable to till land B, but which, as yet, pays no rent. But if eighteen bushels are a sufficient return to a given amount of labor and capital, then when an equal amount of labor and capital engaged on A returns twenty-four bushels, six of that are beyond the ordinary profit, and form the rent on land A, and so on; C will next be the line of comparison, and then D; as the poorer soils are cultivated, the rent of A increases :

product. bushels. product. bushels. product. bushels. product. bushels.

§ 5. Under the name of rent, many payments are commonly included, which are not a remuneration for the original powers of the land itself, but for capital expended on it. The buildings are as distinct a thing from the farm as the stock or the timber on it; and what is paid for them can no more be called rent of land than a payment for cattle would be, if it were the custom that the landlord should stock the farm for the tenant. The buildings, like the cattle, are not land, but capital, regularly consumed and reproduced; and all payments made in consideration for them are properly interest.

But with regard to capital actually sunk in improvements, and not requiring periodical renewal, but spent once for all in giving the land a permanent increase of productiveness, it appears to me that the return made to such capital loses altogether the character of profits, and is governed by the principles of rent. It is true that a landlord will not expend capital in improving his estate unless he expects from the improvement an increase of income surpassing the interest

of his outlay. Prospectively, this increase of income may be regarded as profit; but, when the expense has been incurred and the improvement made, the rent of the improved land is governed by the same rules as that of the unimproved.

Mr. Carey (as well as Bastiat) has declared that there is a law of increasing returns from land. He points out that everything now existing could be reproduced to-day at a less cost than that involved in its original production, owing to our advance in skill, knowledge, and all the arts of production; that, for example, it costs less to make an axe now than it did five hundred years ago; so also with a farm, since a farm of a given amount of productiveness can be brought into cultivation at less cost to-day than that originally spent upon it. The gain of society has, we all admit, been such that we produce almost everything at a less cost now than long ago; but to class a farm and an axe together overlooks, in the most remarkable way, the fact that land can not be created by labor and capital, while axes can, and that too indefinitely. Nor can the produce from the land be increased indefinitely at a diminishing cost. This is sometimes denied by the appeal to facts: "It can be abundantly proved that, if we take any two periods sufficiently distant to afford a fair test, whether fifty or one hundred or five hundred years, the production of the land relatively to the labor employed upon it has progressively become greater and greater.' But this does not prove that an existing tendency to diminishing returns has not been more than offset by the progress of the arts and improvements. "The advance of a ship against wind and tide is [no] proof that there is no wind and tide."

99 1

In a work entitled "The Past, the Present, and the Future," Mr. Carey takes [a] ground of objection to the Ricardo theory of rent, namely, that in point of historical fact the lands first brought under cultivation are not the most fertile, but the barren lands. "We find the settler invariably occupying the high and thin lands requiring little clearing and no drainage. With the growth of population and wealth, other soils yielding a larger return to labor are always brought into activity, with a constantly increasing return to the labor expended upon them."

In whatever order the lands come into cultivation, those

1 Rickards, "Population and Capital," p. 135.

which when cultivated yield the least return, in proportion to the labor required for their culture, will always regulate the price of agricultural produce; and all other lands will pay a rent simply equivalent to the excess of their produce over this minimum. Whatever unguarded expressions may have been occasionally used in describing the law of rent, these two propositions are all that was ever intended by it. If, indeed, Mr. Carey could show that the return to labor from the land, agricultural skill and science being supposed the same, is not a diminishing return, he would overthrow a principle much more fundamental than any law of rent. But in this he has wholly failed.

Another objection taken against the law of diminishing returns, and so against the law of rent, is that the potential increase of food, e. g., of a grain of wheat, is far greater than that of man.' No one disputes the fact that one grain of wheat can reproduce itself more times than man, and that too in a geometric increase; but not without land. A grain of wheat needs land in which it can multiply itself, and this necessary element of its increase is limited; and it is the very thing which limits the multiplication of the grains of wheat. On the same piece of land, one can not get more than what comes from one act of reproduction in the grain. If one grain produces 100 of its kind, doubling the capital will not repeatedly cause a geometric increase in the ratio of reproduction of each grain on this same land, so that one grain, by one process, produces of its kind 200, 400, 800, or 1,600, because you can not multiply the land in any such ratio as would accompany this potential reduplication of the grain. This objection would not seem worth answering, were it not that it furnishes some difficulty to really honest inquirers.

Others, again, allege as an objection against Ricardo, that if all land were of equal fertility it might still yield a rent. But Ricardo says precisely the same. It is also distinctly a portion of Ricardo's doctrine that, even apart from differences of situation, the land of a country supposed to be of uniform fertility would, all of it, on a certain supposition, pay rent, namely, if the demand of the community required

1 1 Rickards, ibid., p. 75.

that it should all be cultivated, and cultivated beyond the point at which a further application of capital begins to be attended with a smaller proportional return.

This is simply the question, before discussed, whether, if only one class of land were cultivated, some agricultural capital would pay rent or not. It all depends on the fact whether population-and so the demand for food-has increased to the point where it calls out a recognition of the diminishing productiveness of the soil. In that case different capitals would be invested, so that there would be different returns to the same amount of capital; and the prior or more advantageous investments of capital on the land would yield more than the ordinary rate of profit, which could be claimed as rent.

A. L. Perry admits the law of diminishing returns, but holds that, "as land is capital, and as every form of capital may be loaned or rented, and thus become fruitful in the hands of another, the rent of land does not differ essentially in its nature from the rent of buildings in cities, or from the interest of money." Henry George admits Ricardo's law of rent to its full extent, but very curiously says: "Irrespective of the increase of population, the effect of improvements in methods of production and exchange is to increase rent. . . . The effect of labor-saving improvements will be to increase the production of wealth. Now, for the production of wealth, two things are required, labor and land. Therefore, the effect of labor-saving improvements will be to extend the demand for land, and, wherever the limit of the quality of land in use is reached, to bring into cultivation lands of less natural productiveness, or to extend cultivation on the same lands to a point of lower natural productiveness. And thus, while the primary effect of labor-saving improvements is to increase the power of labor, the secondary effect is to extend cultivation, and, where this lowers the margin of cultivation, to increase rent."" Francis Bowen' rejects Ricardo's law, and says, "Rent depends, not on the increase, but on the distribution, of the population"asserting that the existence of large cities and towns determines the amount of rent paid by neighboring land. *

1 "Political Economy," p. 288.

↑ "Progress and Poverty," pp. 220, 221. 3" American Political Economy," p. 164.

For other writers opposed to the doctrine of Rent as maintained by Ricardo and Mill, see Bonamy Price, “Practical Political Economy," chap. x; McLeod. "Principles of Economic Philosophy," chap. x; and J. E. T. Rogers, "Manual of Political Economy," chap. xii.