CHAPTER VI.

Conflicting Opinions with respect to the Origin of Rent—Theory of Dr. Anderson—Nature and Progress of Rent—Not a Cause but a Consequence of the High Value of Raw Produce—Does not enter into Price—Distinction between Agriculture and Manufactures—Rents depend partly on the Extent to which Tillage has been carried, and partly on Situation—Inequality and Mischievous Operation of Taxes on Rent.

M. Quesnay and Adam Smith supposed, as has been already seen, that rent was a return to or compensation for the cooperation of natural agents in agriculture; and that it formed a bonus freely given to the husbandman over and above that part of the produce which served as a recompense for his peculiar work. Others supposed that rent originated in the circumstance of the landlords enjoying a monopoly of the soil, and being, in consequence, enabled to obtain an artificially enhanced price for its produce. The latter contended, of course, that rent entered as an important element into the cost of corn and other agricultural products. But in the system of the Economists, rent, being looked upon as a free gift of nature, was not supposed to affect prices. Smith, though he adopted the opinions of the Economists in regard to the origin of rent, is not very consistent in his statements as to its operation on prices; on the whole, however, it would seem that he considered it as directly influencing them.1

The fallacy of these contradictory statements is sufficiently obvious. Were rent really the recompense of the work of nature, it would always exist, wherever cultivation is practised, and would be equal at all times; neither of which is the case. To suppose that it is the result of a monopoly, Edition: current; Page: [407] in the ordinary sense of the term, on the part of the landlords, is still more visionary. No combination of any sort exists among them; and at the very moment that some are receiving high rents, the rents of others are so trifling as to be next to nothing—a sufficient proof that they depend on something else than monopoly.

The true theory of rent was, for the first time, satisfactorily unfolded in the year following the publication of the “Wealth of Nations,” by Dr. James Anderson. He showed, by an original and able analysis, that rent is not a recompense for the work of nature, nor a consequence of land being made private property; but that it owes its origin to the latter being of various degrees of fertility, and to the circumstance of its being impossible to apply capital indefinitely to any quality of land without, generally speaking, obtaining from it a diminished return. He further showed, that corn is always sold at its natural price, or at the price necessary to obtain the required supply, and that this price is not affected by the payment of rent; and he deduced from this doctrine many important practical conclusions, particularly with reference to the influence of tithes and other taxes over raw produce. These doctrines have since been illustrated and enforced by others. But the subject is not yet exhausted; and we shall endeavour to place it in a somewhat novel point of view, and to obviate some of the objections made to the theory.1

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To acquire correct ideas with respect to the nature and origin of rent, it is necessary to discriminate between the sources whence it arises; that is, between the portion of the gross rent of an estate or farm which is paid for the use of the natural and inherent powers of the soil, and the portion paid for the use of the buildings, fences, drains, roads, and other improvements (if such there be) made upon the soil. Two farms may be naturally of about equal goodness, and equally well situated; but, if little or no capital have been expended upon the one, while a great deal has been judiciously expended upon the other, they will let for very different sums. It is usual to call all sums derived by the landlords from land, whatever be their origin, by the name of rent; but, in an inquiry of this sort, it is necessary to distinguish between the sums paid for the use of the land and those paid for improvements, or for the use of the capital laid out upon the land. The latter are obviously profits; and their amount, at any given period, must consequently depend on the principles which govern the rate of profit. And hence, to obviate confusion and inaccuracy, we shall, in this inquiry, regard rent as consisting of that portion of the gross sum paid for the land, which is paid for the use of its natural or inherent powers, or which would be paid for it, supposing it were in a state of nature, without any improvement upon it. Whatever the landlords receive beyond this, is profit, not rent.

On the first settling of any country abounding in large tracts of unappropriated land, no rent is paid; and for this obvious reason, that no person will pay rent for what may be procured in unlimited quantities for nothing. Thus, in colonies where there is an ample supply of unappropriated Edition: current; Page: [409] land, rent, in the proper and scientific sense of the word, is not heard of until the best lands have become private property and been occupied. Suppose, however, that this comes to be the case, and that the population has increased, so that the demand for raw produce can no longer be supplied by the culture of the best lands; under these circumstances, it is plain that population will become stationary, unless the price of corn and other raw produce rise so as to enable inferior lands to be cultivated. No advance short of this will procure another bushel of corn; and competition will not, as will be immediately seen, allow prices to rise permanently above this level. The inhabitants have, therefore, but one alternative. If they pay a price sufficient to cover the expense of cultivating secondary lands, they will obtain additional supplies; if they do not, they must be without them.

Suppose, now, that the price rises so as to pay the expense of raising corn on soils which, in return for the same expenditure that would yield 100 quarters on lands of the first quality, yield only 90 quarters: it is plain it will then be indifferent to a farmer whether he pay a rent of ten quarters for the first quality of land, or farm the second quality, which is unappropriated and open, without paying any rent. If the population went on increasing, lands which would yield only 80, 70, 60, 50, &c., quarters in return for the same expenditure that had raised 100 quarters on the best lands, might be successively brought under cultivation. And when recourse has been had to these inferior lands, the corn rents of those that are superior will plainly be equal to the differences between the quantities of produce obtained from them and the quantity obtained from the worst quality under tillage. Suppose, for example, that the worst quality cultivated yields 60 quarters, then the rent of the first quality will be 40 quarters, or 100—60; the rent of the second quality will, in like manner, be equal to the difference between 90 and 60, or 30 quarters; the rent of the third quality will be equal to 80—60, or 20 quarters, and so on; the produce raised on the Edition: current; Page: [410] land last cultivated, or by means of the capital last applied to the soil, being all the while sold at its necessary price, or at that price which is merely sufficient to cover the cost of its production, including therein the ordinary rate of profit, on the capital of the cultivators. If the price were above this level, agriculture would be a peculiarly profitable business, and tillage would be extended; whereas, on the other hand, if the price fell below this level, capital would be withdrawn from the soil, and the poorer lands be thrown out of cultivation. Under such circumstances, it is clear that rent would not enter into the price of the produce raised by means of the capital last applied to the soil, that being exclusively made up of wages and profits. The proprietors of the superior lands obtain rent; but this is the necessary result of their greater fertility. The demand cannot be supplied without cultivating inferior soils, the produce of which must necessarily sell for such a price as will afford the ordinary rate of profit to their cultivators. This price will, however, yield a surplus, over and above this ordinary rate, to the cultivators of the more fertile lands; and this surplus forms rent.

“In every country,” says Dr. Anderson, “there are various soils which are endued with different degrees of fertility; and hence it must happen, that the farmer who cultivates the most fertile of these can afford to bring his corn to market at a lower price than others who cultivate poorer fields. But if the corn that grows on these fertile spots be not sufficient fully to supply the market, the price will naturally be raised to such a height as to indemnify others for the expense of cultivating poorer soils. The farmer, however, who cultivates the rich spots, will be able to sell his corn at the same rate with those who occupy poore fields; he will, consequently, receive more than the intrinsic value for the corn he raises. Many persons will, therefore, be desirous of obtaining possession of these fertile fields; being content to give a certain premium for an exclusive privilege to cultivate them, varying, of course, according to the more or less fertility of the soil. It is this Edition: current; Page: [411] premium which constitutes what we now call rent: a medium by which the expense of cultivating soils of very different degrees of fertility is reduced to a perfect equality.”1

Rent, therefore, in so far as it is a return for the use of the soil, and not for capital laid out on its improvement, results entirely from the necessity of resorting, as population increases, to soils of a decreasing degree of fertility, or of applying capital to the old land with a less return. It varies inversely as the produce obtained by means of the capital and labour employed in cultivation, increasing when the profits of agriculture diminish, and diminishing when they increase. Profits are at their maximum in countries like Australia, Indiana, and Illinois, and generally in all situations in which no rent is paid, and the best of the good lands only cultivated; but it cannot be said that rents have attained their maximum so long as capital yields any surplus in the shape of profit.

A quarter of wheat may be raised in Kent, Essex, or the Carse of Gowrie, for a third or a fourth part of the expense necessary to raise it on the worst soils in cultivation in the least fertile parts of the country. The same article cannot, however, have two or more prices at the same time and in the same market. Hence, if the price be not such as will indemnify the producers of the wheat raised on the worst soils, they will cease bringing it to market, and the required supplies will no longer be obtained; while, if the price exceed this sum, fresh capital will be applied to its production, and competition will sink prices to their natural level—that is, to a sum sufficient to afford ordinary profits to the raisers of that portion of the required supply which is produced under the most unfavourable circumstances, or at the greatest expense. The cost of producing this last portion determines the price of the whole crop. And, therefore, it is indifferent Edition: current; Page: [412] to the public whether, in an advanced stage of society, the excess of return over the cost of production on lands of the first quality, goes to a non-resident landlord or an occupier. It must go to the one or the other. Corn is not high because rent is paid, but rent is paid because corn is high—because the demand cannot be supplied without cultivating soils of a diminished degree of fertility as compared with the best. Suppose there is an effectual demand for ten millions of quarters of corn; that nine millions may be raised upon lands that yield a high rent, but that it is necessary to raise the other million on inferior lands which yield nothing but ordinary profits to their cultivators: under these circumstances, it is clear that the relinquishing of the rents payable by the tenants of the superior lands would be no boon to the tenants of those that are inferior. It would not lessen their expenses; that is, it would not lessen the capital and labour required to raise that portion of the necessary supply which is produced on their lands; and unless it did this, it is impossible, supposing the demand not to decline, that it should lower prices. Hence, though the landlords gave up the whole of their rents, prices would not be influenced. Such an act would turn farmers into landlords, and landlords into beggars; but there its effect would stop. The case, however, is entirely different when the cost of production varies. If it diminish, the competition of the producers will sink prices in the same proportion; while, if it increase, supplies will not continue to be brought to market, unless the price rise to a corresponding level. In no case, therefore, whether the demand be great or small—whether for a thousand or a million quarters—can the price of raw produce permanently exceed or fall below the sum necessary to pay the cost of producing that portion of the supply which is raised on the worst land, or by means of the last capital laid out on the soil.

It has been objected to this theory, that though it may apply in unappropriated countries like Australia, it will not Edition: current; Page: [413] apply in countries like England, where land is universally appropriated, and where, it is alleged, the worst qualities always yield some small rent to the proprietor.

It may be observed of this objection, that even were it well founded, it would not practically affect the previous conclusions. There are in England and Scotland vast tracts of land which do not let for 6d. an acre; but to cultivate these would require an outlay of many thousands of pounds; and the rent would consequently bear so small a proportion to the expenses of production, as to become altogether evanescent and inappreciable.

There can be no doubt, however, that there is in this, and most other extensive countries, a great deal of land which yields no rent.1 In the United States and Russia such is unquestionably the case; and yet no one presumes to say, that the laws which regulate rent in them are different from those which regulate it in England and France. The poorest lands are always let in immense tracts. If it were attempted to let particular portions of these tracts separately, no one would offer for them; but they appear to yield rent, because, though they really fetch nothing, the more fertile spots with which they are intermixed, may, in most cases, be let for a larger or smaller rent. But although every rood of land in Britain paid a high rent, it might still be truly affirmed, that such rent did not enter into the price of raw produce. Rent consists of the difference, or of the value of the difference, between the produce obtained through the agency of the capital first applied to the land, and that which is last applied to it. It would, as already seen, be indifferent to a cultivator, whether he paid a rent of ten quarters to a landlord Edition: current; Page: [414] for land yielding, with a certain outlay, 100 quarters of corn, or employed the same capital in cultivating inferior land yielding only 90 quarters, for which he paid no rent. Were it possible always to obtain 100 quarters for every equal additional capital applied to the superior soils, no person, it is obvious, would ever resort to those of inferior fertility; and, under such circumstances, the largest population might be supported on the smallest extent of land. But such is not the law under which food is obtained; and the fact that, in the progress of society, new and less fertile land is invariably brought under cultivation, demonstrates that additional capital and labour cannot be indefinitely applied with the same advantage to the old land. The state of a country may be such, the demand for agricultural produce may be so great, that every quality of land actually yields rent; but it is the same, in respect of this theory, if there be any capital employed in husbandry which yields only ordinary profits, whether it be employed upon old or new land. And that a large amount of capital is every where employed in such a manner, is a fact of which there cannot be a doubt. The owners and occupiers of land are influenced by the same principles, in the employment of their capital, that influence other men. Like them they endeavour, in prosecuting their own interests, so to adjust their, capital that the last quantity laid out may yield the ordinary rate of profit, neither more nor less. Suppose, for example, that a landlord occupies a farm which he might let for 200l. a year, producing, with a certain outlay of capital, 300 quarters of wheat: If the farm be managed with the requisite skill and attention, the wheat should, at an average, sell for so much money as is equivalent to the rent, the expense of labour, and the profit on the capital employed. Suppose, now, that the landlord finds that, by laying out additional capital on the farm, it may be made to yield 10, 20, 50, or 100 quarters more; he will make the outlay, provided the additional produce yield the ordinary rate of profit. He will not wait to commence the Edition: current; Page: [415] outlay till prices rise to a still higher elevation. It will be quite enough to make him immediately set about it, if they be such as afford a fair prospect of his realising the usual profits on the capital to be expended. He will, in fact, act exactly as the merchant or manufacturer acts who sends another ship to sea, or builds another cotton-mill, whenever he supposes that the capital so embarked will yield customary profits. And supposing the farm were let to a tenant, he, it is obvious, will do the same as the proprietor, in the event of his being able to obtain so much profit as may suffice, over and above the usual return, to replace the capital itself previously to the termination of the lease. Whether he will employ this additional capital depends entirely on the circumstance of prices being such as will repay his expenses and profits; for he knows he will have no additional rent to pay. Even at the expiration of his lease, the fact of an additional capital being employed would not occasion a rise of rent, unless in so far as some portion of it, by being permanently incorporated with the soil, may increase its inherent powers; and were his landlord to require more rent because a greater moveable capital had been employed, he would cease to employ it; since, by the supposition, he gets only the same profits he might get by employing it in any other department of industry.

If we reverse the previous suppositions, and suppose that the owner of the farm finds that, owing to a fall in the price of corn, the capital employed in its cultivation does not yield the common and ordinary rate of profit, he will then, acting on the same principle that led him in the other case to increase the capital on the farm, begin to withdraw a part of it; and, supposing it to be let, the rent would be proportionally reduced at the end of the lease, or sooner.

It is hardly, perhaps, necessary to state that, in practice, these results do not follow, as here supposed, immediately, and without any difficulty, on a rise or fall of prices: on the contrary, they take place only by degrees; and are often Edition: current; Page: [416] productive, on the one hand, of peculiar advantages, and, on the other, of peculiar sacrifices. But in purely theoretical inquiries, or such as have the establishment of principles for their object, such accidental circumstances may be overlooked; and it may, speaking generally, be said, that the last portion of capital laid out on the soil yields only customary profits; if, on the one hand, it were to yield more, fresh capital would be drawn to agriculture, and competition would sink prices to the level that would merely yield this rate; and if, on the other hand, the capital last applied to the soil yield less than customary profits, part of it would be withdrawn, until, by the diminution of produce and consequent rise of price, the last remaining portion of capital left this rate to its owners. Hence it follows, whether the last quality of land taken into cultivation yield rent or not, that the last capital applied to the land yields only ordinary profits, the price of the produce which it yields, and which regulates the price of all the rest, being unaffected by rent.

The intelligent trader will easily perceive, when it is said that superior lands are the first to be brought into cultivation, that the statement is not made absolutely, but with reference to the capacities and views of the cultivators. Lands endowed with a high degree of natural fertility are often, in thinly-peopled countries, either heavily timbered or so very wet as to be totally unfit for tillage; and wherever this is the case, cultivation is confined at first to open, dry, or down lands. The latter are, in fact, the most fertile which it is in the power of the inhabitants to cultivate. After population has become denser, and capital been accumulated, the neglected lands will most likely be cleared, drained, and brought into tillage. But it by no means follows, though they may yield a greater amount of produce per acre, that they are therefore more fertile than those first cultivated. The presumption indeed is all the other way. Fertility, it is to be remembered, does not depend merely on quantities of produce, but on the quantities compared with the outlays Edition: current; Page: [417] required for their production: so that if an acre of a certain description of land produces 50 bushels of wheat to an outlay of 100l., and an acre of a different description produces 35 or 40 bushels to an outlay of 50l., the latter is by far the more fertile of the two; and when both qualities of land are cultivated, the last will bring a large rent. It is indeed absurd to suppose that men will resort in preference to what is really inferior land. Whatever Mr. Carey1 or any one else may say to the contrary, such folly must be of rare occurrence, and it may be safely laid down that those lands which, all things considered, are the most fertile, will be first brought into cultivation.

It has been said that the previous reasonings involve a contradiction, inasmuch as they account for a rise and a fall of price in the same way, or by an extension of cultivation! But it is easy to see that they do no such thing. The price of corn will always be low where it is cheaply produced, as in Poland; and it will occasionally be low where it costs a great deal to produce it, as in England, when a redundant supply is brought to market. Suppose that the effectual demand for corn in Great Britain is such as will enable lands of the third or fourth degree of fertility to be cultivated with the customary return to the cultivators, but that, owing to variable harvests, to injudicious encouragement held out by the legislature, the ardour of speculation, the miscalculation of farmers, or any other cause, inferior lands, or those of the fifth degree of fertility, have been brought under tillage: the increased quantity of produce that will then be brought to market will plainly depress prices to such an extent that instead of yielding average profits to the cultivators of the fifth class, they will not yield them to the cultivators of the fourth class. But they will yield more to the cultivators of the fourth than to those of the fifth; the latter, therefore, Edition: current; Page: [418] will be first driven from their business; and when they have retired, prices will rise, not indeed to such a height as to enable the fifth class of lands to be cultivated, but so high as to enable the cultivators of the fourth class to continue their business; that is, as has been already shown, to the sum that will enable the raisers of the last portion of the required supply to obtain ordinary profits. Should the demand, instead of continuing stationary, increase so that it could not be supplied without resorting to still inferior lands, the price of corn would rise in proportion to the greater expense of their cultivation. But to whatever extent the demand might increase, if such improvements were made in agriculture, or in the art of raising corn, as would enable the supply to be obtained from land of the highest degree of fertility, prices would fall to the level required to pay the expenses of its cultivators, inferior lands would be abandoned, and rent would disappear.

It is farther said, by those who have cavilled at this theory, that it represents the cultivation of inferior land as the cause of rent; whereas it is, they affirm, the growing demand of the population for food that is its cause, it being the rise of price consequent to this increased demand that occasions the cultivation of inferior lands, and the payment of rent for those that are superior. This, however, is at best mere verbal trifling. The demand of the population for corn elevates its price to the height necessary to obtain the required supply, and may, therefore, be truly said to be the cause of its being produced; but rent originates in the peculiar circumstances under which supplies of corn are produced. Were it not that to obtain an increased supply, it is most frequently necessary to resort to soils of different degrees of fertility, or to apply capital, with a less return, to the old land, rent would be altogether unknown; nor, though the demand for corn were increased in a tenfold proportion, would prices be permanently elevated. It does, therefore, seem to be logically as well as substantially correct to affirm, that the decreasing Edition: current; Page: [419] fertility of the soil is the immediate cause of rent; and that its amount is determined by the extent to which inferior land is cultivated or good land forced.

This analysis of the nature and causes of rent discovers an important distinction between agricultural, and commercial and manufacturing industry. In manufactures, the worst machinery is first set in motion, and every day its powers are improved by new inventions, and it is rendered capable of performing a greater amount of work with the same expense; and as no limits can be assigned to the improved machinery that may be introduced, as a million of steam or other engines may be constructed for the same, or rather for a less proportional expense than would be required for the construction of one; competition never fails to reduce the price of the articles produced by their agency to the sum for which they may be produced at the least expense, or with the best machinery.

In agriculture, on the contrary, the best machines, or best soils are brought first into use, and recourse is afterwards had to inferior soils, or those requiring greater outlays to make them yield the same returns. It is true that improvements in the construction of farming implements, the discovery of more efficient manures, the introduction of more prolific crops, and of improved systems of management, increase, in a high degree, the productiveness of the soil, and proportionally reduce the price of raw produce. But that fall of price, which is permanent in manufactures, is temporary only in agriculture. When the price of corn is reduced, all classes obtain greater quantities in exchange for their products or their labour, so that profits, and capital, are both increased; and this increase, by causing a greater demand for labour and higher wages, leads, in the end, to an increase of population, and, consequently, to a further demand for raw produce and an extended cultivation. Agricultural improvements obviate, sometimes for lengthened periods, the necessity Edition: current; Page: [420] of having recourse to inferior soils and a rise of prices; still, however, their influence in this respect is not permanent. The stimulus which they at the same time give to population, and the natural tendency of mankind to increase up to the means of subsistence, seldom fail, in the long run, to raise prices, and, by forcing recourse to poor lands, rents also.

In illustrating this important distinction between agricultural and manufacturing industry, Malthus has set the theory of rent in a striking point of view. “The earth,” he observes, “has been sometimes compared to a vast machine, presented by nature to man for the production of food and raw materials; but to make the resemblance more just, as far as they admit of comparison, we should consider the soil as a present to man of a great number of machines, all susceptible of continued improvement by the application of capital to them, but yet of very different original qualities and powers.

“This great inequality in the powers of the machinery employed in procuring raw produce, forms one of the most remarkable features which distinguishes the machinery of the land from the machinery employed in manufactures.

When a machine in manufactures is invented which will produce more finished work with less labour and capital than before, if there be no patent, or as soon as the patent is over, a sufficient number of such machines may be made to supply the whole demand, and to supersede entirely the use of all the old machinery. The natural consequence is, that the price is reduced to the price of production from the best machinery; and if the price were to be depressed lower, the whole of the commodity would be withdrawn from the market.

The machines which produce corn and raw materials, on the contrary, are the gifts of nature, not the works of man; and we find by experience that these gifts have very different qualities and powers. The most fertile lands of a country, those which, like the best machinery in manufactures, yield the greatest products with the least labour and capital, are Edition: current; Page: [421] never found sufficient to supply the effective demand of an increasing population. The price of raw produce, therefore, naturally rises till it becomes sufficiently high to pay the cost of raising it with inferior machines, and by a more expensive process; and, as there cannot be two prices for corn of the same quality, all the other machines, the working of which requires less capital compared with the produce, must yield rents in proportion to their goodness.

Every extensive country may thus be considered as possessing a gradation of machines for the production of corn and raw materials, including in this gradation not only all the various qualities of poor land, of which every large territory has generally an abundance, but the inferior machinery which may be said to be employed when good land is further and further forced for additional produce. As the price of raw produce continues to rise, these inferior machines are successively called into action; and as the price of raw produce continues to fall, they are successively thrown out of action. The illustration here used serves to show at once the necessity of the actual price of corn to the actual produce, and the different effect which would attend a great reduction in the price of any particular manufacture, and a great reduction in the price of raw produce.”1

It appears, therefore, that in the earlier stages of society, and when only the best lands are cultivated, rent is unknown. The landlords, as such, do not begin to share in the produce of the soil until it becomes necessary to cultivate lands of an inferior degree of fertility, or to apply capital to the superior lands with a diminished return. Whenever this is the case, rent begins to be paid; and it continues to increase according as cultivation is extended over poorer soils, and diminishes according as they are thrown out of cultivation. Rent, therefore, depends exclusively on the extension of tillage. It is high where tillage is widely extended over inferior lands, Edition: current; Page: [422] and low where it is confined to the superior descriptions. But in no case does rent enter into price; for the produce raised on the poorest lands, or by means of the capital last applied to the culture of the soil, determines the price of the entire crop; and this produce yields only the common and average rate of profit.

In estimating rent, difference of situation has in many cases an influence similar to difference of fertility. Lands that are situated in the immediate vicinity of a large town, uniformly bring higher rents than those that are situated some twelve, twenty, or thirty miles off, provided the latter have no other market. The town affords a ready outlet for a great variety of articles for which there is little or no demand in the country; and though each of these may be trifling, yet their aggregate amount is usually considerable. Inasmuch too as the cost of conveying articles varies with the distance and difficulty of the roads along which they have to be carried, the less charge on those raised in the vicinity of markets enables their growers to pay a proportionally greater amount of rent. To preserve this advantage, the landlords of the counties contiguous to the metropolis opposed in 1767 the extension of turnpike roads to those situated at greater distances. But though their selfish policy had been in so far successful, it would not have gained their object unless they had been able to get obstructions laid on the navigation of the Thames. And had these also been imposed, the result would have been, that by checking or preventing the growth of the city, they would not have realised a tenth part of the advantage from their monopoly that they now reap from the all but boundless market which it affords for all the products, whether of the nearest or most distant parts of the empire.

It would, on many accounts, be desirable to be able readily to distinguish between that portion of the gross rental of a country, which is to be considered as rent properly so called, Edition: current; Page: [423] or as the remuneration paid to the landlords for the use of the natural powers of the soil, and that portion which is the return to, or the interest upon, the capital laid out upon houses, fences, drains, roads, and other improvements. But how desirable soever, it is admitted by all practical men, that it is quite impossible to make such a distinction with any thing approaching to accuracy. No two agriculturists, supposing them to be desired to resolve the gross rent of a single improved farm into its constituent parts, would arrive at the same result. Improvements become so much blended with the natural powers of the soil, that the influence of the one cannot be separated from that of the other; and it is merely the joint value of the two that can be estimated. No doubt can, however, be entertained by any one who reflects for amoment on the vast sums—the many hundred millions—that have been laid out upon the soil of England, that the rent paid to the landlords for the use of its natural powers is but inconsiderable compared with what is paid to them on account of improvements. And hence the inequality and mischievous operation of taxes on rent. Two landlords receive equal rents from their estates; but the rent of one is principally a consequence of natural fertility, while that of the other is derived principally from outlays of capital. What, then, could be more unfair than to subject them both to the same equal tax? And yet the amount of their rents is the only criterion to which recourse could be had in fixing the amount of the tax—for all the tax-collectors in the world could not separate between what was really rent, in the scientific sense of the term, and what was interest on capital. Such a tax would oppose the most effectual obstacle to improvements. Instead of carrying capital from other employments to the land, it would henceforth be carried from the land to them. The object would not then be to have an estate look well, but to have it look ill. And it may be said of estates as of individuals,

• “Pauper videri vult Cinna, et est pauper.”

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The effects formerly produced by the taille, and those now produced by the contribution fonciére in France, and the fluctuating land taxes imposed in other countries, abundantly confirm the truth of this statement; their influence having been most disatrous.

Before closing this chapter, we may observe that the author of the “Critical Dissertation on Value,”1 contends that, because the value of the corn raised on lands paying rent is not, after inferior lands are taken into cultivation, proportioned to the cost of its production, it is incorrect to represent the value of the aggregate produce raised in countries where cultivation is extended over inferior lands, as depending on that principle. But those who contend that the value of raw and other products, the quantities of which admit of indefinite increase, is determined by the cost of their production, invariably refer to the labour required to produce that portion of raw produce, or of any required article which is raised under the most unfavourable circumstances. “The exchangeable value of all commodities,” says Ricardo, “whether they be manufactured, or the produce of the mines, or the produce of land, is always regulated, not by the less quantity of labour that will suffice for their production under circumstances highly favourable, and exclusively enjoyed by those who have peculiar facilities of production, but by the greater quantity of labour necessarily bestowed on their production by those who have no such facilities; by those who continue to produce them under the most unfavourable circumstances—meaning, by the most unfavourable circumstances, the most unfavourable under which the quantity of produce required renders it necessary to carry on the production.”2

This is the sense in which we are always to understand the proposition, that the value of commodities depends on the Edition: current; Page: [425] cost of their production, or on the quantity of labour required to produce them and bring them to market. It is not meant to affirm, that the value of every particular hat or bushel of corn or other article offered for sale is determined by the quantity of labour actually expended on its production. What is really meant is, that the value of all the hats, as of all the corn required for the supply of the market, is determined by the quantity of labour required to produce that hat, or that bushel of corn, which has been produced with the greatest difficulty.

It is obvious that no error can arise in estimating the value of raw produce, from supposing it to have been wholly raised under the same circumstances as that portion which is raised by means of the capital last applied to the soil; for though portions of it may have been raised under very different circumstances, their value is, notwithstanding, determined by, and identical with, the value of that which is raised by this last applied capital. And hence, when corn is employed as capital in industrial undertakings, we are to consider it as being, in fact, either the actual product, or the equivalent of the product, of some quantity of the labour of those who raise corn on the worst lands under tillage; and the quantity of labour so wrought up in this capital, or represented by it, must plainly determine the cost of the commodities produced by its agency. This principle holds in the case of all commodities, the supply of which may be indefinitely extended. On tracing the cost of any article of this description, we shall find that it is determined, in oll ordinary states of the market, by the quantity of labour actually expended on its production, if it be produced under the most unfavourable circumstances, or that is actually expended on a similar article produced under these circumstances.

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