Produced by Frank van Drogen, Carol Brown, Gwen Adams,
Elizabeth Oscanyan, and the Online Distributed Proofreading
Team at https://www.pgdp.net.
Transcriber's Note: A monospaced font will display the tables in this book
better than a variable-spaced font.
PRINCIPLES
OF
POLITICAL ECONOMY
BY
WILLIAM ROSCHER,
PROFESSOR OF POLITICAL ECONOMY AT THE UNIVERSITY OF LEIPZIG,
CORRESPONDING MEMBER OF THE INSTITUTE OF FRANCE, PRIVY
COUNSELLOR TO HIS MAJESTY, THE KING OF SAXONY.
FROM THE THIRTEENTH (1877) GERMAN EDITION.
WITH ADDITIONAL CHAPTERS, FURNISHED BY THE AUTHOR, FOR THIS FIRST
ENGLISH AND AMERICAN EDITION, ON
PAPER MONEY, INTERNATIONAL TRADE, AND THE
PROTECTIVE SYSTEM;
AND A PRELIMINARY
ESSAY ON THE HISTORICAL METHOD IN POLITICAL ECONOMY
(From the French)
BY L. WOLOWSKI,
THE WHOLE TRANSLATED BY
JOHN J. LALOR, A. M.
VOL. II.
[Illustration: Printer's Logo]
NEW YORK:
HENRY HOLT & CO.
1878.
Entered according to Act of Congress, in the year eighteen hundred
and seventy-eight,
BY CALLAGHAN & CO.,
In the office of the Librarian of Congress, at Washington, D. C.
DAVID ATWOOD, STEREOTYPER AND PRINTER, MADISON, WIS.
TO
WILLIAM H. GAYLORD, ESQ.,
_COUNSELOR AT LAW_,
OF CLEVELAND, OHIO,
TO WHOSE BROTHERLY CARE IT IS LARGELY DUE THAT I LIVED TO
TRANSLATE THEM,
THESE VOLUMES
ARE AFFECTIONATELY INSCRIBED.
BOOK III.
DISTRIBUTION OF GOODS.
CHAPTER 1.
INCOME IN GENERAL.
SECTION CXLIV.
RECEIPTS.--INCOME.--PRODUCE.
The idea covered by the word receipts (_Einnahme_) embraces all the new
additions successively made to one's resources within a given period of
time.[144-1] Income, on the other hand, embraces only such receipts as
are the results of economic activity. (See §§ 2, 11.) Produce (_Ertrag_,
_produit_) is income, but not from the point of view of the person or
_subject_ engaged in a business of any kind, but from that of the
business itself, or of the _object_ with which the business is
concerned, and on which it, so to speak, acts.
Income is made up of products, the results of labor and of the
employment and use of resources. These products, the producer may either
consume himself or exchange against other products, to satisfy a more
urgent want.[144-2] Hence, spite of the frequency with which we hear
such expressions as these: "the laborer eats the bread of his employer;"
"the capitalist lives by the sweat of the brow of labor;" or, again, a
manufacturer or business man "lives from the income of his
customers,"[144-3] they are entirely unwarranted. No man who manages his
own affairs well, or those of a household, lives on the capital or
income of another man; but every one lives on his own income, by the
things he has himself produced; although with every further development
of the division of labor, it becomes rarer that any one puts the
finishing stroke to his own products, and can satisfy himself by their
immediate consumption alone. Hence we should call nothing diverted or
derived income except that which has been gratuitously obtained from
another.[144-4]
[Footnote 144-1: Including of course, gifts, inheritances,
lottery prizes, etc.]
[Footnote 144-2: Thus the original income of the peasant
consists in his corn, of the miller in his flour, of the
baker in his bread, of the shoemaker in his shoes. The money
which circulates among all these and the purchaser, is only
the means of exchanging that part of their products which
they cannot themselves use, for other goods. Money, on the
other hand, was the original income of the producers of the
gold or silver it contains. Compare _Mirabeau_, Philosophie
rurale, 1763, ch. 3. _Adam Smith_, II, ch. 2. But
especially, see _J. B. Say_, Traité II, ch. 1, 5; and
_Sismondi_, N. P., I, 90, 376, in which it is correctly
said, that the quality which constitutes anything capital or
income does not inhere in the thing itself, but depends on
the person. Compare, however, I, 148; _Hermann_, Staatsw.
Untersuch. 297 ff., 33 seq.]
[Footnote 144-3: A fundamental thought in _St. Chamans_, Du
Système d'Impôt, 1820. Nouvel Essai sur la Richesse des
Nations, 1824.]
[Footnote 144-4: Thus, for instance, the support given by
the head of a family to the members thereof; also gifts,
alms, thefts. Even _A. L. Schlözer_, St. A., II, 487, will
allow that no one "eats the bread of another," but the
person who has received it from the latter by way of favor
and for nothing. In the case of a rented house, there is
only an exchange of objects of income. The person to whom it
is rented gives up a portion of his, and the renting party
the use of his house. Similarly, in the case of personal
services. Writers who maintain that only certain kinds of
useful labor are productive, must of course extend the
limits of diverted income much farther. See _Lotz_,
Handbuch, III, § 133; _Rau_, Lehrbuch, I, §§ 248, 251.
_Cantillon_ thinks that if no landowner spent more than his
income, it would be scarcely possible for any one else to
grow rich. (Nature du Commerce, 75.) According to _Stein_,
Lehrbuch, 347, every one gets his income from the income of
other people!]
SECTION CXLV.
INCOME.--GROSS, FREE AND NET.
In all _income_, we may distinguish a _gross_ amount, a _net_ amount and
a _free_ amount.[145-1] The gross income of a year, for instance,
consists of all the goods which have been newly produced within that
time. The net[145-2] income is that portion of the former which remains
after deducting the cost of production (§ 106), and which may therefore
be consumed without diminishing the original resources. Only the new
values incorporated in the new commodities make up the net income.
Evidently, a great portion of what is considered in one business the
cost of production is net income in a great many others; as for
instance, what the person engaged in one enterprise in production has
paid out in wages and interest on capital. By means of this outlay, a
portion of his circulating capital is drawn by others as income, and, on
the other hand, a portion of their original income is turned into a
portion of his circulating capital.[145-3] _Free_ income, I call that
portion of net income which remains available to the producer after his
indispensable wants have been satisfied.
An accurate kind of book-keeping which keeps these three elements of
income separate is more generally practicable as civilization advances.
We might call it the _economic balance_. Where commerce is very thriving
it is even customary to provide by law that those classes who need it
especially should have this species of book-keeping. People in a lower
stage of cultivation, with their poetical nature, are unfriendly to such
calculations.[145-4] [145-5] And where natural-economy (_Naturalwirthschaft_)
or barter prevails, a book-keeping of this kind of any accuracy is scarcely
practicable. The ratio which net income bears to gross income is a very
important element to enable us to judge of the advantageousness of any
method of production. If every producer should succeed in consequence of
keeping his books in this manner, in determining exactly the cost to him of
each of his products, this would be an economic progress similar to that of
general spread of good chemical knowledge in the arts. On the amount of
_free_ income, on the other hand, depends all the higher enjoyment of life,
all rational beneficence, and the progressive enrichment of mankind.[145-6]
[Footnote 145-1: Similarly in _Sismondi_, N. P., II, 330,
and _Rau_, Lehrbuch, I, § 71, a.]
[Footnote 145-2: Called by _Hermann_, loc. cit., simply
income.]
[Footnote 145-3: This truth _J. B. Say_ has exaggerated to
the extent of claiming that gross and net income are one and
the same so far as entire nations are concerned. (Traité,
II, ch. 5; Cours pratique, III, 14; IV, 74.) But the gross
profit of the entire production of any one year is much
greater than the simultaneous net income of all the
individuals engaged in it. This is accounted for by the fact
that in such production an amount of circulating capital is
invested which was saved from the net profit of previous
economic times. Compare _Storch_, Nationaleinkommen, 90 ff.
_Kermann_, loc. cit., 323 ff.]
[Footnote 145-4: In the East, a valuation by one's self of
his property is considered a guilty kind of pride, usually
punished by the loss of one's possessions. (_Burckhardt_,
Travels in Arabia, I, 72 ff.) See _Samuel_, 24, on the
census made by David. The Egyptians, however, as may be
inferred from their monuments, must have very early and very
extensively felt the want of some kind of book-keeping such
as we have mentioned. A very accurate sort of book-keeping
among the more highly cultured Romans, with a daily
memorandum and a monthly book with entries from the former
(_adversaria-tabula expensi et accepti_). Compare _Cicero_,
pro Roscio, com. 2, 3; pro Cluent, 30; _Verr._, II, 1, 23,
36. The Latin _putare_, from _putus_, pure, means: to make
an account clear, and therefore corresponds to the American
provincialism, "I reckon," i. e., I believe; and is a
remarkable proof of a rigid method of keeping accounts. The
Italian, or so-called double-entry method of book-keeping,
which gives the most accurate information on the profit from
every separate branch of business, became usual among the
nations of modern Europe whose civilization was the first to
ripen, about the end of the fifteenth century. Its invention
is ascribed to the monk Luca Paciolo di Borgo S. Sepolcro.
In England, this kind of book-keeping is very gradually
coming into use even among farmers, while _Simond_, Voyage
en Angleterre, 2 ed., II, 64, _Dunoyer_, Liberté du Travail,
VIII, 5, say, "it would in France be considered as
ridiculous as the book-keeping of an apple vendor." In
Germany, there have been for some time past, manufactories
of commercial books. Besides, the remarkable difference
brought out by the income tax in England between the exact
statements made by large manufacturers, etc., and by those
engaged in industry on a medium or small scale, bears
evidence of the better way in which the former keep their
accounts, the cause and effect of their better business in
general. Compare _Knies_, in the Tübing. Zeitschr., 1854,
513. On the best mode of determining income, see _Cazaux_,
Eléments d'Économie publique et privée, Livre, II. It is
especially necessary to keep an account of the increase or
diminution, even when accidental, of the value of the fixed
capital employed.]
[Footnote 145-5: The Code de Commerce, I, art. 8, requires
that every merchant should keep a journal, paged and
approved by the authorities, showing the receipts and
disbursements of each day, on whatever account, and also the
monthly expenditures of his family. Besides, he is required
to make a yearly inventory of his debits and credits,
subscribe to it and preserve it. That such books were
excellent judicial evidence may be shown by Italian statutes
of the fourteenth century. (_Martens_, Ursprung des
Wechschrechts, 23.) Those of Germany even in 1449.
(_Hirsch_, Danziger Handelsgeschichte, 232.)]
[Footnote 145-6: Importance of the so-called "transferring
to credit," where a business man considers his business as
an independent entity and as distinct from himself.]
SECTION CXLVI.
NATIONAL INCOME.--ITS STATISTICAL IMPORTANCE.
Among the most important[146-1] but also the most difficult objects of
statistics, that book-keeping of nations, is national income. In
estimating it, we may take our starting point from the goods which are
elements of income, or from the persons who receive them as
income.[146-2]
In the former case the gross national income consists:
A. Of the raw material newly obtained in the country.
B. Of imports from foreign countries, including that which is secured by
piracy, as war-booty, contributions, etc.
C. The increase of values which industry[146-3] and commerce add to the
first two classes up to the time of their final consumption.
D. Services in the narrower sense and the produce (_Nutzungen_) of
capital in use.
All these several elements, estimated at their average price in money,
which supposes that all purchases, especially those under the head D,
are made voluntarily[146-4] and at their natural price.
To find the national net income, we must deduct the following items:
A. All the material employed in production which yields no immediate
satisfaction to any personal want.[146-5]
B. The exports which pay for the imports.
C. The wear and tear of productive capital and capital in use.
In the second case the net national income is to be calculated from the
following items:
A. From the net income of all independent private businesses etc.[146-6]
B. From the net income of the state, of municipalities, corporations and
institutions, derived from their own resources.
C. Under the former heads must be taken into the account such parts of
property as have been immediately consumed and enjoyed.[146-7]
D. Interest on debt must be added only on the side of the creditor, and
deducted from the income of the debtor; otherwise, _error dupli_. This
does not apply to taxes or church dues because the subjects of a good
state and members of a good church purchase thereby things which are
really new and of at least equal value to the outlay. Besides, in both
instances, it is necessary to calculate the number of men who live from
the national income, the average amount of their indispensable wants,
and the average price in money of the same, in order to determine the
_free_ national income by deducting the sum total of these average
wants, estimated at this average price.[146-8] [146-9]
[Footnote 146-1: Not only to compare the happiness and power
of different nations with one another, but also for purposes
of taxation, the profitableness and innocuousness of which
suppose the most perfect adaptation to the income of the
whole people.]
[Footnote 146-2: The former, in _Rau_, Lehrbuch, I, § 247;
the latter in _Hermann_, 308 ff. The former mode of
calculation gives us a means of judging of the comfort of
the people, their control of natural forces, etc.; the
second, of the relation of classes among the people. (_v.
Mangoldt_, Grundriss, 99. V. W. L., 316 ff.) Each member of
the nation produces his income only in the whole of the
nation's economy. Hence _Held_, Die Einkommensteuer, 1872,
70, 77, would, but indeed only under very abstract fictions,
construct private income from the national, and not _vice
versa_.]
[Footnote 146-3: On the average degree of this increase of
values in different industries, see _Chaptal_, De
l'Industrie française, II, passim. _Bolz_, Gewerbekalender
für, 1833, 111. No such scale can be lastingly valid,
because, for instance, almost all technic progress decreases
the appreciation of values through industry, and every
advance made by luxury raises the claims to refined quality
etc. See _Hildebrand_, Jahrbücher für Nat-Oek., 1863, 248
ff.]
[Footnote 146-4: Many items in Class D evade all
calculation. Thus, for instance, the numberless cases of
personal services which are enjoyed only by the doer
himself; also the greater number of products
(_Nutzungen_=usufruct) of capital in use for the consumption
of the owner himself. (Latent income.) Only, it may be, in
the case of dwelling houses, equipages, etc., that the
consumption by use can be estimated in accordance with the
analogy of similarly rented goods.]
[Footnote 146-5: The principal materials consumed in
manufactures are of course not to be deducted here, because
the increase in their value was taken into account above.]
[Footnote 146-6: When an artist who earns $10,000 per annum
appears in a country, the gross national income increases in
a way similar to that in which it increases when a new
commodity is found which would have a yearly increase of
value equal to $10,000 over and above that of the raw
material. Cost of production in the case of such a virtuoso
is scarcely to be alluded to. Nearly his entire income, with
the exception of his traveling expenses, etc., is net, and
the greater portion of it _free_. An income tax would affect
his hearers after as it did before, and in his income, find
a completely new object. _Per contra_, see Saggi economici,
I, 176 f.]
[Footnote 146-7: For purposes of taxation, where a relative
valuation is more the question than an absolute one, it
would be sufficient to assume that every household consumed
clothing, utensils, etc., in proportion to the rest of their
income. Hence, these items might, unhesitatingly, be omitted
altogether.]
[Footnote 146-8: Mathematically demonstrated by _Fuoco_,
Saggi economici, II, 102 ff.]
[Footnote 146-9: The gross income of British Europe is
estimated by _Pebrer_, Histoire financière et statistique
générale de l'Empire Br., 1834, II, 90, at £514,823,059,
viz.: agriculture, £246,600,000; mining, 21,400,000;
manufactures, after deduction made of the raw material,
£148,050,000; internal and coast trade, £51,975,060; foreign
commerce and navigation, £34,398,059; banking, £4,500,000;
interest from foreign countries, £4,500,000. By _Moreau de
Jonnés_, Statist de la Gr. Br., 1837, I, 312, it is
estimated at 18,000,000,000 francs, from which, however, the
raw material used in industry is not deducted. The net
income of Great Britain was estimated by Pitt, in 1799, at
£135,000,000, of which £25,000,000 were received by
landowners for rent, £25,000,000 by farmers, £5,000,000 were
tithes, £3,000,000 from forests, canals, and mines,
£6,000,000 from houses, £15,000,000 from state funds,
£12,000,000 from foreign commerce, £28,000,000 from inland
commerce and manufactures, £3,000,000 from fine arts,
£80,000,000 from Scotland, £5,000,000 from foreign
countries. (_Gentz_, Histor. Journ., 1799, I, 183 ff.)
_Lowe_, England in its present Situation, 1822, p. 246,
speaks of 255,000,000. About 1860, the incomes subject to
taxation alone, that is, all above £100, amounted to
335,000,000. The remainder was certainly worth one-half of
this. (Statist. Journ., 1864, 121.) _Baxter_, in 1867,
assumed it to be £825,000,000. Compare _L. Levi_, on
Taxation, 6.
In France, about forty years ago, according to Chaptal,
Doudeauville, Balbi and others, about 6,500,000,000 francs
gross national income could be counted on. _Schnitzler_
speaks of 7,000,000,000 francs (Creation de la Richesse en
France, 1842, I, 392), after deduction made of the raw
material of manufacture. According to _Wolowski_,
Statistique de la Fr., 1847, it was more than 12,000,000,000
francs. _M. Chevalier_, Revue des deux Mondes, March 15,
1848, has it 10,000,000,000 at most. In these four
estimates, only material products are taken into account.
_Ch. Dupin_ thinks the income per capita was, in 1730, = 108
francs; in 1780, = 169; in 1830, = 269. _Cazeaux_, Eléments,
163, estimated the net national income, in 1825, at
5,000,000,000 francs; _Cochut_, in 1861, at 16,000,000,000.
(Revue des deux Mondes, XXXVII, 703.)
In Spain, _Borrego_, Nationalreichthum, etc. Spaniens, 1834,
33, estimated the income from agriculture at 2,284,000,000
francs; from industry, etc., 361,000,000; commerce,
124,000,000; from houses, 186,000,000; canals, streets etc.,
8,500,000; personal services, 75,000,000; money in
circulation (probably loaned capital), 85,000,000.
In the United States, in 1840, the national income was
estimated at over $1,063,000,000; from agriculture, over
$654,000,000; from manufactures, nearly $240,000,000;
commerce, almost $80,000,000; mining, over $42,000,000; from
lumber (_Wäldern_), almost $17,000,000; and from the
fisheries, almost $12,000,000. The per capita amount of
income was $62. It was largest in Rhode Island--$110; in
Massachusetts it was $103; in Louisiana, $99; and in Iowa,
smallest, $27; in Michigan, it was $33. Compare _Tucker_,
Progress of the United States, 195 ff. The census of 1860
assumes the national wealth, slaves not included, at
$14,183,000,000, that is $451 per capita, with a per capita
annual income of $112. According to _Czörnig_, the gross
income of Austria, from agriculture, the chase and
fisheries, in 1861, was 2,119,000,000 florins; from mining,
41,000,000; from the industries, 1,200,000,000. In Prussia,
the net national income, not including the revenue from
state property, nor the income of the royal household,
seems, from the returns of the income and _class_ tax, to
have been about 2,458,000,000 thalers, in 1874. _Engel_,
Preuss. Statist. Ztschr., 1875, 133. The majority of the
above estimates are obviously unreliable.]
SECTION CXLVII.
NATIONAL INCOME.--ITS STATISTICAL IMPORTANCE.
[CONTINUED.]
The question frequently discussed, whether it is more advantageous to
increase the gross income or the net income[147-1] of a people, may be
readily answered with the assistance of our tripartite division. Since
economic production has no other object than the satisfaction of human
wants, the mere increase of the gross income of a people is a matter of
indifference. An increase of the net income puts a people in a condition
to increase either their numbers or their enjoyments. (See §§ 163 and
239.) The most desirable condition is where both these results are
produced. It is fortunate for a people when the _free_ income of the
nation increases by reason of the absolute or relative decrease of the
cost of production, which adds nothing to enjoyment. But it is
politically and morally to be lamented when it increases at the expense
of the satisfaction of man's necessary wants, especially if the majority
of the people deny themselves in this respect to produce that end. Sir
Thomas More called the sheep of his time, to make place for which so
many farm houses were razed to the ground, ravenous beasts, which
devoured men and laid waste city and country.[147-2]
[Footnote 147-1: The greater number of writers, at bottom,
understand by this question only whether greater efforts
should be made to increase the wages of the lower classes or
the rent and rate of interest on capital paid to the higher.
(_Schmoller_, in the Tüb. Zeitschrift, 1863, 22.)]
[Footnote 147-2: The difference between gross and net income
was introduced into the science principally by the
Physiocrates. _Vauban_ (1707) had no conception of it, and
thirty years later a French minister, in his instructions
concerning the levy of the _vingtièmes_, dimly seeing that
the aggregate amount of the harvest was not clear gain,
ordered, to obtain the latter, that the cost of reaping and
threshing should be deducted. (_Dupont_, Correspondence of
_J. B. Say_, 404, éd. Daire.) By _produit net_, _Quesnay_
means the excess of original production over its cost,
considered from the personal point of view of the individual
landowner. This excess, it is claimed, can alone increase
the national wealth and alone support the "steril" class.
The political and military bearing of this very clearly
recognized. (102 ff., éd Daire.) Hence _Quesnay_, favors it
in every way; by large farming instead of small, by stock
raising on a large scale, supplanting home labor by cheaper
foreign labor, by machinery and the employment of manual
labor, etc.; 91 ff., 200 ff., 274 ff. The elder _Mirabeau_
teaches even that the goodness of a government or of a
constitution, and even national morality may be inferred
from the amount of the _produit net_. (Ph. rurale, ch. 5.)
_Stewart_, Principles, I, ch. 20. _Adam Smith_ gives greater
prominence to the gross income, and grades the principal
branches of national labor according as they increase the
gross product of the nation's economy. (II, chs. 1, 5.)
Similarly, _J. B. Say_, Traité, ch. 8, § 3; _Lauderdale_,
Inquiry, 142.
_Ricardo_ thoroughly reacts against this view, and considers
it a matter of indifference whether a net product (interest
on capital and rent) of a given amount be obtained by the
labor of five or seven million other men, so long as only
five million can live on it. (Principles, ch. 26.) Similarly
_Ganilh_, Systèmes, I, 218 ff.; Théorie, II, 96.
Controverted by _Malthus_, Principles, II, § 6. _Buquoy_,
Theorie der Nat. Wirthsch., 1815, 310 ff. _Sismondi_ has
ridiculed this predilection for the net product which in
_Ricardo_ corresponds with what the Germans call free
product (_freien Ertrage_), and which, contrary to Ricardo's
own opinion, he calls Ricardo's ideal, saying that according
to him, nothing more was to be desired but that "the king
should remain alone on the island and, by turning a crank
forever, do all the work of England through the
instrumentality of automata." (N. P., II, 330 ff.) An entire
people should value only gross product. (I, 183.) In his
Etudes, Essai, II: Du Revenu Social, _Sismondi_
distinguishes as elements of the gross national income: a,
pure capital, the return of outlay; b, that which is at once
both capital and income, and serves as family support
(capital as a necessarily remaining supply, income as the
product of the preceding year); c, net income, the excess of
production over consumption.
The Socialists of our day would prefer to see the whole net
income of a people employed in the satisfaction of the
necessary wants of an ever increasing population. By this
procedure, as a natural consequence, we should witness first
the curtailing of the taxing power, of the funds for the
satisfaction of the more refined wants and of the saving of
capital, nor would it be long before even the existing
generation would experience the bitterness of this "living
from hand to mouth." After a time, even the possibility of
progress and even of mere increase of population would
cease.
_Hermann_, Staatsw. Untersuch., 297 ff., has better than
almost any one else developed the theory of income, and he
lays most stress on the satisfaction of wants as the chief
aim of public economy. _Kröncke_, Das Steuerwesen, 1804, 381
ff.; Grundsätze einer gerechten Besteuerung, 1819, 93 f.,
may be considered the predecessor who prepared the way for
him. Compare the profound work of _Bernhardi_, Versuch einer
Kritik der Gründe die für grosses und kleines Grundeigenthum
angeführt werden, St. Petersburg, 1848. Many controversies
on this subject may be closed by a more accurate
understanding as to terms. Thus, for instance, when _Rau_,
Handbuch, embraces in the cost of production the necessary
maintenance of material-workmen, and of those engaged in the
labor of commerce; or when _Jacob_, Staatswissenschaft, §
496, and _Storch_, Einkommen, 116 ff., even the necessary
support of every class useful to society, their valuation of
the gross national income is in only apparent conflict with
our doctrine on the subject.]
SECTION CXLVIII.
THE TWO PHASES OF INCOME.
In every income which has anything to do with other incomes, it is
necessary to distinguish its immediately productive side, and its profit
or acquisition side. It is necessary, in the first place, that all the
products made by private parties should, so to speak, be put into the
common treasury of the national economy, and that each should thence
draw his own private revenue. Justice requires that there should be a
perfect correlation between the two; that each should enjoy precisely
the quota of the national income to the production of which his person
or his property contributed. A just appreciation of the relative
productive power of the divers branches of labor constitutes one of the
chief bulwarks against the inroads of destructive socialistic theories.
The person who calls a good doctor or a good judge unproductive should,
to be consistent, call those who by their greater intelligence are
fitted to superintend agricultural and industrial enterprises
unproductive, also, as is done by the coarser socialists with their
apotheosis of mere manual labor. Unfortunately, such a settlement as is
above contemplated among the different factors of production, whose
owners are desirous to divide the common product among them, is possible
only where the factors of production are either of the same kind, or can
be reduced to a common denominator.[148-1] But if justice pure and
simple were meted out, no man could subsist. Love or charity must
supplement justice in order to assist those (and especially such as
without any fault of theirs) who are not able to produce anything, or
enough to supply those wants, for instance, children and the poor.
As the net national income, following the three great factors of all
economic production, is divided into three great branches, rent, wages
and interest on capital, the net income from any private business may be
reduced to one or more of these branches.[148-2] The three great
branches of income may be considered with advantage from a great many
different points of view. We may inquire in the case of each of them:
concerning its absolute magnitude, its relation to the aggregate
national income, to the magnitude of the factor of production, of which
it constitutes the remuneration; by what number of men it is shared, and
what number of wants it satisfies.[148-3] Lastly, the difference between
the amount stipulated for, and the original amount of both rent and
wages, as well as the interest of capital, is of special importance. The
former consists in the price paid by the borrower for the use of the
factor of production to the owner; the latter in the immediate products
which the employment of the same productive power brings on one's own
account. Evidently, the original amount is, in the long run, the chief
element in the determination of the stipulated amount. While the former
depends more on the deeper and more durably effective elements of price,
especially the cost of production, the value in use and the paying
capacity of purchasers; the latter is conditioned more by the
superficial variations of supply and demand, and even by custom. For our
purposes, the former is by far the more important, but, at the same
time, by far the more difficult to perceive.
[Footnote 148-1: This is possible between labor and capital,
at least in so far as a comparison can be instituted between
the sacrifice of human rest there is in labor and the
sacrifice of enjoyment in the building up of capital. But
the person who introduces an entirely unimproved piece of
land into the service of production, stands to the laborer
as well as to the capitalist in a relation which is entirely
incomparable with any other. (See § 156.) The doctrine of
former agriculturists, that one-half of the harvest was to
be ascribed to the soil and the other to the manure, would
not suffice here, even if it were correct. Compare _Fraas_,
Gesch. der Landbau- und Forstwissenschaft, 257. But in the
production of a calf, the coöperation of a bull and cow are
necessary. Yet no one is in condition to determine what
portion of the calf is to be accounted as belonging to
either. If the bull and cow belong to different owners, the
relation of supply and demand, and the deeper causes that
determine them, decide in what proportion the value of the
calf is to be divided among them.]
[Footnote 148-2: Among the greatest services rendered by
_Adam Smith_ is, his complete demonstration, that any income
may be resolved into one or more of the three great branches
of the national income. (I, ch. 6.)]
[Footnote 148-3: _Ricardo_ has not unfrequently bewildered
uncritical readers, by his habit--in which he is by no means
always consistent--of using the expressions higher and lower
wages, higher and lower profit of capital, to designate not
the absolute greatness of these branches of income, either
in money or in the wants of life, nor their greatness from a
personal point of view, but only their relative greatness as
compared with the aggregate income, the measure of the quota
of the aggregate product which is divided among workmen,
capitalists, etc. And yet, in the case of most economic
questions, this is without doubt the less interesting side.
Compare the polemic of _R. Jones_, On the Distribution of
Wealth, 1831, I, 288 ff.; _Senior_, Outlines, 142 seq.;
_Carey_, On the Rate of Wages, 1834, 24. Thus, according to
_Ricardo_, the increase of one branch is possible only at
the expense of another, while in the case of flourishing
nations, the three branches increase absolutely and
together. _Ricardo_, himself, was by no means unacquainted
with this, as may be seen from _Baumstark's_ German
translation of his work, pp. 37, 108 ff.]
CHAPTER II.
THE RENT OF LAND.
SECTION CXLIX.
THEORY OF RENT.
Rent is that portion of the regular net product of a piece of land which
remains after deducting the wages of labor and the interest on the
capital usual in the country, incorporated into it.[149-1] Hence it is
the price paid for the using of the land itself, or for what Ricardo
calls the original inexhaustible forces of the soil which are capable of
being appropriated.[149-2] This price also depends, of course, on the
relation between demand and supply; the demand in turn, on the wants and
means of payment of buyers, but the supply by no means on cost of
production, which, from the definitions above given, is here
unthinkable. However, land has this in common with other means of
production, that its price is mainly determined by that of its products.
[Footnote 149-1: According to _von Thünen_, Der isolirte
Staat. in Beziehung auf Landwirthschaft und Nat. Oek, 1850,
I, 14: "what remains of the revenue of an estate after
deducting the interest on all the objects of value which may
be separated from the soil." According to _Whately_, it is
surplus profit. The expression "regular product" supposes,
among other things, an average skillfulness of the economic
individual. Thus, for instance, the farm-rent of a piece of
land generally includes besides the real rent of the land,
interest on much capital which is more or less firmly fixed
in the soil. The importance of the latter may be
approximately determined from the fact that in the
electorate of Hesse, for instance, the value of all meadow
lands, woods, and agricultural lands is estimated at from
205 to 206 millions of thalers, and the value of all the
houses at 100 millions. (_Hildebrand_, Statist. Mittheil.
über die volkswirthschaftlichen Zustände Kurhessens, 1852,
37.) In the English income tax of 1843, the annual value of
all lands in Great Britain was estimated at over 45 millions
sterling, that of all houses at over 38 millions. However
the farm-rent of a piece of land does not by any means
always embrace the entire rent. A part of the rent is paid
to the state in the form of taxes, and another portion to
the payment of tithes. Short leasehold terms, frequent land
sales, the comparatively great difficulty of disengaging
capital invested in the cultivation of land, the union of
landed proprietor, capitalist and laborer in one person
easily obscure the law of rent.]
[Footnote 149-2: The stores of immediate plant food in a
piece of land, of minerals in a mine, of salt in a salt
mine, etc., are subject to the law of rent only in so far as
they may be considered inexhaustible; that is, they are not,
strictly speaking, subject to it. Our definition applies all
the more to the capacity for cultivation, and of support or
bearing capacity mentioned in § 35; and hence it is easier
to follow the law of rent in the case of land used for
building purposes than for agriculture. When _v. Mangoldt_
claims that the exhaustibility or inexhaustibility of the
soil has nothing to do with rent so long as it flows evenly
(_so lange sie eben fliesst_) he is in harmony with his own
general conception of rarity-premiums
(_Seltenheitsprämien_).]
SECTION CL.
THEORY OF RENT. (CONTINUED.)
Agricultural products of equal quantity and quality are produced on
pieces of land of unequal fertility, even when the same amount of skill
is displayed by the husbandman, with very different outlays of capital
and labor.[150-1] And yet the price of these products in the same market
is uniformly the same. This price must, on the supposition of free and
intelligent competition, be, in the long run, at least high enough to
cover the cost of production on even the worst soil (the margin of
cultivation according to Fawcett), which must be brought under
cultivation in order to satisfy the aggregate want. (See § 110.) This
worst land need yield no rent.[150-2] The better land which, with an
equal outlay of labor and capital, produces a greater yield, furnishes
an excess over the cost of production.[150-3] This excess is rent,
which, as a rule, is obviously higher in proportion as the difference in
fertility between the worst and the better land is greater. The person
who cultivates the land of a stranger may unhesitatingly turn this rent
over to the owner; since, notwithstanding his so doing, all that he has
himself contributed to production in labor and capital of his own,
returns to him entire in the product.[150-4]
According to § 34, a continual increase in the amount of labor and
capital lavished on the fertilization of land, agricultural science
remaining the same, leads, sooner or later to this, that every new
addition of capital or labor becomes relatively less remunerative than
the preceding.[150-5] The worse the land is, the sooner is this point
reached. Hence, it necessarily happens that, with an increase in the
aggregate want of agricultural products, greater and greater amounts of
labor and capital are employed in the further fertilization of land, and
that there comes to be a greater difference between the fertility of the
worst and better lands, in consequence of which the rent of the latter
rises.[150-6]
[Footnote 150-1: _Flotow_, Anleitung zur Abschätzung der
Grundstücke nach Klassen, 1820, 50 ff., estimates the cost
of production of a _scheffel_ of rye on land of the first
class, at scarcely 1½ thalers; on land of the tenth class,
at 3 thalers. In Hanover, it is estimated that about 60 per
cent. of the land devoted to gardening and agricultural
products produces only from 2 to 4 times the quantity of
seed sown; over 35 per cent. from 5 to 8 times, and 4.5 per
cent. from 9 to 12 times. (_Marcard_, Zur Beurtheilung des
Nat. Wohlstandes im Königreich Hanover, Tab. 3.) In Prussia,
the rates of net produce adopted by the central commission
in 1862 vary from 3 to 420 silver groschens per _morgen_, in
the case of agricultural land; from 6 to 420 in the case of
meadow land; in the case of pasturage, from 1 to 360. (_v.
Viebahn_, Statist. des Zollvereins, II, 966.) In England,
parliamentary investigations (1821) have shown that the best
land produces from 32 to 40, and the worst from 8 to 12
bushels per acre of wheat. (Edinburgh Review, XL, 21.) As to
the influence of the elevation of land, the royal Saxon
commission for the assessment of the value of land,
estimated that the net product of an acre _of_ land at a
height above the level of the sea,
In the case of 2d class land--
Of 500 feet, 55 per cent.
Of 800 " 52-1/2 "
Of 1600 " 48 "
Of 2400 " 43.8 "
In the case of 11th class land--
42.9 per cent. of the gross yield.
39-1/2 " " " "
34 " " " "
26 " " " "]
[Footnote 150-2: The English are very fond of assuming that
the worst land for the time being under cultivation pays no
rent. (_Ricardo_, Principles, II, 2.) This fact is
frequently obscured by the aggregation into one economic
whole of land that pays no rent and land that is able to pay
rent. (_John Stuart Mill_, Principles, II, ch. 16, § 3.)
True it is that there is a great deal of land which cannot
be farmed out, but which can be used only by its owners.
Compare _Salfeld_, in the Landwirthsch. Centralb., 1871, II,
182 ff. On land near Wetzlar which, notwithstanding the high
price of land in the neighborhood, could not be farmed out
at auction, because no one was desirous to lease it, and
which was therefore turned over to the highest bidder for
the preceding piece, see _Stöckhardt_, Zeitschr. für
deutsche Landwirthe, 1861, 237. Where, however, all the land
has its own proprietors, the competition of farmers may
easily produce a rent for the worst land. It is a matter of
complete indifference to the theory of rent, whether the
worst land when possessed only by right of occupation or
used as pasturage for cattle previous to its cultivation,
had value or not. Compare _Nebenius_, Oeff. Credit, I, 29;
_Hermann_, Staatswirthsch. Unters., 170 seq.]
[Footnote 150-3: The analogous gradation in mining may make
this clearer.]
[Footnote 150-4: _Ricardo_ illustrated this by the following
example. An uncultivated tract of country is settled by a
small colony. As long as there is here an excess of land of
the best quality, and everyone may take possession of it
without paying anything therefor, no rent of the land which
is merely occupied is possible. But if all the first class
land is under cultivation--land which perhaps with the
employment of a small amount of capital yields 5 quarters an
acre per annum; and the increasing population necessitates
the cultivation of land of the second class, which with the
same outlay of capital yields only 4 quarters an acre per
annum, there arises a rent of 1 quarter an acre per annum
for land of the first class. For the price, 4 quarters is
now high enough to cover the cost of production per acre,
and it must be a matter of complete indifference (complete
indifference?) to a new comer whether he obtains 5 quarters
from land of the first class as a farmer and pays out 1
quarter, or whether he harvests 4 quarters from second class
land as proprietor. If there is a further increase of
population, so that land of the third class also, which
yields only 3 quarters per acre per annum, must be brought
under cultivation, the price of corn rises again because the
cost of production has now to be covered by three quarters.
Land of the first class now pays a rent of 2 quarters and
second class land of 1 quarter. (Ch. 2.)]
[Footnote 150-5: _von Thünen_, der isolirte Staat, II, I,
179, estimates that a bed of manure 1/3 of an inch thick on
an acre of ground, increases the production by 1/2; that a
second 1/2 inch of manure increases the yield only by a + of
5/8 corn; the third of 1/4 corn, etc. _Geyer_ is of opinion
that, in Saxony, land of the average quality will yield a
gross product of 60 thalers per acre, and 14 thalers net
product per acre, in case it is managed with the greatest
intelligence and the employment of a large amount of
capital; when managed in a very ordinary way, it would yield
20 thalers gross, and 7-1/2 thalers net product. _Thünen_
gives the following formula determining when it is more
advantageous to cultivate the old land with more
_intensiveness_ (higher farming) than to begin the
cultivation of new: As long as p - _a_q is less than
sqrt(ap), so long is an increase of the outlay of capital on
the same land more profitable than the cultivation of new
land, and _vice versa_. Here p = aggregate product obtained
by a workman in a year from the amount of capital used by
him; a = sum of his necessary yearly wants; _a_ = the
interest per annum of a capital = p; q = the amount of
capital given to assist the individual workman.]
[Footnote 150-6: _Ricardo_ had, in every case in which
outlay of capital and labor of different degrees of
productiveness had to be used on the same land, to suppose a
price of the products = the cost of the least productive
outlay. See the tables in _Ricardo's_ work, On the Influence
of a low Price of Corn on the Profits of Stock, 1815, 14
seq. _Schmoller_, on the other hand, rightly applies the
principle of united costs of production in as far as the
usual amount of profit of the producer is added to the cost
of the commodity with the highest cost of production.
Mittheilungen des Landwirthsch. Instituts zu Halle, 1865,
128. Compare _supra_, §§ 106, 110.]
SECTION CLI.
THEORY OF RENT.--LAND FAVORABLY SITUATED.
The favorable situation of a piece of land operates, in almost every
politico-economical respect, in the same manner as its fertility.[151-1]
If a market, to be fully supplied, needs to be fed from a circuit of ten
miles, the price must be sufficient to make good not only the other cost
of production but the freight over ten miles. Here, therefore, all
producers living nearer to the market, who have to make a smaller outlay
for transportation and yet obtain the same market price for their
produce, make a profit exactly corresponding to the advantage of their
situation.[151-2]
The situation of individual pieces of land relatively to farm buildings,
etc., operates in a similar way.[151-3]
[Footnote 151-1: _L'éloignement équivaut à la stérilité._
(_J. B. Say._) If we imagine with _A. Walker_ an entirely
uncultivated country, equally fertile in every part, settled
only on the coast, and divided into shares of equal breadth,
equally accessible at all points, so that every settler has
unlimited space to extend his possessions from the coast
into the interior, the shares situated in the middle of the
coast strip would be most eagerly sought after; since in its
vicinity, prospectively, all the institutions of the country
would come together. The colonist, therefore, who should
obtain that share as his, would, unquestionably, be in a
condition to pay a price for this preference, that is a
rent. (Science of Wealth, 296.)]
[Footnote 151-2: It is a consequence both of their
difference of situation and of their fertility that in the
Himalaya the farmers low down on the sides pay 50 per cent.
of the gross product as farm-rent, and higher up, 20 per
cent. less. (_Ritter_, Erdkunde, III, 878.) Both influences
may be traced most accurately in East Friesland, and in
similar places: marsh land, sandy land, heath land, and high
moorland.
Its situation influences especially the money rent of land,
and its quality the amount of produce. (_McCulloch_,
Principles, III, 5.)]
[Footnote 151-3: We need only mention the hauling of the
crops and of manure. According to the instructions of the
royal Saxon commission, above mentioned, the cost is assumed
to be 10 per cent. higher for a distance of 250 rods, and 20
per cent. higher for a distance of 500 rods.]
SECTION CLII.
THE THEORY OF RENT. [CONTINUED.]
From what we have said, it follows that the rent of the land of a
country is equal at least to the sum of all the differences between the
product of the least productive portions of capital which have been
necessarily laid out in the cultivation of the soil and the product of
the other portions more productively laid out by other husbandmen. It
may rise higher than this on account of a coalition among landowners or
immoderate competition among farmers, who may thereby be forced to
surrender a portion of their wages and interest on capital to the
former; but it can never lastingly fall below this amount. If the
landowners themselves were to surrender all claim to rent, the price of
agricultural products would not sink if the market was kept fully
supplied; and the excess obtained from the better land over and above
the cost of production would go, but only in the nature of a gift, to
the farmers, corn dealers and individual consumers.[152-1] Normal rent
is not to be explained by any mysterious or peculiar productiveness[152-2]
of the land that yields it, but on the contrary, by the fact that even
material forces unexhaustible in themselves, but which can be productive
only in combination with given parcels of land, uniformly oppose even
successively greater difficulties to every successive and additional
improvement.[152-3]
Moreover, the capital which becomes a part of the land to such an extent
that it cannot be separated from it, and perhaps not even distinguished
from it at sight, such for instance as has been laid out for purposes of
drainage or in the purchase of material intended to modify the nature of
the soil, partakes of the character of the land itself, and its yield
obeys the laws of rent. How frequently it happens that such improvements
made by the farmer without the least assistance from the owner of the
land permanently contribute to an increase of the rent. (§ 181.)[152-4]
[Footnote 152-1: Compare _J. Anderson_, An Inquiry into the
Nature of the Corn Laws, 1777. Extracts from the same in the
Edinburgh Review, LIV, 91 ff. On the other hand, _Buchanan_,
on Adam Smith, IV, 134, thinks that rent arises exclusively
from the monopoly of the owners, and that without it the
price of corn would be lower. It is certain, however, that
if the land of a country be considered as one great piece of
property, and under one great system of husbandry, the
products of the soil might be offered permanently at a price
corresponding to the average cost of production, on the
better and worse pieces of land. (_Umpfenback_, N. Oek.,
191.)]
[Footnote 152-2: _Malthus_, On the Policy of restricting the
Importation of foreign Corn, 1815. Additions, 1817, to the
Essay on the Principle of Population, III, ch. 8-12;
Principles, 217 ff.]
[Footnote 152-3: _Ricardo_ says that if air, water,
elasticity and steam were of different qualities, and might
be made objects of exclusive possession; and that if each
kind could be had only in a moderate supply, they would,
like land, produce a rent, according as they were brought
into use, one kind after another. In the class of natural
forces, also, the possession of a secret of production or of
inimitable skill, or a legal right to its exclusive use, may
produce something similar to rent. (_Senior_, Outlines, 91.)
_Hermann_, Staatswirthsch. Unters., 163 ff., had already
laid the foundation of this doctrine, and earlier yet,
_Canard,_ 17 seq., and _Hufeland_. I, 303 ff. See _supra_, §
120. Hence _v. Mangoldt_ uses the word rent to designate all
rarity-premiums. _John Stuart Mill_, III, ch. 5, 4.
_Schäffle_ speaks of the universal existence of a surplus;
that is, of the factor of rent (Nat. Oek., I, Aufl., 140
ff.), and has recently developed this into a theory
thoroughly systematic and detailed. (Nationalökonomische
Theorie der ausschliessenden Absatzverhältnisse, 1867.)
According to him, rent is "the premium paid for the most
economic course taken in the interest of society in
general;" and hence he finds rent as much in superior labor
and in a very advantageous outlay of capital. Yet he grants,
that "exclusive custom (_Kundschaft_) on the basis of
natural advantages occurs only in the case of land-rent."
(59.) And even granting that he is right, that no rent is by
itself forever secure (74 seq.), and that much rent is a
premium paid for a search after and the appropriation of the
best land, divination of the best situations, etc. (60 ff.,
74 ff.), there still remains the great difference between
rent and the extra income from labor and capital; that here
the very transitory nature of the substratum, or basis, and
the personal merit of the recipient, is the rule, while in
the former case it is a rare exception. Willingly,
therefore, as I recognize the possibility and fruitfulness
of Schäffle's way of conceiving this subject (the latter,
especially, for monographic purposes), I prefer, so far as
the entire system is concerned, the keeping apart of the
three branches of income corresponding to the three factors
of production as has been usual since Adam Smith's time.]
[Footnote 152-4: _John Stuart Mill_, ch. 16, § 5. An example
in _Fawcett_, Manual, 149 seq. This explains many objections
to Ricardo's laws, which are the result of misconception.
Thus, for instance, in _Schmalz_, Staatswirthschaftslehre,
I, 81, Quarterly Review, XXXVI, 412 ff. _Bastiat_, Harmonies
économiques, ch. 9, where rent is considered the interest on
the capital laid out in bringing land under cultivation and
improving it. If, however, we imagine an island to emerge
suddenly from the waves in the vicinity of Naples, in
consequence of an earthquake, no one can doubt that its land
would sell at a very high rate and pay a very good rent. And
yet no capital or labor has been laid out on it. A similar
lesson is taught by the fact, that, in Scotland, rocks which
are covered twice a day by the waves are leased for the sake
of the sea-weed left on them. (_Adam Smith_, Wealth of
Nations, I, ch. 11.) Also by the fact, that in Poulopinang,
a cavity in which many edible swallows' nests are found,
pays £500 a year rent. (Geogr. Ephemeriden, Oct., 1805,
134.) However, _Bastiat_, abstractly speaking, is right when
he says, that every one by the importation of agricultural
products from quarters which pay no rent, and still more by
emigrating thither, may deprive the owners of land of the
tribute imminent in rent.
But how would it be if the cost of transportation and
emigration amounted to more than the rent? The case
theoretically so important, in which all the land in the
world is supposed to have been appropriated as private
property, this writer, generally so lucid, treats in a
surprisingly blind way (275 ff). It is remarkable that _A.
Walker_, Science of Wealth, spite of his prejudices in favor
of Bastiat's doctrines on the gratuitous nature of all
natural forces, nevertheless follows, essentially,
_Ricardo's_ theory of rent, 294 ff.
A much more vulgar error yet is, that rent is the result of
the capacity of the capital employed in the purchase of the
land to produce some interest Thus _Hamilton_, Reports to
the Congress on the Manufactures of the United States, 1793,
and _Canard_, Principes, sec. 5. Per _contra_, compare
_Turgot's_ view, _supra_, § 42, note 1. Even _Locke_,
Considerations on the Lowering of Interest, Works, II, 17
ff., maintained the closest parallel between rent and
interest to be possible, with this difference only, that
money was all of a kind but pieces of land of different
degrees of fertility. Similarly _Sir D. North_, Discourse
upon Trade, 1791, with his parallel of landlord and
stocklord.]
SECTION CLIII.
THEORY OF RENT. (CONTINUED.)
Ricardo says that rent can never, not even in the slightest degree,
constitute an element in the price of corn. This is certainly not a very
happy way of expressing the truth, that a high rent is not the cause,
but the effect, of a relatively high price of corn.[153-1] Ricardo would
have been nearer right had he said that rent was not a component part of
the price of every portion of the supply of corn brought to market.
Is rent an addition to national income? Ricardo (ch. 31) answers this
question in the negative, and says that it takes from the consumers what
it gives to the owners of the land, and that it increases only the value
in exchange of the national wealth.[153-2] It is evident that as thus
stated, the question is not properly put. Neither interest on capital
nor wages are any addition to a nation's income, but, like rent, only
forms of trade, by means of which that income is distributed among the
individuals constituting the nation. (§ 201.)
The special kind of product obtained from a piece of land influences its
rent only in so far as the growth of that kind of product is exclusively
confined either by nature, privilege or prejudice to certain
land.[153-3] Adam Smith is of opinion that the rent of agricultural land
is ordinarily (!) one-third of the gross product; that of coal mines,
from one tenth to a maximum of one-fifth; of good lead and tin mines,
one sixth (with the dues paid the state of twenty-one and two-thirds per
cent.); of Peruvian silver mines, scarcely one-tenth; of gold mines,
one-twentieth. And he thinks that rent grows less certain for every
succeeding article.[153-4]
So far as this is based on facts, it may be explained as follows: The
greater capacity an article has for transportation from one place to
another, the less important is advantage of situation, which is
generally one of the chief elements of rent. The more indispensable the
commodity is, the more readily is the consumer induced to pay a price
for it greater than the cost of production; that is, to pay a rent. This
again is enhanced by the difficulty of the preservation of the
commodity. Lastly, the more it is a mere product of nature,[153-5] the
more difficult it is to simultaneously employ several portions of
capital of different grades of productiveness in its production.
[Footnote 153-1: To be met with in this form even in _Adam Smith_,
Wealth of Nations, I, ch. 11, pr. _John Stuart Mill_, Principles
II, ch. 16, § 6, thus states the matter: "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. The superiority of the instrument is in exact
proportion to the rent paid for it." According to _v. Jacob_,
Grundsätze der Nat. Oek., I, 187, rent constitutes a much larger
portion of the price of commodities than is generally supposed, in
as much as wages depend so largely on the price of the means of
subsistence. Per contra, _Baudrillart_, Manuel, 391 ff., who
maintains that rent is practically insignificant.]
[Footnote 153-2: Similarly _Buchanan_, loc. cit., and _Sismondi_,
Richesse commerciale, I, 49. Compare contra, _Malthus_, Inquiry
into the Nature and Progress of Rent, 15. I would call attention
_en passant_ to the absurdity that there may be an increase in the
value in exchange of a nation's entire resources without any
increase in its value in use. (_Supra_, § 8.)]
[Footnote 153-3: Thus _Adam Smith_ remarks that corn fields and
rice fields pay very different rents, because it is not always
possible to convert one into the other. (Wealth of Nat., I, ch. 11,
1.) Compare the tabular statistical view of the rent of land used
for vineyards, gardens, meadows, pasturages, wood and farming
purposes, in _Rau_, Lehrbuch, I, § 218. For a general theory of the
rent of wooded land, see _Hermann_, Staatsw. Unters., 177 ff.; of
vineyards, 181 seq.]
[Footnote 153-4: _Adam Smith_, Wealth of Nat., I, ch. 11, 3.]
[Footnote 153-5: It is hereby rendered akin to those low stages of
civilization in which no rent is paid.]
SECTION CLIV.
THEORY OF RENT. (CONTINUED.)
As the purchase of a piece of land[154-1] is no more and no less than
its exchange against a portion of capital in the shape of money,[154-2]
its purchase price depends generally on the amount it will rent for as
compared with the interest on the capital to be given in exchange for
it. The rate of interest remaining the same, it rises and falls with its
rent. And _vice versa_, the rent remaining the same it rises and falls
inversely as the rate of interest.[154-3] A rise in the price of land is
not always a proof of the growing wealth of a people. It may proceed
from a depreciation of the value of money, or from a decrease of the
rate of interest caused by a decline in the number of loans which can be
advantageously placed.
It is frequently said, that the price paid for land is greater than the
money-capital which yields an equal revenue.[154-4] This, abstraction
made of proletarian distress prices for small parcels of land and of the
political and social privileges of landowners, is accounted for by the
assumed greater security of the latter,[154-5] which, however, fares ill
enough in war times, and times of political disturbance. The fact itself
is found to exist, I think, only in economically progressive times, when
confidence prevails, and it is based on the pretty certain prospect that
the rate of interest will decline, while rents will rise.[154-6]
It has been observed in Belgium, that the medium farm rent of land, in
quarters remarkable for any economic peculiarity whatever, pays an
interest lower, as compared with the purchase money, in proportion as
the country about is more thickly populated, and as its husbandry is
carried on by farmers instead of by owners.[154-7] This phenomenon is
doubtless correlated with these others, that the conditions just named
are pretty regularly attendant on a high state of civilization, and that
advanced civilization is attended uniformly by a decline in the rate of
interest. (175).[154-8]
[Footnote 154-1: In every day language, people say of a man
who has purchased a piece of land, that he "put" as much
capital as is equal to the purchase price "into his land;"
or "laid out on it" as much. But this mode of expression is
as inaccurate as is this other: "the sun is rising," or "the
sun has gone down."]
[Footnote 154-2: _Macleod_, who is not fond of the natural
mode of expression, maintains that the purchase price of a
piece of land is equal to the discounted value of the sum of
the values of all the future products to be obtained from
the land. (Elements, 75.)]
[Footnote 154-3: C:i::L:r in which C = the capital, i = its
interest, L = the piece of land, and r = its rent.]
[Footnote 154-4: There are traces to be found of the fact
among the ancient Greeks, that the farm-rent of landed
estates paid a smaller interest on the purchase money than
was otherwise usual in the country. _Isaeus de Hagn._, 42;
_Salmasius_, De Modo Usur., 848.]
[Footnote 154-5: Thus even _North_ and _Locke_, loc. cit.;
_Cantillon_, Nature du Commerce, 294.]
[Footnote 154-6: Compare _List_, Werke II, 173. In Belgium,
farm-rent per _hectare_ was, in 1830 = 57.25 francs, in 1835
= 62.78, in 1840 = 70.44, in 1846 = 74.50, on an average.
This was at the rate of from 2.62 to 2.80, or an average of
2.67 per cent. on the purchase money. If to this we add the
increase in the rise of land between 1830 and 1846, divided
by 16, the yearly revenue rises from 2.67 to 3.91 per cent.,
that is pretty nearly the rate of interest on hypothecation,
and is higher or lower in the different provinces, as the
former is higher or lower. (_Heuschling_, Résumé du
Récensement général de 1846, 89.) In France, land paid but
from 2 to 3 per cent. on the purchase money; but both rents
and the price of land have doubled between 1794 and 1844.
(Journal des Econ., IX, 208.)]
[Footnote 154-7: Moreover, whole countries may, because of
their great natural advantages, possess, so far as the
commerce of the entire world is concerned, something
analogous to rent. Thus, for instance, North America,
although here, this world-rent finds expression in the
national height of the wages of labor and of the rate of
interest, (_v. Bernhardi_, Versuch einer Kritik der Gründe
welche für grosses und kleines Grundeigenthum angeführt
werden, 1848, 294.)]
[Footnote 154-8: Writers as old as _Culpeper_, A Tract
against the high Rate of Usurie, 1623, and _Sir J. Child_,
Discourse of Trade, p. 22 of the French translation,
observed the connection existing between a low rate of
interest, national wealth and a flourishing state of
commerce on the one hand, and a high price of the
necessaries of life and of land in the other. _Sir W. Petty_
would estimate the rent of land as follows: If a calf
pasturing in an open meadow gains as much flesh in a given
time as is equal to the cost of the food of 50 men for a
day, and a workman, on the same land, in the same time,
produces food for 60 men, the rent of the land must be 50,
and the rate of wages 10. (Political Anatomy of Ireland, 62
seq.; compare 54.) Besides, he accounts for the height of
rents by the density of the population exclusively, and he
would prefer to see both increase _ad infinitum_. (Several
Essays on Political Arithmetic, 147 ff.)
The germs of the _Ricardo_ law of rent, in _Boisguillebert_:
the price of corn determines how far the cultivation may be
extended; by manuring the land, as much corn as desired may
be obtained, provided the cost of production is covered.
(Traité des Grains, II, ch. 2 ff.) There is a foreshowing of
the same law in the Physiocratic view that only in the
production of raw material is there a real excess over and
above the cost--_produit net_. Compare _Quesnay_, Probl.,
économique, 177 ff. Sur les travaux des artisans. (Daire.)
_Auxiron_, Principes de tout Gouvernement, 1776, I, 126.
_Adam Smith_ came very near to the true principle in the
case of coal mines, but was hindered reaching it in other
cases by the false assumption that certain kinds of
agricultural production always yield a rent, while others do
so only under certain circumstances. Besides he always
considered the interest of capital fixed in the soil;
buildings, for instance, as part of the rent. (Wealth of
Nat., I, ch. 11.) Compare _Hume's_ Letter to Adam Smith;
_Burton's_ Life and Correspondence of Hume, II, 486; _von
Thünen_, Isolirter Staat., I, 15 ff.
The most immediate predecessors of _Ricardo_, Principles, 2,
3, 24, 31, are _Anderson_ (§ 152); _West_, Essay on the
Application of Capital to Land, 1815, and _Malthus_, Inquiry
into the Nature and Progress of Rent, 1815. See § 152. It is
wonderful how a theory which, in 1777, remained almost
untouched, was in 1815 etc., attacked and defended with the
greatest zeal, because it then affected the differences
between the moneyed and landed interest. Yet _Ricardo_ did
not take into account at all the rent-creating influence of
the situation of land in relation to the market, as well as
to the "farm-office" (_dem Wirthschaftshofe_). The influence
of the system of husbandry on rent, first thoroughly treated
by _von Thünen_, loc. cit. What has recently been urged
against _Ricardo_ by, for instance, _J. B. Say_, Traité, II,
ch. 9; _Sismondi_, N. P., III, ch. 12; _Jones_, Essay on the
Distribution of Wealth, 1831 (see Edinburg Review, LIV),
bears evidence either of a misunderstanding of the great
thinker, or else contains only modifications of some
individual abstract propositions of his, stated perhaps too
strictly. In judging _Ricardo_, it must not be forgotten,
that it was not his intention to write a text-book on the
science of Political Economy, but only to communicate to
those versed in it the result of his researches, in as brief
a manner as possible. Hence he writes so frequently making
certain assumptions; and his words are to be extended to
other cases only after due consideration, or rather
re-written to suit the changed case.
_Baumstark_ very correctly says: "Rent rises, not because
new capital has been invested, but when the circumstances of
trade make a new addition to capital possible."
(Volkswirthschaftliche Erläuterungen über Ricardo's System,
1838, 567.) _Fuoco's_ Nuova Teoria della Rendita, Saggi
economici, No. 1, is nothing but an Italian version of the
doctrines of Malthus and Ricardo. The greater number of
anti-Ricardo theories of rent have originated from the rapid
and apparently unlimited growth of national husbandry in
recent times. Thus it is a fundamental thought in
_Rodbertus_, Sociale Briefe, 1851, No. 3, that an increase
of the price of corn need not attend an increase of
population, either uniformly or necessarily. According to
_Carey_, The Past, the Present and the Future, ch. 1, 1848,
the most fertile land is last brought under cultivation,
because it is covered with swamps, forests, etc.; and
because it offers greater resistance to the work of the
agriculturist, by reason of its luxurious vegetation. The
more elevated lands are first cultivated which present fewer
obstacles to cultivation on account of their dryness, their
thinner crust, etc. Carey generalizes this and thinks he has
reversed the _Ricardo_ law of rent! He overlooks entirely
that _Ricardo_ speaks only of the original powers of the
soil. Now a swampy land which must be dried at the expense
of a great deal of labor, possesses less of these original
powers than a sandy soil which may be sown immediately. See
_Carey_, Essay on the Rate of Wages, 232 ff., and the
lengthy exposition of the same doctrine rank with inexact
natural science and unhistorical history in the same
author's Principles of Social Science, 1858, vol. I.
There is this much truth, however, in Carey's error that,
with increasing economic progress, the superiority not only
of situation, relatively to the market, but also of natural
fertility, may of itself go over to other lands. Thus, for
instance, the ancient Slaves used clay soil everywhere as
pasturage, and cultivated the sandy soil, because their
pick-axes could overcome the resistance only of the latter.
_Langethal_, Geschicte der deutschen Landw., II, 66;
_Waitz_, Schlesw. Holstein, Gesch., I, 17. Similarly in
Australia: _Hearne_, Plutology, 1864. Compare, _Roscher_,
Nationalökonomik des Ackerbaues, § 34. The word fertility
should not be taken too exclusively in its present
agricultural sense. In a lower stage of civilization, the
facility of military defense or the _ut fons, ut nemus
placuit_--_Tacit._, Germ., 16--may have more weight.
The chief difference in the theories of rent consists in
this: whether rent is considered a result of production or
only of distribution, and an equalization of gain. Compare
_Behrens_, Krit. Dogmengeschichte der Grundrente, 1868, 48.]
SECTION CLV.
HISTORY OF RENT.
In poor nations, and in those in a low stage of civilization, especially
where the population is sparse, rent is wont to be low. In Turkistan,
land is valued according to the capital invested in its
irrigation.[155-1] In the interior of Buenos Ayres, at the beginning of
the nineteenth century, landed estates were paid for in proportion to
the magnitude of the live stock on them, so that it seemed, at least, as
if the land was given for nothing, or simply thrown in with the
purchase. And only a short time since, an English acre in the same
country, fifteen _leguas_ from the capital, was worth from three to four
pence, and at a distance of fifty _leguas_, only two pence.[155-2] In
Russia, also, not long since, the valuation of landed estates was made,
not in proportion to the superficies, but according to the number of
souls, that is, of male serfs, a _remnant_ suggestive of the previous
situation when no rent was paid.[155-3] Where, in relatively uncivilized
medieval times, instances of the farming out or leasing of land occur,
farm-rents are so small that their payment can only be considered as a
mere recognition of the owner's continuing right of property.
Under these circumstances, it is natural that great landowners,
especially in the lower stages of civilization, should exert an
especially great influence; and that their low tenants (_Hintersassen_)
are more dependent in proportion to the want of capital and the absence
of trade. Hence, these are wont to make up for the smallness of their
rent by great honors paid to their landlords, and great services,
especially military service.[155-4] Besides, the lords of the manor, in
almost every medieval period, have used their influence with the
government to cut down the wages of labor by serfdom and other similar
institutions, and the rate of interest on capital by prohibiting
interest, by usury laws, etc.; and thus, in both ways, to artificially
increase their own share of the national income.
[Footnote 155-1: _A. Burnes_, Reise nach Bukhara, II, 238.]
[Footnote 155-2: _W. Maccann_, Two Thousand Miles Ride
through the Argentine Provinces, London, 1853, I, 20; II,
143. Ausland, 1843, No. 140. Frisian ancient documents in
which parcels of land are described as _terræ 20 animalium,
48 animalium_, etc. _Lacomblet_, Urkundenbuch, I, 27.
_Kindlinger_, Münster Beitr., I, Urkundenbuch, 24.]
[Footnote 155-3: The custom began to be more usual in Russia
also to say "so many _dessjatines_ and the peasantry
belonging thereto." This was especially so in the case of
very fertile land, as for instance in Orel. See _v.
Haxthausen_, Studien, II, 510. Formerly the bank loaned only
250 per soul, afterwards up to 300 R. Bco. (II, 81). Spite
of this _v. Haxthausen_ thinks that rent would be illusory,
in Russia, in case agriculture was carried on with hired
workmen. (I, Vorrede, XIII.) _Carey's_ remark, "every one is
familiar with the fact that farms sell for little more than
the value of the improvements," may be true of the United
States (The Past, Present and Future, 60.)]
[Footnote 155-4: This condition of things continued in the
highlands of Scotland until the suppression of the revolt of
1745. The celebrated Cameron of Lochiel took the field with
800 tenants, although the rent of the land was scarcely
£500. (_Senior_, Three Lectures on the Rate of Wages, 45.)
"Poor 12,000 pound sterling per annum nearly subverted the
constitution of these kingdoms!" (_Pennant._)]
SECTION CLVI.
INFLUENCE OF ADVANCING CIVILIZATION ON RENT.
Advancing civilization contributes in three different ways to raise
rents.[156-1] The growth of population necessitates either a more
_intensive_ agriculture (higher farming), or causes it to extend over
less fertile parcels of land, or parcels less advantageously
situated.[156-2] If the growth of population be attended by an increase
of capital, this happens in a still higher degree. The people now
consume, if not more, at least wheat of finer quality, more and better
fed live stock; the consequence of which is, that the demands made on
the land are increased. Lastly, if the population be gradually
concentrated in large cities, this fact also must contribute to raise
rents, because it requires a multitude of costly transportations of
agricultural produce and so increases the cost of production (up to the
time of consumption) on the less advantageously situated
land.[156-3] [156-4]
As most of the symptoms of a higher civilization become apparent
earliest, and in the most striking manner, in large cities, so also a
rise in rents is first felt in them. The building of houses may be
considered as the most _intensive_ of all cultivation of land and that
which is most firmly fixed to the soil.[156-5] Rent has nowhere an
unsurpassable maximum any more than a necessary minimum.
[Footnote 156-1: _Jung_, Lehrbuch der Cameralpraxis, 1790,
182, has so little idea of this that he is of opinion that
farm-rent must grow ever smaller.]
[Footnote 156-2: According to _Schmoller_, in the
Mittheilungen des landwirthschaftlich. Instituts zu Halle,
1865, 112 seq., the average farm-rent of the Prussian
domains per _morgen_, and the population to the square mile,
amounted:
===============+============+============+============+==========
_District._ | _1849._ | _1864._ | _1849._ | _1858._
---------------+------------+------------+------------+----------
| _Thalers._ | _Population_
| | _per square mile_
Königsberg, | 0.73 | 1.16 | 2076 | 2298
Gumbinnen, | 0.59 | 0.76 | 2059 | 2249
Danzig, | 1.02 | 1.51 | 2656 | 2926
Marienwerder, | 0.63 | 1.06 | 1944 | 2135
Posen, | 0.69 | 1.07 | 2789 | 2857
Bromberg, | 0.69 | 1.10 | 2116 | 2322
Stettin, | 1.07 | 1.73 | 2355 | 2614
Cöslin, | 0.83 | 1.30 | 1735 | 1940
Stralsund, | 0.95 | 1.50 | 2347 | 2549
Breslau, | 1.19 | 1.45 | 4733 | 5034
Liegnitz, | 1.17 | 1.75 | 3676 | 3763
Oppeln, | 0.86 | 1.20 | 3973 | 4433
Potsdam, | 1.08 | 1.59 | 3317 | 3640
Frankfort, | 1.29 | 2.00 | 2446 | 2660
Magdeburg, | 2.31 | 2.98 | 3290 | 3508
Werseburg, | 2.35 | 3.03 | 3934 | 4270
Erfurt, | 2.04 | 2.55 | 5621 | 5735
Münster, | .... | 2.03 | 3192 | 3299
Minden, | 2.48 | 2.62 | 4841 | 4808
===============+============+============+============+==========
Compare the review of rents in the states of the Zollverein,
in _v. Viehbahn_, Statistik, II, 979. It is difficult to
compare different countries with one another in this
respect, because it is seldom certain whether the word rent
means exactly the same thing in them. Besides, it should not
be overlooked, how difficult it is to ascertain what rent,
in the strict sense of the term, as used by _Ricardo_, is.]
[Footnote 156-3: Moreover, the rise of rents, in so far as
it depends on the greater cost of transportation to a
growing market, becomes progressively slower. The concentric
circles about that point increase in a greater ratio than
the radii.]
[Footnote 156-4: As to the history of rents in England, a
comparison of the years from 1480 to 1484, with the most
recent times, shows that the amount of rent estimated in
money in agricultural districts, where no very great
"improvements" have been made, have increased as 1 to
80-100, while the price of wheat has increased 12-fold and
wages 10-fold. (_Rogers_, in the Statist. Journal, 1864,
77.) According to _Hume_, History of England, ch. 33, it
seems that rents under Henry VIII. were only 1/10 of those
usually paid in his time, while the price of commodities was
only 1/4 of the modern. _Davenant_, Works, II, 217, 221,
estimates the aggregate rent of land, houses and mines, at
the beginning of the seventeenth century, at £6,000,000;
about 1698, at £14,000,000; capitalized respectively at
£72,000,000 and £252,000,000. About 1714, _J. Bellers_,
Proposals for Employing the Poor, puts it at £15,000,000;
about 1726, _Erasm. Phillips_, State of the Nation in
Respect to Commerce etc., at £20,000,000; about 1771, _A.
Young_, at £16,000,000; about 1800, _Beeke_, Observations on
the Income-Tax, at £20,000,000; about 1804, _Wakefield_,
Essay on Political Economy, at £28,000,000; about 1838,
_McCulloch_, Statist., I, 535, at £29,500,000. The poor tax
in England and Wales, in 1841, was on a valuation of
£32,655,000. (_Porter_, Progress, VI, 2, 614); 1864-5, the
annual value of lands, £46,403,853 (Stat. Journal, 1869.)
Moreover, the income from houses, railroads, etc. (real
property other than lands), increased very much more than
that received from pieces of farming land; between 1845 and
1864-5, the former by 392.8 per cent., and the latter by
27.9 per cent. (_Hildebrand's_ Jahrbb., 1869, II, 383 seq.);
and the income tax of 1857 on £47,109,000. There was a still
more rapid growth of rent in Scotland. In 1770, it was only
£1,000,000-1,200,000: in 1795, £2,000,000; in 1842,
£5,586,000. (_McCulloch_, I, 576, ff.) In Ireland, about
1776, it was only $900,000, according to _Petty_. (Political
Anatomy of Ireland, I, 113.) _A. Young_ assumed it to be
£6,000,000 in 1778; _Newenham_, View of Ireland, about 1808,
£15,000,000. In many parts of the Rosendale Forest in
Lancashire, the land is leased by the ell, at £121, and even
at £131 per acre; i. e., more than the whole forest of
15,300 acres was rented for in the time of James I. In many
of the moorland portions of Lancashire, rent has risen in
150 years, 1,500 and even 3,000 per cent. (Edinburg Rev.,
1843, Febr., 223.)
The amount of rents in Prussia, _Krug_ assumed to be in
1804, 50,000,000 thalers, and _von Viebahn_, Zollverein
Statistik, II, 974, in 1862, 116,500,000 thalers. _Lavergne_
assumed the rents of France after 1850 to be 1,600,000,000
francs (Revue des deux Mondes, Mars, 1868); and _Dutot_,
Journal des Economistes, Juin, 1870, in 1870, at
2,000,000,000. In Norway, the capitalized value of all the
land was assessed at 13,000,000,000 thalers in specie, in
1665; in 1802, at 25,500,000; in 1839, at 64,000,000
thalers. _Blom_, Statistik von Norwegen, I, 145. The older
such estimates are, the more unreliable they are.]
[Footnote 156-5: In Paris, in 1834, the square _toise_ = 37
sq. feet, in the Rue Richelieu and Rue St. Honoré, cost
1,500 to 2,000 francs; in Rue neuve Vivienne, 2,500 to 3,500
francs; in 1857, from 200 to 500 francs per square meter, =
10 sq. feet, was very usual. (_Wolowski_.) Before the gates
of Paris, the rent amounted to as high as 250 francs per
_hectare_; at Fontainebleau, to only from 30 to 40. (Journal
des Economistes, Mars, 1856, 337.) In Market Square,
Philadelphia, land was worth from 3,000 to 4,000 francs per
sq. _toise_, and in Wall Street, New York, about 4,000
francs. (_M. Chevalier_, Letters sur l'Amérique, 1836, I,
355.) In St. Petersburg, after 6 years, the house frequently
falls to the owner of the area. (_Storch._ by _Rau_, I, 248
f.) In Manchester, the Custom House area cost from 10 to 12
pounds sterling per square yard; in the center of the city,
as high of £40, that is, nearly £200,000 per acre. In
Liverpool, in the neighborhood of the Exchange and of Town
Hall, the cost is from 30 to 40 pounds sterling. (Athenæum,
Dec. 4, 1852.) In London, a corner building on London
street, erected for £70,000, with only three front windows,
pays a rental of £22,000. (Allg. Zeitung, 1 Febr., 1866.)
The villa at Misenum--a very beautiful location--which the
mother of the Gracchi bought for about 5,000 thalers, came
into the possession of L. Lucullus, consul in the year B. C.
74, for about 33 times as much. _Mommsen_, Römisch. Gesch.,
II, 382.]
SECTION CLVII.
HISTORY OF RENT.--IMPROVEMENTS IN THE ART OF AGRICULTURE.
Improvements in the art of agriculture which are confined to individual
husbandmen leave rent unaffected. They do not perceptibly lower the
price of agricultural products, and only effect an increase of the
reward of enterprise which is entirely personal to the more skillful
producers and does not attach to the ground itself.
But how is it when these improvements become general throughout the
country? If population and consumption remain unchanged, the supply of
agricultural products will exceed the demand. This would compel farmers,
if there be no avenue open to exports, to curtail their production. The
least fertile and most disadvantageously situated parcels of land will
be abandoned to a greater or less extent, and the least productive
capital devoted to agriculture, withdrawn. In this way, rent goes down
both relatively and absolutely, although the owners of land may be able
to partially cover their loss by the gain which results to them as
consumers and capitalists.[157-1] (§ 186). After a time, however, and as
a consequence of the diminished price of corn, population and
consumption will increase, and entail an extension of agriculture and a
consequent rise in rents.[157-2] If it, relatively speaking, reaches the
same point as before, it still is absolutely much greater than before.
Let us suppose that there are three classes of land of equal extent in a
country, which for an equal outlay of capital produce 100,000, 80,000
and 70,000 bushels yearly. The rent of the land here would be equal to
at least 40,000 bushels. If the yield of production now doubles, while
the demand for agricultural products also doubles, the aggregate harvest
will be 200,000 + 160,000 + 140,000 bushels, and consequently rent will
have risen to at least 80,000 bushels. But this increase of rent has
injured no one. If the population increases in a less degree than the
productiveness of the land, the consumer may, to a certain extent, gain
largely, and the landowner better his condition. However, great
agricultural improvements spread so gradually over a country, that, as a
rule, the demand for agricultural products can keep pace with the
increased supply. But even in this case, that transitory absolute
decline of rent may be avoided; and it cannot be claimed universally, as
it is by many who are satisfied with mumbling Ricardo's words after him,
that an increase of rent is possible only by an enhancement of the price
of the products of the soil. Where the development of a people's economy
is a normal one, the rent of land is wont to increase gradually, but at
the same time to constitute a diminishing quota of the entire national
income.[157-3]
Improvements in milling,[157-4] and in the instruments of
transportation[157-5] adapted to agricultural products, and the
introduction of cheaper[157-6] food, have the same effect as
improvements of agricultural production. All such steps in advance
render an increase in population, or in the nation's resources, possible
without any corresponding increase in the amount paid to landowners as
tribute money.[157-7]
The foregoing facts furnish us the data necessary to decide what
influence permanent soil improvements have on the rent of land.[157-8]
The improved parcels of land now grow more fertile. Their rentability
also increases, while that of the others becomes not only relatively but
absolutely less, if the demand remains unaltered. The whole is as if
capital had been transformed into fertile land, and this added to the
improved land.
[Footnote 157-1: Since it has seemed absurd to many writers
to say that an improvement in the art of agriculture may
cause rents to decline (compare _Malthus_, Principles, I,
ch. 3, 8), _John Stuart Mill_, Principles, IV, ch. 3, § 4,
prefers to put the question thus: whether the landowner is
not injured by the improvement of the estates of other
people, although his own is included in the improvement.
Compare _Davenant_, Works, I, 361. And so the long
agricultural crisis through which Germany passed at the
beginning of the third decade of this century was produced
mainly by the great impulse given to agriculture (_Thaer_,
_Schuerz_ etc.), while population did not keep pace with it.
Similarly, at the same time, in England, _McCulloch_, Stat.,
I, 557 ff. Of course, the less fertile pieces of land
declined even relatively most in price. From 1654 to 1663,
Switzerland experienced a severe agricultural crisis,
attended with oppressive cheapness of corn, a great decline
in the price of land, innumerable cases of insolvency,
revolts of the peasantry, emigration, etc. (_Meyer von
Knonau_, Handbuch d. schweiz. Gesch., II, 43.) The Swiss
had, precisely during the Thirty Years' War which spared
them, so extensively developed their agricultural interests,
that now that other countries began to compete with them,
they could not find a market large enough for their
products. For English instances of similar "agricultural
distress" in the seventeenth and eighteenth centuries, see
_Child_, Discourse on Trade, 73, 124 seq.; _Temple_,
Observations upon the U. P., ch. 6; _Tooke_, History of
Prices, I, 23 seq., 42. Even where there have been no
technic improvements, a series of unusually good harvests
may have the same results, of which there are many instances
scattered through _Tooke's_ first volume.
There is great importance attached in England to the
difference between those agricultural reforms which save
land and those which effect a saving in capital and labor.
The latter, it is said, decrease the money rent of the
landowner by depreciating the price of corn, but leave the
corn-rent unaltered. The former, on the other hand, decrease
the rent both in money and corn, but the money rent in a
higher degree. (_Ricardo_, Principles, ch. 2; _J. S. Mill_,
Principles, IV, ch. 3, 4.)]
[Footnote 157-2: When the demand for products of the soil
which minister to luxury, such as fat meat, milk,
vegetables, is increasing, a greater cheapness of the
necessary wheat may raise rent, for the reason that lands
are now cultivated which were not formerly tillable. Thus,
there is now land in Lancashire which could not formerly be
planted with corn, because the laborers would have consumed
more than the harvest yielded. Since the large imports of
the means of subsistence from Ireland these lands have been
transformed into artificial meadows, gardens, etc.
(_Torrens_, The Budget, 180 ff.) Compare _Adam Smith_, I,
257, ed. Bas. _Banfield_ would misuse these facts to
overturn the theory of Ricardo. (Organization of Industry,
1848, 49 ff.)]
[Footnote 157-3: The French testamentary tax was on an
amount,
In 1835, of 552 mill. francs moveable property
and 984 " immoveable.
In 1853, of 820 " francs moveable property
and 1,176 " immoveable.
In 1860, of 1,179 " francs moveable property
and 1,545 " immoveable.
so that the preponderance of immoveable property constituted
a converging series of 78, 43, and 31 per cent. (_Parieu._)
In North America, with its great unoccupied territory, the
reverse is the case. The census of 1850 gave a moveable
property of 36 per cent.; that of 1860 of only 30 per cent.
According to _Dubost_, the rent of land in Algeria was 80
per cent., a gross product of only 10-15 francs per
_hectare_; in Corsica, 66 per cent., a gross yield of from
30-35 per cent.; in the Department du Nord, 17.5-24 per
cent., a gross yield of from 500-740 francs. (Journal des
Economistes, Juin, 1870, 336 ff.)]
[Footnote 157-4: The repeated sifting of the bran (_mouture
économique_) had great influence in this respect. In France,
in the sixteenth century, a _setier_ of wheat gave only 144
pounds of bread. In 1767, according to _Malouin_, L'Art du
Bonlanger, it gave 192 pounds. It now gives from 223 to 240
pounds. The gain in barley is still greater; the _setier_
gives 115 pounds of flour, formerly only 58. (_Roquefort_,
Histoire de la Vie Privée des Français, I, 72 ff.
_Beckmann_, Beitr. zur Gesch. der Erfind., II, 54.)]
[Footnote 157-5: In the beginning of the eighteenth century,
the counties in the neighborhood of London addressed a
petition to Parliament against the extension of the building
of turnpike roads which caused their rents to decline, from
the competition of distant districts. (_Adam Smith_, Wealth
of Nat., I, ch. 11, 1.) Compare _Sir J. Stewart_,
Principles, I, ch. 10. Improvements in transportation which
affect the longest and shortest roads to a market in an
absolutely equal degree, as, for instance, the bridging of a
river very near the market, leave rent unaffected. (_von
Mangoldt_, V. W. L., 480.)]
[Footnote 157-6: _Malthus_, Principles, 231 ff. If the
laboring class were to become satisfied with living on
potatoes instead of meat and bread as hitherto, rents would
immediately and greatly fall, since the necessities of the
people might then be obtained from a much smaller
superficies. But after a time, the consequent increase in
population might lead to a much higher rent than before;
since a great deal of land too unfertile for the cultivation
of corn might be sown with potatoes, and thus the limits of
cultivation be reached much later.]
[Footnote 157-7: In France, between 1797 and 1847, the
average price of wheat did not rise at all. _Hipp. Passy_
mentions pieces of land which produced scarcely 12
hectolitres of wheat, but which now produce 20--an increased
yield of 170 francs, attended by an increase in the cost of
only 75 francs. (Journal des Economistes, 15 Oct., 1848.)
Moreover, it may be that a not unimportant part of modern
rises in the price of corn may be accounted for by the
better quality of the corn caused by higher farming. (_Inama
Sternbeg_, Gesch. der Preise, 10 seq.) Such facts, readily
explainable by _Ricardo's_ theory, remove the objection of
_Carey_, _Banfield_ and others, that the condition of the
classes who own no land has, since the middle ages,
unquestionably improved. Political Economy would be simply a
theory of human degradation and impoverishment, if the law
of rent was not counteracted by opposing causes. (_Roesler_,
Grundsätze, 210.) According to _Berens_, Krit.
Dogmengeschichte, 213, the actual highness of rent is to be
accounted for by the antagonism between the "soil-law
(_Bodengesetz_) of the limited power of vegetation," and the
"progress of civilization" (but surely only to the extent
that the latter improves the art of agriculture). Thus, too,
_John Stuart Mill_, Principles, I, ch. 12; II, ch. 11, 15
seq.; III, ch. 4 seq.; IV, ch. 2 ff.]
[Footnote 157-8: Thus, for instance, drainage works which,
where properly directed, have paid an interest of from 25 to
70 per cent. per annum in England and Belgium on the capital
invested.]
SECTION CLVIII.
HISTORY OF RENT.--IN PERIODS OF DECLINE.
If a nation's economy be declining, in consequence of war for instance,
the disastrous influence hereof on rent may be retarded by a still
greater fall in wages or in the profit on capital. But it can be hardly
retarded beyond a certain point.[158-1] As a rule, the decline of rents
begins to be felt by the least fertile and least advantageously situated
land.[158-2] [158-3]
[Footnote 158-1: "The falling of rents an infallible sign of
the decay of wealth." (_Locke._) In England, in 1450, land
was bought at "14 years' purchase;" i. e., with a capital =
14 times the yearly rent paid, in 1470, at only "10 years'
purchase." (_Eden_, State of the Poor, III, App., I, XXXV.)
This was, doubtless, a consequence of the civil war raging
in the meantime. The American war (1775-82) depressed the
price of land in England to "23-1/4 years' purchase,"
whereas it had previously stood at 32. (_A. Young._) The
rent of land, in many places in France, declined from 10,000
to 2,000 livres, on account of the many wars during Louis
XIV.'s reign. (_Madame de Sévigné's_ Lettres, 25 Dec, 1689.)
Even in 1677, it was only one-half of its former amount
(_King_, Life of Locke, I, 129.) The whole Bekes county
(_comitat_) in Hungary was sold for 150,000 florins under
Charles VI.; after the unfortunate war with France.
(_Mailath_, Oesterreich, Gesch., IV, 523.) Compare
_Cantillon_, Nature du Commerce, 248. In Cologne, a new
house was sold in the spring of 1848 for 1,000 thalers, the
site of which alone had cost 3,000 thalers; and there are
six building lots which formerly cost over 3,000 thalers,
now valued at only 100 thalers. (_von Reden_, Statist.
Zeitschr., 1848, 366.) On the other hand, Napoleon's war
very much enhanced English rents (_Porter_, Progress of the
Nation, II, 1, 150 ff.), because it affected England's
national husbandry principally by hindering the importation
of the means of subsistence. (_Passy_, Journal des
Economistes, X, 354.)]
[Footnote 158-2: Thus the price of lands, in Mecklenburg,
between 1817 and 1827, fell 30 to 40 per cent. in the least
fertile quarters; in the better, from 15 to 20 per cent.
(_von Thünen_, in _Jacob_, Tracts relating to the Corn
Trade, 40, 187.) _Per contra_, see Hundeshagen Landwirthsch.
Gewerbelehre, 1839, 64 seq., and _Carey_, Principles, I,
354.]
[Footnote 158-3: The average rent in England was, in 1815,
17s. 3d. In the counties, it was highest in Middlesex, 38s.
9d.; in Rutland, 38s. 2d.; Leicester, 27s. 3d.; lowest in
Westmoreland, 9s. 1d. In Wales, the average was 7s. 10d.;
highest in Anglesea, 19s.; lowest in Merioneth, 4s. 8d. In
Scotland the average was 5s. 1-1/2d.; highest, Midlothian,
24s. 6-1/2d.; lowest, Highland Caithness, Cromarthy,
Inverness and Rosse, from 1s. 1d. to 1s. 5d.; Orkneys,
8-1/2d.; Sutherland, 6d.; Shetlands, 3d. In Ireland, the
average was 12s. 9d.; highest in Dublin, 20s. 1-1/2d.;
lowest, Donegal, 6s. (_McCulloch_, Stat., I, 544 ff.;
Yearbook of general Information, 1843, 193.) In France,
_Chaptal_, De l'Industrie Fr., 1819, I, 209 ff., estimates
the average yield per _hectare_ at 28 francs; in the
Department of the Seine, 216; Nord, 69.56; Lower Seine,
67.85; in the upper Alps, 6.2; in the lower Alps, 5.99: in
the Landes, 6.25. While in the Landes, only 20 francs a
_hectare_ are frequently paid, the purchase price in the
neighboring Medoc is sometimes 25,000 francs. (Journal des
Economistes, Jan. 15, 1851.) In Belgium, the average price
of agricultural land is 52.46; in East Flanders, 53.19; in
Namur, 29.24. (_Heuschling_, Statistique, 77.)]
SECTION CLIX.
HISTORY OF RENT.--RENT AND THE GENERAL GOOD.
We so frequently hear rent called the result of the monopoly[159-1] of
land, and an undeserved tribute paid by the whole people to landowners,
that it is high time we should call attention to the common advantage it
is to all. There is evidently danger that, with the rapid growth of
population, the mass of mankind should yield to the temptation of
gradually confining themselves to the satisfaction of coarse, palpable
wants; that all refined leisure, which makes life and the troubles that
attend it worth enduring, and which is the indispensable foundation of
all permanent progress and all higher activity, should be gradually
surrendered. (See § 145.) Here rent constitutes a species of reserve
fund, which grows greater in proportion as these dangers impend by
reason of the decline of wages and of the profit of capital, or
interest.[159-2] Besides, precisely in times when rent is high, the sale
and divisibility of landed estates act as a beneficent reaction against
the monopoly of land, which is always akin to the condition of things
created by rent.
But it is of immeasurably greater importance that high rents deter the
people from abusing the soil in an anti-economic way; that they compel
men to settle about the centers of commerce, to improve the means of
transportation, and under certain circumstances to engage in the work of
colonization; while, otherwise, idleness would soon reconcile itself to
the heaping together of large swarms of men.[159-3] The anticipation of
rent may render possible the construction of railroads, which enable the
land to yield that very anticipated rent.
[Footnote 159-1: "Rent is a tax levied by the landowners as
monopolists." (_Hopkins_, Great Britain for the last forty
Years, 1834.) For a very remarkable armed and successful
resistance of farmers in the state of New York to the claims
for rent of the Rensselaer family, represented by the
government, see _Wappäus_ Nord Amerika, 734.]
[Footnote 159-2: _Malthus_, Additions to the Essay on
Population, 1817, III, ch. 10; compare also _Verri_,
Meditazioni, XXIV, 3. The Physiocrates call the landowners
_classe disponible_, since, as they may live without labor,
they are best adapted to military service, the civil
service, etc., either in person or by defraying the expenses
of those engaged in them. (_Turgot_, Sur la Formation etc.,
§ 15; Questions sur la Chine, 5.)]
[Footnote 159-3: Well discussed by _Schäffle_, Theorie, 65,
72, 83. _Malthus_ considers the capital and labor expended
in agriculture more productive than any other, because they
produce not only the usual interest and wages, but also
rent. If, therefore, the manufacturing and commercial profit
of a country = 12 per cent., and the profit of capital
employed in agriculture = 10 per cent., a corn law which
compelled the capital engaged in manufactures and commerce
to be devoted to agriculture would be productive of
advantage to the national husbandry in general, if the
increase in rent should amount to about 3 per cent. (On the
Effects of the Corn Laws and of a Rise or Fall in the Price
of Corn on the Agriculture and the general Wealth of the
Country, 1815. The Grounds of an Opinion on the Policy of
Restricting the Importation of Foreign Corn, 1815.) Compare
_supra_, § 55, and the detailed rectification in _Roscher_,
Nationalökonomik des Ackerbaues, etc., § 159 ff.]
CHAPTER III.
WAGES.