The Doctrine of Rent.
The doctrine of Rent spoken of in the last Lecture, must now be more fully explained, as I have said; it may be briefly statedthus: The Rent of land is the payment for the excess of the value of the produce of the better land over the poorestcultivated land: the poorest being that kind of land which just pays for being cultivated.
Let A be the best land (best as being most fertile, nearest the market, or for the like reasons).And let the produce of it underthe usual cultivation be ?2 per acre per annum on the average.
Let B be next best land, and let its produce be ?0 per acre; and suppose this produce just pays the expense of cultivation.
Let C be still inferior land, which under the like cultivation yields only ? per acre.
Therefore the land C does not pay the expense of cultivation, and no one will with a view to profit, bestow upon it theexpense of cultivation.
The land B may be cultivated with a view to profit, by a person who can have it rent-free: by the proprietor for instance.
The land A may l)e cultivated with a view to profit by any one, paying for it a rent of ? an acre.When he has paid that rent,his profits will still be the usual profits of stock.
This is necessarily the origin and measure of Rent: for the proprietor of A will not allow any one to cultivate it on lowerterms, since he can obtain those terms.
A person who thus rents land and cultivates it with a view to obtaining the profits of his stock, is a Farmer.The Rents nowspoken of are Farmer's Rents.
A: Produce = 12
Rent = 2
B: Produce = 10
Rent = 0
C: Produce = 8
Uncultivated This diagram may represent the kinds of land: A, B, C the different kinds yielding different values of produce, inconsequence, as has been said, of being more fertile, nearer to the market, or other causes.
Recent Rise of Rents in England, how produced?
The main importance of the Doctrine of Rent, is in the views to which it leads respecting the causes and the effects of a riseor fall of rents.
Suppose that the price of corn (or other produce of the land,) increases, and that the expense of cultivating the land remainsthe same.Suppose this increase of price to be one fourth of the original price.
Then the value of the produce of A will be increased by ? instead of 12, it will be 12 + 3 or 15.
The value of the produce of B will be increased also by ? instead of 10 it will be io + 2?or 12?
And as the expense of cultivation is still only 10 as before, there will be in this case, besides the ordinary profit of stock, anextra profit of 2?which the farmer of B can afford to pay to the proprietor; and which the proprietor will demand as therent of B.
In this case the value of the produce of C will also be increased by one-fourth instead of 8 it will be 10.And as the expenseof cultivating C with the usual profits is 10, a person can afford to cultivate C, paying no rent.
In this case C, which was not cultivated before, is cultivated now in consequence of the increased price of corn.Thisincreased price may be supposed to arise from the increased demand occasioned by an increased population.The increasedproduce arising from the cultivation of C will provide for the increased population.
This new state of things may be represented by this diagram, A: Produce =15Rent = 5B: Produce = 12?
Rent = 2?
C: Produce = 10
Rent = 0.
In this case, Rents increase in consequence of corn having become dearer.
Mr Ricardo assumed that this was the general case :that a rise of rents is always accompanied by an increased price of corn,in consequence of the necessity of obtaining corn from inferior soils: as in.the above case, in consequence of the increase ofpopulation it was necessary to obtain corn from the land C, as well as from the land A and B.
Mr Ricardo asserted that the interest of the landlord (which is the rise of rents), is opposed to the interest of the consumersof produce (which is cheap prices).
It will be my business to show that this proposition is altogether erroneous.
That cause which Mr Ricardo assumes as the general cause of the rise of rents is not the general cause, if it ever operate:
and is not the cause of the rise which has taken place in England in modern times.
I will first prove that this is not the cause which has operated, and then I will endeavour to show what is the cause which hasproduced the effect.
This, then, is the proposition to which I first invite your attention.
The rise of rents in England in recent times has not resulted from the Ricardian cause, the rise of prices of produce inconsequence of the increased difficulty of production.
To prove this, I shall prove that when rents rise from the Ricardian cause, (the increased difficulty of production), the wholerent must necessarily become a larger fraction of the produce.
Thus, in the case which we have taken, the produce of an acre of the lands A, B, C, is respectively 12, 10, and 8.And, if wesuppose the quantity of each quality of land to be equal, (a supposition made merely at first to simplify the reasoning,) whenC is not cultivated, the produce is as 12 + 10 = 22, and the rent as 2.The rent is 1/11 the produce.
When C is cultivated, the produce is as 1 + 12?+ 10 = 37? and the rent is as 5 + 2? = 7? The rent is ?the produce.
Thus in this case the rent increases from 2 to 7? and it is at the latter stage 1/5 of the produce, having at the former been Itis a larger portion of the whole at the last than at the first.
The numbers in this case result from the supposition that the quantities of each of the kinds of land, A, B, C, are equal.
But the general result, that the rent is a greater portion of the produce at the latter stage than at the former, does not dependon any supposition as to quantities.It will be the same, whatever be the quantities of different kinds of land.
For each kind of land will have the rent a greater fraction at the latter stage than at the former ; and therefore all thefractions at the latter stage, multiplied by their quantities, and added together, must be greater than at the former stage.
