wealth of the society, every increase in the quantity of useful labour employed within it, tends indirectly to raise the real rent of land,' Adam Smith believes to require very little proof. 'A certain proportion of this labour,' he says, ' naturally goes to the land. A greater number of men and cattle are employed in its cultivation, the produce increases with the stock which is thus employed in raising it, and the rent increases with the produce.' Neither in the article on Political Economy in the Encyclopædia Britannica in 1810, nor in Boileau's treatise in 1811, does there appear to be any feeling that Adam Smith's theory as to the causes of variations of rent is seriously inadequate or erroneous. Buchanan, who looked on the ownership of land as a gigantic natural monopoly, probably thought it a simple matter that when population, and consequently the demand for raw produce, increase, the price and the quantity of raw produce should increase also and raise rent. In a note to Adam Smith's comparison of the price of hides in a barbarous country with their price in an improved and manufacturing country,' he says: "The demand of an improved country for every sort of rude produce is so great that it must raise the prices in spite of any regulation to the contrary; and Dr. Smith's great error is that he never gives sufficient weight to those natural causes.'2 And in a note to Adam Smith's remark that when a greater number of men and cattle are employed in the cultivation of the land, the rent increases with the produce,'' he says simply, 'When the produce increases, there is no doubt that the rent must increase along with it.'4 In the tract on the Nature and Progress of Rent, Malthus, after examining 'the nature and origin of rent,' considers 'the laws by which it is governed, and by which its increase or decrease is regulated': 'When capital has accumulated,' he says, 'and labour fallen on the most eligible lands of a country, other lands, less favourably circumstanced with respect to fertility or situation, may be occupied 1 Bk. I. ch. xi. p. 108 a. 2 Buchanan's ed. of Wealth of Nations, vol. i. p. 390. 4 Buchanan's ed. vol. i. p. 447. with advantage. The expenses of cultivation, including profits, having fallen, poorer land, or land more distant from markets, though yielding at first no rent, may fully repay these expenses, and fully answer to the cultivator. And, again, when either the profits of stock or the wages of labour, or both, have still further fallen, land still poorer, or still less favourably situated, may be taken into cultivation. And, at every step, it is clear that if the price of produce does not fall, the rents of land will rise. And the price of produce will not fall, as long as the industry and ingenuity of the labouring classes, assisted by the capitals of those not employed on the land, can find something to give in exchange to the cultivators and landlords, which will stimulate them to continue undiminished their agricultural exertions, and maintain their increasing excess of produce.' '1 The main causes which increase the difference between the price of produce and the expenses of cultivation 2 are, he says, 1st, such an accumulation of capital as will lower the profits of stock; 2dly, such an increase of population as will lower the wages of labour; 3dly, such agricultural improvements, or such increase of exertions, as will diminish the number of labourers necessary to produce a given effect; and 4thly, such an increase in the price of agricultural produce, from increased demand, as without nominally lowering the expense of production, will increase the difference between this expense and the price of produce.' The operation of the first three causes he considers 'quite obvious.' With regard to the fourth he thinks it necessary to offer a few further observations,' which are simply a part of his explanation of the recent rise of rent in England disguised in the form of wide general propositions. Increase of demand in surrounding nations for imports of raw produce might, he says, greatly raise the price of raw produce in the exporting country, while the expenses of cultivation would rise only slowly and gradually to the same proportion.' 'Nor would the effect be essentially different in a country which continued to feed its own people, if, instead of a demand for its raw produce, there was the same increasing demand for its manufactures. These manufactures, if from such a demand the value of their amount 1 Pp. 21, 22. 2 At first he says, 'diminish the expenses of cultivation or reduce the cost of the instruments of production compared with the price of produce,' but it soon appears that he is thinking of the difference and not the ratio between the expenses of production and the price of the produce (see p. 25). in foreign countries was greatly to increase, would bring back a great increase of value in return, which increase of value could not fail to increase the value of the raw produce.'1 Observing that it will be objected that the increased difference between the price of raw produce and the expenses of cultivation thus caused will form, not a permanent increase of landlords' rent, but a temporary increase of farmers' profits, he relies on the fact that landlords do not compensate their tenants for improvements: 'The increased capital which is employed in consequence of the opportunity of making great temporary profits, can seldom or [n]ever be entirely removed from the land at the expiration of the current leases; and on the renewal of these leases the landlord feels the benefit of it in the increase of his rents.' 2 It is not necessary, of course, he explains, for a rise of rent, that all four causes should operate at once, but only that by one or some of them the difference between the price of produce and the expenses of production should be increased. During the last twenty years rents had been raised by improvements in the modes of agriculture and by the constant rise of prices, followed only slowly by a proportionate rise' of the expenses of production, although profits had been higher. As a corollary of this theory as to the causes which determine rent, Malthus lays it down that no fresh land can be taken into cultivation till rents have risen, or would allow of a rise upon what is already cultivated.'s Poor land, he says, is costly to cultivate, and if the price of produce will not pay the cost, it must remain uncultivated. Consequently, in order that cultivation may be extended to poorer land, it is necessary that the difference between the price of produce and the expenses of cultivation should increase. Whenever this happens rents rise. 'It is equally true,' he adds, 'that without the same tendency to a rise of rents, occasioned by the operation of the same causes, it cannot answer to lay out fresh capital in the improvement of old land -at least upon the supposition that each farm is already furnished with as much capital as can be laid out to advantage, according to the actual rate of profits.' 4 1 P. 23. 2 P. 26. • P. 27. • Pp. 28, 29. In the Essay on the Influence of a Low Price of Corn Ricardo ascribed the increase of rent, measured in corn or 'raw produce,' entirely to the fall in the rate of profit, which he supposed to be occasioned by the diminishing productiveness of the successive additions to labour or 'capital' expended on the land. Wages being fixed by extraneous causes, the whole of the surplus of produce over wages is supposed in the first stage of cultivation to belong to profits. When additional capital is expended with a diminished return, and the rate of profit consequently falls, a smaller amount of produce is required to pay the profits of the original capital. The whole surplus over wages, or net return, yielded by the original capital therefore becomes divided into two parts; first, the reduced profits, and, secondly, a rent to the owner of the land on which capital yielding a larger return than is necessary to pay the ordinary rate of profit can be employed. In a numerical example, the statistics of the first four stages of cultivation are supposed to be as follows,1 both capital and produce being reckoned, not in pounds sterling, but in quarters of 1 Works, pp. 371, 373. See also above, pp. 281, 282. The rent paid in respect of the capital numbered A increases from 0 to 14-28, 27-27, and 39·13, and the total of all rents increases from 0 to 14-28, 409, and 78-26. How much the rent of any particular acre increases we are not told, since it is left an open question whether the capitals A, B, C, and D are employed on the same or on different land. The landlord, Ricardo points out, is benefited by the increasing difficulty of procuring food, in consequence of accumulation,' in a double manner. He gets a larger rent, reckoned in raw produce, and raw produce is at a higher price: 'Not only is the situation of the landlord improved (by the increasing difficulty of procuring food, in consequence of accumulation) by obtaining an increased quantity of the produce of the land, but also by the increased exchangeable value of that quantity. If his rent be increased from 14 to 28 quarters it would be more than doubled, because he would be able to command more than double the quantity of commodities, in exchange for the 28 quarters. As rents are agreed for and paid in money, he would, under the circumstances supposed, receive more than double of his former money rent. 'As the revenue of the farmer is realised in raw produce, or in the value of raw produce, he is interested, as well as the landlord, in its high exchangeable value, but a low price of produce may be compensated to him by a great additional quantity. 'It follows, then, that the interest of the landlord is always opposed to the interest of every other class in the community. His situation is never so prosperous as when food is scarce and dear: whereas, all other persons are greatly benefited by procuring food cheap.'1 Edward West, in his pamphlet on the Application of Capital to Land, treated of the causes which regulate rent, in the course of an endeavour to convince landowners that the consequences of a great importation of corn would not be so injurious to their interests as they supposed. If, he says, the cost of raising rude produce were always the same, whatever the quantity raised, landlords might well be alarmed at the idea of a great importation, since any considerable fall in the 1 Works, pp. 377, 378. |