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Land And Artificial Instruments

One may hire many things besides land and pay what is commonly called
rent for them. No one would think of calling by any other term the
amount paid for the use of a building, a room in a building, or the
furniture in the room. All these things yield rent to their owners;
and if the intuitions which govern the common use of terms are to be
trusted, the income derived from such things and that derived from
land have some essential qualities in common. Every such income is
paid for the use of some concrete instrument, and is measured, not by
a percentage on the value of the instrument, but by a lump sum--a
certain number of dollars per month or per year.

The Mode of Calculating the Rent of Concrete Instruments

Now the
rent of such instruments of production, whether artificial or not, can
be measured in exactly the same way in which the rent of land is
measured. We saw that there are two margins of utilization of land, an
extensive and an intensive one, and that the product of labor and
capital at either of these margins may be used as a basis for
computing the surpluses which constitute the rent of the land. The
landlord gets from a good field what it produces minus what the labor
and capital that are used on this field would produce if they were
used on the poorest land in cultivation; or, what is the same thing,
he gets from the field what it produces minus what this labor and
capital would produce if they were set working somewhere on the
intensive margin of cultivation. Take the men out of this field, add
them in small detachments to the men who are already cultivating other
fields, in order that such fields may be tilled a little more
intensively, and measure the product which the laborers create when
they are so placed. Withdraw also the capital from the field, add it,
in small amounts, to the capital that is working elsewhere, and
measure its specific product. The sum of these two specific products
is the same amount that is arrived at by using the former standard.
This labor and capital, formerly used on the good field, scattered as
they now are among the users of other good land, will create the same
amount that they would have created if they had been employed on the
poorest land in cultivation. This amount is, as it were, what they
produce by their own unaided power; and whatever is produced in excess
of this amount when a good field comes to their assistance is the rent
of that field, for it is the contribution which the field makes to the
joint production. Total product of land, labor and auxiliary capital
minus the product created by the labor and auxiliary capital when
these agents are put in marginal positions equals the rent of the

The Rent of an Instrument measured from the Intensive Margin

can measure the product of any instrument in this way. If it is a
ship, it takes labor to sail it and requires a considerable amount of
auxiliary capital. We must fill the bunkers with coal, stock the
steward's department with provisions, furnish and light the staterooms
and the saloons, and provide cordage and a wide variety of other ship
stores. All this labor and all this capital we could take out of the
ship and use elsewhere. We could convert them into marginal labor and
capital. We could divide them among the owners of other ships where
they would be used in a way that would make these other ships somewhat
more efficient and cause each of them to earn a little more than it
now earns. Whatever the labor and capital could, in this way, produce
furnishes the basis for computing the rent of the ship. Subtract it
from the total joint product of labor, capital, and ship, and you have
what the vessel separately earns.

The Mode of Testing the Productive Power of a Ship

Put the labor
and capital into the ship and set it doing its proper work of carrying
freight and passengers, and you cause a certain product to be created.
The steamship company gets an aggregate amount for the service it
renders by means of the labor, the auxiliary capital, and the ship. A
certain smaller amount would be realized if the labor and the
auxiliary capital were taken out of the ship, distributed, and used in
the way we have just described. The difference between the two amounts
is the rent of the ship, or its particular contribution to the general
product. This gives us a formula for computing the rent, not only of
land, but of buildings, tools, machines, vehicles, and every other
concrete instrument of production. The formula, indeed, is so general
that it enables us to compute the earnings of any agent whatsoever.
The rent of any such agent is what it adds to the marginal product of
labor and capital used in connection with it.

No-rent Instruments

The majority of instruments that are in use
add something to the marginal product of the labor and capital used in
connection with them. Some add more and some add less, according to
their several qualities. As a rule, any tool of trade produces most
when it is new and less and less as it grows older. In the end it is
discarded because it has so deteriorated that it no longer adds
anything to the marginal product of the labor and capital that are
used in connection with it. A wagon has become so rickety that it no
longer pays to furnish a horse, a harness, and a driver for it. The
capital and labor that these represent would earn as much if they were
detached from the old vehicle and added to the equipment of some
person who has a stock of good ones. The rent of this old wagon is
nothing. As in the case of the poorest land in cultivation, it is a
matter of indifference whether certain amounts of labor and capital
are used in connection with it, or whether they are withdrawn and
employed elsewhere. This poor vehicle, like the poor land, may be used
without positive loss; but if it is so used, nobody gets any income
from it. It has no power to enter in a really productive way into
combination with labor and capital, for it cannot so combine with them
as to add anything to those marginal products which the labor and
capital could create if they remained detached from it.

The Universality of the Test of Rent

This test, whether an
instrument can or cannot add something to the marginal product of
labor and capital, may be universally used. It may be applied to
everything that is made as an aid to labor. There are no-rent
buildings, locomotives, cars, tracks, ships, wagons, furnaces,
engines, boilers, and, in short, instruments of every description that
figure in production. Combine any one of them with labor and capital
and see what you get out of the combination; then take the labor and
capital away and see what they will produce as marginal labor and
capital; and the difference between the two amounts, whatever it is,
is the rent of the instrument. If the difference is nil, the
instrument is at the point of being abandoned.[1]

[1] Whether such an instrument should or should not be
called a capital good is a question of mere nomenclature; but
in this treatise we consider that every part of what we term
capital produces an income, and therefore a no-rent
instrument is not a capital-constituting good--otherwise
termed a capital good.

True Capital rather than Capital Goods moved in Making such Tests of

In applying these tests with scientific accuracy we
should take away the true capital used in connection with a
rent-paying instrument and use it as marginal capital elsewhere,
rather than take away the particular concrete thing in which that
capital is now embodied. In the case of the ship the accurate test is
made, not by taking stores, etc., bodily out of it and putting them
into other ships, but by letting the stores first earn what they can
where they are, converting the earnings into money, and, when the
stores are completely used up, spending the money to procure marginal
additions to the outfit provided for the other ships.

One Difference between Land and Artificial Capital Goods

In the
case of land a particular area is marginal or no-rent land, and, in a
static state, it remains so. Any particular ship, wagon, engine, or
other made tool begins its career as a rent payer and ends it as a
no-rent instrument. If we watch the whole social stock of instruments
of production, we shall see the no-rent points not fixed in location,
but shifting from place to place. Now this machine, now another, and
now still another reaches the unproductive state and is supplanted by
instruments of similar kind that are new and efficient.

Original Elements in the Soil

The real difference between the rent
of a piece of land and that of a building, machine, vehicle, or any
similar instrument arises from the fact that the land is not going to
destruction and the artificial instrument is. There are elements in
what is commonly called land that wear out as do the tools that are
used in tilling it, but these elements are not land in the economic
sense. Land, as Ricardo long ago said, consists in the "original and
indestructible powers of the soil." He singles out certain constituent
elements of every farm, forest, building site, or other piece of what
is called land in ordinary usage, and gives to this new concept the
name land in an economic sense. These so-called "powers" are
original elements because man does not make them; they are provided
altogether by nature, and the only way in which man may be said to
impart any productive power to them is by putting them into
combinations in which they can produce. When men settle upon what has
been vacant land, they bring the land into combination with labor, and
when they break up the land for tillage and put buildings on it, they
combine it with artificial capital. By means of these combinations
land acquires productive power; but physically considered, it is
altogether a natural product.

Indestructible Elements in the Soil

Land in the economic sense is
indestructible because the natural effect of use is not to destroy it.
This does not mean that it is not physically possible to destroy land
to the extent of making it forever impracticable to use it in the ways
in which land is commonly utilized. Nature may do this by sinking it
beneath the ocean, and man can, if he will, do something akin to this;
but he does not naturally destroy what is truly land in the using. It
is impossible to use a plow, a spade, or a reaping machine without
injuring it and, in the end, wearing it out. It is also impossible to
draw the nutritive constituents out of the superficial loam and
convert them into crops without exhausting the supply of these sources
of fertility and so spoiling that which is commonly called the land,
though it is not so in the economic sense. What is really land in this
sense is not affected. Nitrates and phosphoric acid that lie in the
topmost stratum of the soil are among the destructible instruments of
agriculture. The supply of them has to be renewed, if cultivation is
continued, and they are therefore in the class with the plows, spades,
and reaping machines which also wear out. But whatever there is in the
soil that suffers no deterioration from any amount of use is the land
with which political economy has to deal.

The Gross and the Net Rent of Land Identical

As land does not wear
out and require renewal, all that it adds to the products of the labor
and capital that are used in connection with it may be taken by the
landlord as an income without reducing the amount of his property.
Whatever land produces at all is a net addition to the general income
of society.

Net Rent of Artificial Instruments Smaller than Gross Rent

It is
not safe, on the other hand, for the owner of buildings, tools, or
live stock to take for his own consumption all that these produce. If
he were to use up their gross produce as he gets it, he would find, in
due time, that a considerable part of his property had vanished. Such
instruments wear out and become worthless, and if no part of what they
produce is set aside as a sinking fund with which to purchase other
instruments to take their places, one whole genus of capital must go
altogether out of existence.

Artificial Instruments Self-replacing

What actually happens is
that these instruments create enough wealth to pay for their own
successors, and that, too, besides paying a net return, which,
regarded in one way, is interest. If you compute the whole product of
one of these instruments by the Ricardian formula which we have
examined, the amount of it will be whatever the instrument, during its
entire career, adds to the product of the labor and of the capital
that are used in connection with it; and that includes the fund for
renewal that has just been described, the amount, namely, which the
owners must set aside for repairing the instrument and finally
purchasing another. As the instrument itself provides this sinking
fund, it may be said to create, in an indirect way, its own successor.
The ship earns, over and above the net income which is interest on its
cost, enough to keep itself seaworthy so long as it sails and, in the
end, to build another ship. The locomotive, the furnace, the loom, the
sewing machine, the printing press, etc., all pay for and thus
indirectly produce their own successors.

The Net Rent of a Permanent Series of Similar Instruments

first charge on the product of any instrument of this kind is the
amount necessary for replenishing the waste of it and for providing a
successor when this original instrument shall have been wholly worn
out. In like manner, the first charge on the successor is providing a
similar fund, and so on indefinitely. A part of the productive power
of every one in an endless series of similar instruments is devoted to
this type of reproduction. The series maintains itself and yields an
income besides; and that remainder of its gross rent which is left
after waste of tissue is repaired is available as a net income for the
owner. This net remainder constitutes an interest on the owner's
capital. He possesses a permanent fund of productive wealth embodied
in the endless series of these perishable instruments, and the series
taken as a self-perpetuating whole yields nothing but this interest.
Each instrument, separately considered, yields interest and a sinking
fund; but the sinking fund is not available as an income, since it
must take shape as another instrument which serves to keep the series
intact. What the first instrument creates in addition to the sinking
fund is its contribution to interest, and what each instrument creates
above what is required for virtual self-perpetuation is also interest.

Interest and Net Rent Identical

We may therefore reduce interest
to the form of a net rent by calculating the gross rent afforded by
each instrument in such a series and by ascertaining how much of this
merely repairs waste and how much is true income. As interest is
usually expressed in the form of a percentage, we may reduce the net
rent to this form by comparing it with the cost of the first
instrument, which is the amount originally invested. The series of
instruments will yield a net return every year. We can compute the
gross return of each instrument according to the Ricardian formula for
measuring the product of the land. It will diminish from year to year
and will ultimately vanish. We can add the several annual gross
earnings of the instrument during its economic lifetime in the form of
an absolute sum, which is the total rent of the instrument. From this
we can deduct the cost of replacing this worn-out capital good, and
the remainder will be the net rent of the instrument. We can, in a
like way, get the net rent of all the following instruments in the
series for a long period, add these net rents together, and get the
true net earnings of the series for the time covered by the
calculation. If this chances to be ten years we may compare a tenth of
this total, or the earnings of the series for one average year, with
the cost of the first instrument,--which is the capitalist's original
investment,--and we shall thus get the fraction which represents the
annual rate of interest on that investment. Perhaps in an average year
the series has earned, above what is required to repair waste, five
hundredths of what the first instrument cost. That is, then, the rate
of interest that the series as a whole, or the permanent capital, is
yielding. The whole procession of instruments in which permanent
capital is invested creates every year this fraction of its own value,
over and above the sum that is needed to offset the wear and tear of
an average year's use.[2]

[2] If the fund for replacing a costly capital good, such as
a ship or a building, were allowed to accumulate for a term
of years before being spent, the parts of it remaining on
hand for some time would earn interest for their owner, and
in his bookkeeping this would figure as reducing the amount
he must save from the product of the ship or the building in
order to replace it. This does not affect the general law of
self-replacement, for the ship or building really produces
what results from this compounding.

General Interest as Rent

If you compute the net income of all
tools, machines, and other like things in the world, add the amounts,
and get the grand total of them all, you have the entire income from
this part of the capital of the world in the form of net rent. If then
you compute the value of all this class of instruments and see how
large a part of this value the net rent is, you translate this total
rent into the form of interest, and therefore net rent and interest
are the same income regarded in two different ways.[3]

[3] In computing both of these values for comparison one
should use a labor-cost standard, and we shall later see
under what limitations such a standard may legitimately be

Stocks of Made Instruments graded in Quality as is Land

It is
necessary to notice the fact that the permanent series of tools,
buildings, and other active capital goods shows forever the same
gradations of quality that are found in the case of land. There are
always to be found some instruments which are producing a large
amount--that is, they are adding a large amount to the product of the
labor and the further capital that are combined with them in
production. A given amount of labor and capital creates much more
wealth when working with a machine of the highest class than it would
if distributed in marginal positions; and this is equivalent to saying
that such an instrument is itself highly productive. Other instruments
are to be found which are creating less, and there is never wanting a
grade of no-rent instruments which are adding nothing to the marginal
product of the other agents. It would be as well for the labor that
used them if it should drop them and add itself to the force which is
working with good instruments. Any one manufactured instrument begins
its career as a maximum-rent instrument and ends it as a no-rent one.
The ship is at its best when it starts on its first voyage, and the
mill is at its best in the first year of its running. Each instrument
goes gradually downward in the scale till it reaches a stage in which
it really produces nothing, since it adds nothing to what would be
produced without it. The permanent series of instruments never thus
deteriorates. All the depreciation of particular things is made good
by the repairing and the replenishing which go on. In the series as a
whole there are forever present grade number one, grade number two,
grade number three, etc., exactly as in the case of land. If we wish,
we can reckon the income that is to be gotten from each part of the
series according to the old-time formula that is familiarly used in
the case of land, "What labor and capital create by the use of this
piece of ground in excess of what they would create if they were
applied to the poorest land in use." For a grade of land read a grade
of the self-perpetuating series of artificial instruments, and it will
appear that each grade above the poorest yields, with the labor and
capital that are combined with it, a surplus above what this labor and
this capital could create if they were combined with the poorest grade
in the permanent series.

Different Modes of Destroying and Replenishing Stocks of Capital
Goods of the Two General Classes

The process of keeping up a stock
of tools of trade is unlike the process of keeping intact a stock of
materials and unfinished goods, because the modes in which the two
kinds of capital goods deteriorate and perish are unlike.

In the case of the raw materials that gradually ripen into articles
for consumption and which we have called passive capital goods, the
waste of tissues that takes place is quite unlike that which takes
place in the case of active capital goods, the tools and implements
that are used in the process. The raw material acquires value through
the whole process, and in the end it gives itself, with all its
acquired value, into the hands of the consumer. In a static state such
goods embody the whole income of society, including the products of
all labor and of all capital.


The series of A's represents the process of creating consumers'
goods from the rawest material. The A''' as taken away for
consumption represents, as it were, the wasting tissue of passive
capital goods; and it contains in itself the wages of all the labor in
this series of subgroups, the interest on all the capital there used,
and, in addition to these, the sinking fund that is necessary in order
to keep the active capital intact. Some of the articles of the kind
A''' will have to be given over to the men who keep the tools,
buildings, etc., in repair and replace them when they are worn out.
The whole force of the industry of this group expends itself simply in
making good the loss that the withdrawal of the A''' for use
occasions. It does, in short, nothing but replace the perpetually
wasting tissue of the A's. All industry, except that of the makers
of active instruments, may be considered in the light of an operation,
the aim of which is to keep the stock of passive capital goods
intact, or, what is the same thing, to keep the fund of circulating
capital undiminished. Whoever puts anything into this fund enables it
to overflow and to furnish an income without suffering any diminution.
The sole purpose of such capital is to overflow, that is, to suffer,
at one and the same time, a loss and a replenishment which neutralizes
the loss. It exists for nothing else except to ripen into consumers'
wealth. Nevertheless, though the ripened A's are perpetually
consumed, the series of A's is abiding capital, is entitled to its
share of interest, and is certain to get it. A part of the perpetual
flow of A''''s is this interest. As the whole income of the society
consists in A''''s, a certain number of the A''''s that are
withdrawn for consumption go to capitalists as interest on the
permanent fund which is kept in existence in the form of A, A',
A'', and A'''. A certain other part of the outflow of A''''s
goes also to capitalists as interest on that other permanent fund
which is maintained in the form of tools, machines, and buildings,
such as must everywhere be used in the series. A third part of the
flow of A''''s is wages of labor in this group; and a final portion
is what we have called the sinking fund, the amount that is given over
as an income to the producers in another group, not here represented,
who keep the stock of buildings, tools, etc., intact. These four
withdrawals of income constitute the process by which the stock of
passive goods is depleted, and the grand resultant of all industry is
to atone for that depletion.

Labor and the Obtaining of its Product, in Static Industry,

One function of the permanent series of A's is to
enable labor everywhere to get its virtual product without waiting,
and that too in the form in which it needs it for use. The labor that
converts A'' into A''' supplies the waste of tissue that takes
place at that end of the line by withdrawal of an A'''. The labor
that turns A' into A'' replaces the waste that takes place at that
point when an earlier A'' becomes an A'''. The labor at A'
replaces the waste at that point, and that at A replaces the waste
at still another point. They are all at work keeping the stock of
A's unimpaired, and one of them does as much toward keeping up the
perpetual flow of A''''s as any other.

If we pump water in at one end of a full reservoir, we instantly cause
it to overflow at the other end; and every worker in such a series as
we have described may be thought of as putting something into the
permanent reservoir of capital and so causing a corresponding
overflow. He gets his reward day by day as the work proceeds. Wherever
a laborer may be in such a series, his work creates a ripened product
as it goes on. He has not to wait for it. His work and its fruit are

Differences between Land and Made Instruments Apparent in Dynamic

A point that has great theoretical interest is the
nature of the difference between land and other productive
instruments. In a static society the difference would be comparatively
unimportant, but it is brought into prominence by the changes which
constitute a dynamic state. The static hypothesis requires that
capital should not increase or diminish in quantity, and that it
should not change its forms. The equipment of every mill and of every
ship is kept unimpaired but not enlarged or improved. There is a fixed
number of spindles in the cotton mill, of lathes in the machine shop,
of sewing machines in the shoe factory, etc., and this fact removes
the most striking difference which, in a dynamic society, actually
distinguishes land from other things.

Land, in the economic sense, does not increase in quantity, however
changeful and progressive a society may be. The chief distinguishing
mark of land--that of being fixed in amount--separates it from other
things only in a dynamic state and because of the action of the forces
which produce organic changes. These are subjects to be studied in the
dynamic division of economic theory.

A Distinguishing Mark of Land which appears in a Static State of

In a static state there remains this difference between a
piece of ground and a building, a tool, or any other instrument: the
ground is not artificially made and does not perish in the using;
while the building or the tool or other appliance is so made and does
so perish. It must in wearing itself out create in the indirect way
which we have described its own successor. The engine must, by a part
of its product, pay the men who will make another engine and so
perpetuate the series of engines. This makes it necessary for the
owner of the engine to save some of its gross rent to pay for
depreciation and renewal, while he can safely use the whole rent of

This Mark of Distinction not Applicable when Land is contrasted with
a Permanent Stock of Capital Goods

If we look, not at one
particular instrument, but at an entire series of them,--if we take
into view, not only the engine which is now driving the mill, but also
the one that will succeed it, and again the one which will succeed
that second engine, and so on forever,--this difference between land
and the artificial instrumentality vanishes. The series of engines,
like land itself, yields only a net rent. The remainder of its gross
product is not a true rent at all, since any one of the engines
creating it has to consume it on itself and cannot give it to the
owner as an income. This remainder pays certain men for keeping the
series of engines intact, and what is given to them as pay for their
services cannot accrue to any one as an income from the series of
instruments so maintained. It is the earnings of the corps of
maintenance created by their own labor and capital. What the series of
engines yields over and above what it expends in maintaining itself it
gives to its owners as an income. This is their net return and they
can use it without trenching on their property. The analogy between
the returns from land and those from a self-perpetuating series of
made capital goods is in this particular complete.

The Source of the Fund for Repairs and Renewals

The fund for
repairs and renewals must, of course, like the net income itself, be
furnished by instruments that are above the no-rent grade. A machine
will naturally be used as long as it pays anything whatever, and
during the latter part of its career it usually produces less than
mere interest on its cost. So long as the labor and the auxiliary
capital that are combined with the instrument produce by its aid any
more than they would produce if they were withdrawn from it and added,
as marginal increments, to the labor and capital that are working in
connection with good instruments, they will continue to use the
machine and they will abandon it only when it ceases to pay anything
whatever. Out of the total amount it produces before reaching this
point of abandonment comes the amount that is needed as an offset for
the cost of providing a new machine.

Incorrectness of a Common Statement concerning Rent and Price

brings into view a striking fallacy of what has been current economic
theory. It has been customary to claim that the rent of land "is not
an element in price," although the interest on capital is such an
element. The rent of land is the net product of land; and if interest
be kept distinct from it, this income is the net product of a
permanent stock of capital goods. The relations of these two component
parts of the constant output of goods to the prices of the goods are

Proof of the Incorrectness of the Current Statement concerning Rent
and Price

The vague form of the current statement concerning rent
and price is responsible for much confusion of thought on that
subject. What the statement would mean is that the price of wheat is
not affected by the great contributions to the supply of it which good
lands are making. These contributions are the rent in its original
form. The rent of wheat land is wheat, that of cotton land is cotton,
that of mill sites is manufactured goods, etc. That money is used in
payments made to landlords changes nothing that is essential. To say
that such contributions to the supply of particular commodities are
not an element in determining the prices of them, would be as
unreasonable as to make the same assertion concerning other parts of
the supply. Quite as logically might it be asserted that other
components in the supply do not affect prices--that the amount of
wheat which is attributable to harvesting machinery or the amount of
calico which is imputable to looms has no influence in the market
values of these articles.

Why the Produce due to Good Land prevents Prices from greatly

If the use of good wheat land were merely discontinued, the
supply of wheat would of course be not only lessened, but reduced
almost to nothing, and a famine price would at once result. If, now,
an attempt were made to make good the shortage of the supply of this
cereal by tilling lands which are now at the margin of cultivation, it
would at once appear that not enough of such land exists to enable us
to accomplish the purpose, and it would be necessary to push the
margin outward and till poorer and poorer soils, at a greatly
enlarging cost. We should grub out worse thickets, drain worse swamps,
terrace more discouraging hillsides, irrigate more remote and barren
deserts, etc. All this would mean a greater cost of production of
wheat and a higher price for it in the market.

It would also mean another thing. The extending of the margin of
cultivation which makes it include poorer grades of land causes that
part of the area now tilled which does not command any rent to yield
one. After the margin should have been greatly extended and finally
located in a region where getting anything out of the soil would
require a struggle, it would appear that all of the lands newly
annexed to the cultivated area except the last and poorest would
command a rent. All but those on the new margin would add a definite
quota to the supply of wheat, and this contribution would be their
rent. Entering into the supply, it would of course count in the
adjustment of price.

What can reasonably be conceded concerning Rent and Price

There is
another possible meaning of the phrase "Rent is not an element in
price"; and, whether it was clearly in the minds of those early
economists who made the assertion or not, it is what their argument
proves. The payment of rent by tenants to landlords has no effect on
the market value of the produce. "Food would not become cheaper," says
Professor Fawcett, "even if land were made rent free." There would be
the same need of food stuffs as before, and the tillage of lands would
be pushed to the present margin, where the yield is smallest. The
cost, in labor and capital, of that marginal part of the supply of
food which has come from these poorest lands would continue to be what
it has been heretofore. The farmers would, of course, get from the
good lands the same surplus that they get at present; but the fact
that land had been made rent free would enable them to keep it. This
surplus is, of course, rent, and transferring it from landlords to
tenants does not affect prices. So much of the doctrine formerly
current is true; and it would have forestalled much confused thought
as well as much controversy if the statement concerning rent and price
had made it clear that any rent in its original form is an element in
the supply of produce, and the existence of it helps to determine
prices, while the payments made by tenants to landlords do not affect
them. If these payments should cease and the tenants should retain the
rent, prices would continue to be what they now are.[4]

[4] The claim that rent is not an element in price making
might be made in the case of artificial instruments of
production as reasonably as it can be made in the case of
land. If it means that the existence of the rent has no
effect on price, it is wholly incorrect in both cases. The
statement may be so changed as to tell what is true
concerning the rent of land, and it will then also tell the
truth about the product of the artificial instruments, which
is interest in its original form. These statements may be
made in parallel columns, and one will be as true as the
other and no truer.

A needed part of the supply A needed part of the supply
of wheat is grown on marginal of woolen cloth is woven on
land. marginal looms.

The price of the wheat must The price of the cloth must
pay for the labor and capital pay for the labor and capital
used on this land. that, in the woolen
manufacture, are combined
with these looms.

The price of wheat raised on The price of cloth woven
good land is the same as that on good looms is the same as
of wheat raised on the marginal that of equally good cloth
zone, and it affords a surplus woven on marginal ones, and
above wages and interest paid it affords a net surplus above
by farmers for labor and the cost of maintaining the
capital used in the tilling stock of looms and the
of the good land. wages and interest paid by
manufacturers for further
capital used in connection
with the good looms.

The existence of this surplus The existence of this surplus
in its original form, that in its original form, that
of wheat, affects the supply of cloth, affects the supply
and the price of that product. and the price of this product.

The fact that farmers pay The fact that entrepreneurs
landlords for this surplus pay capitalists for this
has no effect on the price surplus has no effect on the
of wheat. price of cloth.

The more important facts concerning rent have reference to
the original form of it, namely, a product in kind. Whatever
constitutes a part of the supply of anything affects the
price of it. The surplus afforded by good looms is an element
in the supply of cloth, and that afforded by good land is an
element in the supply of wheat. They make these two supplies
larger than they would otherwise be, and of course they are
of cardinal importance in determining price. The rent of
anything is an element in the supply of some kind of goods,
and the annihilation of it would reduce the supply and raise
the price of product in which, in its first estate, it

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