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 som
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