CHAPTER XXIV RENT Definition of Rent.-The word "rent," as used by most. persons, refers to a sum of money paid for the use of any article. The economist limits rent to payment for the use of land. Money paid for the use of capital is interest, not rent. Economic rent is the income which land affords as its share in the production of wealth. Some lands are more fertile than others. We may imagine land so poorly suited to raising wheat that the crop will merely pay the cost of labor, seed, and interest on the capital. This land would be the margin of cultivation for wheat. There would be nothing for rent. On another piece of land the same amount of labor and capital will pay all expenses and afford a surplus of fifteen bushels per acre. The difference is not due to superior use of labor and capital, for we have assumed they are equal in each case. The superiority of the land accounts for the larger yield. Location makes some lands better, than others. Land which is near a market is better than distant lands. Advantage of location is frequently great enough to overcome advantage of fertility. For example, the soil in the Red River Valley of North Dakota is superior to the soil of eastern Long Island, but Long Island land commands larger rents because of proximity to New York City. The rent of agricultural land, it is seen, depends upon two things: fertility of the soil and proximity to market. It should be noted that economic rent exists whether the land is cultivated by the owner or is leased to a tenant. Land on the Margin of Cultivation.-Any piece of land is capable of many uses. The tendency is to put the land to that use for which it is best suited. Land near a city will be used for truck farming because this employment of the land pays best. More distant lands will be more profitably employed in raising wheat or general farming. The point where it is a matter of indifference to the farmer whether he engages in truck farming or general farming is the margin of cultivation for truck farming. There is rent afforded for this marginal land when devoted to truck farming, because it must pay as much for truck farming as it would pay if devoted to general farming. The poorer lands used in general farming may be used for grazing. These lands must afford the same rent for agricultural purposes that they would yield if devoted to grazing. It is seen that economic rent consists of two elements— marginal rent, or the rent paid for the poorest land actually used for any purpose, and differential rent, which measures the difference between marginal land and better lands. Is There "No-Rent Land"?-Economists speak of "norent land." This land is too poor to produce more than a bare living. The cultivator of "no-rent land" can only support himself and therefore there is nothing left for rent. There are such lands in cultivation, even though better lands are idle. This is because of the ignorance, shiftlessness, or lack of ambition of the farmer. Rents of Agricultural Lands Do Not Affect Prices.-Let us imagine an island in the Southern Seas. The land of this island is most fertile in the north and regularly declines in fertility as we approach the south. Along comes Robinson Crusoe and takes possession of a part of the most fertile land, which is capable of yielding forty bushels of wheat FORTY BUSHEL LAND Enough of this land to produce THIRTY BUSHEL LAND Enough of this land to produce 80,000 bushels TWENTY BUSHEL LAND Enough of this land to produce to the acre. The land is free and no rent is paid. Soon Friday lands and occupies an adjoining strip of land. Still no rent is paid as there is abundance of equally fertile land unoccupied. So long as there is demand for only that amount of wheat that can be raised on the best land and there is still a portion of the best land to be had for the asking there will be no rent. But the population grows and soon the best land is all occupied and there is demand for more wheat than can be raised on the best land. If the cost of production is eighty cents per bushel on the land which produces forty bushels to the acre, the thirty-bushel land will not be used until the price of wheat rises to about $1.07 a bushel, because the same amount of labor and capital is required to produce thirty bushels on the poorer land as would produce forty bushels on the best land. As soon as the price of wheat rises enough to make it profitable to cultivate the thirty-bushel land, the better land will command a rental of ten bushels to the acre, because a farmer could as well afford to pay ten bushels rent for the best land as to raise thirty bushels on the no-rent land. Moreover he would have superior social advantages on the better land as he would be near Crusoeville where there is a general store, a school, a church, and "movies" on Saturday night. In like manner when the demand for wheat exceeds 180,000 bushels a year, the price of wheat will rise until it becomes profitable to cultivate the twenty-bushel land and now the forty-bushel land will afford a rent of twenty bushels per acre and the thirty-bushel land will command a rent of ten bushels per acre. From the illustration it is seen that prices are not high because rent is paid, but rent is paid because prices are high. Do Agricultural Rents Always Rise ?-It might be thought that rents of agricultural land will continually rise as population increases. Such is not the case-new and rich agricultural lands may be opened to cultivation. These will raise the margin of cultivation and tend to |