Rural Wealth and Welfare: Economic Principles Illustrated and Applied in Farm LifeFairchild, Geo. T. (George Thompson)
Science
Rural Wealth and Welfare: Economic Principles Illustrated and Applied in Farm Life
Fairchild, Geo. T. (George Thompson)
Agriculture -- Economic aspects; Economics
In technical discussion the term rent is usually confined to the
compensation secured from appropriation of space, peculiar location,
natural fertility, mineral deposits, water privileges, or any natural
advantage to be used in production. In this limited meaning rent is
confined to the advantage gained by the owner of wealth in any form so
affected by the law of supply and demand as to gain a scarcity value. The
term unearned increment,—meaning an increase of value without cost of
exertion,—has been largely applied to such cases, and illustrations are
taken chiefly from the ownership of land and similar natural forces. The
same unearned increment, however, accrues to the possessor of any article
of value or any personal attainment, which through increasing wants of the
community becomes, on that account alone, more valuable in market. Thus a
bin full of wheat, saved from a year of plenty to a year of scarcity, has
gained a value abnormal,—that is, from the fact of its scarcity. Yet no
one would think of applying the term rent in such a ease, because the
foresight which stored the grain gains its compensation in profits. If the
same kind of foresight has plotted a city upon wild lands, and held a
portion of those plotted lots until a crowded population competes for
their use, such wealth is said to be gained upon the principle of rent.
The difference seems to be chiefly in the greater permanence and the
gradual advancement of the profits secured.
The every-day operations of a farming community illustrate both interest
and rent in all their complications and definitions. Every farmer, in
estimating the cost of his wheat crop, may properly calculate both the
interest on his capital invested in tools, teams, machinery and wages, and
the rent of his land, keeping distinct accounts of interest and rent; or
he may combine in one account as interest the use of capital in machinery
and land. If he owns the whole establishment, he is likely to combine both
interest and rent with the return for his foresight and energy in managing
the farm under the name profits. All these returns, however, come for
different reasons, though under the same general principle of values
expressed in the law of supply and demand. The farmer working a rented
farm and the one working a mortgaged farm are alike paying both rent and
interest, since every farm involves both the wealth accumulated by
exertion and the wealth advanced by increasing population. While the owner
of the mortgaged farm apparently pays interest, if at the end of the term
of the mortgage the farm is returned to its former owner by foreclosure,
the result is that the mortgagee, while nominally owner of the land, has
simply been a renter. In a fair settlement of equities he will have paid
for the use of the land he has cultivated. Interest and rent are thus seen
to be terms separated rather by peculiarities of application than by
difference of principle. It is proper, however, to treat them separately
Public-domain text, read in full here on John Shaqi.
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