Rent the Payment for the Use of Land 1

lands, supply, capital, labor, demand, return, value, available, pay and yield

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The extent to which land values may go is well il lustrated in any large city, and the skyscraper is an eloquent reminder of the monopoly values of land in congested communities. In some cities, building ordinances limit the height of structures, tho they probably result in a higher rent for the quarters that are available; moreover they force an extension of the business districts, to meet the needs of the mercantile fraternity that are looking for quarters. House rent, store and warehouse rent, and office rent depend upon the supply of capital and land that is available.

In new communities, such as mining towns, rents of buildings inay reach fabulous prices, not because land is not available, but because capital for building purposes is scarce. When as a consequence the in terest rates rise, and more certainly as permanency in the town is attained, capital will make its appear ance. The connection of the supply of capital with the rent of buildings is apparent, since a higher re turn must be paid to induce capital to enter an en terprise when the supply of capital is not equal to the demand. On the other hand, the scarcity of land sites forces high prices of land and necessitates, when a low rate of interest is the rule, a higher capitalized value of the land.

8. Rent of agricultural other than those found in the return for urban sites, enter the problem of the rent of agricultural lands. Loca tion alone fixes tbe rent in the case of urban sites, while the productivity of the land, and its location, the intensity of the cultivation, and the efficiency of the farmer contribute to the determination of the rent of farming lands. To put it in somewhat different terms, the supply of any particular kind of land is practically fixed. The matter of labor supply, is very different, since labor can be moved from point to point, while land is stationary. On account of this stubborn fact of nature, certain tracts of land come to have a higher value than others. The principles of both supply and demand apply to its value, as they do to the value of labor or of commodities. The increase in population in a district where such exceptional lands are located, forces their value and their renting return higher and higher.

We know that there is a tendency for wages, at least in limited areas, to reach a uniform standard. Thus farm laborers will get practically the same pay over a considerable territory. In the Northwest, the amount is $35 per month and board and lodging. Every farmer knows that two pieces of land, of equal fertility, but located at different distances from a town, will not bring their owners the same rent— one will receive more than the other because of the advantage in regard to transportation costs.

But land seldom possesses the same fertility all the time, nor is it always cultivated to the same degree. A. farmer who possesses scientific skill, compared with a shiftless farmer, can make the same land yield more product with no greater expenditure; therefore, when it comes to purchasing, lie can naturally afford to bid higher than his shiftless neighbor. Some lands do not

respond to careful cultivation, and these remain' in the bands of the less expert farmers.

It is the utilization of inferior lands that causes rent. This inferiority may arise from factors of location or fertility. In the early days of new countries the first settlers were not called upon to pay rent, for the best and most available lands were open to their occu pancy. As soon as the best lands were no longer able to meet the demand for products, and less satis factory lands were brought into use, the first owners were able to demand a rent for the use of their lands. The high rents now paid for Illinois and Iowa farms are illustirative of this statement. Annual rent of from $6 to $8 per acre is paid in cash for these farms. They are near the markets, their soil is fertile, and the buildings are satisfactory. So much for the farms, but another element appears in the form of population.

The United States now has a population of over 100,000,000. The amount of food products needed by such a vast army of people is enormous. The farms o'f Iowa and Illinois were not able to supply the demand, so the new lands of Minnesota and the Dakotas were utilized ; later still, Canada was called upon to furnish part of the supply from the crops of her virgin soil. Nature has decreed that there shall be a limit to the amount that any soil can pro duce. In time the principle of diminishing returns will come into play, and increased labor on a given area will yield in proportion a smaller return. The skill and intelligence of man can indeed, by one im provement after another, in production, neutralize this action of the law of diminishing returns, but not indefi nitely. So new lands must be brought into use, and the owners of fertile and well-located lands are able to the prospective renter: "You must pay a re turn for these lands that is equal to what you could earn on them, over and above the returns from no-rent lands, where capital and labor alone receive a pay ment in the form of interest and wages." In any statement about economic problems some allowance for variations must be made because of the many factors involved. Land is put to many uses; some of it serves for truck gardens, and the poorest land can be devoted to pasturage; poor wheat land might also be used as grazing land and, while fail ing to yield rent as wheat-producer, might yet make a return over that of the marginal g,razing lands. Finally, there is the land that has an economic use of so little importance that it makes no return over the cost of cultivation. This is the marginal land from which rent is measured. It is the land that just pays the cost of usage; there is no increment, and conse quently no rent. But in view of the fact that the returns from such lands are necessary to the market supply, the cost of making them yield a production must be met.

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