RENT. Rent is commonly defined as the income received for the use of land, whether the owner uses it himself or leases it to some one else. Land, however, must be distinguished i from real estate which includes not simply the land itself, but the improvements and the fixtures on the. land. Land in th7 strictly economic sense means simply the origi nal and indestructible properties of the soi Economic rent would, therefore, include only the income received for the use of these origi nal and indestructible properties. There is still some question as to whether land should be so defined as to include the available supplies of plant food which may be found in the soil. From the standpoint of the original settler on a piece of virgin land, considerable supplies of plant food are found in the soil and may, there fore, be regarded as original properties. In older and more permanent settlements, however, this original supply of plant food has long been exhausted and whatever plant food there is in the soil must be regarded as one of the improve ments which have been placed on the land, along with draining, fencing, wells, buildings and so forth. In short, while a certain amount of plant food may have been one of the original properties of the soil, it is clearly not an in destructible property. It may easily be ex hausted and usually has to be replaced by human endeavor. There is, therefore, a tend ency to define land in stricter terms so as to include only the physical and geometrical prop erties of solidity, extension and location. Rent in this strict and narrow interpretation is that which the owner receives for the use of these physical and geometrical properties. This defi nition is satisfactory for urban land. The only difficulty is in applying it to farm land. The physical and geometrical properties of solidity, extension and location are the only properties that give urban land any appreciable part of its value. These are the only properties needed for building purposes. Farm land, however, derives a large part of its value from soil fertility which is partly chemical. Tice farm owner who receives rent from his farm is not likely to dis tinguish that part of his income which is due to the chemical fertility of his soil from that part which is due to the physical and geometrical properties of solidity, extension and location.
The principle which determines the amount which a piece of land yields in the way of rent has been variously stated. The most widely ac cepted statement is that formulated first by the Scotch writer, Anderson, and later by the Englishman, Ricardo. Both regard rent as due to a preferential value. If we assume that there is always free land, that is, land which can be had free of charge, then the utmost which will be paid for the use of a particular piece of land is the equivalent of the superiority of this land over such free land as may be had. Some thing can always be produced. on free land. If we can determine how much more can be pro duced with the same amount of labor and ex penditure on a given piece of land than could be produced on free land, the difference between these two products will measure the degree of preference for the piece of land in question; or this difference in product will represent the preferential value of the better piece of land.
Stated in formal terms, this law of rent is as follows: The rent of a given piece of land is equal to the difference between what it will yield under the method of treatment suited to its condition and that which the best free land available could be made to yield with the same application of labor and capital under a treat ment suitable to its condition.
cause of rent is undoubtedly the scar city of land. This does not mean that all land of all qualities is scarce, but that lands of cer tain desirable kinds and qualities are scarce. These are the only lands that yield rent. If we consider a certain desirable piece of land and find that there is not enough of the same grade to supply all the needs of the community, then, in order that the needs of the community may be supplied, inferior grades of land must be brought into use. Rather than make use of these inferior grades, cultivators, builders and so forth will pay something for the use of the better grades. While the cause of rent is the scarcity of the better grades of land, the amount of rent is limited by the presence and availability of inferior grades of land and their degree of inferiority. If there is an abundance of land only slightly inferior to the piece of land in question, this piece of land will cont. mand a low rental. If there is a scarcity of inferior land and if it is vastly inferior to the piece of land in question, then the piece of land in question will command a high rental. There is another way of looking at the question of rent, though it leads to much the same con clusion. The rent of a given piece of land may be said to be equal to its social produc tivity. If a given piece of land is brought into cultivation, the labor and capital necessary to its cultivation cannot be used on other land, or if it is thrown out of cultivation, the labor and capital which formerly cultivated it must be now employed on other land. How much dif ference does it make to the community whether this piece of land is cultivated or not? If it is a good piece of land and is thrown out of cultivation, the labor and capital which for merly cultivated it will produce less when em ployed on other land than it formerly produced on the piece of land in question. When we determine how much less, we have a measure of the social value or the social productivity of the piece of land in question. If it is very poor land, and there is plenty of other land equally good on which the labor and capital can be em ployed, it will make no 'difference whatever to the total productivity of the community whether the piece of land in question is cultivated or not. In that case the piece of land in question is worth nothing and will command no rent. The more difference it makes to the community whether the piece of land in question is used or not, the higher the rental which it will com mand.