THE SINGLE TAX: WHAT AND WHY 745
entirely upon the amount of rent which is annually collected at present, and which it is believed can be annually collected in future. Men are willing to give for a piece of land just as much as, and no more than, such a price as in their judgment would, if invested in other perfectly safe securities, produce an annual income equal to the rent which they believe will, on the average, be paid for the use of that land. Suppose the ordinary rate of interest upon a perfectly safe bond to be 4 per cent. Such a 4 per cent, bond would then sell for Sioo. A piece of land which produced a net rent, after deducting all taxes and all expenses, of S4 every year, and which all men were satisfied would never produce any more or any less, would also sell for SiOO. This is called "twenty-five years' purchase;" and this is the term constantly used in ascertaining the value of land. It is always estimated at just as many years' purchase of the annual net rent as the capital of perfectly safe investments bears to the current rate of interest on them. When the current rate of interest is 5 per cent., land is worth, on the average, twenty years' purchase of its annual rent. When the rate of interest falls to 4 per cent., land is worth twenty-five years' purchase. When the rate falls to 3 per cent., land is worth thirty-three years' purchase. Thus the value of land rises and falls with its rent; but the market value of land has no influence whatever on fixing rent.
Again, it must be noted that the value of land may be pres- ent or speculative. Most men believe that the rent of land will always continue to rise; and therefore they believe that the market value of land will rise also. This, however, is a matter of speculation, as to which nobody is ever quite correct, and most people are generally very much out of the way. When land speculators make a correct guess, they acquire what is termed "the unearned increment." When they make a mistake, they lose what some philosophers have attempted to call "the unearned decrement." In reality, there is no such thing as a "decrement" in land, unless it is swept away by a flood or other- wise intrinsically injured. Every penny of the value of land is unearned increment ; and as the value can never be less than
