Page:Encyclopædia Britannica, Ninth Edition, v. 19.djvu/391

POLITICAL ECONOMY 375 by Hume s letter was ho led to modify what he had said in his first edition on the subject of rent. It must be remembered that not merely the unequal fertilities of different soils will determine differences of rent ; the more or less advantageous situation of a farm in relation to markets, and there fore to roads and railways, will have a similar effect. Ever} 7 diminution of the cost of transit will enable the produce to be brought to market at a smaller expense, and will thus increase the surplus which constitutes rent. This consideration is indicated by Ricardo, though he does not give it prominence, but dwells mainly on the comparative productiveness of soils. Rent is defined by Ricardo as the price paid for the use of "the original and indestructible powers of the soil." He thus differentiates rent, as he uses the term, from what is popularly designated by the word ; and, when it is to be taken in his sense, it is often qualified as the " true " or " economic " rent. Part of what is paid to the land lord is often really profit on his expenditure in preparing the farm for cultivation by the tenant. But it is to be borne in mind that wherever such improvements are " amalgamated with the land," and " add permanently to its productive powers," the return for them follows the laws, not of profit, but of rent. Hence it becomes difficult, if not impossible, in practice to discriminate with any degree of accuracy the amount received by the landlord "for the use of the original powers of the soil " from the amount received by him as remuneration for his improvements or those made by his predecessors. These have raised the farm, as an instrument for producing food, from one class of productiveness to a higher, and the case is the same as if nature had originally placed the land in question in that higher class. Smith had treated it as the peculiar privilege of agriculture, as compared with other forms of production, that in it " nature labours along with man," and therefore, whilst the workmen in manu factures occasion the reproduction merely of the capital which employs them with its owner s profits, the agricultural labourer occasions the reproduction, not only of the employer s capital with profits, but also of the rent of the landlord. This last he viewed as the free gift of nature which remained " after deducting or com pensating everything which can bo regarded as the work of mau." Ricardo justly observes in reply that "there is not a manufacture which can be mentioned in which nature does not give her assist ance to man." He then goes on to quote from Buchanan the re mark that "the notion of agriculture yielding a produce and a rent in consequence, because nature concurs with industry in the process of cultivation, is a mere fancy. It is not from the produce, but from the price at which the produce is sold, that the rent is derived ; and this price is got, not because nature assists in the production, but because it is the price which suits the consumption to the supply." 1 There is no gain to the society at large from the rise of rent ; it is advantageous to the landlords alone, and their interests are thus permanently in opposition to those of all other classes. The rise of rent may be retarded, or prevented, or even temporarily changed to a fall, by agricultural improvements, such as the intro duction of new manures or of machines or of a better organization of labour (though there is not so much room for this last as in other branches of production), or the opening of new sources of supply- in foreign countries ; but the tendency to a rise is constant so long as the population increases. The great importance of the theory of rent in Ricardo s system arises from the fact that he makes the general economic condition of the society to depend altogether on the position in which agri cultural exploitation stands. This will be seen from the following statement of his theory of wages and profits. The produce of every expenditure of labour and capital being divided between the labourer and the capitalist, in proportion as one obtains more the other will necessarily obtain less. The productiveness of labour being given, nothing can diminish profit but a rise of wages, or increase it but a fall of wages. Now the price of labour, being the same as its cost of production, is determined by the price of the commodities necessary for the support of the labourer. The price of such manufactured articles as he requires has a constant tendency to fall, principally by reason of the progressive application of the division of labour to their production. But the cost of his main tenance essentially depends, not on the price of those articles, but on that of his food ; and, as the production of food will in the progress of society and of population require the sacrifice of more and more labour, its price will rise ; money wages will consequently rise, and with the rise of wages profits will fall. Thus it is to the necessary gradual descent to inferior soils-, or less productive expenditure on the same soil, that the decrease in the rate of profit which has historically taken place is to be. attributed (Smith ascribed this decrease to the competition of capitalists, though in 1 Senior, however, has pointed out that Smith is partly right; whilst it is true that rent is demanded because the productive powers of nature are limited, and increased population requires a less remunerative expenditure in order to obtain the necessary supply, on the other hand, it is the power which most land possesses of producing the subsistence of more persons than are required for its cultivation that supplies the fund out of which rent can be paid. one place, book I. chap, ix., he had a glimpse of the Ricardian view). This gravitation of profits towards a minimum is happily checked at times by improvements of the machinery employed in the produc tion of necessaries, and especially by such discoveries in agriculture and other causes as reduce the cost of the prime necessary of the labourer ; but, here again, the tendency is constant. Whilst the capitalist thus loses, the labourer does not gain ; his increased money wages only enable him to pay the increased price of his necessaries, of which he will have no greater and probably a less share than he had before. In fact, the labourer can never for any considerable time earn more than what is required to enable the class to subsist in such a degree of comfort as custom has made in dispensable to them, and to perpetuate their race without either increase or diminution. That is the " natural " price of labour; and if the market rate temporarily rises above it population will be stimulated, and the rate of wages will again fall. Thus, whilst rent has a constant tendency to rise and profit to fall, the rise or fall of wages will depend on the rate of increase of the working classes. For the improvement of their condition Ricardo thus has to fall back on the Malthusian remedy, of the effective application of which he does not, however, seem to have much expectation. The securities against a superabundant population to which he points are the gradual abolition of the poor laws for their amend ment would not content him and the development amongst the working classes of a taste for greater comforts and enjoyments. It will be seen that the socialists have somewhat exaggerated in announcing, as Ricardo s "iron law" of wages, their absolute iden tity with the amount necessary to sustain the existence of the labourer and enable him to continue the race. He recognizes the influence of a " standard of living" as limiting the increase of the numbers of the working classes, and so keeping their wages above the lowest point. But he also holds that, in long-settled countries, in the ordinary course of human affairs, and in the absence of special efforts restricting the growth of population, the condition of the labourer will decline as surely, and from the same causes, as that of the landlord will be improved. If we are asked whether this doctrine of rent, and the conse quences which Ricardo deduced from it, are true, we must answer that they are hypothetically true in the most advanced industrial communities, and there only (though they have been rashly applied to the. cases of India and Ireland), but that even in those communities neither safe inference nor sound action can be built upon them. As we shall see hereafter, the value of most of the theorems of the classical economics is a good deal attenuated by the habitual as sumptions that we are dealing with " economic men," actuated by one principle only ; that custom, as against competition, has no existence ; that there is no such thing as combination ; that there is equality of contract between the parties to each transaction, and that there is a definite universal rate of profit and wages in a com munity, which implies that the capital embarked in any undertak ing will pass at once to another in which larger profits are for the time to be made ; that a labourer, whatever his local ties of feeling, family, habit, or other engagements, will transfer himself imme diately to any place where, or employment in which, for the time, larger wages are to be earned than those he had previously obtained ; and that both capitalists and labourers have a perfect knowledge of the condition and prospects of industry throughout the country, both in their own and other occupations. But in Ricardo s specu lations on rent and its consequences there is still more of abstrac tion. The influence of emigration, which has assumed vast dimen sions since his time, is left out of account, and the amount of land at the disposal of a community is supposed limited to its own ter ritory, whilst contemporary Europe is in fact largely fed by the western States of America. He did not adequately appreciate the degree in which the augmented productiveness of labour, whether from increased intelligence, improved organization, introduction of machinery, or more rapid and cheaper communication, steadily keeps down the cost of production. To these influences must be added those of legal reforms in tenure, and fairer conditions in con tracts, which operate in the same direction. As a result of all these causes, the pressure anticipated by Ricardo is not felt, and the cry is rather of the landlords over falling rents than of the consumer over rising prices. The entire conditions are in fact so altered that Prof. Nicholson, no enemy to the "orthodox" econo mics, when recently conducting an inquiry into the present state of the agricultural question, pronounced the so-called Ricardian theory of rent "too abstract to be of practical utility." A particular economic subject on which Ricardo has thrown a useful light is the nature of the advantages derived from foreign commerce, and the conditions under which such commerce can go on. Whilst preceding writers had represented those benefits as consisting in affording a vent for surplus produce, or enabling a portion of the national capital to replace itself with a profit, he pointed out that they consist "simply and solely in this, that it enables each nation to obtain, with a given amount of labour and capital, a greater quantity of all commodities taken together."

This is no doubt the point of view at which we should habitually