PRINCIPLES

OF

POLITICAL ECONOMY

BY

WILLIAM ROSCHER,

PROFESSOR OF POLITICAL ECONOMY AT THE UNIVERSITY OF LEIPZIG, CORRESPONDING MEMBER OF THE INSTITUTE OF FRANCE, PRIVY COUNSELLOR TO HIS MAJESTY, THE KING OF SAXONY.

FROM THE THIRTEENTH (1877) GERMAN EDITION.

WITH ADDITIONAL CHAPTERS, FURNISHED BY THE AUTHOR, FOR THIS FIRST ENGLISH AND AMERICAN EDITION, ON

PAPER MONEY, INTERNATIONAL TRADE, AND THE PROTECTIVE SYSTEM;

AND A PRELIMINARY

ESSAY ON THE HISTORICAL METHOD IN POLITICAL ECONOMY

(From the French)

By L. WOLOWSKI,

THE WHOLE TRANSLATED BY

JOHN J. LALOR, A. M.

VOL. II.

NEW YORK:

HENRY HOLT & CO.

1878.

Entered according to Act of Congress, in the year eighteen hundred and seventy-eight,
By CALLAGHAN & CO.,
In the office of the Librarian of Congress, at Washington, D. C.

DAVID ATWOOD, STEREOTYPER AND PRINTER, MADISON, WIS.

TO

WILLIAM H. GAYLORD, Esq.,

COUNSELOR AT LAW,
OF CLEVELAND, OHIO,

TO WHOSE BROTHERLY CARE IT IS LARGELY DUE THAT I LIVED TO TRANSLATE THEM,

THESE VOLUMES

ARE AFFECTIONATELY INSCRIBED.

BOOK III.

DISTRIBUTION OF GOODS.

CHAPTER 1.

INCOME IN GENERAL.

SECTION CXLIV.

RECEIPTS.—INCOME.—PRODUCE.

The idea covered by the word receipts (Einnahme) embraces all the new additions successively made to one's resources within a given period of time.[144-1] Income, on the other hand, embraces only such receipts as are the results of economic activity. (See §§ 2, 11.) Produce (Ertrag, produit) is income, but not from the point of view of the person or subject engaged in a business of any kind, but from that of the business itself, or of the object with which the business is concerned, and on which it, so to speak, acts.

Income is made up of products, the results of labor and of the employment and use of resources. These products, the producer may either consume himself or exchange against other products, to satisfy a more urgent want.[144-2] Hence, spite of the frequency with which we hear such expressions as these: "the laborer eats the bread of his employer;" "the capitalist lives by the sweat of the brow of labor;" or, again, a manufacturer or business man "lives from the income of his customers,"[144-3] they are entirely unwarranted. No man who manages his own affairs well, or those of a household, lives on the capital or income of another man; but every one lives on his own income, by the things he has himself produced; although with every further development of the division of labor, it becomes rarer that any one puts the finishing stroke to his own products, and can satisfy himself by their immediate consumption alone. Hence we should call nothing diverted or derived income except that which has been gratuitously obtained from another.[144-4]

[144-1] Including of course, gifts, inheritances, lottery prizes, etc.

[144-2] Thus the original income of the peasant consists in his corn, of the miller in his flour, of the baker in his bread, of the shoemaker in his shoes. The money which circulates among all these and the purchaser, is only the means of exchanging that part of their products which they cannot themselves use, for other goods. Money, on the other hand, was the original income of the producers of the gold or silver it contains. Compare Mirabeau, Philosophie rurale, 1763, ch. 3. Adam Smith, II, ch. 2. But especially, see J. B. Say, Traité II, ch. 1, 5; and Sismondi, N. P., I, 90, 376, in which it is correctly said, that the quality which constitutes anything capital or income does not inhere in the thing itself, but depends on the person. Compare, however, I, 148; Hermann, Staatsw. Untersuch. 297 ff., 33 seq.

[144-3] A fundamental thought in St. Chamans, Du Système d'Impôt, 1820. Nouvel Essai sur la Richesse des Nations, 1824.

[144-4] Thus, for instance, the support given by the head of a family to the members thereof; also gifts, alms, thefts. Even A. L. Schlözer, St. A., II, 487, will allow that no one "eats the bread of another," but the person who has received it from the latter by way of favor and for nothing. In the case of a rented house, there is only an exchange of objects of income. The person to whom it is rented gives up a portion of his, and the renting party the use of his house. Similarly, in the case of personal services. Writers who maintain that only certain kinds of useful labor are productive, must of course extend the limits of diverted income much farther. See Lotz, Handbuch, III, § 133; Rau, Lehrbuch, I, §§ 248, 251. Cantillon thinks that if no landowner spent more than his income, it would be scarcely possible for any one else to grow rich. (Nature du Commerce, 75.) According to Stein, Lehrbuch, 347, every one gets his income from the income of other people!

SECTION CXLV.

INCOME.—GROSS, FREE AND NET.

In all income, we may distinguish a gross amount, a net amount and a free amount.[145-1] The gross income of a year, for instance, consists of all the goods which have been newly produced within that time. The net[145-2] income is that portion of the former which remains after deducting the cost of production (§ 106), and which may therefore be consumed without diminishing the original resources. Only the new values incorporated in the new commodities make up the net income. Evidently, a great portion of what is considered in one business the cost of production is net income in a great many others; as for instance, what the person engaged in one enterprise in production has paid out in wages and interest on capital. By means of this outlay, a portion of his circulating capital is drawn by others as income, and, on the other hand, a portion of their original income is turned into a portion of his circulating capital.[145-3] Free income, I call that portion of net income which remains available to the producer after his indispensable wants have been satisfied.

An accurate kind of book-keeping which keeps these three elements of income separate is more generally practicable[TN 1] as civilization advances. We might call it the economic balance. Where commerce is very thriving it is even customary to provide by law that those classes who need it especially should have this species of book-keeping. People in a lower stage of cultivation, with their poetical nature, are unfriendly to such calculations.[145-4] [145-5] And where natural-economy (Naturalwirtschaft) or barter prevails, a book-keeping of this kind of any accuracy is scarcely practicable. The ratio which net income bears to gross income is a very important element to enable us to judge of the advantageousness of any method of production. If every producer should succeed in consequence of keeping his books in this manner, in determining exactly the cost to him of each of his products, this would be an economic progress similar to that of general spread of good chemical knowledge in the arts. On the amount of free income, on the other hand, depends all the higher enjoyment of life, all rational beneficence, and the progressive enrichment of mankind.[145-6]

[145-1] Similarly in Sismondi, N. P., II, 330, and Rau, Lehrbuch, I, § 71, a.

[145-2] Called by Hermann, loc. cit., simply income.

[145-3] This truth J. B. Say has exaggerated to the extent of claiming that gross and net income are one and the same so far as entire nations are concerned. (Traité, II, ch. 5; Cours pratique, III, 14; IV, 74.) But the gross profit of the entire production of any one year is much greater than the simultaneous net income of all the individuals engaged in it. This is accounted for by the fact that in such production an amount of circulating capital is invested which was saved from the net profit of previous economic times. Compare Storch, Nationaleinkommen, 90 ff. Kermann, loc. cit., 323 ff.

[145-4] In the East, a valuation by one's self of his property is considered a guilty kind of pride, usually punished by the loss of one's possessions. (Burckhardt, Travels in Arabia, I, 72 ff.) See Samuel, 24, on the census made by David. The Egyptians, however, as may be inferred from their monuments, must have very early and very extensively felt the want of some kind of book-keeping such as we have mentioned. A very accurate sort of book-keeping among the more highly[TN 2] cultured Romans, with a daily memorandum and a monthly book with entries from the former (adversaria-tabula expensi et accepti). Compare Cicero, pro Roscio, com. 2, 3; pro Cluent, 30; Verr., II, 1, 23, 36. The Latin putare, from putus, pure, means: to make an account clear, and therefore corresponds to the American provincialism, "I reckon," i. e., I believe; and is a remarkable proof of a rigid method of keeping accounts. The Italian, or so-called double-entry method of book-keeping, which gives the most accurate information on the profit from every separate branch of business, became usual among the nations of modern Europe whose civilization was the first to ripen, about the end of the fifteenth century. Its invention is ascribed to the monk Luca Paciolo di Borgo S. Sepolcro.

In England, this kind of book-keeping is very gradually coming into use even among farmers, while Simond, Voyage en Angleterre, 2 ed., II, 64, Dunoyer, Liberté du Travail, VIII, 5, say, "it would in France be considered as ridiculous as the book-keeping of an apple vendor." In Germany, there have been for some time past, manufactories of commercial books. Besides, the remarkable difference brought out by the income tax in England between the exact statements made by large manufacturers, etc., and by those engaged in industry on a medium or small scale, bears evidence of the better way in which the former keep their accounts, the cause and effect of their better business in general. Compare Knies, in the Tübing. Zeitschr., 1854, 513. On the best mode of determining income, see Cazaux, Eléments d'Économie publique et privée, Livre, II. It is especially necessary to keep an account of the increase or diminution, even when accidental, of the value of the fixed capital employed.

[145-5] The Code de Commerce, I, art. 8, requires that every merchant should keep a journal, paged and approved by the authorities, showing the receipts and disbursements of each day, on whatever account, and also the monthly expenditures of his family. Besides, he is required to make a yearly inventory of his debits and credits, subscribe to it and preserve it. That such books were excellent judicial evidence may be shown by Italian statutes of the fourteenth century. (Martens, Ursprung des Wechschrechts, 23.) Those of Germany even in 1449. (Hirsch, Danziger Handelsgeschichte, 232.)

[145-6] Importance of the so-called "transferring to credit," where a business man considers his business as an independent entity and as distinct from himself.

SECTION CXLVI.

NATIONAL INCOME.—ITS STATISTICAL IMPORTANCE.

Among the most important[146-1] but also the most difficult objects of statistics, that book-keeping of nations, is national income. In estimating it, we may take our starting point from the goods which are elements of income, or from the persons who receive them as income.[146-2]

In the former case the gross national income consists:

A. Of the raw material newly obtained in the country.

B. Of imports from foreign countries, including that which is secured by piracy, as war-booty, contributions, etc.

C. The increase of values which industry[146-3] and commerce add to the first two classes up to the time of their final consumption.

D. Services in the narrower sense and the produce (Nutzungen) of capital in use.

All these several elements, estimated at their average price in money, which supposes that all purchases, especially those under the head D, are made voluntarily[146-4] and at their natural price.

To find the national net income, we must deduct the following items:

A. All the material employed in production which yields no immediate satisfaction to any personal want.[146-5]

B. The exports which pay for the imports.

C. The wear and tear of productive capital and capital in use.

In the second case the net national income is to be calculated from the following items:

A. From the net income of all independent private businesses etc.[146-6]

B. From the net income of the state, of municipalities, corporations and institutions, derived from their own resources.

C. Under the former heads must be taken into the account such parts of property as have been immediately consumed and enjoyed.[146-7]

D. Interest on debt must be added only on the side of the creditor, and deducted from the income of the debtor; otherwise, error dupli. This does not apply to taxes or church dues because the subjects of a good state and members of a good church purchase thereby things which are really new and of at least equal value to the outlay. Besides, in both instances, it is necessary to calculate the number of men who live from the national income, the average amount of their indispensable wants, and the average price in money of the same, in order to determine the free national income by deducting the sum total of these average wants, estimated at this average price.[146-8] [146-9]

[146-1] Not only to compare the happiness and power of different nations with one another, but also for purposes of taxation, the profitableness and innocuousness[TN 3] of which suppose the most perfect adaptation to the income of the whole people.

[146-2] The former, in Rau, Lehrbuch, I, § 247; the latter in Hermann, 308 ff. The former mode of calculation gives us a means of judging of the comfort of the people, their control of natural forces, etc.; the second, of the relation of classes among the people. (v. Mangoldt, Grundriss, 99. V. W. L., 316 ff.) Each member of the nation produces his income only in the whole of the nation's economy. Hence Held, Die Einkommensteuer, 1872, 70, 77, would, but indeed only under very abstract fictions, construct private income from the national, and not vice versa.

[146-3] On the average degree of this increase of values in different industries, see Chaptal, De l'Industrie française, II, passim. Bolz, Gewerbekalender für, 1833, 111. No such scale can be lastingly valid, because, for instance, almost all technic progress decreases the appreciation of values through industry, and every advance made by luxury raises the claims to refined quality etc. See Hildebrand, Jahrbücher für Nat-Oek., 1863, 248 ff.

[146-4] Many items in Class D evade all calculation. Thus, for instance, the numberless cases of personal services which are enjoyed only by the doer himself; also the greater number of products (Nutzungen=usufruct) of capital in use for the consumption of the owner himself. (Latent income.) Only, it may be, in the case of dwelling houses, equipages, etc., that the consumption by use can be estimated in accordance with the analogy of similarly rented goods.

[146-5] The principal materials consumed in manufactures are of course not to be deducted here, because the increase in their value was taken into account above.

[146-6] When an artist who earns $10,000 per annum appears in a country, the gross national income increases in a way similar to that in which it increases when a new commodity is found which would have a yearly increase of value equal to $10,000 over and above that of the raw material. Cost of production in the case of such a virtuoso is scarcely to be alluded to. Nearly his entire income, with the exception of his traveling expenses, etc., is net, and the greater portion of it free. An income tax would affect his hearers after as it did before, and in his income, find a completely new object. Per contra, see Saggi economici, I, 176 f.

[146-7] For purposes of taxation, where a relative valuation is more the question than an absolute one, it would be sufficient to assume that every household consumed clothing, utensils, etc., in proportion to the rest of their income. Hence, these items might, unhesitatingly, be omitted altogether.

[146-8] Mathematically demonstrated by Fuoco, Saggi economici, II, 102 ff.

[146-9] The gross income of British Europe is estimated by Pebrer, Histoire financière et statistique générale de l'Empire Br., 1834, II, 90, at £514,823,059, viz.: agriculture, £246,600,000; mining, 21,400,000; manufactures, after deduction made of the raw material, £148,050,000; internal and coast trade, £51,975,060; foreign commerce and navigation, £34,398,059; banking, £4,500,000; interest from foreign countries, £4,500,000. By Moreau de Jonnés, Statist de la Gr. Br., 1837, I, 312, it is estimated at 18,000,000,000 francs, from which, however, the raw material used in industry is not deducted. The net income of Great Britain was estimated by Pitt, in 1799, at £135,000,000, of which £25,000,000 were received by landowners for rent, £25,000,000 by farmers, £5,000,000 were tithes, £3,000,000 from forests, canals, and mines, £6,000,000 from houses, £15,000,000 from state funds, £12,000,000 from foreign commerce, £28,000,000 from inland commerce and manufactures, £3,000,000 from fine arts, £80,000,000 from Scotland, £5,000,000 from foreign countries. (Gentz, Histor. Journ., 1799, I, 183 ff.) Lowe, England in its present Situation, 1822, p. 246, speaks of 255,000,000. About 1860, the incomes subject to taxation alone, that is, all above £100, amounted to 335,000,000. The remainder was certainly worth one-half of this. (Statist. Journ., 1864, 121.) Baxter, in 1867, assumed it to be £825,000,000. Compare L. Levi, on Taxation, 6.

In France, about forty years ago, according to Chaptal, Doudeauville, Balbi and others, about 6,500,000,000 francs gross national income could be counted on. Schnitzler speaks of 7,000,000,000 francs (Creation de la Richesse en France, 1842, I, 392), after deduction made of the raw material of manufacture. According to Wolowski, Statistique de la Fr., 1847, it was more than 12,000,000,000 francs. M. Chevalier, Revue des deux Mondes, March 15, 1848, has it 10,000,000,000 at most. In these four estimates, only material products are taken into account. Ch. Dupin thinks the income per capita was, in 1730, = 108 francs; in 1780, = 169; in 1830, = 269. Cazeaux, Eléments, 163, estimated the net national income, in 1825, at 5,000,000,000 francs; Cochut, in 1861, at 16,000,000,000. (Revue des deux Mondes, XXXVII, 703.)

In Spain, Borrego, Nationalreichthum, etc. Spaniens, 1834, 33, estimated the income from agriculture at 2,284,000,000 francs; from industry, etc., 361,000,000; commerce, 124,000,000; from houses, 186,000,000; canals, streets etc., 8,500,000; personal services, 75,000,000; money in circulation (probably loaned capital), 85,000,000.

In the United States, in 1840, the national income was estimated at over $1,063,000,000; from agriculture, over $654,000,000; from manufactures, nearly $240,000,000; commerce, almost $80,000,000; mining, over $42,000,000; from lumber (Wäldern), almost $17,000,000; and from the fisheries, almost $12,000,000. The per capita amount of income was $62. It was largest in Rhode Island—$110; in Massachusetts it was $103; in Louisiana, $99; and in Iowa, smallest, $27; in Michigan, it was $33. Compare Tucker, Progress of the United States, 195 ff. The census of 1860 assumes the national wealth, slaves not included, at $14,183,000,000, that is $451 per capita, with a per capita annual income of $112. According to Czörnig, the gross income of Austria, from agriculture, the chase and fisheries, in 1861, was 2,119,000,000 florins; from mining, 41,000,000; from the industries, 1,200,000,000. In Prussia, the net national income, not including the revenue from state property, nor the income of the royal household, seems, from the returns of the income and class tax, to have been about 2,458,000,000 thalers, in 1874. Engel, Preuss. Statist. Ztschr., 1875, 133. The majority of the above estimates are obviously unreliable.

SECTION CXLVII.

NATIONAL INCOME.—ITS STATISTICAL IMPORTANCE.
(CONTINUED.)

The question frequently discussed, whether it is more advantageous to increase the gross income or the net income[147-1] of a people, may be readily answered with the assistance of our tripartite division. Since economic production has no other object than the satisfaction of human wants, the mere increase of the gross income of a people is a matter of indifference. An increase of the net income puts a people in a condition to increase either their numbers or their enjoyments. (See §§ 163 and 239.) The most desirable condition is where both these results are produced. It is fortunate for a people when the free income of the nation increases by reason of the absolute or relative decrease of the cost of production, which adds nothing to enjoyment. But it is politically and morally to be lamented when it increases at the expense of the satisfaction of man's necessary wants, especially if the majority of the people deny themselves in this respect to produce that end. Sir Thomas More called the sheep of his time, to make place for which so many farm houses were razed to the ground, ravenous beasts, which devoured men and laid waste city and country.[147-2]

[147-1] The greater number of writers, at bottom, understand by this question only whether greater efforts should be made to increase the wages of the lower classes or the rent and rate of interest on capital paid to the higher. (Schmoller, in the Tüb. Zeitschrift, 1863, 22.)

[147-2] The difference between gross and net income was introduced into the science principally by the Physiocrates. Vauban (1707) had no conception of it, and thirty years later a French minister, in his instructions concerning the levy of the vingtièmes, dimly seeing that the aggregate amount of the harvest was not clear gain, ordered, to obtain the latter, that the cost of reaping and threshing should be deducted. (Dupont, Correspondence of J. B. Say, 404, éd. Daire.) By produit net, Quesnay means the excess of original production over its cost, considered from the personal point of view of the individual landowner. This excess, it is claimed, can alone increase the national wealth and alone support the "steril" class.

The political and military bearing of this very clearly recognized. (102 ff., éd Daire.) Hence Quesnay, favors it in every way; by large farming instead of small, by stock raising on a large scale, supplanting home labor by cheaper foreign labor, by machinery and the employment of manual labor, etc.; 91 ff., 200 ff., 274 ff. The elder Mirabeau teaches even that the goodness of a government or of a constitution, and even national morality may be inferred from the amount of the produit net. (Ph. rurale, ch. 5.) Stewart, Principles, I, ch. 20. Adam Smith gives greater prominence to the gross income, and grades the principal branches of national labor according as they increase the gross product of the nation's economy. (II, chs. 1, 5.) Similarly, J. B. Say, Traité, ch. 8, § 3; Lauderdale, Inquiry, 142.

Ricardo thoroughly reacts against this view, and considers it a matter of indifference whether a net product (interest on capital and rent) of a given amount be obtained by the labor of five or seven million other men, so long as only five million can live on it. (Principles, ch. 26.) Similarly Ganilh, Systèmes, I, 218 ff.; Théorie, II, 96. Controverted by Malthus, Principles, II, § 6. Buquoy, Theorie der Nat. Wirthsch., 1815, 310 ff. Sismondi has ridiculed this predilection for the net product which in Ricardo corresponds with what the Germans call free product (freien Ertrage), and which, contrary to Ricardo's own opinion, he calls Ricardo's ideal, saying that according to him, nothing more was to be desired but that "the king should remain alone on the island and, by turning a crank forever, do all the work of England through the instrumentality of automata." (N. P., II, 330 ff.) An entire people should value only gross product. (I, 183.) In his Etudes, Essai, II: Du Revenu Social, Sismondi distinguishes as elements of the gross national income: a, pure capital, the return of outlay; b, that which is at once both capital and income, and serves as family support (capital as a necessarily remaining supply, income as the product of the preceding year); c, net income, the excess of production over consumption.

The Socialists of our day would prefer to see the whole net income of a people employed in the satisfaction of the necessary wants of an ever increasing population. By this procedure, as a natural consequence, we should witness first the curtailing of the taxing power, of the funds for the satisfaction of the more refined wants and of the saving of capital, nor would it be long before even the existing generation would experience the bitterness of this "living from hand to mouth." After a time, even the possibility of progress and even of mere increase of population would cease.

Hermann, Staatsw. Untersuch., 297 ff., has better than almost any one else developed the theory of income, and he lays most stress on the satisfaction of wants as the chief aim of public economy. Kröncke, Das Steuerwesen, 1804, 381 ff.; Grundsätze einer gerechten Besteuerung, 1819, 93 f., may be considered the predecessor who prepared the way for him. Compare the profound work of Bernhardi, Versuch einer Kritik der Gründe die für grosses und kleines Grundeigenthum angeführt werden, St. Petersburg, 1848. Many controversies on this subject may be closed by a more accurate understanding as to terms. Thus, for instance, when Rau, Handbuch, embraces in the cost of production the necessary maintenance of material-workmen, and of those engaged in the labor of commerce; or when Jacob, Staatswissenschaft, § 496, and Storch, Einkommen, 116 ff., even the necessary support of every class useful to society, their valuation of the gross national income is in only apparent conflict with our doctrine on the subject.

SECTION CXLVIII.

THE TWO PHASES OF INCOME.

In every income which has anything to do with other incomes, it is necessary to distinguish its immediately productive side, and its profit or acquisition side. It is necessary, in the first place, that all the products made by private parties should, so to speak, be put into the common treasury of the national economy, and that each should thence draw his own private revenue. Justice requires that there should be a perfect correlation between the two; that each should enjoy precisely the quota of the national income to the production of which his person or his property contributed. A just appreciation of the relative productive power of the divers branches of labor constitutes one of the chief bulwarks against the inroads of destructive socialistic theories. The person who calls a good doctor or a good judge unproductive should, to be consistent, call those who by their greater intelligence are fitted to superintend agricultural and industrial enterprises unproductive, also, as is done by the coarser socialists with their apotheosis of mere manual labor. Unfortunately, such a settlement as is above contemplated among the different factors of production, whose owners are desirous to divide the common product among them, is possible only where the factors of production are either of the same kind, or can be reduced to a common denominator.[148-1] But if justice pure and simple were meted out, no man could subsist. Love or charity must supplement justice in order to assist those (and especially such as without any fault of theirs) who are not able to produce anything, or enough to supply those wants, for instance, children and the poor.

As the net national income, following the three great factors of all economic production, is divided into three great branches, rent, wages and interest on capital, the net income from any private business may be reduced to one or more of these branches.[148-2] The three great branches of income may be considered with advantage from a great many different points of view. We may inquire in the case of each of them: concerning its absolute magnitude, its relation to the aggregate national income, to the magnitude of the factor of production, of which it constitutes the remuneration; by what number of men it is shared, and what number of wants it satisfies.[148-3] Lastly, the difference between the amount stipulated for, and the original amount of both rent and wages, as well as the interest of capital, is of special importance. The former consists in the price paid by the borrower for the use of the factor of production to the owner; the latter in the immediate products which the employment of the same productive power brings on one's own account. Evidently, the original amount is, in the long run, the chief element in the determination of the stipulated amount. While the former depends more on the deeper and more durably effective elements of price, especially the cost of production, the value in use and the paying capacity of purchasers; the latter is conditioned more by the superficial variations of supply and demand, and even by custom. For our purposes, the former is by far the more important, but, at the same time, by far the more difficult to perceive.

[148-1] This is possible between labor and capital, at least in so far as a comparison can be instituted between the sacrifice of human rest there is in labor and the sacrifice of enjoyment in the building up of capital. But the person who introduces an entirely unimproved piece of land into the service of production, stands to the laborer as well as to the capitalist in a relation which is entirely incomparable with any other. (See § 156.) The doctrine of former agriculturists, that one-half of the harvest was to be ascribed to the soil and the other to the manure, would not suffice here, even if it were correct. Compare Fraas, Gesch. der Landbau- und Forstwissenschaft, 257. But in the production of a calf, the coöperation of a bull and cow are necessary. Yet no one is in condition to determine what portion of the calf is to be accounted as belonging to either. If the bull and cow belong to different owners, the relation of supply and demand, and the deeper causes that determine them, decide in what proportion the value of the calf is to be divided among them.

[148-2] Among the greatest services rendered by Adam Smith is, his complete demonstration, that any income may be resolved into one or more of the three great branches of the national income. (I, ch. 6.)

[148-3] Ricardo has not unfrequently bewildered uncritical readers, by his habit—in which he is by no means always consistent—of using the expressions higher and lower wages, higher and lower profit of capital, to designate not the absolute greatness of these branches of income, either in money or in the wants of life, nor their greatness from a personal point of view, but only their relative greatness as compared with the aggregate income, the measure of the quota of the aggregate product which is divided among workmen, capitalists, etc. And yet, in the case of most economic questions, this is without doubt the less interesting side. Compare the polemic of R. Jones, On the Distribution of Wealth, 1831, I, 288 ff.; Senior, Outlines, 142 seq.; Carey, On the Rate of Wages, 1834, 24. Thus, according to Ricardo, the increase of one branch is possible only at the expense of another, while in the case of flourishing nations, the three branches increase absolutely and together. Ricardo, himself, was by no means unacquainted with this, as may be seen from Baumstark's German translation of his work, pp. 37, 108 ff.

CHAPTER II.

THE RENT OF LAND.

SECTION CXLIX.

THEORY OF RENT.

Rent is that portion of the regular net product of a piece of land which remains after deducting the wages of labor and the interest on the capital usual in the country, incorporated into it.[149-1] Hence it is the price paid for the using of the land itself, or for what Ricardo calls the original inexhaustible forces of the soil which are capable of being appropriated.[149-2] This price also depends, of course, on the relation between demand and supply; the demand in turn, on the wants and means of payment of buyers, but the supply by no means on cost of production, which, from the definitions above given, is here unthinkable. However, land has this in common with other means of production, that its price is mainly determined by that of its products.

[149-1] According to von Thünen, Der isolirte Staat. in Beziehung auf Landwirthschaft und Nat. Oek, 1850, I, 14: "what remains of the revenue of an estate after deducting the interest on all the objects of value which may be separated from the soil." According to Whately, it is surplus profit. The expression "regular product" supposes, among other things, an average skillfulness of the economic individual. Thus, for instance, the farm-rent of a piece of land generally includes besides the real rent of the land, interest on much capital which is more or less firmly fixed in the soil. The importance of the latter may be approximately determined from the fact that in the electorate of Hesse, for instance, the value of all meadow lands, woods, and agricultural lands is estimated at from 205 to 206 millions of thalers, and the value of all the houses at 100 millions. (Hildebrand, Statist. Mittheil. über die volkswirthschaftlichen Zustände Kurhessens, 1852, 37.) In the English income tax of 1843, the annual value of all lands in Great Britain was estimated at over 45 millions sterling, that of all houses at over 38 millions. However the farm-rent of a piece of land does not by any means always embrace the entire rent. A part of the rent is paid to the state in the form of taxes, and another portion to the payment of tithes. Short leasehold terms, frequent land sales, the comparatively great difficulty of disengaging capital invested in the cultivation of land, the union of landed proprietor, capitalist and laborer in one person easily obscure the law of rent.

[149-2] The stores of immediate plant food in a piece of land, of minerals in a mine, of salt in a salt mine, etc., are subject to the law of rent only in so far as they may be considered inexhaustible; that is, they are not, strictly speaking, subject to it. Our definition applies all the more to the capacity for cultivation, and of support or bearing capacity mentioned in § 35; and hence it is easier to follow the law of rent in the case of land used for building purposes than for agriculture. When v. Mangoldt claims that the exhaustibility or inexhaustibility of the soil has nothing to do with rent so long as it flows evenly (so lange sie eben fliesst) he is in harmony with his own general conception of rarity-premiums (Seltenheitsprämien).

SECTION CL.

THEORY OF RENT.
(CONTINUED.)

Agricultural products of equal quantity and quality are produced on pieces of land of unequal fertility, even when the same amount of skill is displayed by the husbandman, with very different outlays of capital and labor.[150-1] And yet the price of these products in the same market is uniformly the same. This price must, on the supposition of free and intelligent competition, be, in the long run, at least high enough to cover the cost of production on even the worst soil (the margin of cultivation according to Fawcett), which must be brought under cultivation in order to satisfy the aggregate want. (See § 110.) This worst land need yield no rent.[150-2] The better land which, with an equal outlay of labor and capital, produces a greater yield, furnishes an excess over the cost of production.[150-3] This excess is rent, which, as a rule, is obviously higher in proportion as the difference in fertility between the worst and the better land is greater. The person who cultivates the land of a stranger may unhesitatingly turn this rent over to the owner; since, notwithstanding his so doing, all that he has himself contributed to production in labor and capital of his own, returns to him entire in the product.[150-4]

According to § 34, a continual increase in the amount of labor and capital lavished on the fertilization of land, agricultural science remaining the same, leads, sooner or later to this, that every new addition of capital or labor becomes relatively less remunerative than the preceding.[150-5] The worse the land is, the sooner is this point reached. Hence, it necessarily happens that, with an increase in the aggregate want of agricultural products, greater and greater amounts of labor and capital are employed in the further fertilization of land, and that there comes to be a greater difference between the fertility of the worst and better lands, in consequence of which the rent of the latter rises.[150-6]

[150-1] Flotow, Anleitung zur Abschätzung der Grundstücke nach Klassen, 1820, 50 ff., estimates the cost of production of a scheffel of rye on land of the first class, at scarcely 1½ thalers; on land of the tenth class, at 3 thalers. In Hanover, it is estimated that about 60 per cent. of the land devoted to gardening and agricultural products produces only from 2 to 4 times the quantity of seed sown; over 35 per cent. from 5 to 8 times, and 4.5 per cent. from 9 to 12 times. (Marcard, Zur Beurtheilung des Nat. Wohlstandes im Königreich Hanover, Tab. 3.) In Prussia, the rates of net produce adopted by the central commission in 1862 vary from 3 to 420 silver groschens per morgen, in the case of agricultural land; from 6 to 420 in the case of meadow land; in the case of pasturage, from 1 to 360. (v. Viebahn, Statist. des Zollvereins, II, 966.) In England, parliamentary investigations (1821) have shown that the best land produces from 32 to 40, and the worst from 8 to 12 bushels per acre of wheat. (Edinburgh Review, XL, 21.) As to the influence of the elevation of land, the royal Saxon commission for the assessment of the value of land, estimated that the net product of an acre of land at a height above the level of the sea,

[150-2] The English are very fond of assuming that the worst land for the time being under cultivation pays no rent. (Ricardo, Principles, II, 2.) This fact is frequently obscured by the aggregation into one economic whole of land that pays no rent and land that is able to pay rent. (John Stuart Mill, Principles, II, ch. 16, § 3.) True it is that there is a great deal of land which cannot be farmed out, but which can be used only by its owners. Compare Salfeld, in the Landwirthsch. Centralb., 1871, II, 182 ff. On land near Wetzlar which, notwithstanding the high price of land in the neighborhood, could not be farmed out at auction, because no one was desirous to lease it, and which was therefore turned over to the highest bidder for the preceding piece, see Stöckhardt, Zeitschr. für deutsche Landwirthe, 1861, 237. Where, however, all the land has its own proprietors, the competition of farmers may easily produce a rent for the worst land. It is a matter of complete indifference to the theory of rent, whether the worst land when possessed only by right of occupation or used as pasturage for cattle previous to its cultivation, had value or not. Compare Nebenius, Oeff. Credit, I, 29; Hermann, Staatswirthsch. Unters., 170 seq.

[150-3] The analogous gradation in mining may make this clearer.

[150-4] Ricardo illustrated this by the following example. An uncultivated tract of country is settled by a small colony. As long as there is here an excess of land of the best quality, and everyone may take possession of it without paying anything therefor, no rent of the land which is merely occupied is possible. But if all the first class land is under cultivation—land which perhaps with the employment of a small amount of capital yields 5 quarters an acre per annum; and the increasing population necessitates the cultivation of land of the second class, which with the same outlay of capital yields only 4 quarters an acre per annum, there arises a rent of 1 quarter an acre per annum for land of the first class. For the price, 4 quarters is now high enough to cover the cost of production per acre, and it must be a matter of complete indifference (complete indifference?) to a new comer whether he obtains 5 quarters from land of the first class as a farmer and pays out 1 quarter, or whether he harvests 4 quarters from second class land as proprietor. If there is a further increase of population, so that land of the third class also, which yields only 3 quarters per acre per annum, must be brought under cultivation, the price of corn rises again because the cost of production has now to be covered by three quarters. Land of the first class now pays a rent of 2 quarters and second class land of 1 quarter. (Ch. 2.)

[150-5] von Thünen, der isolirte Staat, II, I, 179, estimates that a bed of manure 1/3 of an inch thick on an acre of ground, increases the production by ½; that a second ½ inch of manure increases the yield only by a + of 5/8 corn; the third of ¼ corn, etc. Geyer is of opinion that, in Saxony, land of the average quality will yield a gross product of 60 thalers per acre, and 14 thalers net product per acre, in case it is managed with the greatest intelligence and the employment of a large amount of capital; when managed in a very ordinary way, it would yield 20 thalers gross, and 7½ thalers net product. Thünen gives the following formula determining when it is more advantageous to cultivate the old land with more intensiveness (higher farming) than to begin the cultivation of new: As long as p - aq is less than √ap, so long is an increase of the outlay of capital on the same land more profitable than the cultivation of new land, and vice versa. Here p = aggregate product obtained by a workman in a year from the amount of capital used by him; a = sum of his necessary yearly wants; a = the interest per annum of a capital = p; q = the amount of capital given to assist the individual workman.

[150-6] Ricardo had, in every case in which outlay of capital and labor of different degrees of productiveness had to be used on the same land, to suppose a price of the products = the cost of the least productive outlay. See the tables in Ricardo's work, On the Influence of a low Price of Corn on the Profits of Stock, 1815, 14 seq. Schmoller, on the other hand, rightly applies the principle of united costs of production in as far as the usual amount of profit of the producer is added to the cost of the commodity with the highest cost of production. Mittheilungen des Landwirthsch. Instituts zu Halle, 1865, 128. Compare supra, §§ 106, 110.

SECTION CLI.

THEORY OF RENT.—LAND FAVORABLY SITUATED.

The favorable situation of a piece of land operates, in almost every politico-economical respect, in the same manner as its fertility.[151-1] If a market, to be fully supplied, needs to be fed from a circuit of ten miles, the price must be sufficient to make good not only the other cost of production but the freight over ten miles. Here, therefore, all producers living nearer to the market, who have to make a smaller outlay for transportation and yet obtain the same market price for their produce, make a profit exactly corresponding to the advantage of their situation.[151-2]

The situation of individual pieces of land relatively to farm buildings, etc., operates in a similar way.[151-3]

[151-1] L'éloignement équivaut à la stérilité. (J. B. Say.) If we imagine with A. Walker an entirely uncultivated country, equally fertile in every part, settled only on the coast, and divided into shares of equal breadth, equally accessible at all points, so that every settler has unlimited space to extend his possessions from the coast into the interior, the shares situated in the middle of the coast strip would be most eagerly sought after; since in its vicinity, prospectively, all the institutions of the country would come together. The colonist, therefore, who should obtain that share as his, would, unquestionably, be in a condition to pay a price for this preference, that is a rent. (Science of Wealth, 296.)

[151-2] It is a consequence both of their difference of situation and of their fertility that in the Himalaya the farmers low down on the sides pay 50 per cent. of the gross product as farm-rent, and higher up, 20 per cent. less. (Ritter, Erdkunde, III, 878.) Both influences may be traced most accurately in East Friesland, and in similar places: marsh land, sandy land, heath land, and high moorland.

Its situation influences especially the money rent of land, and its quality the amount of produce. (McCulloch, Principles, III, 5.)

[151-3] We need only mention the hauling of the crops and of manure. According to the instructions of the royal Saxon commission, above mentioned, the cost is assumed to be 10 per cent. higher for a distance of 250 rods, and 20 per cent. higher for a distance of 500 rods.

SECTION CLII.

THE THEORY OF RENT.
(CONTINUED.)

From what we have said, it follows that the rent of the land of a country is equal at least to the sum of all the differences between the product of the least productive portions of capital which have been necessarily laid out in the cultivation of the soil and the product of the other portions more productively laid out by other husbandmen. It may rise higher than this on account of a coalition among landowners or immoderate competition among farmers, who may thereby be forced to surrender a portion of their wages and interest on capital to the former; but it can never lastingly fall below this amount. If the landowners themselves were to surrender all claim to rent, the price of agricultural products would not sink if the market was kept fully supplied; and the excess obtained from the better land over and above the cost of production would go, but only in the nature of a gift, to the farmers, corn dealers and individual consumers.[152-1] Normal rent is not to be explained by any mysterious or peculiar productiveness[152-2] of the land that yields it, but on the contrary, by the fact that even material forces unexhaustible in themselves, but which can be productive only in combination with given parcels of land, uniformly oppose even successively greater difficulties to every successive and additional improvement.[152-3]

Moreover, the capital which becomes a part of the land to such an extent that it cannot be separated from it, and perhaps not even distinguished from it at sight, such for instance as has been laid out for purposes of drainage or in the purchase of material intended to modify the nature of the soil, partakes of the character of the land itself, and its yield obeys the laws of rent. How frequently it happens that such improvements made by the farmer without the least assistance from the owner of the land permanently contribute to an increase of the rent. (§ 181.)[152-4]

[152-1] Compare J. Anderson, An Inquiry into the Nature of the Corn Laws, 1777. Extracts from the same in the Edinburgh Review, LIV, 91 ff. On the other hand, Buchanan, on Adam Smith, IV, 134, thinks that rent arises exclusively from the monopoly of the owners, and that without it the price of corn would be lower. It is certain, however, that if the land of a country be considered as one great piece of property, and under one great system of husbandry, the products of the soil might be offered permanently at a price corresponding to the average cost of production, on the better and worse pieces of land. (Umpfenback, N. Oek., 191.)

[152-2] Malthus, On the Policy of restricting the Importation of foreign Corn, 1815. Additions, 1817, to the Essay on the Principle of Population, III, ch. 8-12; Principles, 217 ff.

[152-3] Ricardo says that if air, water, elasticity and steam were of different qualities, and might be made objects of exclusive possession; and that if each kind could be had only in a moderate supply, they would, like land, produce a rent, according as they were brought into use, one kind after another. In the class of natural forces, also, the possession of a secret of production or of inimitable skill, or a legal right to its exclusive use, may produce something similar to rent. (Senior, Outlines, 91.) Hermann, Staatswirthsch. Unters., 163 ff., had already laid the foundation of this doctrine, and earlier yet, Canard, 17 seq., and Hufeland. I, 303 ff. See supra, § 120. Hence v. Mangoldt uses the word rent to designate all rarity-premiums. John Stuart Mill, III, ch. 5, 4. Schäffle speaks of the universal existence of a surplus; that is, of the factor of rent (Nat. Oek., I, Aufl., 140 ff.), and has recently developed this into a theory thoroughly systematic and detailed. (Nationalökonomische Theorie der ausschliessenden Absatzverhältnisse, 1867.)

According to him, rent is "the premium paid for the most economic course taken in the interest of society in general;" and hence he finds rent as much in superior labor and in a very advantageous outlay of capital. Yet he grants, that "exclusive custom (Kundschaft) on the basis of natural advantages occurs only in the case of land-rent." (59.) And even granting that he is right, that no rent is by itself forever secure (74 seq.), and that much rent is a premium paid for a search after and the appropriation of the best land, divination of the best situations, etc. (60 ff., 74 ff.), there still remains the great difference between rent and the extra income from labor and capital; that here the very transitory nature of the substratum, or basis, and the personal merit of the recipient, is the rule, while in the former case it is a rare exception. Willingly, therefore, as I recognize the possibility and fruitfulness of Schäffle's way of conceiving this subject (the latter, especially, for monographic purposes), I prefer, so far as the entire system is concerned, the keeping apart of the three branches of income corresponding to the three factors of production as has been usual since Adam Smith's time.

[152-4] John Stuart Mill, ch. 16, § 5. An example in Fawcett, Manual, 149 seq. This explains many objections to Ricardo's laws, which are the result of misconception. Thus, for instance, in Schmalz, Staatswirthschaftslehre, I, 81, Quarterly Review, XXXVI, 412 ff. Bastiat, Harmonies économiques, ch. 9, where rent is considered the interest on the capital laid out in bringing land under cultivation and improving it. If, however, we imagine an island to emerge suddenly from the waves in the vicinity of Naples, in consequence of an earthquake, no one can doubt that its land would sell at a very high rate and pay a very good rent. And yet no capital or labor has been laid out on it. A similar lesson is taught by the fact, that, in Scotland, rocks which are covered twice a day by the waves are leased for the sake of the sea-weed left on them. (Adam Smith, Wealth of Nations, I, ch. 11.) Also by the fact, that in Poulopinang, a cavity in which many edible swallows' nests are found, pays £500 a year rent. (Geogr. Ephemeriden, Oct., 1805, 134.) However, Bastiat, abstractly speaking, is right when he says, that every one by the importation of agricultural products from quarters which pay no rent, and still more by emigrating thither, may deprive the owners of land of the tribute imminent in rent.

But how would it be if the cost of transportation and emigration amounted to more than the rent? The case theoretically so important, in which all the land in the world is supposed to have been appropriated as private property, this writer, generally so lucid, treats in a surprisingly blind way (275 ff). It is remarkable that A. Walker, Science of Wealth, spite of his prejudices in favor of Bastiat's doctrines on the gratuitous nature of all natural forces, nevertheless follows, essentially, Ricardo's theory of rent, 294 ff.

A much more vulgar error yet is, that rent is the result of the capacity of the capital employed in the purchase of the land to produce some interest Thus Hamilton, Reports to the Congress on the Manufactures of the United States, 1793, and Canard, Principes, sec. 5. Per contra, compare Turgot's view, supra, § 42, note 1. Even Locke, Considerations on the Lowering of Interest, Works, II, 17 ff., maintained the closest parallel between rent and interest to be possible, with this difference only, that money was all of a kind but pieces of land of different degrees of fertility. Similarly Sir D. North, Discourse upon Trade, 1791, with his parallel of landlord and stocklord.

SECTION CLIII.

THEORY OF RENT.
(CONTINUED.)

Ricardo says that rent can never, not even in the slightest degree, constitute an element in the price of corn. This is certainly not a very happy way of expressing the truth, that a high rent is not the cause, but the effect, of a relatively high price of corn.[153-1] Ricardo would have been nearer right had he said that rent was not a component part of the price of every portion of the supply of corn brought to market.

Is rent an addition to national income? Ricardo (ch. 31) answers this question in the negative, and says that it takes from the consumers what it gives to the owners of the land, and that it increases only the value in exchange of the national wealth.[153-2] It is evident that as thus stated, the question is not properly put. Neither interest on capital nor wages are any addition to a nation's income, but, like rent, only forms of trade, by means of which that income is distributed among the individuals constituting the nation. (§ 201.)

The special kind of product obtained from a piece of land influences its rent only in so far as the growth of that kind of product is exclusively confined either by nature, privilege or prejudice to certain land.[153-3] Adam Smith is of opinion that the rent of agricultural land is ordinarily (!) one-third of the gross product; that of coal mines, from one tenth to a maximum of one-fifth; of good lead and tin mines, one sixth (with the dues paid the state of twenty-one and two-thirds per cent.); of Peruvian silver mines, scarcely one-tenth; of gold mines, one-twentieth. And he thinks that rent grows less certain for every succeeding article. [153-4]

So far as this is based on facts, it may be explained as follows: The greater capacity an article has for transportation from one place to another, the less important is advantage of situation, which is generally one of the chief elements of rent. The more indispensable the commodity is, the more readily is the consumer induced to pay a price for it greater than the cost of production; that is, to pay a rent. This again is enhanced by the difficulty of the preservation of the commodity. Lastly, the more it is a mere product of nature,[153-5] the more difficult it is to simultaneously employ several portions of capital of different grades of productiveness in its production.

[153-1] To be met with in this form even in Adam Smith, Wealth of Nations, I, ch. 11, pr. John Stuart Mill, Principles II, ch. 16, § 6, thus states the matter: "Whoever cultivates land, paying a rent for it, gets in return for his rent an instrument of superior power to other instruments of the same kind for which no rent is paid. The superiority of the instrument is in exact proportion to the rent paid for it." According to v. Jacob, Grundsätze der Nat. Oek., I, 187, rent constitutes a much larger portion of the price of commodities than is generally supposed, in as much as wages depend so largely on the price of the means of subsistence. Per contra, Baudrillart, Manuel, 391 ff., who maintains that rent is practically insignificant.

[153-2] Similarly Buchanan, loc. cit., and Sismondi, Richesse commerciale, I, 49. Compare contra, Malthus, Inquiry into the Nature and Progress of Rent, 15. I would call attention en passant to the absurdity that there may be an increase in the value in exchange of a nation's entire resources without any increase in its value in use. (Supra, § 8.)

[153-3] Thus Adam Smith remarks that corn fields and rice fields pay very different rents, because it is not always possible to convert one into the other. (Wealth of Nat., I, ch. 11, 1.) Compare the tabular statistical view of the rent of land used for vineyards, gardens, meadows, pasturages, wood and farming purposes, in Rau, Lehrbuch, I, § 218. For a general theory of the rent of wooded land, see Hermann, Staatsw. Unters., 177 ff.; of vineyards, 181 seq.

[153-4] Adam Smith, Wealth of Nat., I, ch. 11, 3.

[153-5] It is hereby rendered akin to those low stages of civilization in which no rent is paid.

SECTION CLIV.

THEORY OF RENT.
(CONTINUED.)

As the purchase of a piece of land[154-1] is no more and no less than its exchange against a portion of capital in the shape of money,[154-2] its purchase price depends generally on the amount it will rent for as compared with the interest on the capital to be given in exchange for it. The rate of interest remaining the same, it rises and falls with its rent. And vice versa, the rent remaining the same it rises and falls inversely as the rate of interest.[154-3] A rise in the price of land is not always a proof of the growing wealth of a people. It may proceed from a depreciation of the value of money, or from a decrease of the rate of interest caused by a decline in the number of loans which can be advantageously placed.

It is frequently said, that the price paid for land is greater than the money-capital which yields an equal revenue.[154-4] This, abstraction made of proletarian distress prices for small parcels of land and of the political and social privileges of landowners, is accounted for by the assumed greater security of the latter,[154-5] which, however, fares ill enough in war times, and times of political disturbance. The fact itself is found to exist, I think, only in economically progressive times, when confidence prevails, and it is based on the pretty certain prospect that the rate of interest will decline, while rents will rise.[154-6]

It has been observed in Belgium, that the medium farm rent of land, in quarters remarkable for any economic peculiarity whatever, pays an interest lower, as compared with the purchase money, in proportion as the country about is more thickly populated, and as its husbandry is carried on by farmers instead of by owners.[154-7] This phenomenon is doubtless correlated with these others, that the conditions just named are pretty regularly attendant on a high state of civilization, and that advanced civilization is attended uniformly by a decline in the rate of interest. (175).[154-8]

[154-1] In every day language, people say of a man who has purchased a piece of land, that he "put" as much capital as is equal to the purchase price "into his land;" or "laid out on it" as much. But this mode of expression is as inaccurate as is this other: "the sun is rising," or "the sun has gone down."

[154-2] Macleod, who is not fond of the natural mode of expression, maintains that the purchase price of a piece of land is equal to the discounted value of the sum of the values of all the future products to be obtained from the land. (Elements, 75.)

[154-3] C:i::L:r in which C = the capital, i = its interest, L = the piece of land, and r = its rent.

[154-4] There are traces to be found of the fact among the ancient Greeks, that the farm-rent of landed estates paid a smaller interest on the purchase money than was otherwise usual in the country. Isaeus de Hagn., 42; Salmasius, De Modo Usur., 848.

[154-5] Thus even North and Locke, loc. cit.; Cantillon, Nature du Commerce, 294.

[154-6] Compare List, Werke II, 173. In Belgium, farm-rent per hectare was, in 1830 = 57.25 francs, in 1835 = 62.78, in 1840 = 70.44, in 1846 = 74.50, on an average. This was at the rate of from 2.62 to 2.80, or an average of 2.67 per cent. on the purchase money. If to this we add the increase in the rise of land between 1830 and 1846, divided by 16, the yearly revenue rises from 2.67 to 3.91 per cent., that is pretty nearly the rate of interest on hypothecation, and is higher or lower in the different provinces, as the former is higher or lower. (Heuschling, Résumé du Récensement général de 1846, 89.) In France, land paid but from 2 to 3 per cent. on the purchase money; but both rents and the price of land have doubled between 1794 and 1844. (Journal des Econ., IX, 208.)

[154-7] Moreover, whole countries may, because of their great natural advantages, possess, so far as the commerce of the entire world is concerned, something analogous[TN 4] to rent. Thus, for instance, North America, although here, this world-rent finds expression in the national height of the wages of labor and of the rate of interest, (v. Bernhardi, Versuch einer Kritik der Gründe welche für grosses und kleines Grundeigenthum angeführt werden, 1848, 294.)

[154-8] Writers as old as Culpeper, A Tract against the high Rate of Usurie, 1623, and Sir J. Child, Discourse of Trade, p. 22 of the French translation, observed the connection existing between a low rate of interest, national wealth and a flourishing state of commerce on the one hand, and a high price of the necessaries of life and of land in the other. Sir W. Petty would estimate the rent of land as follows: If a calf pasturing in an open meadow gains as much flesh in a given time as is equal to the cost of the food of 50 men for a day, and a workman, on the same land, in the same time, produces food for 60 men, the rent of the land must be 50, and the rate of wages 10. (Political Anatomy of Ireland, 62 seq.; compare 54.) Besides, he accounts for the height of rents by the density of the population exclusively, and he would prefer to see both increase ad infinitum. (Several Essays on Political Arithmetic, 147 ff.)

The germs of the Ricardo law of rent, in Boisguillebert: the price of corn determines how far the cultivation may be extended; by manuring the land, as much corn as desired may be obtained, provided the cost of production is covered. (Traité des Grains, II, ch. 2 ff.) There is a foreshowing of the same law in the Physiocratic view that only in the production of raw material is there a real excess over and above the cost—produit net. Compare Quesnay, Probl., économique, 177 ff. Sur les travaux des artisans. (Daire.) Auxiron, Principes de tout Gouvernement, 1776, I, 126. Adam Smith came very near to the true principle in the case of coal mines, but was hindered reaching it in other cases by the false assumption that certain kinds of agricultural production always yield a rent, while others do so only under certain circumstances. Besides he always considered the interest of capital fixed in the soil; buildings, for instance, as part of the rent. (Wealth of Nat., I, ch. 11.) Compare Hume's Letter to Adam Smith; Burton's Life and Correspondence of Hume, II, 486; von Thünen, Isolirter Staat., I, 15 ff.

The most immediate predecessors of Ricardo, Principles, 2, 3, 24, 31, are Anderson (§ 152); West, Essay on the Application of Capital to Land, 1815, and Malthus, Inquiry into the Nature and Progress of Rent, 1815. See § 152. It is wonderful how a theory which, in 1777, remained almost untouched, was in 1815 etc., attacked and defended with the greatest zeal, because it then affected the differences between the moneyed and landed interest. Yet Ricardo did not take into account at all the rent-creating influence of the situation of land in relation to the market, as well as to the "farm-office" (dem Wirthschaftshofe). The influence of the system of husbandry on rent, first thoroughly treated by von Thünen, loc. cit. What has recently been urged against Ricardo by, for instance, J. B. Say, Traité, II, ch. 9; Sismondi, N. P., III, ch. 12; Jones, Essay on the Distribution of Wealth, 1831 (see Edinburg Review, LIV), bears evidence either of a misunderstanding of the great thinker, or else contains only modifications of some individual abstract propositions of his, stated perhaps too strictly. In judging Ricardo, it must not be forgotten, that it was not his intention to write a text-book on the science of Political Economy, but only to communicate to those versed in it the result of his researches, in as brief a manner as possible. Hence he writes so frequently making certain assumptions; and his words are to be extended to other cases only after due consideration, or rather re-written to suit the changed case.

Baumstark very correctly says: "Rent rises, not because new capital has been invested, but when the circumstances of trade make a new addition to capital possible." (Volkswirthschaftliche Erläuterungen über Ricardo's System, 1838, 567.) Fuoco's Nuova Teoria della Rendita, Saggi economici, No. 1, is nothing but an Italian version of the doctrines of Malthus and Ricardo. The greater number of anti-Ricardo theories of rent have originated from the rapid and apparently unlimited growth of national husbandry in recent times. Thus it is a fundamental thought in Rodbertus, Sociale Briefe, 1851, No. 3, that an increase of the price of corn need not attend an increase of population, either uniformly or necessarily. According to Carey, The Past, the Present and the Future, ch. 1, 1848, the most fertile land is last brought under cultivation, because it is covered with swamps, forests, etc.; and because it offers greater resistance to the work of the agriculturist, by reason of its luxurious vegetation. The more elevated lands are first cultivated which present fewer obstacles to cultivation on account of their dryness, their thinner crust, etc. Carey generalizes this and thinks he has reversed the Ricardo law of rent! He overlooks entirely that Ricardo speaks only of the original powers of the soil. Now a swampy land which must be dried at the expense of a great deal of labor, possesses less of these original powers than a sandy soil which may be sown immediately. See Carey, Essay on the Rate of Wages, 232 ff., and the lengthy exposition of the same doctrine rank with inexact natural science and unhistorical history in the same author's Principles of Social Science, 1858, vol. I.

There is this much truth, however, in Carey's error that, with increasing economic progress, the superiority not only of situation, relatively to the market, but also of natural fertility, may of itself go over to other lands. Thus, for instance, the ancient Slaves used clay soil everywhere as pasturage, and cultivated the sandy soil, because their pick-axes could overcome the resistance only of the latter. Langethal, Geschicte der deutschen Landw., II, 66; Waitz, Schlesw. Holstein, Gesch., I, 17. Similarly in Australia: Hearne, Plutology, 1864. Compare, Roscher, Nationalökonomik des Ackerbaues, § 34. The word fertility should not be taken too exclusively in its present agricultural sense. In a lower stage of civilization, the facility of military defense or the ut fons, ut nemus placuit—Tacit., Germ., 16—may have more weight.

The chief difference in the theories of rent consists in this: whether rent is considered a result of production or only of distribution, and an equalization of gain. Compare Behrens, Krit. Dogmengeschichte der Grundrente, 1868, 48.

SECTION CLV.

HISTORY OF RENT.

In poor nations, and in those in a low stage of civilization, especially where the population is sparse, rent is wont to be low. In Turkistan, land is valued according to the capital invested in its irrigation.[155-1] In the interior of Buenos Ayres, at the beginning of the nineteenth century, landed estates were paid for in proportion to the magnitude of the live stock on them, so that it seemed, at least, as if the land was given for nothing, or simply thrown in with the purchase. And only a short time since, an English acre in the same country, fifteen leguas from the capital, was worth from three to four pence, and at a distance of fifty leguas, only two pence.[155-2] In Russia, also, not long since, the valuation of landed estates was made, not in proportion to the superficies, but according to the number of souls, that is, of male serfs, a remnant suggestive of the previous situation when no rent was paid.[155-3] Where, in relatively uncivilized medieval times, instances of the farming out or leasing of land occur, farm-rents are so small that their payment can only be considered as a mere recognition of the owner's continuing right of property.

Under these circumstances, it is natural that great landowners, especially in the lower stages of civilization, should exert an especially great influence; and that their low tenants (Hintersassen) are more dependent in proportion to the want of capital and the absence of trade. Hence, these are wont to make up for the smallness of their rent by great honors paid to their landlords, and great services, especially military service.[155-4] Besides, the lords of the manor, in almost every medieval period, have used their influence with the government to cut down the wages of labor by serfdom and other similar institutions, and the rate of interest on capital by prohibiting interest, by usury laws, etc.; and thus, in both ways, to artificially increase their own share of the national income.

[155-1] A. Burnes, Reise nach Bukhara, II, 238.

[155-2] W. Maccann, Two Thousand Miles Ride through the Argentine Provinces, London, 1853, I, 20; II, 143. Ausland, 1843, No. 140. Frisian ancient documents in which parcels of land are described as terræ 20 animalium, 48 animalium, etc. Lacomblet, Urkundenbuch, I, 27. Kindlinger, Münster Beitr., I, Urkundenbuch, 24.

[155-3] The custom began to be more usual in Russia also to say "so many dessjatines and the peasantry belonging thereto." This was especially so in the case of very fertile land, as for instance in Orel. See v. Haxthausen, Studien, II, 510. Formerly the bank loaned only 250 per soul, afterwards up to 300 R. Bco. (II, 81). Spite of this v. Haxthausen thinks that rent would be illusory, in Russia, in case agriculture was carried on with hired workmen. (I, Vorrede, XIII.) Carey's remark, "every one is familiar with the fact that farms sell for little more than the value of the improvements," may be true of the United States (The Past, Present and Future, 60.)

[155-4] This condition of things continued in the highlands of Scotland until the suppression of the revolt of 1745. The celebrated Cameron of Lochiel took the field with 800 tenants, although the rent of the land was scarcely £500. (Senior, Three Lectures on the Rate of Wages, 45.) "Poor 12,000 pound sterling per annum nearly subverted the constitution of these kingdoms!" (Pennant.)

SECTION CLVI.

INFLUENCE OF ADVANCING CIVILIZATION ON RENT.

Advancing civilization contributes in three different ways to raise rents.[156-1] The growth of population necessitates either a more intensive agriculture (higher farming), or causes it to extend over less fertile parcels of land, or parcels less advantageously situated.[156-2] If the growth of population be attended by an increase of capital, this happens in a still higher degree. The people now consume, if not more, at least wheat of finer quality, more and better fed live stock; the consequence of which is, that the demands made on the land are increased. Lastly, if the population be gradually concentrated in large cities, this fact also must contribute to raise rents, because it requires a multitude of costly transportations of agricultural produce and so increases the cost of production (up to the time of consumption) on the less advantageously situated land.[156-3] [156-4]

As most of the symptoms of a higher civilization become apparent earliest, and in the most striking manner, in large cities, so also a rise in rents is first felt in them. The building of houses may be considered as the most intensive of all cultivation of land and that which is most firmly fixed to the soil.[156-5] Rent has nowhere an unsurpassable maximum any more than a necessary minimum.

[156-1] Jung, Lehrbuch der Cameralpraxis, 1790, 182, has so little idea of this that he is of opinion that farm-rent must grow ever smaller.

[156-2] According to Schmoller, in the Mittheilungen des landwirthschaftlich. Instituts zu Halle, 1865, 112 seq., the average farm-rent of the Prussian domains per morgen, and the population to the square mile, amounted:

Compare the review of rents in the states of the Zollverein, in v. Viehbahn, Statistik, II, 979. It is difficult[TN 5] to compare different countries with one another in this respect, because it is seldom certain whether the word rent means exactly the same thing in them. Besides, it should not be overlooked, how difficult it is to ascertain what rent, in the strict sense of the term, as used by Ricardo, is.

[156-3] Moreover, the rise of rents, in so far as it depends on the greater cost of transportation to a growing market, becomes progressively slower. The concentric circles about that point increase in a greater ratio than the radii.

[156-4] As to the history of rents in England, a comparison of the years from 1480 to 1484, with the most recent times, shows that the amount of rent estimated in money in agricultural districts, where no very great "improvements" have been made, have increased as 1 to 80-100, while the price of wheat has increased 12-fold and wages 10-fold. (Rogers, in the Statist. Journal, 1864, 77.) According to Hume, History of England, ch. 33, it seems that rents under Henry VIII. were only 1/10 of those usually paid in his time, while the price of commodities was only ¼ of the modern. Davenant, Works, II, 217, 221, estimates the aggregate rent of land, houses and mines, at the beginning of the seventeenth century, at £6,000,000; about 1698, at £14,000,000; capitalized respectively at £72,000,000 and £252,000,000. About 1714, J. Bellers, Proposals for Employing the Poor, puts it at £15,000,000; about 1726, Erasm. Phillips, State of the Nation in Respect to Commerce etc., at £20,000,000; about 1771, A. Young, at £16,000,000; about 1800, Beeke, Observations on the Income-Tax, at £20,000,000; about 1804, Wakefield, Essay on Political Economy, at £28,000,000; about 1838, McCulloch, Statist., I, 535, at £29,500,000. The poor tax in England and Wales, in 1841, was on a valuation of £32,655,000. (Porter, Progress, VI, 2, 614); 1864-5, the annual value of lands, £46,403,853 (Stat. Journal, 1869.) Moreover, the income from houses, railroads, etc. (real property other than lands), increased very much more than that received from pieces of farming land; between 1845 and 1864-5, the former by 392.8 per cent., and the latter by 27.9 per cent. (Hildebrand's Jahrbb., 1869, II, 383 seq.); and the income tax of 1857 on £47,109,000. There was a still more rapid growth of rent in Scotland. In 1770, it was only £1,000,000-1,200,000: in 1795, £2,000,000; in 1842, £5,586,000. (McCulloch, I, 576, ff.) In Ireland, about 1776, it was only $900,000, according to Petty. (Political Anatomy of Ireland, I, 113.) A. Young assumed it to be £6,000,000 in 1778; Newenham, View of Ireland, about 1808, £15,000,000. In many parts of the Rosendale Forest in Lancashire, the land is leased by the ell, at £121, and even at £131 per acre; i. e., more than the whole forest of 15,300 acres was rented for in the time of James I. In many of the moorland portions of Lancashire, rent has risen in 150 years, 1,500 and even 3,000 per cent. (Edinburg Rev., 1843, Febr., 223.)

The amount of rents in Prussia, Krug assumed to be in 1804, 50,000,000 thalers, and von Viebahn, Zollverein Statistik, II, 974, in 1862, 116,500,000 thalers. Lavergne assumed the rents of France after 1850 to be 1,600,000,000 francs (Revue des deux Mondes, Mars, 1868); and Dutot, Journal des Economistes, Juin, 1870, in 1870, at 2,000,000,000. In Norway, the capitalized value of all the land was assessed at 13,000,000,000 thalers in specie, in 1665; in 1802, at 25,500,000; in 1839, at 64,000,000 thalers. Blom, Statistik von Norwegen, I, 145. The older such estimates are, the more unreliable they are.

[156-5] In Paris, in 1834, the square toise = 37 sq. feet, in the Rue Richelieu and Rue St. Honoré, cost 1,500 to 2,000 francs; in Rue neuve Vivienne, 2,500 to 3,500 francs; in 1857, from 200 to 500 francs per square meter, = 10 sq. feet, was very usual. (Wolowski.) Before the gates of Paris, the rent amounted to as high as 250 francs per hectare; at Fontainebleau, to only from 30 to 40. (Journal des Economistes, Mars, 1856, 337.) In Market Square, Philadelphia, land was worth from 3,000 to 4,000 francs per sq. toise, and in Wall Street, New York, about 4,000 francs. (M. Chevalier, Letters sur l'Amérique, 1836, I, 355.) In St. Petersburg, after 6 years, the house frequently falls to the owner of the area. (Storch. by Rau, I, 248 f.) In Manchester, the Custom House area cost from 10 to 12 pounds sterling per square yard; in the center of the city, as high of £40, that is, nearly £200,000 per acre. In Liverpool, in the neighborhood of the Exchange and of Town Hall, the cost is from 30 to 40 pounds sterling. (Athenæum, Dec. 4, 1852.) In London, a corner building on London street, erected for £70,000, with only three front windows, pays a rental of £22,000. (Allg. Zeitung, 1 Febr., 1866.) The villa at Misenum—a very beautiful location—which the mother of the Gracchi bought for about 5,000 thalers, came into the possession of L. Lucullus, consul in the year B. C. 74, for about 33 times as much. Mommsen, Römisch. Gesch., II, 382.

SECTION CLVII.

HISTORY OF RENT.—IMPROVEMENTS IN THE ART OF AGRICULTURE.

Improvements in the art of agriculture which are confined to individual husbandmen leave rent unaffected. They do not perceptibly lower the price of agricultural products, and only effect an increase of the reward of enterprise which is entirely personal to the more skillful producers and does not attach to the ground itself.

But how is it when these improvements become general throughout the country? If population and consumption remain unchanged, the supply of agricultural products will exceed the demand. This would compel farmers, if there be no avenue open to exports, to curtail their production. The least fertile and most disadvantageously situated parcels of land will be abandoned to a greater or less extent, and the least productive capital devoted to agriculture, withdrawn. In this way, rent goes down both relatively and absolutely, although the owners of land may be able to partially cover their loss by the gain which results to them as consumers and capitalists.[157-1] (§ 186). After a time, however, and as a consequence of the diminished price of corn, population and consumption will increase, and entail an extension of agriculture and a consequent rise in rents.[157-2] If it, relatively speaking, reaches the same point as before, it still is absolutely much greater than before. Let us suppose that there are three classes of land of equal extent in a country, which for an equal outlay of capital produce 100,000, 80,000 and 70,000 bushels yearly. The rent of the land here would be equal to at least 40,000 bushels. If the yield of production now doubles, while the demand for agricultural products also doubles, the aggregate harvest will be 200,000 + 160,000 + 140,000 bushels, and consequently rent will have risen to at least 80,000 bushels. But this increase of rent has injured no one. If the population increases in a less degree than the productiveness of the land, the consumer may, to a certain extent, gain largely, and the landowner better his condition. However, great agricultural improvements spread so gradually over a country, that, as a rule, the demand for agricultural products can keep pace with the increased supply. But even in this case, that transitory absolute decline of rent may be avoided; and it cannot be claimed universally, as it is by many who are satisfied with mumbling Ricardo's words after him, that an increase of rent is possible only by an enhancement of the price of the products of the soil. Where the development of a people's economy is a normal one, the rent of land is wont to increase gradually, but at the same time to constitute a diminishing quota of the entire national income.[157-3]

Improvements in milling,[157-4] and in the instruments of transportation[157-5] adapted to agricultural products, and the introduction of cheaper[157-6] food, have the same effect as improvements of agricultural production. All such steps in advance render an increase in population, or in the nation's resources, possible without any corresponding increase in the amount paid to landowners as tribute money.[157-7]

The foregoing facts furnish us the data necessary to decide what influence permanent soil improvements have on the rent of land.[157-8] The improved parcels of land now grow more fertile. Their rentability also increases, while that of the others becomes not only relatively but absolutely less, if the demand remains unaltered. The whole is as if capital had been transformed into fertile land, and this added to the improved land.

[157-1] Since it has seemed absurd to many writers to say that an improvement in the art of agriculture may cause rents to decline (compare Malthus, Principles, I, ch. 3, 8), John Stuart Mill, Principles, IV, ch. 3, § 4, prefers to put the question thus: whether the landowner is not injured by the improvement of the estates of other people, although his own is included in the improvement. Compare Davenant, Works, I, 361. And so the long agricultural crisis through which Germany passed at the beginning of the third decade of this century was produced mainly by the great impulse given to agriculture (Thaer, Schuerz etc.), while population did not keep pace with it. Similarly, at the same time, in England, McCulloch, Stat., I, 557 ff. Of course, the less fertile pieces of land declined even relatively most in price. From 1654 to 1663, Switzerland experienced a severe agricultural crisis, attended with oppressive cheapness of corn, a great decline in the price of land, innumerable cases of insolvency, revolts of the peasantry, emigration, etc. (Meyer von Knonau, Handbuch d. schweiz. Gesch., II, 43.) The Swiss had, precisely during the Thirty Years' War which spared them, so extensively developed their agricultural interests, that now that other countries began to compete with them, they could not find a market large enough for their products. For English instances of similar "agricultural distress" in the seventeenth and eighteenth centuries, see Child, Discourse on Trade, 73, 124 seq.; Temple, Observations upon the U. P., ch. 6; Tooke, History of Prices, I, 23 seq., 42. Even where there have been no technic improvements, a series of unusually good harvests may have the same results, of which there are many instances scattered through Tooke's first volume.

There is great importance attached in England to the difference between those agricultural reforms which save land and those which effect a saving in capital and labor. The latter, it is said, decrease the money rent of the landowner by depreciating the price of corn, but leave the corn-rent unaltered. The former, on the other hand, decrease the rent both in money and corn, but the money rent in a higher degree. (Ricardo, Principles, ch. 2; J. S. Mill, Principles, IV, ch. 3, 4.)

[157-2] When the demand for products of the soil which minister to luxury, such as fat meat, milk, vegetables, is increasing, a greater cheapness of the necessary wheat may raise rent, for the reason that lands are now cultivated which were not formerly tillable. Thus, there is now land in Lancashire which could not formerly be planted with corn, because the laborers would have consumed more than the harvest yielded. Since the large imports of the means of subsistence from Ireland these lands have been transformed into artificial meadows, gardens, etc. (Torrens, The Budget, 180 ff.) Compare Adam Smith, I, 257, ed. Bas. Banfield would misuse these facts to overturn the theory of Ricardo. (Organization of Industry, 1848, 49 ff.)

[157-3] The French testamentary tax was on an amount,

so that the preponderance of immoveable property constituted a converging series of 78, 43, and 31 per cent. (Parieu.) In North America, with its great unoccupied territory, the reverse is the case. The census of 1850 gave a moveable property of 36 per cent.; that of 1860 of only 30 per cent. According to Dubost, the rent of land in Algeria was 80 per cent., a gross product of only 10-15 francs per hectare; in Corsica, 66 per cent., a gross yield of from 30-35 per cent.; in the Department du Nord, 17.5-24 per cent., a gross yield of from 500-740 francs. (Journal des Economistes, Juin, 1870, 336 ff.)

[157-4] The repeated sifting of the bran (mouture économique) had great influence in this respect. In France, in the sixteenth century, a setier of wheat gave only 144 pounds of bread. In 1767, according to Malouin, L'Art du Bonlanger, it gave 192 pounds. It now gives from 223 to 240 pounds. The gain in barley is still greater; the setier gives 115 pounds of flour, formerly only 58. (Roquefort, Histoire de la Vie Privée des Français, I, 72 ff. Beckmann, Beitr. zur Gesch. der Erfind., II, 54.)

[157-5] In the beginning of the eighteenth century, the counties in the neighborhood of London addressed a petition to Parliament against the extension of the building of turnpike roads which caused their rents to decline, from the competition of distant districts. (Adam Smith, Wealth of Nat., I, ch. 11, 1.) Compare Sir J. Stewart, Principles, I, ch. 10. Improvements in transportation which affect the longest and shortest roads to a market in an absolutely equal degree, as, for instance, the bridging of a river very near the market, leave rent unaffected. (von Mangoldt, V. W. L., 480.)

[157-6] Malthus, Principles, 231 ff. If the laboring class were to become satisfied with living on potatoes instead of meat and bread as hitherto, rents would immediately and greatly fall, since the necessities of the people might then be obtained from a much smaller superficies. But after a time, the consequent increase in population might lead to a much higher rent than before; since a great deal of land too unfertile for the cultivation of corn might be sown with potatoes, and thus the limits of cultivation be reached much later.

[157-7] In France, between 1797 and 1847, the average price of wheat did not rise at all. Hipp. Passy mentions pieces of land which produced scarcely 12 hectolitres of wheat, but which now produce 20—an increased yield of 170 francs, attended by an increase in the cost of only 75 francs. (Journal des Economistes, 15 Oct., 1848.) Moreover, it may be that a not unimportant part of modern rises in the price of corn may be accounted for by the better quality of the corn caused by higher farming. (Inama Sternbeg, Gesch. der Preise, 10 seq.) Such facts, readily explainable by Ricardo's theory, remove the objection of Carey, Banfield and others, that the condition of the classes who own no land has, since the middle ages, unquestionably improved. Political Economy would be simply a theory of human degradation and impoverishment, if the law of rent was not counteracted by opposing causes. (Rœsler, Grundsätze, 210.) According to Berens, Krit. Dogmengeschichte, 213, the actual highness of rent is to be accounted for by the antagonism between the "soil-law (Bodengesetz) of the limited power of vegetation," and the "progress of civilization" (but surely only to the extent that the latter improves the art of agriculture). Thus, too, John Stuart Mill, Principles, I, ch. 12; II, ch. 11, 15 seq.; III, ch. 4 seq.; IV, ch. 2 ff.

[157-8] Thus, for instance, drainage works which, where properly directed, have paid an interest of from 25 to 70 per cent. per annum in England and Belgium on the capital invested.

SECTION CLVIII.

HISTORY OF RENT.—IN PERIODS OF DECLINE.

If a nation's economy be declining, in consequence of war for instance, the disastrous influence hereof on rent may be retarded by a still greater fall in wages or in the profit on capital. But it can be hardly retarded beyond a certain point.[158-1] As a rule, the decline of rents begins to be felt by the least fertile and least advantageously situated land.[158-2] [158-3]

[158-1] "The falling of rents an infallible sign of the decay of wealth." (Locke.) In England, in 1450, land was bought at "14 years' purchase;" i. e., with a capital = 14 times the yearly rent paid, in 1470, at only "10 years' purchase." (Eden, State of the Poor, III, App., I, XXXV.) This was, doubtless, a consequence of the civil war raging in the meantime. The American war (1775-82) depressed the price of land in England to "23¼ years' purchase," whereas it had previously stood at 32. (A. Young.) The rent of land, in many places in France, declined from 10,000 to 2,000 livres, on account of the many wars during Louis XIV.'s reign. (Madame de Sévigné's Lettres, 25 Dec, 1689.) Even in 1677, it was only one-half of its former amount (King, Life of Locke, I, 129.) The whole Bekes county (comitat) in Hungary was sold for 150,000 florins under Charles VI.; after the unfortunate war with France. (Mailath, Oesterreich, Gesch., IV, 523.) Compare Cantillon, Nature du Commerce, 248. In Cologne, a new house was sold in the spring of 1848 for 1,000 thalers, the site of which alone had cost 3,000 thalers; and there are six building lots which formerly cost over 3,000 thalers, now valued at only 100 thalers. (von Reden, Statist. Zeitschr., 1848, 366.) On the other hand, Napoleon's war very much enhanced English rents (Porter, Progress of the Nation, II, 1, 150 ff.), because it affected England's national husbandry principally by hindering the importation of the means of subsistence. (Passy, Journal des Economistes, X, 354.)

[158-2] Thus the price of lands, in Mecklenburg, between 1817 and 1827, fell 30 to 40 per cent. in the least fertile quarters; in the better, from 15 to 20 per cent. (von Thünen, in Jacob, Tracts relating to the Corn Trade, 40, 187.) Per contra, see Hundeshagen Landwirthsch. Gewerbelehre, 1839, 64 seq., and Carey, Principles, I, 354.

[158-3] The average rent in England was, in 1815, 17s. 3d. In the counties, it was highest in Middlesex, 38s. 9d.; in Rutland, 38s. 2d.; Leicester, 27s. 3d.; lowest in Westmoreland, 9s. 1d. In Wales, the average was 7s. 10d.; highest in Anglesea, 19s.; lowest in Merioneth, 4s. 8d. In Scotland the average was 5s. 1½d.; highest, Midlothian, 24s. 6½d.; lowest, Highland Caithness, Cromarthy, Inverness and Rosse, from 1s. 1d. to 1s. 5d.; Orkneys, 8½d.; Sutherland, 6d.; Shetlands, 3d. In Ireland, the average was 12s. 9d.; highest in Dublin, 20s. 1½d.; lowest, Donegal, 6s. (McCulloch, Stat., I, 544 ff.; Yearbook of general Information, 1843, 193.) In France, Chaptal, De l'Industrie Fr., 1819, I, 209 ff., estimates the average yield per hectare at 28 francs; in the Department of the Seine, 216; Nord, 69.56; Lower Seine, 67.85; in the upper Alps, 6.2; in the lower Alps, 5.99: in the Landes, 6.25. While in the Landes, only 20 francs a hectare are frequently paid, the purchase price in the neighboring Medoc is sometimes 25,000 francs. (Journal des Economistes, Jan. 15, 1851.) In Belgium, the average price of agricultural land is 52.46; in East Flanders, 53.19; in Namur, 29.24. (Heuschling, Statistique, 77.)

SECTION CLIX.

HISTORY OF RENT.—RENT AND THE GENERAL GOOD.

We so frequently hear rent called the result of the monopoly[159-1] of land, and an undeserved tribute paid by the whole people to landowners, that it is high time we should call attention to the common advantage it is to all. There is evidently danger that, with the rapid growth of population, the mass of mankind should yield to the temptation of gradually confining themselves to the satisfaction of coarse, palpable wants; that all refined leisure, which makes life and the troubles that attend it worth enduring, and which is the indispensable foundation of all permanent progress and all higher activity, should be gradually surrendered. (See § 145.) Here rent constitutes a species of reserve fund, which grows greater in proportion as these dangers impend by reason of the decline of wages and of the profit of capital, or interest.[159-2] Besides, precisely in times when rent is high, the sale and divisibility of landed estates act as a beneficent reaction against the monopoly of land, which is always akin to the condition of things created by rent.

But it is of immeasurably greater importance that high rents deter the people from abusing the soil in an anti-economic way; that they compel men to settle about the centers of commerce, to improve the means of transportation, and under certain circumstances to engage in the work of colonization; while, otherwise, idleness would soon reconcile itself to the heaping together of large swarms of men.[159-3] The anticipation of rent may render possible the construction of railroads, which enable the land to yield that very anticipated rent.

[159-1] "Rent is a tax levied by the landowners as monopolists." (Hopkins, Great Britain for the last forty Years, 1834.) For a very remarkable armed and successful resistance of farmers in the state of New York to the claims for rent of the Rensselaer family, represented by the government, see Wappäus Nord Amerika, 734.

[159-2] Malthus, Additions to the Essay on Population, 1817, III, ch. 10; compare also Verri, Meditazioni, XXIV, 3. The Physiocrates call the landowners classe disponible, since, as they may live without labor, they are best adapted to military service, the civil service, etc., either in person or by defraying the expenses of those engaged in them. (Turgot, Sur la Formation etc., § 15; Questions sur la Chine, 5.)

[159-3] Well discussed by Schäffle, Theorie, 65, 72, 83. Malthus considers the capital and labor expended in agriculture more productive than any other, because they produce not only the usual interest and wages, but also rent. If, therefore, the manufacturing and commercial profit of a country = 12 per cent., and the profit of capital employed in agriculture = 10 per cent., a corn law which compelled the capital engaged in manufactures and commerce to be devoted to agriculture would be productive of advantage to the national husbandry in general, if the increase in rent should amount to about 3 per cent. (On the Effects of the Corn Laws and of a Rise or Fall in the Price of Corn on the Agriculture and the general Wealth of the Country, 1815. The Grounds of an Opinion on the Policy of Restricting the Importation of Foreign Corn, 1815.) Compare supra, § 55, and the detailed rectification in Roscher, Nationalökonomik des Ackerbaues, etc., § 159 ff.

CHAPTER III.

WAGES.

SECTION CLX.

THE PRICE OF COMMON LABOR.

Like the price of every commodity, the immediate wages of common labor is determined by the relation of the demand and supply of labor. Other circumstances being the same, every great plague[160-1] or emigration[160-2] is wont, by decreasing the supply, to increase the wage's of labor; and a plague, the wages of the lowest kind of labor most.[160-3] And so, the increased demand, in harvest time, is wont to increase wages; and even day board during harvest time is wont to be better.[160-4] [160-5] In winter the diminished demand lowers wages again.[160-6] Among the most effective tricks of socialistic sophistry is, unfortunately, to caricature the correct principle: "labor is a commodity," into this other: "the laborer is a commodity."

Moreover, common labor has this peculiarity, that those who have it to supply are generally much more numerous than those who want it; while the reverse is the case with most other commodities. Another important peculiarity of the "commodity" labor, is, that it can seldom be bought, without at the same time reducing the person of the seller to a species of dependence. Thus, for instance, the seller cannot be in a place different from that in which his commodity is. Hence a change in the person, etc. of the buyer very readily necessitates in the workman a radical change of life, and that the levelling adjustment of local excess and want is rendered so difficult in the case of this commodity.[160-7] Hence, it is that, if in the long run the exchange of labor against wages is to be an equitable one (§ 110), the master of labor must, so to speak, incorporate part of his own personality into it, have a heart for faithful workmen and thus attach them to himself.[160-8]

[160-1] High rate of Italian wages after the plague in 1348, but also many complaints of the indolence and dissoluteness of workmen. (M. Villani, I, 2 ff., 57 seq. Sismondi, Gesch. der ital. Republiken in Mittelalter, VI, 39.) In England, the same plague increased the wages of threshers from an average of 1.7 d. in 1348, to 3.3 d. in 1349. Mowers received, during the 90 years previous, 1/12 of a quarter of wheat per acre; in 1371-1390, from 1/7 to 1/6. The price of most of their wants was then from 1/8 to 1/12 as high as in A. Young's time, and wages ¼ as high. (Rogers, I, 306, 271, 691.) The great earthquake in Calabria, in 1783, produced similar effects. (Galanti, N. Beschreiburg von Neapel, I, 450.) Compare Jesaias, 13, 12. On the other hand, depopulation caused by unfortunate wars is not very favorable to the rate of wages; instance, Prussia in 1453 ff., after the Polish struggle, and Germany, after the Thirty Years' War.

[160-2] How much it contributes to raise wages that workmen can, in a credible way, threaten to move to other places, is illustrated by the early high wages and personal freedom of sailors. Compare Eden, State of the Poor, I, 36. In consequence of the recent great emigration from Ireland, the weekly wages of farm hands in that country was 57.4 per cent. higher than in 1843-4. In Connaught, where the emigration was largest, it was 87 per cent. higher. (London Statist. Journ., 1862, 454.)

[160-3] Compare Rogers, I, 276, and passim.

[160-4] And this in proportion as the uncertainty of the weather causes haste. In England, the harvest doubles wages. (Eden.) In East Friesland, it raises it from 8-10 ggr. to 2 thalers sometimes (Steltzner); in the steppes of southern Russia, from 12-15, to frequently 40-50 kopeks. This explains why the country people who come into the weekly market are anxious, during harvest time, to get rid of their stocks as fast as possible. According to the Statist. Journal, 1862, 434, 448, the average wages in harvest and other times, amounted to:

The reason why the wages of females rises more in harvest time than the wages of males may be the same that in many places in Ireland has made emigration more largely increase the wages of women. (l. c., 454.) Every excess of workmen depresses, and every scarcity of workmen enhances the wages of the lowest strata relatively most.

[160-5] The wages of English sailors was usually 40-50 shillings a month. During the last naval war, it rose to from 100 to 120, on account of the great demand created by the English fleet. (McCulloch, On Taxation, 40.)

[160-6] The winter wages of German agricultural laborers varies between 6.1 and 20 silver groschens; summer wages between 7.9 and 27.5 silver groschens. Emminghaus, Allg. Gewerbelehre, 81, therefore, advises that in winter the meal time of workmen in the fields should be postponed to the end of the day, and winter wages then made less low than at present.

[160-7] W. Thornton, On Labour, its wrongful Claims and rightful Dues, its actual, Present and possible Future, 1869, II, ch. 1. Harrison, Fortnightly Review, III, 50.

[160-8] Just as the husband binds himself in marriage. While in concubinage there is apparent equality, it costs the woman a much greater sacrifice than the man.

SECTION CLXI.

WAGES OF LABOR.—THE MINIMUM OF WAGES.

Human labor cannot, any more than any other commodity, be supplied, in the long run, at a price below the cost of production.[161-1] [161-2] The cost of production here embraces not only the necessary or customary means of subsistence of the workman himself, but also of his family; that is, of the coming generation of workmen. The number of the latter depends essentially on the demand for labor. If this demand be such that it may be satisfied by an average of six children to a family, the rate of wages must be such as to support the workman himself and to cover the cost of bringing up six children.[161-3] Where it is customary for the wife and child, as well as for the father, to work for wages, the father does not need to earn the entire support of the family, and hence individual wages may be smaller.[161-4] But if it were to fall below the cost mentioned above, it would not be long before increased mortality and emigration, and a diminution of marriages and births would produce a diminution of the supply; the result of which would be, if the demand remained the same, a renewed rise of wages.

Conversely, it would be more difficult for the rate of wages to be maintained long much above that same cost, in proportion as the gratification of the sexual appetite was more generally considered the highest pleasure of sense, and the love of parents for their children as the most natural human duty. As Adam Smith says, where there is a great demand for men, there will always be a large supply of them.[161-5]

[161-1] Compare Engel's beautiful lecture on the cost of labor to itself (Selbstkosten = self-cost), Berlin, 1866.

[161-2] Wolkoff zealously and rightly argues, that the minimum wages is not the taux naturel of wages. (Lectures, 118 ff., 284.) von Thünen also divides wages into two component parts—that which the workman must lay out in his support in order to continue able to work, and that which he receives for his actual exertion. (Isolirter Staat., II, 1, 92 seq.)

[161-3] Gasparin distinguishes five periods in the career of a workman generally: a, he is supported by his parents; b, he supports himself and is in a condition to save something; c, he marries, and supports his children with trouble; d, the children are able to work, and the father lives more comfortably; e, his strength and resources decline. (Villermé, Tableau de l'État physique et moral des Ouvriers, 1840, II, 387.)

[161-4] Cantillon, Nature du Commerce, etc., 1755, is of opinion that a day laborer, to bring up two children until they are grown, needs about as much as he does for his own support; and that his wife may, as a rule, support herself by her own work. (42 ff.) In Germany, it is estimated that, in the case of day laborers, a woman can earn only from 1/3 to ½ of what her husband does; mainly because she is so frequently incapacitated for work by pregnancy, nursing, etc. (Rau, Lehrbuch, I, § 190.) In France, in 1832, a man working in the fields earned, on an average, 1¼ francs a day, the wife ¾ of a franc (200 days to the year), the three children 38/100 francs (250 days to the year), an aggregate of 650 francs per annum. (Morogues.) In England, the average amount earned in the country was for males, per annum, £27 17s.; (munications[TN 6] relative to the Support and Maintenance of the Poor, 1834, p. LXXXVIII.) The wife of an English field hand, without children, earns 1/3 more than one with children. In the case of mothers, a difference of fewer or more children is unnoticeable in the effects on wages. (London Statist. Journal, 1838, 182.) In the spinning factories in Manchester, in 1834, children between 9 and 10 years of age were paid, weekly, from 2s. 9d. to 2s. 10d.; between 10 and 12, from 3s. 6d. to 3s. 7d.; between 12 and 14, from 5s. 8d. to 5s. 9d.; between 14 and 16, from 7s. 5d. to 7s. 6d. (Report of the Poor Commissioners, 204.) Those manufactures which require great physical strength, like carpet and sail-cloth weaving, and those carried on in the open air and in all kinds of weather, allow of no such family competition and debasement of wages. (Senior in the Report of the parliamentary Committee on Hand Weavers, 1841.)

[161-5] Similarly, J. Möser, Patriot. Phant., I, 40. Adam Smith infers from the following symptoms in a country that wages are higher there than the indispensable minimum, viz.: if wages in summer are higher than in winter, since it is seldom that enough is saved in summer to satisfy the more numerous wants of winter; if wages vary less from year to year and more from place to place than the means of subsistence, it they are high even where the means of subsistence are cheapest. (Wealth of Nat., I, ch. 8.)

SECTION CLXII.[TN 7]

COST OF PRODUCTION OF LABOR.

The idea conveyed by the expression necessaries of life is, within certain limits, a relative one. In warm countries, a workman's family needs less clothing, shelter, fuel and even food[162-1] than in cold countries. This difference becomes still more striking when the warm countries possess absolutely cheaper food as, for instance, rice, Turkish wheat, bananas etc. Here, evidently, other circumstances being the same, the rate of wages may be lower.[162-2] The cultivation of the potato has operated in the same direction; since an acre of land planted with potatoes yields, on an average, twice as much food as the same acre planted with rye.[162-3] In France, two-thirds of the population lived almost without animal food, on chestnuts, Indian corn, and potatoes (Dupin), while in England, malt, hops, sugar, brandy, tea, coffee, tobacco, soap, newspapers, etc. are described as "articles chiefly used by the laboring classes." (Carey.)

The standard of decency of the working class also has great influence here. The use of blouses in Paris has nothing repulsive, nor that of wooden shoes in many of the provinces of France, nor the absence of shoes in lower Italy; while the English workman considers leather shoes indispensable, as he did only a short time ago a cloth coat. Compare infra, § 214.[162-4]

[162-1] Explained since Liebig's time by the fact that a part of food is consumed to preserve animal heat: means of respiration in contradistinction to means of nutrition. Recent research has shown that in cold weather more urea and also more carbonic acid are given off; hence the means of supplying this deficit should be greater in cold weather than in warm. This more rapid transformation is wont, when nutrition is sufficient, to be accompanied by more energetic activity. (Moleschott, Physiologie der Nahrungsmittel, 1850, 47, 50, 83.)

[162-2] This is opposed in part by the fact that a hot climate induces indolence, and that therefore he needs a greater incentive to overcome his disposition to idleness. Thus, in the cooler parts of Mexico, the rate of wages was 26 sous a day, in the warmer, 32 sous. (Humboldt, N. Espagne, III, 103.)

[162-3] According to Engel, Jahrbuch für Sachsen, I, 419, on acres similarly situated and under similar conditions, the lowest yielded:

The dry substance of these products yielded:

In Saxony, from 1838 to 1852, the average prices stood as follows:

(loc. cit.) The high price of protein in wheat depends probably on the more agreeable appearance and pleasanter taste of wheat flour; the still higher price of potato protein on the exceedingly easy mode of its preparation.

[162-4] As regards food alone, the cost of the support of a plowman on Count Podewil's estate, reduced by Rau, Lehrbuch, § 191, to the unit of rye, is annually 1,655 lbs. of rye. According to Koppe, it is 1,952 lbs.; to Block, 2,300 lbs.; to Kleemann, from 1,888 to 2,552 lbs.; to Möllenger, 2,171 lbs. The first three estimate the cost in meat at 78, 160 and 60 pounds. Compare Block, Beitr. Z. Landgüterschätzungskunde, 1840, 6. Exhaustive estimates for all Prussian governmental districts in von Reden, Preussische Erwerbs, und Verkehrsstatistik, 1853, I, 177 ff., according to which the requirement, per family, varies between 71 thalers in Gumbinnen and 204 thalers in Coblenz, the average being 105 thalers. According to more recent accounts, a laborer's family in East Prussia, gangmen not included, get along very well on 177 thalers per annum. (von der Goltz, Ländl. Arbeiterfrage, 1872, 9 ff.) In Mecklenburg, omitting Hofgänger, on 183 thalers. (Ann. des. patr. Vereins, 1865, No. 26.)

The necessary outlay of the family of an agricultural day laborer in England, in 1762, was estimated as follows: for bread and flour, £6 10s. per annum; for vegetables and fruit, £1 1-2/3s.; for fuel, light and soap, 2-9-5/6s.; for milk, butter and cheese, £1 1-6-5/6s.; for meat, £1 6s.; for house-rent, 1-6s.; for clothing, bedding, etc., 2-16-1/3s.; for salt, beer and colonial wares, 1-16-5/6s.; for medicine, expenses attending confinement of wife, etc., 1-6½s. (J. Wade, History of the middle and working Classes, 1853, 545.) Concerning 1796, compare Sir F. M. Eden, State of the Poor, I, 660, 1823; Lowe, on the present Condition of England. Compare on the receipts and expenses of ten working families in and about Mühlhausen, the tables in the Journal des Economistes, October, 1861, 50; and further Ducpétiaux, Budgets économiques des Classes ouvrières en Belgique, 1855. According to Playfair in Knop, Agriculturchemie, I, 810, ff., different classes of grown men need daily food.

Here 1 stands for a convalescent who can bear only enough to preserve life; 2, the condition of rest; 3, moderate motion of from 5 to 6 English miles' walk daily; 4, severe labor = a walk of 20 English miles daily; 5, very severe labor = to a day's walk of 14 English miles, with a load weighing 60 lbs. If the fat be given in terms of starch, the aggregate need of both substances in the case of 1 is 6.6 times as great as the need of plastic substance; in the case of 2, 3, 4, and 5, respectively 5.7, 5.2, 4.8 and 4.0 times as much.

A Dutch soldier doing garrison duty receives daily, in times of peace, 0.333 kilogrammes of wheat flour, 0.125 of meat, 0.850 of potatoes, 0.250 of vegetables, containing in the aggregate 60 grammes of albumen. In forts, where the service is more severe, he receives 0.50 kilogrammes of wheat flour, 0.06 of rice or groats, with an aggregate amount of 116 grammes of albumen. (Mulder, Die Ernährung in ihrem Zusammenhange mit dem Volksgeiste, übersetzt von Molecshott, 1847, 58 seq.) According to the researches of Dr. Smith, in order to avoid the diseases caused by hunger, a man needs, on an average, to take 4,300 grains of carbon and 200 grains of nitrogen in his daily food; a woman 3,900 grains of carbon and 180 grains of nitrogen. In 1862, the workmen in the famishing cotton industries of Lancashire were actually reduced to just about this minimum. (Marx, Kapital, I, 642.) Death from starvation occurs in all vertebrates when the loss of weight of the body, produced by a want of food, amounts to between two-fifths and one-half of what it was at the beginning of the experiment. (Chossat, Recherches expérimentales sur l'Inanition, 184, 3.)

SECTION CLXIII.

WAGES OF LABOR.—POWER OF THE WORKING CLASSES OVER THE RATE OF WAGES.

In this way, the working classes hold in their own hands one of the principal elements which determine the rate of wages; and it is wrong to speak of an "iron law" which, under the control of supply and demand, always reduces the average wages down to the means of subsistence.[163-1] For the moment, indeed, not only individual workmen, but the whole working class is master of the supply of its commodity only to a very small extent; since, as a rule, the care for existence compels it to carry, and that without interruption, its whole labor-power to market. But it is true that the future supply depends on its own will; since, with an increase or decrease in the size of the families of workingmen, that supply increases or diminishes. If, therefore, by a favorable combination of circumstances, wages have risen above the height of urgent necessity, there are two ways open to the working class to take advantage of that condition of things. The workman either raises his standard of living, which means not only that his necessary wants are better satisfied, his decencies increased and refined, but also and chiefly, that the intellectual want of a good prospect in the future, which so particularly distinguishes the honorable artisan from the proletarian is taken into consideration. And it is just here that a permanent workingmen's union, which should govern the whole class, might exert the greatest influence. Their improved economic state can be maintained only on condition that the laboring class shall create families no larger than they hope to be able to support consistently with their new wants.[163-2]

Or, the laboring class continues to live on as before, from hand to mouth, and employ their increased resources to gratify their sexual appetite earlier and longer than before, thus soon leading to an increase of population.

The English took the former course in the second quarter of the last century, when English national economy received a powerful impetus, and the large demand for labor rapidly enhanced the rate of wages. The Scotch did in like manner a generation later. The second alternative was taken by the Irish, when the simultaneous spread of the cultivation of the potato[163-3] and the union with England, at the beginning of the nineteenth century, gave an extraordinary extension to their resources of food. While the population of Great Britain, between 1720 and 1821, did little more than double, the population of Ireland increased from 2,000,000 to nearly 7,000,000 between 1731 and 1821. No wonder, therefore, that the average wages of labor was twenty to twenty-four pence per day in the former, and in the latter only five pence. (MCCulloch.)[163-4]

Naturally enough, this difference of choice by the two peoples is to be explained by the difference in their previous circumstances. The Irish people, robbed by violence of their own higher classes, and, therefore, and on this account precisely, almost entirely destitute of a middle class, had lost the check on increase they possessed in the middle ages, without having as yet assimilated to themselves[TN 8] the checks which come with a higher stage of culture. Their political, ecclesiastical and social oppression allowed them no hope of rising by temporary sacrifices and energetic efforts permanently to a better condition as citizens or gentlemen. Only the free man cares for the future. Hence, the sexual thoughtlessness and blind good nature, the original tendencies of the Irish people, necessarily remained without anything to counterbalance them. It always supposes a high degree of intelligence and self-restraint among the lower classes, when an increase in the thing-value, or the real value of wages, does not produce an increase in the number of workmen, but in their well-being. The individual is too apt to think that it matters little to the whole community whether he brings children into the world or not, a species of egotism which has done most injury to the interests in common of mankind. As a rule, it requires a great and palpable enhancement of wages to make workmen, as a class, raise their standard of living.[163-5] [163-6]

[163-1] Compare Lassalle, Antwortschreiben an das Central Comite zur Berufung eines allg. deutschen Arbeitercongresses, 1863, 15; also Turgot, sur la Formation etc., § 6. When Lassalle says that when a varied standard of living has become a national habit it ceases to be felt as an improvement, he says what is in a certain sense true. But is the man to be pitied who, absolutely speaking, is getting on well enough; relatively speaking, better off than before; but who is only not better off than other men?

[163-2] A case in Holstein, in which, in the first half of the eighteenth century, the serfs of a hard master conspired together not to marry, and thus soon forced him to sell his estate. (Büsch, Darstellung der Handlung, V, 3, II.)

[163-3] On the otherwise remarkable economic advance in Ireland about 1750, see Orrey, Letters concerning the Life and Writings of Swift, 1751, 127; Anderson, Origin of Commerce, a., 1751.

[163-4] Compare especially Malthus, Principles, ch. 4, sec. 2. How little Adam Smith dreamt of this may be best seen in I, 115, Bas. Recently, the average wages per week amounted in England to 22½s., in Scotland to 20½s., in Ireland to 14¾s. (Levi, Wages and Earnings of the working Classes, 1866.)

[163-5] Thus the unheard of long series of excellent harvests in England, between 1715 and 1765, contributed very largely to this favorable transformation. Day wages expressed in wheat, between 1660 and 1719, amounted on an average to only about 2/3 of a peck; between 1720 and 1750, to an entire peck. In the fifteenth century, a similar series of good harvests contributed very much to the flourishing condition of the "yeomanry." Under Henry VII., workmen earned from two to three times as much corn as they did a century later. And so in France, the great Revolution at the end of the eighteenth century, by setting free a vast quantity of hitherto bound-up force, enhanced the productiveness of the entire economy of the nation, and made the division of the national income more nearly equal. There is an essential connection here between the rapidity of the transition and the facts, that the habits of consumption of the working class received a powerful impulse, and that population increased much less rapidly than the national income. Compare John Stuart Mill, Principles, II, ch. 11, 2. In our own days again, English workmen had a splendid opportunity to raise their standard of life. Emigration to Australia, etc. preponderated over the natural increase of population to such an extent that, in 1852, for instance, only 217,000 more human beings were born in England and Wales than died, and 368,000 emigrated. At the same time, exports increased: in 1849, they were £63,000,000; in 1850 £71,000,000; about the end of 1853, something like £90,000,000.

This golden opportunity was used by the English laboring classes to both largely multiply marriages and to enhance the rate of wages. The number of marriages contracted in England yearly, from 1843 to 1847, was 136,200; from 1853 to 1857, 159,000. The number of births annually, from 1843 to 1847, was 544,800; from 1853 to 1857, 640,400. And wages, in a number of industries, rose, between 1839 and 1859, from about 18 to 24 per cent. (Quarterly Review, July, 1860, 86), while the prices of most of the necessaries of life declined. That, in the same time, the condition of English laborers was elevated, both intellectually and morally, is proved by many facts cited in Jones' and Ludlow's work on the social and political condition of the laboring classes in England. In Germany, the recent establishment of peace on a firm footing and the French war contributions have given the country an impulse which might be taken advantage of by the laboring class with the happiest results if they would accustom themselves to more worthy wants and at the same time preserve their accustomed industry.

[163-6] The cheapening of the necessaries of life, experience shows, is more likely to lead to an increase of population; that of luxuries, to a raising of the standard of life or of comfort.

SECTION CLXIV.

WAGES.—COST OF PRODUCTION OF LABOR.

As the cheapening of the means of subsistence, when the circle of wants of the laboring class has not correspondingly increased, leads to a decline of wages, so an enhancement of their price must, when wages are already so low as only to be able to satisfy indispensable wants, produce an increase in the rate of wages. The transition in the former case is as pleasing as in the latter it is replete with the saddest crises.[164-1] The slower the rise in the price of the means of subsistence is, the more it is to be feared that the working classes will seek to meet it, not by emigration or by a diminished number of marriages, but by decreasing the measure of their wants, the introduction of a poorer quality of food, etc.[164-2]

However, all this is true only of permanent changes in the average price of the means of subsistence, such as are produced, for instance, by the development of agriculture, by taxation etc. Transitory fluctuations, such as result, for instance, from a single good or bad harvest, cannot have this result.[164-3] It is, in poor countries at least, one of the worst effects of a bad harvest, that it tends to positively lower the rate of wages. A multitude of persons who would otherwise be able to purchase much labor are now deterred from doing so, by the enhancement of the price of food.[164-4] On the other hand, the supply increases: many men who before would not work even for money, see themselves now compelled to do so. Those who have been workmen hitherto are compelled by want to make still greater exertions.[164-5] ]

In very cheap years, all this is naturally reversed.[164-6]

[164-1] According to McCulloch, Edition of Adam Smith, 472, the food of a day laborer's family constitutes between 40 and 60 per cent. of their entire support. In the case of Prussian field hands, it is generally 54 per cent. greatest in the province of Saxony, viz., 58 per cent. and lowest in Posen, 43 per cent. Compare Rau, Lehrbuch, I, § 191. This may serve as a point of departure, from which to measure the influence of a given enhancement of the price of corn. In opposition to Buchanan (Edition of Adam Smith, 1817, 59), who had denied the influence of the price of the means of subsistence on the rate of wages, see Ricardo, Principles, ch. 16.

[164-2] How easily English farmers have accustomed themselves to the consequences of momentary calamities, may be seen from John Stuart Mill, Principles, II, ch. 11, 5 seq.; Thornton, Population and its Remedy, 1846, passim. Malthus, Principles, sec. 8, shows in opposition to Ricardo, Principles, ch. 8, that it is not all one to the laboring classes whether their wages rise while the price of the means of subsistence remains the same, or whether the rate of wages remaining nominally the same, the commodities to be purchased decline in price. If for instance, potato-food, physiologically considered, was just as good as flesh-food and wheat bread, yet an unmarried workman or a father with a number of children below the average would be able to save less from the former for the reason that it possesses less value in exchange. (Edinburg Rev., XII, 341.) Thus, e. g., in Ireland, between A. Young and Newenham (1778-1808), the rate of wages increased more than the price of potatoes, but all other means of subsistence in a still greater ratio. (Newenham, A view of Ireland, 1808.) Compare Malthus, On the Policy of Restricting the Importation of foreign Corn, 1815, 24 ff.; contra. Torrens, on the Corn trade, 1820, 374 ff.

[164-3] Compare Garve in MacFarlan, On Pauperism, 1785, 77. Thus, in the United States, the same quantities of coffee, leather, pork, rice, salt, sugar, cheese, tobacco, wool, etc., could be earned in 1836 by 23.5 days' labor; in 1840, by 20.75; in 1843, by 14.8; in 1864, by 34.6. (Walker, Science of Wealth, 256.)

[164-4] The person who formerly consumed perhaps four suits of clothes in a year now limits himself to two, and forces the tailor to dismiss one journeyman. In Bavaria, the dear times, 1846-47, and probably also the disturbances of 1848-49, caused officials, pensioners, annuitants and professional men to discharge one-tenth of the female domestics they employed in 1840. (Hermann, Staatsw. Unters, II, Aufl., 467.)

[164-5] The labor of digging during the time of scarcity in England was paid one-third of the price usually paid in good years. (Porter, Progress of the Nation, III, 14, 454.) On the Slavic[TN 9] portions of Silesia, see Hildebrand's Jahrb., 1872, I, 292. According to Rogers, I, 227 ff., 315 ff., and the table of prices in the appendix to Eden, State of the Poor, the price in England of a quarter of wheat and a day's wages was, in—

[164-6] Petty, Several Essays on Political Arithmetic, 133 ff. Adam Smith, Wealth of Nat., I, ch. 8. Ricardo, Principles, ch. 9. In Hesse, in consequence of a series of many rich harvests from 1240 to 1247, no servants could be had at all, so that the nobility and clergy were obliged to till their own lands. (Anton, Gesch. der deutschen Landwirthschaft, 111, 209.)

SECTION CLXV.

WAGES.—THE DEMAND FOR LABOR.

The demand for labor, as for every other commodity, depends, on the one hand, on the value in use of it, and on the other, on the purchaser's capacity to pay for it (his solvability), These two elements determine the maximum limit of wages, as the means of support considered indispensable by the workmen determine the minimum. There are circumstances conceivable under which the rise in wages might entirely eat up rents; but there must always be a portion of the national income reserved to reward capital (its profit). If wages were to absorb the latter also, the mere owner of capital would cease to have any interest in the progress of production. Capital would then be withdrawn from employment and consumed.[165-1] Obviously, no man engaged in any enterprise can give more as wages to his workmen than their work is worth to him.[165-2] Hence the additional product in any branch of industry, due to the labor of the workman last employed, has a controlling influence on the rate of the wages which can be paid to his fellow workmen. If the additional products of the workmen successively last employed constitute a diverging series,[165-3] the last term in the series is the natural expression of the unsurpassable maximum of wages; if they constitute a converging series, men the employer can pay the last workman higher wages than the additional product due to him; provided, however, that the reduction which is to be expected in the case of the workmen previously employed to the same level still leaves him a sufficiently high rate of profit.[165-4] Hence the growing skill of a workman, in and of itself, makes an increase of his wages possible;[165-5] while, conversely, if he can be replaced by capital, which always relatively decreases the value in use of his labor, there is a consequent pressure on his wages.

[165-1] Storch, Handbuch, I, 205 seq.

[165-2] Higher wages promised, for instance, as a reward for saving a human life or some other very precious thing in great danger of being destroyed. In the case of material production, labor is worth to the party engaged in the enterprise, at most, as much as the price of the product after the remaining cost of reproducing it is deducted.

[165-3] Possibly in consequence of a better division of labor or of some other advance made in the technic arts.

[165-4] Thus, for instance, in harvesting potatoes, if, after they have been ploughed up, only those nearest the surface are collected, a laborer can gather over thirty Prussian scheffels in a day. But the fuller and completer the gathering of potatoes desired is, the smaller will be the product of one workman and of one day's labor. If, therefore, a man wants to gather even the last bushel in a potato field of 100 square rods, so much labor would be required to accomplish it that the workman would not gather enough to feed him during his work, to say nothing of supplying his other wants. Supposing that 100 scheffels of potatoes had grown on 100 square rods, and that of these were harvested—

[165-5] In Manchester, in 1828, the wages paid for spinning one pound of cotton yarn, No. 200, was 4s. 1d.; in 1831, only from 2s. 5d. to 2s. 8d. But, in the former year, the spinner worked with only 312 spools; in the latter, with 648; so that his wages increased in the ratio of 1274 to 1566. (Senior, Outlines.)

SECTION CLXVI.

WAGES.—PRICE OF COMMON LABOR.

In the case of a commodity as universally desired as human labor is, the idea of the purchasers' capacity to pay (solvability) must be nearly commensurate with the national income, or to speak more correctly, with the world's income.[166-1] In regard to the different kinds of labor, and especially to common labor, it is evident that the different kinds of consumption require very different quantities of them. Here, therefore, we depend on the direction which national consumption takes, and this in turn is most intimately related to the distribution of the national income.[166-2] If all workmen were employed in nothing but the production of articles consumed by workmen, the rate of wages would be determined almost exclusively by the ratio between the number of the working population and the amount of the national income. But, if this were the case, landowners and capitalists would be obliged to live just as workmen do, and their highest luxury would have to consist in feeding idlers. (§ 226). The effect must be much the same, when the wealthy are exceedingly frugal and employ their savings as rapidly as possible in the employment of common home labor; while, on the other hand, the exportation of wheat, wood, and other articles, which the working classes consume, in exchange for diamonds, lace, champagne, diminishes the efficient demand for common labor in a country.[166-3]

The assumption frequently made, that the demand for labor depends on the size of the national capital, is far from exact.[166-4] Thus, for instance, every transformation of circulating into fixed capital, especially when the labor used in effecting this transformation is ended, diminishes the demand for other labor. That principle is not unconditionally true, even in the case of circulating capital. Thus, for instance, the rate of wages is wont to be raised by the transfer of capital from such businesses as require little labor into such as require much.[166-5] Only that part of circulating capital can have any weight here which is intended, directly or indirectly, for the purchase of labor and for the purchase of each kind of labor in particular.[166-6] The capital of the employer is, by no means, the real source[166-7] of the wages of even the workmen employed by him, It is only the immediate reservoir through which wages are paid out, until the purchasers of the commodities produced by that labor make good the advance, and thereby encourage the undertaker to purchase additional labor. Correlated to this is the fact, that other circumstances being the same, those workmen usually receive the highest wages who have to do most immediately with the consumer.[166-8]

[166-1] Senior denies this. Let us suppose that agriculture in Ireland employs on every 200 acres ten working men's families, one-half of whom are used to satisfy the aggregate wants of the working people, and the other half in the production of wheat to be exported to England. If now the English market requires meat and wool instead of wheat, the Irish landowner will, perhaps, find it advantageous, of the ten laboring families, to employ one in stock raising, a second in obtaining food, etc. to support the laborers, and to discharge all the others. If, then, the increased net product is employed in the purchase of other Irish labor, all goes on well enough; but if, instead of this, the landowners should import articles of English manufacture, the demand for labor in Ireland would doubtless decrease, notwithstanding the increase of its income. (Outlines, I, 154.) Senior here overlooks two things: first, that in the supposed case, if eight-ninths of Irish laborers are thrown out of employment, spite of the increased income of the owners of landed estates, Ireland's national income is on the whole probably diminished (§ 146), and secondly, that, possibly, the demand for labor in England experiences a greater increase than the decrease in Ireland; since, with the addition to the world-income, there would be an increase in the world-demand for labor.

[166-2] Compare Hermann, Staatswirthsch. Untersuch., 280 ff. Earlier yet, Malthus, Principle of Population, II, ch. 13.

[166-3] Thus, Thomas More, Utopia, 96, 197, thinks that if every one was industrious and engaged in only really useful business, no one would need to fatigue himself very much; while, as it is now, the few real laborers there are wear themselves out in the service of the vanity of the rich, are poorly fed and worked exceedingly hard.