The opportunity for cooperative industry is nowhere greater than in a community of farmers. b.u.t.ter and cheese factories, cold storage plants and milk stations invite the cooperation of interested farmers upon the simplest possible basis of agreement. The multiplication of such enterprises is desirable, and the farmers of every community may profitably study the conditions of success. The greatest obstacle heretofore, has been the want of competent management, and the distrust aroused and maintained by the inefficiency and fraud of managers. It is possible, too, that farmers generally do not recognize the actual importance of executive abilities, and are unwilling to pay the salary actually earned by a thoroughly competent man.

_Legal restrictions as to labor._-It is natural for those who suffer in the struggle for better wages to seek the support of law in restrictions upon contracts as to wages, hours of employment and conditions of comfort.

The principle that governments must protect the weak against the strong in any community is a thoroughly established one. Yet its applications are subject to continual readjustment. Mult.i.tudes of experiments have been tried, affecting the whole range of inequalities in wages and perquisites.

In many instances, wages have been fixed by law, and that for long periods of time, but without relieving in any respect the actual force of compet.i.tion among wage-earners themselves. Indeed, the tendency of very explicit enactments is to weaken the individual ability of wage-earners by destroying ambition. Wages fixed by law are necessarily as low as the average would be in a free compet.i.tion; otherwise production is hindered and capital is diminished. With this low average any worker of more than average ability gains nothing by exerting his ability, but does gain ease by neglect. Thus enforced uniformity reduces the energy of the producing forces and practically closes the doors of advancement from wage-earning to profit-making.

A similar effect is found in efforts to regulate the hours of labor by law, except where the law simply defines the meaning of a day's work or emphasizes the importance of public health and vitality rather than equality in distribution. Humanity has done much in reducing hours of toil, and may yet do more; but it will be for humanity's welfare in larger considerations than are measured by money. The eight-hour question, so constantly agitated in certain callings, concerns the entire people just so far,-and no farther,-as the general health and energy of the community depend upon it. Farming communities stand aloof from its application; and yet there is no question that the farmer's home might be even better than it is for developing physical and mental vigor, if hours of toil were more carefully restricted to meet the conditions of healthful growth and activity.

Other conditions, affecting the employment of children and women, are proper subjects of restriction by law; for these also involve the consideration of general welfare in the elevation of the physical, mental and moral characteristics of the race. Upon the same plane must be put all legal restrictions upon methods and machinery, reducing the dangers from accident and promoting the comfort of employes. All restrictions serve their purpose only so long as they are appreciated as having their reason for existence in general welfare. The rights of an employer, under contract with his employe, like the rights of a parent in control of his child, are subject to the law of good will; and the world will yet find a way to make its restrictions felt wherever recklessness or carelessness or greed destroys good will.

_Nationalization of industry._-A somewhat popular suggestion in solution of labor difficulties is the so-called nationalization of industry. This, in general terms, is a proposition to equalize compensation and avoid fluctuation in both wages and employment by public control of all industries under official management. While this involves some principles of socialism, more properly discussed in connection with consumption of wealth, its relations to productive industry may be briefly presented here. The plans proposed are as yet expressed only in most general terms.

Even the method of bringing about such a revolution of thought, feeling and action has not been devised. Still less ready is anyone to point out the details of a plan for the actual production. The nearest a.s.sociated ideas are found in governmental services through a post office department or the management of a system of transportation. Most advocates of the method overlook the fact that in such government administration of partial industries the law of compet.i.tion is still operative between these enterprises and the universal industry of the people.

The difficulties in governmental management under present conditions are anything but small, especially under popular rule, where the dominion of party and the influence of position are all-powerful. Under monarchial rule the organization of such industries becomes like that of an army, in which arbitrary power predominates. It seems easy to see that any effort to solve the problems of labor employment by national control involves finally the arbitrary decision of power, in adjustment of both duties and compensation. The management by officials, however those officials are appointed, is not necessarily wiser, more efficient or more benevolent than the management by interested men, whose life is in natural contact, through business relations, with employes. Those who have had experience with official control under popular government are not likely to expect a readjustment of all interests from the standpoint of politicians to be marked by either universal good will or universal common sense. It is reasonable to suppose that wherever general welfare in actual use of wealth can be best promoted by public control, such control will come through the free exercise of individual judgment with reference to the work in hand. While there ought to be no objection on the part of any to a government enterprise which can be shown to serve in that way the greatest good of all, n.o.body ought to a.s.sume that the nationalization of industries is for the greatest good. Each great undertaking will require its own proof, not only of the welfare to be expected, but of the practical means by which that end can be secured.

_The spirit of equity chief._-The trend of experience goes to show that true economic interests, not only of the community but of individuals, are in accord with general principles of welfare. It seems certain that communities paying the highest wages are those which gain the highest return for labor in product, and maintain the highest general rates of profit. In general, also, those enterprises which are controlled with most care for equity in wages and for the general welfare of employes are most stable under fluctuations of business and most genuinely successful. While wealth may be acc.u.mulated unjustly in the hands of those who oppress their neighbors, there can be no doubt that in long periods of time the best adjustment of all interests gives not only the truest welfare but the largest wealth and the best use of it. The spirit of equity must eventually control both managers and wage-earners, and no other disposition can furnish a final solution of the problems of distribution between employers and employed. If employers are greedy, the wrong will not be righted by an equal display of greed on the part of wage-earners.

The spirit of true philanthropy is the only proper spirit for discussion of these questions.

Chapter XX. Proceeds Of Capital: Interest And Rent.

_Practical distinctions._-The terms interest and rent are distinguished in actual practice by the fact that interest is paid for the use of capital in some circulating form, while rent is paid for the use of fixed capital.

One who borrows anything, expecting to return not the thing itself but its equivalent in value, is said to borrow upon interest. One who borrows the same thing, expecting to return the identical thing, is said to pay rent for its use. Thus interest is paid for control of circulating capital until an equivalent is returned, and rent is paid for control of fixed capital until the same articles are returned in prime condition. A farmer who borrows a mowing machine from the warehouse, giving his note for its value, pays, when he returns that value at the end of the year, interest upon his note. If he borrows the same machine from his neighbor under contract to return the machine in good condition at the end of the season, he pays rent for its use. The young man who borrows his neighbor's farm, expecting at the end of five years to make that farm his own, gives a mortgage note, promising at the end of five years to return an equivalent value for the farm, with annual interest. If, on the contrary, he expects to return the farm itself at the end of five years, without reduction in value, he makes a lease, embodying this agreement, with annual rent for use of the farm.

Both interest and rent are liable to involve the element of risk as to the proper return of the valuable thing promised, and to that extent they partake of the nature of profits. The true interest and rent are independent of the possible risk, and have to do simply with the advantage naturally accruing to the possessor of wealth from its use as capital, and forming one of the chief reasons for acc.u.mulating wealth at all.

In technical discussion the term rent is usually confined to the compensation secured from appropriation of s.p.a.ce, peculiar location, natural fertility, mineral deposits, water privileges, or any natural advantage to be used in production. In this limited meaning rent is confined to the advantage gained by the owner of wealth in any form so affected by the law of supply and demand as to gain a scarcity value. The term unearned increment,-meaning an increase of value without cost of exertion,-has been largely applied to such cases, and ill.u.s.trations are taken chiefly from the ownership of land and similar natural forces. The same unearned increment, however, accrues to the possessor of any article of value or any personal attainment, which through increasing wants of the community becomes, on that account alone, more valuable in market. Thus a bin full of wheat, saved from a year of plenty to a year of scarcity, has gained a value abnormal,-that is, from the fact of its scarcity. Yet no one would think of applying the term rent in such a ease, because the foresight which stored the grain gains its compensation in profits. If the same kind of foresight has plotted a city upon wild lands, and held a portion of those plotted lots until a crowded population competes for their use, such wealth is said to be gained upon the principle of rent.

The difference seems to be chiefly in the greater permanence and the gradual advancement of the profits secured.

The every-day operations of a farming community ill.u.s.trate both interest and rent in all their complications and definitions. Every farmer, in estimating the cost of his wheat crop, may properly calculate both the interest on his capital invested in tools, teams, machinery and wages, and the rent of his land, keeping distinct accounts of interest and rent; or he may combine in one account as interest the use of capital in machinery and land. If he owns the whole establishment, he is likely to combine both interest and rent with the return for his foresight and energy in managing the farm under the name profits. All these returns, however, come for different reasons, though under the same general principle of values expressed in the law of supply and demand. The farmer working a rented farm and the one working a mortgaged farm are alike paying both rent and interest, since every farm involves both the wealth acc.u.mulated by exertion and the wealth advanced by increasing population. While the owner of the mortgaged farm apparently pays interest, if at the end of the term of the mortgage the farm is returned to its former owner by foreclosure, the result is that the mortgagee, while nominally owner of the land, has simply been a renter. In a fair settlement of equities he will have paid for the use of the land he has cultivated. Interest and rent are thus seen to be terms separated rather by peculiarities of application than by difference of principle. It is proper, however, to treat them separately for the sake of more perfect understanding of the conditions applicable to each.

Chapter XXI. Principles Of Interest.

_Reasons for interest._-The propriety of interest under any circ.u.mstances has often been questioned, and its rightfulness is still bitterly disputed. Both church and state have at times denounced the receiving of interest as criminal. Yet in actual practice of commercial life throughout the world interest has been sustained in all ages. The Jewish law prohibited interest between neighbors, where the reason for borrowing was a.s.sumed to be poverty, but authorized it in dealings with foreigners, where the transaction was a.s.sumed to be in trade. The principle upon which interest in all productive industry is actually founded is that capital, gained by exertion and saved by self-control, secures to its present possessor such advantages of time and choice of use for his abilities as can be given by nothing else. In the study of production we have seen that time-saving is an important result of capital in its various forms. A carpenter's kit of tools represents a value in use equal at least to the time he might consume in making them. He can afford to keep them for another's use only while they bring to him the advantage of that time-saving. His neighbor is willing to secure him in that advantage by paying him for the use of the tools all, or nearly all, that he gains by using tools over what he would have without them. The borrower will still be the gainer by opportunity to do work not possible without the tools.

The bargain between borrower and lender, like any bargain, is a fair one only when both are benefited. The limits of fairness in the deal are naturally reached when a clear understanding of all conditions is had in open market. Neither borrower nor lender can take advantage of the other without fraud. Neither is under obligation to give to the other without an equivalent. The whole question rests upon service rendered, as truly as in any other bargain.

A large proportion of the opposition to interest arises from a misconception of the phrase, "borrowed money." The fact is that borrowing and lending have to do chiefly with other forms of wealth. Most notes are given for the transfer of all sorts of property under a promise to return equal value in the future. Money may not enter into the transaction at all, except as the standard of value is in terms of money. Even when money is exchanged for a note, the borrower hastens to part with the money for the tools or provisions which make him a profitable producer. In payment of his note he offers money again, simply because it commands every desirable form of value for the owner of the wealth. If a farmer wants a wagon without the present means to buy, he offers the dealer his promise to pay after six months, when the corn crop just planted shall have matured. If the dealer cannot afford to hold the note because he needs the capital in his business, that others may be supplied with wagons, either the farmer or the dealer carries the note to some one who _can_ afford to wait for returns, which may be either a banker, whose business provides just such accommodation, or a neighboring farmer who has just sold his wool. In either case, the first farmer borrows what he wants in carrying on his business, and at the end of six months, through a similar transaction of finding some one ready to take his product, pays his note with corn. (See p. 164.)

Interest is never confined to money transactions, nor even to those in which terms of money are used. All owners of productive wealth gain interest in its use as truly as in lending it. The farmer is not a money-lender in general, because his wealth will bring him larger profit by its use as stock or machinery. Even when he borrows from his neighbors, it is possible that he secures a larger interest, though he calls it profit, than he pays the lender. Interest is often paid in kind. The laughable story of borrowing a hen from one neighbor and a sitting of eggs from another, to be returned after a time with advantage, is actually paralleled by some transactions. A friend of mine having a magnificent pasture agreed with his neighbor, who owned a fine flock of ewes, to pasture that flock for three years, returning at the end of that time just twice the number of sheep received. He explained to me that he had made a great bargain, since the wool would pay for the use of the pasture, and he should have at the end of the three years a flock about equal to the flock he returned. This bargain involved interest at the rate of 33-? per cent, without any terms of money, and an indefinite profit to the owner of the pasture in addition to an average price for such use. This profit is his return for the risk undertaken; since he promised to double the flock under any circ.u.mstances, and if foot-rot or scab had ruined the flock under his management, he would still have the same obligation toward the owner.

Such bargains will always be made so long as both parties are benefited, for no possible construction of laws and no diatribes of fanatics can prevent them. Any calculation as to the enormous growth of wealth by interest is more than balanced by a similar calculation of the multiplication of wealth by production. If Abraham's shekels at compound interest make an impossible sum of money, Abraham's flock of sheep with the ordinary rate of increase makes an equally impossible worldful.

_Varying rates of interest._-Interest rates are subject to fluctuation and variations under the natural relations of borrowers and lenders very much as are prices of commodities. Variations, in comparison of different regions, are due to several causes. In any community where enterprise is great and industrial forces are unusually productive, the interest rates are high as compared with another community with few compet.i.tors in industrial enterprise and less productive forces. Thus in countries having new land producing large crops with moderate exertion and an increasing population ready to put in such crops, the return for the use of capital in provisions, stock and machinery is great, and the lender gets high rates of interest. If, added to this apparent productiveness, there are risks of failure from droughts, storms and injurious insects, the bargain is more favorable to the lender in expressed terms, though it may be less favorable in actual results. Thus risk enters practically into calculations of interest, whatever the circ.u.mstances.

Interest varies in the same region with a variation of energy and productive enterprise or of the speculative spirit undertaking great improvements, and on the other hand with any change of circ.u.mstances affecting universal credit. Distrust on the part of anybody reduces the readiness with which borrowers find lenders. In times of widespread lack of confidence, when all credit becomes debt, the borrower is likely to offer unusual rates of interest. And the few who are willing to lend at all expect enormous profits in such interest.

Similar variations in rates of interest are found between different cla.s.ses of borrowers, due to the variation of risk. Thus promises to pay on demand, with personal security of two good paymasters, will usually be accepted at very low rates of interest, since the owner of wealth so loaned feels sure of having the wealth when he wants it. Government loans in times of peace and prosperity being essentially without risk, approach very near the same low rate of interest, since the owner of these securities believes himself at any time able to command the use of his wealth for any purpose by a transfer of these securities. If for any reason, official or legislative, public confidence is disturbed, rates of interest on such securities rise proportionally through the sale at a discount. Even a law prohibiting such sale would have exactly the contrary effect to that intended, because of creating additional distrust. Loans upon time, if secured by productive landed estate not subject to unusual risks, can usually be made at moderate rates, and form a fair basis for judging the normal interest in any region. Loans secured by chattel mortgage bring higher rates, because the chattels involved are a less certain means of payment than landed estate. Loans secured upon unproductive lands, whether in prospective farms or city lots, are made at high rates, not only because these lands fail to furnish in themselves the means of interest payment, but because they represent the speculative energy of their owners with unmeasured risk. All these variations and fluctuations are found in every community, and grow out of the natural wants of borrowers and the natural feelings of lenders. Custom may have something to do with rates in special cases, as it has to do with wages and retail prices, but in the range of frequent dealing between borrowers and lenders rates follow the higgling of the market as truly as prices of commodities.

_Usury laws._-It has been the custom for ages to distinguish between interest and usury, interest being supposed to be a fair payment for use of borrowed wealth and usury a larger payment in the distress of a borrower. Usury once meant only use, the equivalent of interest, but since it was once prohibited by law in England, the name is now attached to what is still prohibited by law, an interest above a definite rate prescribed by statute. The object of such legal restrictions is evidently protection of the borrower against extortion. Yet it is practically proved by experience of the world that such restrictions operate against the borrower by limiting lenders in open market and sometimes closing the market entirely. The would-be borrower, under adverse conditions in the market, is obliged to find in some byway a lender whose scruples against infringement upon the law may be overcome by extra payment. Under such circ.u.mstances there is no market rate, and borrowers bind themselves in numerous ways to special payments not in direct conflict with the letter of the law. Evasions of restrictions under such circ.u.mstances are inevitable. A farmer buys a hundred-dollar horse, giving a note, payable in one year without interest, for $120; or he sells his note to a neighbor at what he will give; or he goes to a broker and pays him a commission for securing a loan at the legal rate of interest. Even at a bank, prohibited by law from taking more than the legal discount on the pain of losing its charter, a borrower may give his note for $500, tacitly agreeing to leave on deposit a fifth of the sum, thus paying interest on $500 for the use of $400.

All these forms of evasion are easily adopted with very little possibility of conviction, even when usury is charged. Even in the most flagrant violation of laws the chances of conviction are greatly restricted by the fact that a prosecuting witness, who, after making a contract in violation of law, takes advantage of that law to violate his contract, destroys all credit for himself, and so comes under the ban of society. The best methods of public restriction against extortion of any kind in interest, in rent or in prices of commodities are those that provide for publicity of contracts. Where no legal restrictions upon rates of interest are fixed, current rates are much more likely to be public and widely advertised, and extortion is less possible than where the law encourages secret contracts by the need of evasion. It is quite possible that society will find a way of securing against the extortion of p.a.w.n-shops and secret brokerage by a public organization competing honestly for the same patronage. Such companies have been organized in a few cities with success in meeting the wants of the distressed, under such restrictions of charter and management as insure fair dealing. It seems as possible to regulate such matters by license and inspection as it is to control the hack-men of a whole city.

_Loan a.s.sociations._-It is proper in this connection to refer to loan a.s.sociations, the growth of recent years. The purpose of such a.s.sociations is direct cooperation in borrowing and lending among neighbors similarly situated as to property. They are especially adapted to a.s.sist wage-earners in securing comfortable homes, for which they can pay gradually from their earnings. The system, however, has been widely extended, to the advantage of different cla.s.ses of property owners, even to the establishment of cooperative banks among farmers. The essentials to success and safety in such a.s.sociations are, first, that they shall be strictly local, confined to territory within which mutual acquaintance can give a fair basis for genuine credit; second, the objects sought by individual borrowers must be fairly equal in risk as well as in ends to be served; third, the management must be thoroughly trustworthy, with a genuine interest of all shareholders in the selection of officers; fourth, all shareholders should have similar relations to the a.s.sociation as both borrowers and lenders, and each shareholder's responsibility should cease at the final settlement of his obligation; fifth, provision should be made for frequent auditing of accounts, official reports and inspection.

_Uses of interest._-In closing the subject of interest, it is well to recall the fact that interest exists in the very nature of productive energies, and that ability to transfer the use of property in any form of capital without transferring the interest is most useful to society. It sustains the aged, who must otherwise be wholly dependent, and the childhood of the race in all development of body, mind and soul. Interest sustains the ma.s.s of educational and charitable inst.i.tutions, as well as the individual life of mult.i.tudes whose present earnings could not keep body and soul together. Moreover, the possibility of paying interest secures to the enterprising young men of the world the opportunity to make their highest energies productive. Thus the matter of interest pervades the thrift of society as well as the sustenance, and cultivates everywhere that present economy which provides for the rainy day. The fact that nearly one-fifteenth of the population of the United States are depositors in savings banks alone proves the extent and importance of interest to the general welfare. With added facilities for depositing small savings in postal savings banks, the advantage would be still more widely felt, and the general economy in the use of both earnings and capital would be promoted. All this extension of interest-bearing increases the tendency everywhere noticed to a diminution of current rates. With a multiplication of capital in any community, the rates of wages increase, while the rates of interest diminish. Both tendencies are natural effects of the same cause.

Chapter XXII. Principles Of Land Rent.

_Rent values of land._-The general character of rent, as connected with the use of fixed capital and so a.s.sociated with interest, has already been touched upon. In that sense it depends upon the fact that possession of wealth is universally an advantage in production of future wealth and is subject to all the peculiarities affecting interest. But land rent, as represented in the value of farms, city lots, mineral claims, fisheries, water privileges, wharves, etc., has peculiarities of its own. Its connection directly with rural wealth in the value of farm lands makes it of special importance in this discussion. While rent, as such, is comparatively unimportant to farming interests in the United States, where most of the land is worked by its owners, the principle is involved as fully in the transfer value of farms as it is in countries where land is almost universally rented for farm purposes, like England and Ireland. It is simply necessary to remember that the rent question in such a country as England, where land is seldom transferred from owner to owner (but all values are expressed in the terms of annual rental), is quite different in form from the question in our country, where transfer of landed property is free and common, and the rental is regulated largely by current rates of interest upon land values. In England, too, the rent question involves long standing relations between the people and landed proprietors who, for generation after generation, have been rulers of the people as well as landlords, and are still the natural magistrates over the renters upon their estates. Yet the princ.i.p.al occasion for rents in such countries is exactly the same as that for varying values of land in the United States.

Peculiar intricacies of methods of rent-paying and of terms in leases, varying with the customs of different countries, have little importance in the United States, except for comparisons.

The United States afford superior advantages for the study of land values fairly independent of restrictive laws or customs. The rapid settlement of wild lands by farmers and the rapid building of cities under free compet.i.tion give the fairest ill.u.s.tration of tendencies in land values to be found in the world. The fact that the government for the past fifty years has encouraged the settlement of new land at the bare cost of establishing ownership makes the problem almost as simple as if the government had no voice in the distribution.

It may be proper to recall the conditions under which any individual has been able to secure the absolute control of land as a proprietor: First, by preemption, involving temporary residence until the land is purchased and patented, at the nominal price of $1.25 an acre, or $2.50 within ten miles of such railroads as may have been subsidized by a gift of one-half the land within the same limits. Second, by homestead preemption, by which any head of a family, present or prospective, can secure 160 acres of land by payment of certain registration fees, amounting in all to less than $20 upon the average, and making his residence upon the land for a period of five years. The issue of a patent at the end of the five years establishes ownership. The soldier's homestead, offered to those who had served as volunteers in the army of the nation, varied from this only in a reduced term of residence. Third, homesteaders, as well as others, could secure additional lands under a provision for tree culture on the treeless prairies, the requirement being the planting of a few acres of trees and the maintenance of culture on those acres for a period of eight years.

Even the establishment of trees in permanent growth was not a requisite.

Fourth, by certain outlay for irrigation purposes in arid lands a tract of 640 acres could be secured. In addition to these, certain land grants to the several states led to the issue of scrip, ent.i.tling the possessor to locate on government lands upon payment of only fees of registration.

Certain states, within whose borders public lands did not exist, being unable to hold lands in other states or territories, sold scrip at less than half the price asked by the government for lands.

All these methods operated not only as a stimulant to the settlement of new territory, but as a check upon rising values of land in the older communities. Nevertheless, this rapid development has given the best of opportunities for watching the tendencies of land values.

_Propriety of land rent._-The right of property in land, like every other property right, rests upon its advantage in the welfare of communities.

Among savage tribes individual control of plots of ground would interfere with welfare, as hindering the only use to which the land is put in hunting. Among people living by herding no nice dividing lines are needed, though strife between herdsmen, since the days of Abraham and Lot, results from the mingling of herds upon the same feeding grounds. With the actual tillage of soil, control of the s.p.a.ce tilled becomes absolutely necessary, and more necessary with every improvement in agriculture which takes the nature of permanent improvement upon the soil. No agriculture beyond the merest skinning of the surface has ever existed without permanent occupation. Even where the land is distinctly owned, but used under temporary leases, few permanent improvements in agriculture are possible.

The necessary permanence of control over the products of toil makes an essentially permanent control of land necessary to the common welfare. For this reason the progress of civilization everywhere demands more distinct boundaries of landed property, and this in the interest of the whole community, which shares in the progress. The more intensive and far-seeing the methods of farming become, the greater the necessity for fixed boundaries. This necessity is recognized in all provisions for exact surveys, complete records of transfers in ownership; and finally for government guaranty of t.i.tle. Such ownership underlies all prudential consumption of wealth for future returns. The loss to communities from want of it is seen in the waste of game in unappropriated countries and the destruction of the seals in the seal fisheries. Yet this ownership is still subject under all circ.u.mstances to the law of welfare for the entire community. The community's right of eminent domain has always been recognized in the need of public highways and other public improvements, and is likely to be still further recognized with any new necessity, like the control of injurious insects or quarantine against disease. Yet none of these restrictions diminish the necessity of ownership, in the sense of individual control for all purposes of agriculture, manufactures, commerce and social relations. This individual control is intimately connected with our ideas of rent, and would be still, though all the lands were managed under one proprietorship, and that a public one. Rent would accrue and be paid, though the whole people held t.i.tle to the land.

_The sources of land values._-The value of land, like every other value, is the result of comparisons. Whatever advantage is given to a producer by his possession of land is likely to form his estimate of its value. In the comparison of two farms of equal dimensions every difference in fertility, location as to drainage, exposure, or convenience to market or social advantages, adaptability to improved methods in agriculture and convenience of arrangement, will enter into the estimate of worth. If one of the farms can be had for the asking, the other will be worth just what its advantages will add to the power of the owner in the production of wealth, provided both are considered alike as simply machines for producing food. Usually, however, economy in the consumption of wealth is considered also. In a new country lands most easily accessible and readily tillable are chosen first. With added demand for food, less accessible or less easily tillable lands are occupied. At once the more accessible have a value equal to the greater ease with which the same product can be offered in market. If the difference were only a mile of hauling all produce and all commodities for which produce is exchanged, that cost of transportation would make the value of the nearest land. If the difference is simply in yield for a given amount of labor, the land which yields thirty bushels of wheat to the acre, when land which yields twenty bushels can be had for the taking, will be worth ten bushels of wheat a year, and its value will be estimated in dollars at a sum which securely at interest will bring a similar return. If, by and by, the demand for food or improvement in transportation or an easier method makes it worth while to cultivate land yielding only ten bushels of wheat to the acre, the annual value of land yielding twenty bushels will be ten bushels, and that of the land yielding thirty bushels will have become twenty bushels.

Thus the rent, and correspondingly the value of farms, increases with the increasing demand for farm products, whether that demand results from the increased number of eaters at hand, from the increased ability of these eaters to supply their wants, or from ready transportation to eaters elsewhere. Many influences in various directions affect the tendency to an increase of land values with the increase of population. Some have been led to the a.s.sumption that only the multiplication of food-eaters, increasing the need for land, makes rent possible. Connecting it with the theory of Malthus that population tends to increase in geometrical ratio, while food can increase only in arithmetical ratio, they have denounced rent as a price paid to monopolists under stress of danger from starvation. These forget that rent is payable as truly out of increasing abilities of individuals to meet increasing wants as under the spur of more distressing wants. Indeed, starvation, or the approach to it, never pays rent, however strong an incentive it may be to promise rent.

_Rent in price of products._-Does the value of the land upon which my wheat is raised enter into the price of my wheat? If all land values were destroyed, would the wheat of the world be cheaper, because its cost would be diminished? The price at any time is just enough to bring the supply to market and keep it there. A portion of the supply has cost even more than it brings to its owner. If any brings more than cost, the difference goes either to the energetic raiser using improved methods, or to the fortunate receiver of timely showers, or to the possessor of the fruitful field.

Neither the profit of the raiser, through his method and the shower, nor the rent of the fertile field has made a bushel of wheat less or more valuable in market. The value of the wheat in the market makes both the profit and the rent. If the value of wheat falls, the value of best wheat lands sometimes follows; but land values do not directly affect prices of products, though they may be directly dependent upon those prices.

Indirectly, however, the value of land may affect prices of products.

Land, in certain speculative movements of society, gains a value for future use. If the fertile fields are held for speculative purposes, less fertile fields must furnish a limited supply at increased price. If the fields are wanted for homes, the supply must come from a distance at greater cost, or be raised on fewer acres by more costly tillage, and will not come till the price is increased. Thus high rents, or land values, if maintained by outward forces may diminish the total product, and so affect prices. But no conspiracy of land holders can affect the price of their products so long as their lands are employed in supplying the market.

_Variation in land values._-Rents vary in different countries under various customs of those countries, and so land values can be compared only by knowing the customs and laws which influence the transfer of landed property, either by deed or by lease. Differences in value are often due to considerations entirely distinct from production. Farms are homes as well as machines; and the privileges of home life, with all the relations of family, friendship and patriotic a.s.sociations, may rouse compet.i.tion that greatly influences the market value of farms. In any community, whatever custom or law hinders compet.i.tion in farming affects the relative value of farms in productive industry. Peculiarities in the method of holding lands have much to do with their value. The hopes and expectations of the people have large influence. Whatever stimulates enterprise and increases speculative energy enlarges the estimate of land value. Whatever depreciates abilities or discourages enterprise diminishes land value. Whatever encourages permanent improvements and far-sighted plans in farming increases land prices. Whatever discourages the spirit of improvement reduces such prices.

In some of these ways it is possible to account for great differences of value in regions apparently equal in natural advantages. Thus n.o.body wants lands in Turkey, however fertile, in comparison with lands in a free country like ours. Countries under a poor system of agriculture with inefficient labor cannot maintain high value of land. Ignorance and thriftlessness in a community of laborers operates in the same way. Thus the habits of the people, as well as their laws, enter into the question of rent. In countries where large estates are parceled out to renters, generation after generation, the customary terms of leases as to time, method of payment, adjustment of improvements, restrictions as to methods of tillage, and requirement of capital, enter largely into the question of rents. In some the fear of eviction under arrearages cuts a prominent figure; in others the confiscation of improvements destroys all enterprise. Upon the continent of Europe, in some places, the payment of rent in produce,-what we call working of land upon shares,-greatly limits individual enterprise, though it gives to the land owner a direct control in the methods employed on the land. Restrictions of law or of custom upon transfer of ownership always have the effect of diminishing the general productiveness by hindering the natural compet.i.tion of productive enterprise. The result of all laws of entail, by which enormous estates are held from generation to generation under control of the same family, is universally deprecated because of its interference with the natural law of supply and demand as to farms and homes. All such restrictions favor the spirit of monopoly and cultivate arbitrary power, which in every way hinders progress.