ELEMENTS OF POLITICAL ECONOMY.

Otago Daily Times, Issue 14447, 13 February 1909, Page 4

ELEMENTS OF POLITICAL ECONOMY.

By 11. D. BroFoitn, 11. A. (Lecturer on Political Economy, Otugo Uuivcisity).

No. V.

LAND. Wo now come lo (lit? third factor of production— land. Tlio leading idea lo grasp in distinguishing it from the other factors is that it is passive. It furnishes the material upon which labour and capital expend thomselves. Sometimes land is reyarded as private wealth. Wlien .so regarded il imtsl not lie forgotten it is wealth by mere appropriation, and not by creation of industry. Jl, is a gift of Nature and not the product of human effovl. The mind must be fortified Jjo r»» against mis* concopt ion arising from tho loose, indefinite meaning pqmlurly given to the term land. In common speech wo do nol nialte any nico discrimination between hind in the strict sense and improvements effected upon it b.v labour. In the economic acceptation of the term land comprises nothing which is the outcome of labour. Therefore when we am treating of the value of land we must be careful lo distinguish v.-hatever value is due lo the exertions of labour and ciyiilal. If boggy land is drained, I lie value added by drainage represents the result of industry, and cannot bo regarded as the value of landwhich in political economy imports ilio natural and indestructible properties of the sod only. No doubt, the greatest d:(lieulty is experienced in separating the unimproved from the improved "value: for after the lapse of years certain kinds of improvements become merged with the soil and are indistinguishable from it. Yet Ihe economic conception of liimj is a just and a necessary one. ]>,v failure to observe the distinction between what Nature provides and what man's labour supplies in the lit'oce-"!! of production we fatally unfit ourselves for a clear understanding'of Ihe many social and mmoniic problems which press upon our attention. L'.W OV DIMINISUIXft KETITN" Now. land has a peculiar qualify which occasions tile most far-reaching consequences. Every farmer knows that after a certain amount of labour and capital has been applied to his laud it does not pay to apply more. Any additional applications of labour and capital do nol yield the same proportionate result-. It will lie profitable lo plough a field once." perhaps twice, but certainly not three limes, before sowing. Double the labour employed on an already well-cultivaled farm and you do Hot double the product. After s certain point is reached any further cultivation even of the most fertile land will vidtl a diminishing return lo a unit of effort. It was Ricardo who first elaborated Ihis law of diminishing return and laid just cuiphaise ii|,on ils economic importance. To him we must, ascribe the merit of discovering that paramount truth in economics that land only possesses value, is able to command a money price, because of decreasing responsiveness io 1 lie energv of labour. If there were illimitable abundance of rich laud, or an iUiiuii :!.le fertility to tholnnd we have, it would not be worth a. farthing an acre. But because there is not, because there is limitation, scarcity, a diminishing degree of productiveness, 'value attaches to land. Kitardo illustrated this phenomenon from the experience of settlement in now countries. As a general rule th best 'land in a country is taken up first. (Gradually Iho best lawi is all ou-apic.l: then, «.s population fuiiher a>hanccs,- recourse muse Ix; had to inferior land-in-ferior oil her in fertility or no-'it.i«n. What la Uio consequence'; The best hind possesses a. dillerenriul advantage which ■ indicated by Ihe fad Hint the owner is able to commar.-d » rent for it. M'o might illustrate i,|. tlms: fiuppene a. hundred' people lo settle in a. new country. Thcr? is sutiicicnt—but only sullicicnt—land u-f Ihe best quality for all, yielding, say. GO bushels of wheat lo the acre, Population n<nv increases, and re-sort must be bad to land ol pooler ipialily in order lo pro.luce Ihe required uinouni of find tor ihe growing ccnimuiirr.y. This laiwl, we will sij', yields to the same uiwmw l of labour and capital only 40 'bushels lo ihe acre. At once rent emerges. It. is obvious that it would he ;vs profitable .[or the cultivator 10 pay a rent equivalent to 20 bushols to the aero for the fmft-class land as to cicupy Ihe second-class land rent free. Hill let population further increase until tilft supply of second-da-s land gives out, [Then, io meet the iiicrixiacd demand for foi'd tho third-class land must tie liro'.nrnt Hjidfii' Ihe plough. This, we will say, yields 30 biithels to the ;iert>, whereas wiih (he same illinium of labour ami capital tlx! sceond-duss land would yield 40 and tho finst-cluss (jO bushels. It. is ipiite JiHinifet that it. v.-ould "pay" the farmer to give lime bushels of I,lie ybhl of every acre, of seioiid-ciass land to the owner as rent rattier than cultivate the third-class laud free of rent. It is eiiuaih clean that, if would "pay" him lo give 29 bu>heU as rent to the owner of lirst-cla.-s land. in either case be gains a bushel an acre by paying rent. t ; o long us there was abundance of first-class land to supply all tine K'titiircmenKs of the community, no land could i-oiiiuKim! a rent. So Jotljr as Mioro wis abuixkmcv of .-:ccondcla.v: hind, tho ronf of the c-oultl nut risi* abovo 20 bushels 0.11 am\ jiut .recouree is had to the third-da** land, 'ihe sccond-da.ss laud is abb lo command a rem of 10 bushels anil the lirsr-cl«-,s 30 .bushels. A SIGNIFICANT BESn.T. Tins result is deeply significant. It shows that ronl is an index not of growing but of declining productiveness. It .measures not the lioiu.'iy but the uigga/'Uiof Naiure. tlroiviiig lvidts iudiciUO jiot increasing facility on the part of labour in obtaining produce from the soil, but increii.-'iiii; diliicuttv. That is, tlicy result from a diminishing return to exertion 011 the inferior soils, or, in other wortls, 'to an iucivaM: 111 the cos! of production. ■\Vl(ercas a unit ol labour on the tirst-dass land could purchase 60 bushels, ou the

second-class it could produce only 40 bushels, and on third-class only 30 bushels. Tho advantage of ihe superior productiveness of labour on Ihe lirsl-ehiss land g..es to the landlord, and is called economic Will. The mom pressure of population, or oth«r causes, forces the margin of cultivation down, tho givarcr will bo tlie relative advairtago. and heiioo the rent- of the superior lands. The value of the superior land is measured hv t.he degree, of ils suiirnoriiy over die most inferior ill US-.!.

The law of diuiinihing return, however, wiih its concomitant law of rent, is tint restricted in its application to -diil'erent degrees of fertility in agricultural land. It applies to differential advantages of situation ;l s well, [he value of Jsvnd in the centre of a town is greater than that of land in ihe taiburhs; "the higher Viiiue of the former corresponds to the greater advantage it lias in filiation. Tlio value of a farm near a railway is grower than that of a farm far removed from such moans of transportation of its products; the higher va.!uo of ihe former Measures exactly the advantages whirh the proximity of the railway all'oids. The best sites, tho most acw.-sible (aims, .ire taken up iirst; wlieu these are occupied inferior ones are resorted to. Competition, then, secures to these best sites j. value corresponding to their advantage. Advantage in situation has the same effect as advantage in fertility. To he far removed from a distributing eomro enhances the cost of production in the same way as the churlishness of the soil. The advancing value or rent of the best land indicates tlio increasing obstacles to production on land inferior in point of fertility or situation but which must, needs be occupied to meet the requirements of a growing population.

MALTIIUS. This law terrified Ahllhus, a man famous in economic literature for his prediction of the necessary extinction of multitudes of the human race in every age by starvation. Two mighty forces, irresistible as tlio Jaw of gravitation, seemed to him to be co-operating for the destruction of man. He observed that the quantity of laud in the world was Ktrictlv limited,"and that what did exist, tended to yield a diminishing proportionate return to increasing up plications of labour. lie further observed that iwpuhition overywhew manifested a tendency to inerase. lie calculated out alarming tables showing the amazing fecundity of man. Examining tlio bitfory, of nuuu/ous -picjs, b,o concluded

Hint population invariably increases to tho )K)in( of severe pressure upon the moans of subsistence. l''roin starvation ho could sit no escape. This alone kept population from swarming over tho earth like ants. How could il b n otherwise, ho argued; land is increasingly niggardly as man, impelled by the need of filfing an everincreasing number of mouth', works it more and more intensively. Maithus therefore, gave to the world his gloomy conolu-ion that the poverty of the poor, that famine and destitution, were tho outcome of the operation of (wo malignant laws, the law of diminishing: return to land and of progressively increasing population. He saw no power in any economic adjustment to relieve the distress of the poor. Th" S'i!'/incr;red tenth was lo him a cold scientific result of natural Jaws. For iniuiy years the deductions of Malthus dominated political economy. It became I lit) science of despair. It earned for itself the liflo of Ihe "dismal science."

In Ihe next article I will examine tho. causes which have operated to falsify theso dismal forecasts.