§1. Usance and usufruct: definitions. §2. Usance-value of agents yielding products of like grade. § 3. Usance-value of agents yielding products of different grades. § 4. Effect of the presence of one agent upon the usance-value of another. § 5. Usance-value determining utilization. § 6. Time as a factor in usance-value. § 7. Usance-value and the margin of utilization. § 8. Usance-value of complementary agents.

§ 1. Usance and usufruct: definitions. As the use of a consumptive good involves the using up of the good itself, the value of the consumptive use is identical with the value of the good itself. But when the uses are separable, the problem of value presents more complicated aspects. The series of separable uses of which a durative good consists may be called its usance. The concrete object which yields the uses may, by repairs and replacement, be treated as a durative use-bearer, capable of yielding either an unending or a definitely limited series of like uses. This theoretical possibility appears in a number of practical problems. It is involved in the careful use of any durative agent by the owner himself. It is the important consideration in the definition of the legal right of usufruct. In law, usufruct is "the right of using and enjoying the income of an estate or other thing belonging to another, without impairing the substance." One heir may have the usufruct for a term of years and another heir have meantime only the reversionary right, which, however, entitles him to sue for waste if the substance of the estate is being impaired, as by cutting standing timber, neglecting repairs, etc. The tenant of a rented farm has the usufruct, but must not impair (with minor exceptions) the substance of the farm. The value of the usufruct in any given period may be called the usufructuary value, or usance-value, as distinct from the value of the estate, or of the concrete object. We have now to consider how the usance-value is related to the value of the products, be they indirect goods, direct goods, or psychic income.

§ 2. Usance-value of agents yielding products of like grade. Consider the simple case where the products are themselves immediately enjoyable goods, such as fruit. The value of the use of the tree is simply the net-value (deducting costs of cultivation, etc.) of the fruit that the tree yields in the season. It is clear that if the farmer has his choice between a tree that yields 30 bushels and one that yields 20 bushels of like apples (this being the net difference after deducting costs), he will value the season's yields of the two trees in the ratio of 3 to 2. The tree yielding the more fruit is counted by so much the better, and relative values are at any given moment expressed by the relative quantities of products.

In a like manner, orchards (groups of agents) may be evaluated. In the San Gabriel valley, as in other parts of California, there is a frostless belt, marked off by a narrow belt of uncertain climate from the lands where, because of the probability of frost, it is quite unsafe to attempt to cultivate the delicate orange-tree and other semi-tropical plants. The usance-values of the orchards show gradations corresponding with the average amount of net products from the frostless belt to the region of frost. In manifold ways differences in geological formation affect the use of land and the success of many industries. On one side of a little creek may be limestone land, on the other shale, and the limestone land produces larger crops and therefore has the greater value. The usance-value is plainly a reflection or derivative of the net-value of the products yielded during the period, and if other things are equal the usance-values of two use-bearers in the same market will differ as do the quantities of like uses which they yield.

§ 3. Usance-values of agents yielding products of different grades. If now two agents be compared whose products are equal in quantity but of different grade or quality, the agents will obviously have different usance-values corresponding with the differences in quality. Take a well-known example in the case of land. A peculiar mineral quality in the soil of a vineyard may impart to wine a choice flavor that can at once be recognized by experts, while other fields, distant but a few rods, cannot by any effort be made to produce wine of the same rare quality. There is said to be a marked difference in the success of orchards and of vineyards lying only a short distance apart on the shores of the larger lakes of New York. Nearness to the water moderates the temperature, often prevents frosts, and hence insures the ripening and enhances the quality as well as increases the quantity of the fruit. Where the peculiar nature, slope, or location of the land is found to be the cause of the exceptional quality of its fruits, the land acquires an exceptional usance-value as compared with ordinary land in the neighborhood.

It is the same with the usance-value of all other material agents. The common nag and the thorobred horse, the loom for weaving rag carpets and one for weaving complex designs in silk, the scow and the yacht, are yielding uses which have differing values reflected to them from their final products, and accordingly they vary in usance-value. The same principle applies in the case of human services. The labor-income or the wage obtained by a man for his labor for a definite period is a reflection of the value of that labor to his employer, and eventually to the user of the product. In all cases the usance-value is a derivative.

§ 4. Effect of the presence of one agent upon the usance-value of another. Let us now consider the effect which the presence of agents of inferior quality may have upon the usance-value of better agents. It is clear (see Chapter 12) that if two agents are of different grades of excellence, the better agent will be first used: but when there is sufficient demand, the less efficient agent will be pressed into service. Tho inferior as a whole, it has uses which are better than the lower grades of uses of the better agent, and we can speak of these uses as competing with, or as being substituted for, the more intensive uses of the better agent. Regarding the various uses in both objects as separable, we see that the total supply available to meet a given demand is increased by the presence of the inferior agent. The use of the inferior agent limits the utilization of the one of better grade, and therefore limits or lessens its usance-value. If there is but one grade of agent, it is necessarily valued without reference to any lower grade. There may be at first enough of the higher grade of agents to produce all the fruit wanted of the better quality. If, then, there is an increasing demand, and the additional yield can be secured only with more intensive utilization, the value of the product rises. The presence of inferior grades, however, limits that rise, because use can be shifted to them. Within the limits of substitution the poorer grades reduce somewhat the demand for the better grades. The usance-value of the better agents is due primarily to their scarcity and (not less important) to the scarcity of the more effective uses in those agents; but the substitutable uses in other available agents have their part in determining the particular level of valuation in any economic situation.