Extensive Cultivation and the rent levels

Rents on grades of land with different degrees of extension of culti-vation (approximate).

Tract —

     
 

A

B

C

D

When A only ....................

0

0

0

0

When B first taken ...............

2

0

0

0

When C first taken .................

4

2

0

0

When D first taken ...............

6

4

2

0

When D more intensive ..............

6+

4+

2+

0+

TABLE 1 Successive Static Equilibria on Tract A, with a Slow Rate of

Growth of Intensity of Cultivation

   

Units of labor on the best

Cost

of

labor

Cost of labor per

Bushels raised per

Rent

per

acre

land per unit acre

acre

 

When first grade of land first used.

10

2.4

24.

24.

0

When second grade of land first used

11

2.2

24.2

26.3

2.1

When third grade of land first used.

12

2.0

24.

28.4

4.4

When fourth grade of land first used

13

1.8

23.4

30.3

6.9

So far as the rent results from differences in fertility, it depends on the maintenance of the fertility. If the fertile qualities of the better fields are not restored and maintained, the yield on the once better land would fall at the same time that cultivation extended to the poorer land. Rent may, however, in some cases result from mere advantage of location as population extends.

When a change in the relative quantity of land (or other agents) occurs that imputes to labor less bountiful results, it is a case of decreasing returns; a change in the opposite direction (through discovery, opening of new lands, increase of agents, etc.) is a case of increasing returns.

§ 8. Law of increasing and decreasing returns. The law of increasing and decreasing (or diminished) returns may be thus stated. The amount attributable to the labor element of a whole population varies with the amount and efficiency of the material agents at the disposal of labor, increasing if they increase more rapidly than population, and decreasing if the population increases more rapidly than they do. It is one aspect of the law of proportionality as applied, not to a private enterprise, but to the relation of the whole population to its resources. The law of decreasing returns received a name first, and the term has been loosely applied to many very different problems.8 It was first used in England about 1815 with reference to land in agriculture under steadily increasing intensity of cultivation of the soil year by year in order to get more food per acre. It was called the law of " the decreasing returns of capital and labor as applied to land." The course of events in England called attention to the subject. Population was growing rapidly, and there was need for more food. During much of the time from 1793 to 1815 England was at war, and it was hard to obtain food from abroad. The English farmers, tempted by the higher prices, took poorer lands (marshy, cold clay, infertile) into cultivation and sought to get larger crops from the older fields. This took more labor per acre, and yielded a larger total product, but less per day's labor. Grain and other produce rose in price, land rents and land values increased, wages fell, and therefore the peasant's day of labor bought less food than before. The worst period of all for high wheat prices was from 1800 to 1813; the year of highest recorded annual average price was 1812, $3.80 a bushel. It was a lesson in dynamic economics on a large scale.

8 See note at end of chapter on Various meanings of diminishing returns.

§ 9. Increasing returns in the nineteenth century. Other forces were at work to create better dynamic conditions in western Europe. The great war ended in 1815 and wheat prices in England fell to a much lower level by 1822.° This level was nearly maintained in English markets until 1877. Then again was a great fall to the lowest point in 1894. Returns in agriculture after 1815 were on the whole increasing until 1894. Accordingly, a day's common labor exchanged for more food than before. Population grew, but still improved methods of agriculture produced more with less labor. Methods of transportation improved and the additional food was imported instead of being produced by very intensive cultivation of the limited area of England. After the forties a great Irish emigration actually reduced year by year the total population of Ireland. Methods of production outside of agriculture were at the same time improving, and real wages almost steadily rose in western Europe throughout the nineteenth century. The great fall in wheat prices as measured in the markets of Liverpool from 1878 to 1894 which bankrupted many farmers and reduced agricultural land values in the eastern United States and in western Europe, brought cheap food to the people. It was a period of increasing returns in agriculture, as an actual historical fact. It is a question whether that period did not come to an end about 1895, the growth of population in the international food markets of Europe and America having overtaken the increase of command over agricultural lands and brought us again into a period of decreasing returns.

9 Wheat PRices, Annual Average in England

Period of

   

Average

price per

bushel

Highest prices .................

14 yrs.,

1800-1813

$2.76

Lower prices .......................

8 yrs.,

1814-1821

2.25

Still lower prices .............. .............

56 yrs.,

1822-1877

1.65

Rapidly falling prices ........................

6 yrs.,

1878-1883

1.33

Lower prices ............

9 yrs.,

1884-1892

.98

Lowest prices ............................

14 yrs.,

1893-1906

.82

Rising prices ........................

7 yrs.,

1907-1914

(about) 1.00