§ 9. Divergent valuations of different bidders. In explaining the differences in the rents of agents we have thus far mentioned as affecting the result only the limitation and variation in the physical qualities of the agents themselves, whether it be the fertility of the soil, the height of the waterfall, the mechanical efficiency of the machine, the convenience of location, or anything else. These are solely objective differences, whereas there are many subjective (that is, human, personal) differences that influence the result, causing the individual bidders, either borrowers or lenders, to value a particular usance differently.

It has been shown how the valuations of bidders vary in the purchase of commodities, and it is no less true that the valuations of bidders for usances vary. Many circumstances make both the quantity and the value of the products as well as of the costs anything but a fixed, predetermined, unchangeable amount to the various bidders. A durative agent often has to its owner both a value-in-use and a value-in-exchange, a usance and a price, and the two may be approximately equal or very unequal. The owner of a farm may work it himself, or being old, or indolent, or incompetent, or more suitably occupied, he may prefer to let the farm to a tenant. Where the owner can himself manage the farm he has a reserve-valuation below which he will not let it to any tenant; whereas in the other case he is in the position of an urgent seller (of the usance) to the highest bidder (quality of tenant, security, etc., as well as amount of rent being considered). This does not mean that the rent is necessarily lower when the owner can not use the agent himself. The owner's reserve-valuation may often be below the bid of others.

ch. 13, sec. 4, Effect of the presence of one agent upon the usance-value of another. Essentially it is the principle of substitution; see ch. 4, secs. 2-4.

§ 10. Example of competing bids. If there are several tenants that would like to get a certain farm, their maximum usance-valuations might be as follows: A, $500; B, $475; C, $450; D, $425; E, $400. At the basis of each bid must be a forecast of the net usance that the bidder anticipates he could make from it; but he may bid less if he thinks that he can thus get the agent. Each bidder would count his own labor at the figure it would bring if elsewhere applied, and would estimate some return on whatever stock he expected to put into the business. Many factors of psychic income, varying with individual tastes, as liking for the neighborhood, conditions favorable to health, nearness to schools, etc., enter into the actual bid. With due allowance for these differences, A, who counts on a net usufruct of 25 more than B does, ought to be the more skilful farmer, but this is merely his expectation, and he may be mistaken. Even in this case, if A can give security or can convince the landlord that the rent will be paid, he may be able to outbid B and get the farm for a rent of $476. Then, if his forecast was correct, he would clear $24 by renting this particular farm; and in addition he gets the opportunity to apply his own labor and earn returns on his productive agents. This situation is represented in Figure 27.

§11. Complexity of the situation lying back of each bid. It should be noted that each bidder's valuation implies a comparison of the agent with other agents more or less nearly equal to this one in its qualities and usance. The opportunity of a place to work, needed by each, would be lacking if there were but one farm to rent. But several farms are in the neighborhood, and the knowledge of their availability is a part of the circumstances influencing the bids, as is also the chance that each man has of moving elsewhere or of hiring out for wages. If in fact there were but one farm and no other possible place to earn a living, the maximum bids would rise greatly, for each bidder would reduce to the uttermost his estimate of the value of his own services to be deducted from the gross product. The interrelation between the amounts attributable to labor and to the farm is such that rent and wages mutually affect each other. In fact, as bids are made in view of an existing situation, rents reach some degree of equilibrium in a neighborhood. Each tenant has a farm and each farm a tenant, rents and tenant's income being kept from year to year closely in accord with the level of individual valuations (see Chapter 7, sections 7-9).

* The various bidders for the usance of a particular agent have different valuations, A to E. The valuation of each bidder is his estimate of the total yield less the other costs of obtaining the products.

Compiting Bids of Would be Tenants

§ 12. Personal efficiency as affecting the valuation of agents. In general it is true that the most skilful cultivator will make a more liberal allowance for his own services in his bid on every grade of farm, for on every farm his skill, tho in varying degrees, will enable him to get a larger net product than his competitors. Despite this higher valuation of his own services, the most skilful cultivator is likely to be the highest bidder for the best agents. The best agents used for a particular purpose tend to get into the hands of the best managers, for the better the agents to which superior skill is applied, the greater are its results as compared with less skill. Thus in many localities this distribution of ability in accordance with fertility is so marked that it is proverbial: "poor lands, poor men." But when a man's ability is of a special kind, either by natural talent or by training, he may be able to succeed well in one industry tho failing in another that calls for no more, but' merely different, ability. For example a good general farmer may be a poor florist or market gardener, a good lumberman may be a poor furniture maker.

§ 13. Variability of rents. Rentals of farms, of regular residences and of stores, used from year to year, are comparatively stable. Summer rates for rooms in some college towns where there is a summer school are one-half the regular rates. Rents for unoccupied summer cottages rise quickly if the weather is warm early in the season, for tenants are willing to pay "anything within reason." Livery charges in many places are higher Sundays than on week days; in college towns are higher both Saturdays and Sundays; and on festal occasions such as "Junior proms" and "Senior weeks," antique equipages are drawn from hiding to lure incredible sums from the devotees of society. Decoration Day and Fourth of July, if it is pleasant weather, boat hire is likely to be doubled. In these cases the supply at any price can be only slightly increased, for the time, and the demand carries off the whole available stock at abnormally high prices. The rent appears to the regular patrons to be fixed arbitrarily by the seller; but a study of the conditions will show that the rate fixed is approximately the correct market-price for the conditions, one that just carries off the supply and leaves no efficient demand unsatisfied.