In our illustration in a previous section we showed that the rent of land increases with the growth of population. The land has no value independently of the presence of the population. Certain reformers seizing upon this idea maintain that since rent is the product of the growth of society, society should collect the rent. The land owner, they contend, does nothing for society except to collect the rent and this is of no advantage to society. If the rent were taken for the uses of society, it would relieve people from the necessity of paying taxes of various kinds and would permit the state to do many things for its citizens which it cannot do now for lack of funds. In answer to this contention it may be urged that under the custom of permitting owners to take rent the land has taken on a value and that many purchasers of land have paid considerable sums for the land and received a return equivalent to fair interest. To take from these owners the full amount of the rental would be to confiscate the entire capital value of the land. This would bring many hardships with it and it would constitute an injustice that the state cannot afford to indulge in. The situation, however, is different with regard to the future increase in value of the land. There is much to be said in favor of the state's taking a part or the whole of this future "unearned increment." The arguments against such a procedure on the part of the state have to do with its expediency rather than with its justice.

Questions

1. What is the popular meaning of the term "profit"? What elements must be deducted from profits in this sense in order to arrive at profits as the economist understands the term?

2. What are the sources of profits?

3. Is it socially desirable that the enterpriser receive profits as a regard for undertaking risks? Justify your answer.

4. What are the limits to monopoly profits?

5. What is meant by capitalizing monopoly profits?

6. What is rent?

7. Why do we distinguish between land and capital?

8. Why is rent paid for the use of land?

9. What was Ricardo's explanation of the measure of rent?

Are differences in the qualities of different pieces of land a cause of rent?

10. How does location affect the rent of land?

11. Where there is no no-rent land from which to measure, may we still think of rent as being measured by difference in productivity? Explain.

12. Is high rent of land a cause of high price of the product? Explain.

13. What is the relation between rent and the selling price of land?

14. Is rent-taking justifiable?

Supplementary Reading

Carver, Distribution of Wealth, Chaps. v. and vii.

Ely, Outlines, xxi. and xxv.

Marshall, Principles, Book VI., Chaps. vii.-x.

Seager, Principles, Chaps. xii.-xiv.

Seligman, Principles, Chaps. xxiii. and xxiv.

Taussig, Principles, Chaps. xlii.-xliv., xlix., and 1.

Walker, Political Economy, Part IV, Chaps. ii. and iv.