MICHIGAN ACADEMY OF SCIENCE. 35 



price; while if the demaml is small, supply price is what sets the 

 price and that may be increased by an increment tax. 



What is true of moving pictures is true, mutatis mutandis, of a 

 <»eneral tax on buildings. If a site is much more valuable for an 

 expensive form of exploitation than for a cheap one, it will be 

 used for that form and taxes on it will be borne by the site owner 

 until the whole differential advantage is eaten up. If all urban 

 and suburban land could compete for all kinds of uses, then a 

 tax on any method of exploitation would have to be borne by those 

 who desired to exploit land in that way. But in real life we find 

 not a continuous series of sites each a little less valuable than the 

 last, but distinct series for each particular kind of development, 

 with great breaks both within and between the series. The inci- 

 dence of a tax, say on skyscrapers, is absolutely unaffected by the 

 potential competition of sites five miles from the business district, 

 or by the possible use of business district sites for agricultural pur- 

 poses. 



We must abandon the Ricardian idea of rent when discussing 

 urban values. Except to some extent for residential purposes, 

 the value of land is not dependent on its superiority over another 

 site, but on its actual value for the use to which it can best be 

 put, whether or not there is another site adapted to the same 

 method of utilization. We must restore Smith's definition of rent — 

 the excess of income over necessary expenditure and reasonable 

 l)rofits — to the throne from which it was expelled by the difi'er- 

 ential idea. In this belief I am supported by the theory and prac- 

 tice of all real estate men with whom I have discussed the matter. 



There is especially a very noticeable break between agricultural 

 land and building land, due partly to the nature of the outlays 

 necessary to prepare land for building, the risk of the enterprise, 

 and the long time needed before profits can be realized even when 

 the adventure is successful. The growth of cities is not steady 

 in all directions but fitful and in unanticipated directions. Land 

 agents wlio are lucky make immense profits, others incur immense 

 losses. A new car-line will suddenly increase values in the dis- 

 trict served, but it may incidentally ruin land development schemes 

 in some other district. For this reason the contention that the 

 value of land for agricultural purposes constitutes a foundation 

 on which land-owners can plant themselves in resisting attempts 

 on the i»art of builders to shift building taxes on to them is errone- 

 ous. The foundation is there, but it is so far below the actual 

 price levels and so detached from them that in many cases it is 



