98 UNIVERSITY OF ILLINOIS 



would be as well off if he worked for wages, let his capital for in- 

 terest, and abandoned his land, as he would be if he kept his land and 

 tried to grow corn. He would have no motive for holding on to his 

 land and no one else would have a motive for buying his land. 



Suppose, however, that the price of corn should rise to sixty 

 cents a bushel and it was expected that it would remain at this level, 

 one year with another. There is now ten cents a bushel surplus. 

 Obviously, no man would abandon his land under these conditions. 

 He has a motive for keeping it; and there would be plenty who 

 would be glad to buy it at some fair price. In other words, no man 

 could make as much by abandoning his land and letting his capital 

 at interest as he could by keeping his land and growing corn. 



How much advantage would his land be to him? Well, let us 

 suppose that he can grow fifty bushels of corn to the acre on the aver- 

 age and makes ten cents on each bushel. He then makes five dollars 

 on each acre of land. Five dollars capitalized at the rate of five 

 per cent would be one hundred dollars. One hundred dollars would 

 be, therefore, the logical price for an acre of that land. Now a rise 

 from fifty cents to sixty cents a bushel is not so very violent, but with 

 the figures which I have assumed, it would make the difference be- 

 tween no price and one hundred dollars an acre for farm land. 

 Again, assume that there is another rise of ten cents a bushel in the 

 price of corn, the expenses of growing the crop remaining the same. 

 A change from sixty cents to seventy cents is not so very violent, but 

 this would exactly double the logical price of farm land; for now, 

 instead of making ten cents on each bushel, he makes twenty cents, 

 clear, over and above the expenses of growing the crop. Translated 

 into acres, he now makes ten dollars an acre instead of five dollars. 

 Capitalizing this ten dollars at five per cent makes two hundred 

 dollars, the logical price of an acre of land, instead of one hundred 

 dollars. In short, an increase of one-sixth in the price of corn pro- 

 duces logically a doubling of the price of farm land. A similar fall 

 in the price of corn would produce a similarly violent fall in the 

 price of farm land. 



To BUY ON CREDIT A HAZARDOUS UNDERTAKING 



In this country, where the tendency is for farmers to own their 

 own land, they are very likely to measure their own prosperity in 

 terms of the trend of land prices. It is inevitable that there should 

 be very wide fluctuations in land prices. Of course, this is not likely 

 to have a great deal of influence on the farmer who owns his land 



