COST OP PRODUCTION 221 



ordinary rise in the prices of primary produce. At the 

 same time there are reliable indications that better 

 methods of farming have increased the fertility of the 

 soil, but this operates to produce the same result as the 

 high prices of produce namely, a greater return per 

 acre from the land. We thus arrive at the conclusion 

 that, broadly speaking, the price of land is determined 

 by the return which it is expected to yield a conclusion 

 so obvious that it is almost unnecessary to dwell upon 

 it. But what is to be said to those who attribute the 

 supposed loss on wheat growing to rising land values, 

 when these values are themselves a result of the rise in 

 the prices of primary produce, including wheat? In so 

 far as the rise in pastoral and dairy products have 

 brought about the increases in land values, the contention 

 may be correct. But wheat lands have also risen in value, 

 and in view of this it is not wholly consistent to claim 

 this rise as a cause rendering the pursuit of the industry 

 unprofitable. While this idea is repudiated, it must not 

 be thought that the price of land does not enter into 

 cost of production. This is in no way inconsistent. 

 Obviously rent is a factor in estimating the cost of 

 production, but this does not mean that high rents cause 

 high prices. High rents are largely the result of high 

 prices. 



We are now in a position to undertake an analysis of 

 the rent of land as that term is customarily understood. 

 The full rent of a farm in New Zealand, or in any 

 country, with the possible exception of those which are 

 only in the embryo stages of their development, is made 

 up of three elements. The first is due to the natural 

 inherent value of the soil, or the " natural and indes- 

 tructible powers of the soil. ' ' The second element arises 

 from improvements made on it by man, and is in reality 

 interest on capital invested. Very often most important 

 of all is the third element, which is the result of the 

 growth of a dense and rich population, of the progress 



