AGRICULTURAL ECONOMICS 



When we consider the mortgage in all of its 

 relations it is apparent that this is one of the 

 important means of acquiring landownership ; 

 and while it sometimes proves disastrous, it is 

 practically indispensable in our rural organization, 

 and on the whole it may be looked upon as an 

 institution friendly to the interests of the farmers. 



Section V. The taxation of mortgages. It 

 has been noted by economists that the market price 

 of land is often greater than the capitalization of 

 the net rent at the current rate of interest. That 

 is, men are willing to take a lower return on in- 

 vestments in land than on loans, even where the 

 security is a farm mortgage. This is said to in- 

 crease the difficulty of paying off farm mortgages. 

 The man whose farm is mortgaged must pay, for 

 example, six per cent, for the use of money which, 

 as an investment in land, is yielding him no more 

 than four per cent. 



With the Ricardian theory of distribution in 

 mind, which assumes that all farmers possess the 

 same degree of efficiency, economists have con- 

 cluded that this discrepancy between the net rent 

 and the interest would make it practically impos- 

 sible for the farmers to pay off their mortgages. 

 It will be readily understood from the discussion 

 of profits due to superior ability, that all but the 

 less efficient farmers are able to counterbalance 

 this loss by earning personal profits, so that the 

 fact of the discrepancy is not so disastrous as has 

 224 



