THE VALUE OF FARM LAND AND EQUIPMENTS 211 



price which the farmer can afford to pay, but does not, of course, 

 necessarily represent the market price of the instrument of 

 production. The market price may be greater or less than the 

 capital value obtained in this way, for the instrument of pro- 

 duction may have as many valuations as there are different 

 grades of farmers to use it and different grades of uses to which 

 it may be put by a given farmer. In order to get a capital 

 value that will correspond more or less closely to the market 

 value of the various forms of capital-goods it will be necessary, 

 therefore, to arrive at the competitive price which will be paid 

 for the use of a given equipment during the series of years of its 

 usefulness, and then find the present value of the series of in- 

 comes, in the same way as has been done in the case of land. 

 But since it is not common in this country to let horses, tools, 

 and machinery to farmers for a hire, this method of capitaliza- 

 tion is less practical to the farmer when applied to equipments 

 than when applied to land. 



The cost of producing the machine or the horse is an important 

 element in determining the price which must be paid for it in 

 order that it may be produced. On the other hand, the use- 

 fulness of the machine or the horse to the farmer forms the 

 basis for his estimating whether or not he can better afford 

 to pay the market price or do without them. It may be true 

 even that the capital value of the instrument, when calculated 

 on the basis of its usefulness to a given farmer, may be greater 

 than its market value and yet it might be unprofitable for the 

 farmer to buy the particular horse or machine, because other 

 means of securing the same end might prove more profitable. 



The theory of capitalization is especially useful in the con- 

 sideration of the value of farm land because the value of a given 

 piece of land has no particular relation to the cost of bringing 

 such land under cultivation. The income received by the 

 landlord is largely a surplus which is credited to land becaust 

 it is scarce, rather than because it costs any definite amoune 

 to improve the land. Land is also much more permanent in 

 character than is equipment, and for this reason, also, it lends 

 itself with more facility to the above method of capitalization. 



