192 AGRICULTURAL ECONOMICS 



The motives that underlie the actions of men when bidding 

 for the use of land are fundamentally the same as those that 

 operate in determining the values of other useful things. The 

 theory of rent is therefore an attempt to indicate the way in 

 which the theory of value works itself out when applied to the 

 annual value of land. 



While all land that is useful and scarce is valuable, all such 

 land is not equally valuable, for the simple reason that all land 

 is not equally useful. This variation in usefulness may be due 

 to variations in the fertility of the land or to differences in the 

 location of the land with respect to the market for the goods 

 produced. Economists have usually thought of the least 

 desirable land in use at a given time as being rent free. That 

 is, it is assumed that the least desirable land will be in great 

 abundance in proportion to the demand for such land, and, 

 therefore, that no rent will be paid for its use. This " no- 

 rent " land is then taken as the starting point for measuring 

 the rent of the more useful grades of land. According to the 

 Ricardian Theory* the rent of any given grade of land is meas- 

 ured by the difference in the value of the produce resulting from 

 a given outlay of labor and capital on that land, and on the no- 

 rent land. For example, suppose a farmer can, with the same 

 effort and expenditure, produce goods as shown in Table XI. 



TABLE XI 



The assumption is that, if all these grades of land, and no 

 more, are needed to supply the market, competition will tend 

 to make the rent of the requisite quantity of fifth-grade land 

 $100, that of fourth-grade $200, that of third-grade $300, that 



1 David Ricardo, "Principles of Political Economy and Taxation," Chapter II. 



