RENTS AND PROFITS 193 



of second-grade $400, and that of the first grade $500. This 

 is said to be true because it is assumed that the farmer can as 

 well afford to pay these sums as use the no-rent land. This 

 theory ignores the variation in the efficiency of the factors 

 other than land, and, while it shows the differential character 

 of rent, which was the point Ricardo was emphasizing, it cannot 

 be regarded as a measure of rent. 



Many economists have ignored variations in the efficiency 

 of farmers, manufacturers, and men of commerce, but others, 

 following Walker, 1 adhere to a theory of profits analogous 

 to the Ricardian theory of rent. They believe that all farmers 

 are not equally efficient, and that the farmers who, because of 

 their better judgment and greater skill, manage their farm opera- 

 tions better than their competitors, are able to secure larger 

 returns from the same expenditures for labor and equipment 

 on the same grade of land. These economists would assume the 

 returns given for the various grades of land in the above illustra- 

 tions to be the product of the least capable farmer needed to 

 supply the demand for agricultural products, and that the farmer 

 whose ability is superior to that of the least capable farmer will 

 be in a position to secure a profit. The profit of a given farmer 

 will be measured, it is said, by the difference in the value of 

 the product that he can secure and the value of the product 

 secured by the least capable farmer, with a given outlay on 

 a given grade of land. For example, suppose that with a given 

 outlay on no-rent land (that is, on the least useful land needed 

 to supply the demand for agricultural products) the value of the 

 product secured by the different grades of farmers is as follows : 



TABLE XII 



1 Francis A. Walker, "Political Economy," chapter on Profits. 

 o 



