CONTRACTS USED IN RENTING FARMS ON SHARES. 31 



result of mutual demands and concessions and is therefore for the 

 most part the final outcome of the blind operation of economic forces 

 rather than the result of a deliberately planned system of division. 



It would seem that the main physical factors which operate in 

 the production of farm products are land, working capital, and 

 labor. If, therefore, an agreement could be reached on a reasonable 

 valuation of land and a reasonable rate of interest which this land 

 should draw, and also upon a satisfactory payment for labor and a 

 rate of interest on working capital, these three factors, namely, 

 interest on land, interest on working capital, and wages for labor, 

 could be used as a rational basis for a percentage distribution of 

 products. 



One of the great difficulties in establishing such a rational basis 

 for the division of farm products under a share system of leasing is 

 found in arriving at a proper estimate of the value of land. Farm 

 land in the better farming sections is now held at prices which indi- 

 cate the strong influence of speculative expectation of further rise 

 in land prices. In fact much land is already capitalized at so high a 

 price that the owner is forced to accept a lower rate of interest from 

 the operation of the farm than could be reasonably expected from the 

 same amount of capital otherwise invested. In estimating the value 

 of the relative contributions of working capital and land to farm 

 production, it is necessary to take into consideration the high relative 

 risk and depreciation involved in the maintenance of live stock and 

 farm machinery, as compared with the indestructibility of farm land. 

 It may perhaps be fair to consider the relative contribution of a 

 dollar invested as working capital as about three times that of a 

 dollar invested in land, working capital yielding 10 per cent and 

 land 3^ per cent interest. 



The tenant's services can not justly be considered as consisting 

 merely of manual labor. His managerial ability is an important part 

 of -his services. It is unfair^ therefore, to rate the tenant's services 

 to the partnership at the same value for all values of farms in a given 

 neighborhood. A labor income of $500 might be an adequate recom- 

 pense for a tenant's services on a $10,000 farm, but on a farm worth 

 $50,000 his time and managerial ability are worth more. No business 

 man would think of putting in charge of a $50,000 plant a man whose 

 services were worth no more than $500. In order to obviate such an 

 Injustice to the tenant, it is necessary to assume that the value of his 

 labor and managerial ability increases somewhat in proportion to 

 the increase in the value of the farm. 



The tendency at present is for the land to take an increasingly 

 large proportion of the joint product of land, working capital, and 

 labor. In many of the richest farming districts land values have be- 

 come so high that the landlord's interest on his investment is only 3 



