COST OF PRODUCTION 221 
ordinary rise in the prices of primary produce. At the 
same time there are reliable indications that better 
methods of farming have increased the fertility of the 
soil, but this operates to produce the same result as the 
high prices of produce — namely, a greater return per 
acre from the land. We thus arrive at the conclusion 
that, broadly speaking, the price of land is determined 
by the return which it is expected to yield—a conclusion 
so obvious that it is almost unnecessary to dwell upon 
it. But what is to be said to those who attribute the 
supposed loss on wheat growing to rising land values, 
when these values are themselves a result of the rise in 
the prices of primary produce, including wheat? In so 
far as the rise in pastoral and dairy products have 
brought about the increases in land values, the contention 
may be correct. But wheat lands have also risen in value, 
and in view of this it is not wholly consistent to claim 
this rise as a cause rendering the pursuit of the industry 
unprofitable. While this idea is repudiated, it must not 
be thought that the price of land does not enter into 
cost of production. This is in no way inconsistent. 
Obviously rent is a factor in estimating the cost of 
production, but this does not mean that high rents cause 
high prices. High rents are largely the result of high 
prices. 
We are now in a position to undertake an analysis of 
the rent of land as that term is customarily understood. 
The full rent of a farm in New Zealand, or in any 
country, with the possible exception of those which are 
only in the embryo stages of their development, is made 
up of three elements. The first is due to the natural 
inherent value of the soil, or the ‘‘natural and indes- 
tructible powers of the soil.’’ The second element arises 
from improvements made on it by man, and is in reality 
interest on capital invested. Very often most important 
of all is the third element, which is the result of the 
growth of a dense and rich population, of the progress 
