U. S. DEPARTMENT OF AGRICULTURE. 
Land incomes as we know them are either rising or falling; they 
do not continue the same year after year. Buyers and sellers of land 
anticipate the future as best they can in determining what price they 
will pay or must receive when they buy or sell land. If land incomes 
are rising it means that the value of land at any given time will be 
higher than the capitalization of its net earnings at the going rate of 
interest on long-time investments at that time would warrant. 
Consequently, the ratio of income to value would be low in com- 
parison to the rate of interest. 
The first problem, then, is to find out what this annual relationship 
is, and to discover its variations from region to region. Since there 
are changes in the interest rate as time goes on and changes in the 
rate at which land incomes increase or decrease, it becomes necessary 
to study the second phase of the problem; that is, the long-time tend- 
ency of the annual relationship. That this is a very important phase 
of the problem is brought out on pages 37 to 40. The third problem 
is to find out the anticipated relationship befween value in a given 
year and all the future incomes. 
Since the value in any given year is the sum of all the future 
incomes discounted to their present worth, one of the relation- 
ships sought here is this rate of discount. The relationship is an 
anticipated one, because it is not known for a certainty what the 
future incomes will be, so that in actual fact it is the estimated future 
incomes which are discounted to a present worth and whose sum 
gives the present value. This problem then involves two questions: 
(1) What are the anticipated future incomes ? (2) What is the rate 
at which they are discounted; or in other words, what is the rate of 
return which buyers and sellers of land expect to get on their in- 
vestments ? 
This anticipated rate of return may not be realized. Land incomes 
may increase more rapidly than anticipated, less rapidly than antici- 
pated, or they may decline, as has been the case since 1920. In the 
first case the long-time rate of return on the investment will be 
greater than anticipated, but in the second it will be less and in the 
third still less. Thus the fourth problem presents itself, the problem 
of determining what the actual return on the investment is, as against 
what it is anticipated to be, at the time a purchase is made. No 
answer can be given to this question for investments made at the 
present time; but for the past it can be shown how actual land income 
varied from what it was anticipated to be. Although this fourth 
problem can not be answered definitely for present investments, some 
consideration of it is necessary to understand the concrete relation- 
ships between the income from land and its selling price. 
The relationship involved in the first two problems may be 
thought of as one which shows the rate of return on the value of each 
and every particular year. The relationship sought in the last two 
problems is one that shows the long-time rate of return on the invest- 
ment. The latter relationship is the more fundamental, the former 
relationship being, in a way, incidental to it. The former can not be 
explained without knowing the latter, but the reverse is not true 
The practical importance of a statistical measurement of these 
relationships is obvious. The investor in farm mortgages, for 
instance, wants to know in general two things: (1) How large a loan 
can he make with safety ? And (2) will the interest payments be met 
