32 
BULLETIN 1224, U. S. DEPARTMENT OF AGRICULTURE. 
(I t 
the formula I '=-+~2» in which all the terms except /are given. The 
question now is, has i any foundation in fact? Is it based on any 
concrete experience of the buyers and sellers of land ? Or is it a 
mere mathematical abstraction resulting from the assumption that 
the rate of capitalization is the mortgage rate of interest? (See pp. 
40 to 46 for a justification of this assumption.) 
It is a matter of general knowledge that farmers anticipate future 
changes in land incomes in buying and selling farm lands. But how 
much of the future do they anticipate, and what is the basis for the 
increases that they project into the future and capitalize into a pres- 
ent worth? Theoretically the value of land is based upon all the 
future incomes. Since it is impossible for any individual to know 
Average Gross Cash Rent per Acre, 1905-1920. 
DOLLARS 
PER ACRE 
1 
i 
X— — X 
OWA 
SOUTHERN MINN. 
SOUTHERN WIS. 
OHIO 
NORTHERN ILL. 
EASTERN NEBR. & S. DAK 
1 
/ 
t 
i 
• 
^^ 
— o 
<K^ 
y 
== ^ 
^ 
**=*■ 
^ 
^ 
^ ^ 
^. 
b^c r 
}o**\ 
.;•> 
1— ■ 
*"! 
>' 
d^ 
* "^ 
r^r 
',-J*^ 
* 
' 
„— 
/ 
— 
: — 
x— - 
,*- 
-X — 
— *"*■ 
— X- 
— — * 
1 
1905 06 '07 '08 '09 '10 
'12 '13 'I-** '15 '16 '17 '18 '19 1920 
Fig. 6. — The cash rents in these areas do not show the fluctuations from year to year, which is charac- 
teristic of commodity prices, but move upward in fairly smooth curves. The difference in the rate of 
increase in these areas is also of great significance. 
exactly what the future will bring forth, values are based upon esti- 
mated future incomes. What is the basis for the estimated future 
incomes ? In the main, judgments of the future are based upon past 
experience, and the more uniform the experience of the past the 
more certainty is felt of forecasts of the future. Up to 1920 the 
present generation of farmers have as a rule experienced nothing but 
rising land incomes. They have not all increased at the same rate, 
but in all large areas they have increased. The movement of cash 
rents in six important areas is shown in Figure 6. 
This chart shows that average cash rents have moved upward since 
1905, and there is no doubt but that they were moving upward for a 
number of years previous. But in Iowa, eastern Nebraska, and south- 
eastern South Dakota they have increased at a much greater rate 
