RELATION OF LAND INCOME TO LAND VALUE. 43 
existing landlords will increase the supply of farms for sale and thus 
hold down their price, so that the rate of return on farm lands is held 
in equilibrium with the return on these securities which are offered 
as alternative investments. While buyers, then, in the main may 
not think in terms of alternative investments, this class of sellers do. 
and it is their action which keeps the rate of return on farm lands in 
equilibrium vnth the return on other investments. 
It is often stated that investment in farm lands offers greater 
security than most other lines of investment. While it is true that 
farm lands can not run away, their values can and do. The truth 
of this should be impressed upon every one by what happened to 
land values in the war period and what has happened since. In- 
vestment in farm land almost always involves some risk, and this 
risk is usually greater than that involved in the purchase of farm 
mortgages or municipal and railway bonds or any other investments 
equally good. In the case of bonds a definite rate of interest on 
the investment is promised. This rate of interest and the principal 
are guaranteed in the case of farm mortgages and railway bonds by 
the right to take over the property in case the interest is not paid, 
and the loan is usually enough less than the value of the property 
to make it secure. The buyer of a farm, however, has no definite 
promise as to what return he will receive on his investment. It is 
an uncertain return depending upon the future prices for his products 
and his future costs. He is not buying the right to receive a definite 
return, nor is the principal always secure. Many of those who 
bought land in 1918, 1919, and 1920 can not now sell out and obtain 
the principal of their original investment and probably can not do 
so for a number of years to come. 
Furthermore, it must be remembered that a large percentage of 
the value of farm land during the 15 or 20 years preceding 1920 was 
based upon expected increases in land income which might or might 
not have been realized for all that the buyers of land during that 
period knew. The same is true to-day after three years of falling 
land incomes and falling land values. A large part of the value is 
still based upon expected increases in land income which will not be 
realized until the prices of agricultural products start upward again 
and maintain a strong upward course. 
This element of risk, though always present in farm-land invest- 
ment, has probably not been thoroughly appreciated by the present 
generation of farmers, who up to 1920 had witnessed nothing but 
constantly rising land values, but it seems likely that it will be 
taken more into account in the future. 
Do farmers have alternative investments i It is often stated that 
in effect they do not, and that even if they did they would not con- 
sider them. " When it is stated that farmers do not consider alter- 
native investments, the prospective buyer of land is usually had in 
mind. The farmer who is not ready to retire would rather own and 
operate his own farm than be a tenant, even though he could invest 
his capital in other securities and get a higher rate of return than he 
could by bujung farm land. But this is not the case with the retir- 
ing farmer or landlord. To these classes a farm is an invest men t to 
be compared with other investments which may ov may not yield a 
larger return in the long run. The only question here i-. do such 
