RELATION OF LAND INCOME TO LAND VALUE. 51 
and an increasing spread between the annual earning power of land 
and its sale price, the effective demand for farms on the part of bu ■ 
has been declining, and the demand on the part of tenants increasing, 
so that retiring farmers have found it more profitable to lease their 
farms than to sell them. 
Competition is thus maintained as the effective force in both the 
renters' and the buyers' market, so that land must normally bring its 
full farm rent when leased, and sell on the basis of its capitalized 
farm rent. Average cash rents may, therefore, be used to measure 
the average income on all farms which are of the same grade as the 
rented farms. And the ratio of cash rent to land value reflects the 
ratio of income to value on all lands. 
Landlords are sometimes criticized for figuring that they must 
receive a certain rent from their tenants because their land is worth so 
much; for it is argued the value of the land is based upon the rent 
it will bring and not vice versa. Such a landlord is making his calcu- 
lations correctly from an individual point of view, for he argues, "If I 
can not get a rent from a tenant that will pay me as high a per cent 
on the investment in the long run, taking accounc of the anticipated 
increases in rent, as I can get by selling and taking a mortgage on the 
place, then I will sell it. " The landlord always has the alternative of 
selling or leasing his farm and he will choose the one that is to his 
best advantage. Competition is so effective among the buyers of 
land that a landlord can usually get a price for his farm based upon a 
capitalization of its full farm rent. Ii he decides to lease it, he will 
not take a cash rent that is lower than the farm rent, because he can 
get the full farm rent by selling the farm. 
It is, therefore, difficult to see that custom has any important 
influence in determining contract rents in this country. Custom 
does not influence land values, and so long as landlords have the 
alternative of selling or leasing it is not likely that they will accept 
a lower return from a tenant than they could get by selling and taking 
a mortgage from the purchaser. It is this possibility of selling or 
leasing their farms which is presented to the landlords as alternatives 
that makes competition, and not custom the effective force in the 
renter's market. It is through the strategic position of these retiring 
farmers and landlords that the supply of land is adjusted to the 
demand for it, on the part of both renters and buyers, and thus the 
equilibrium is maintained between contract rents and farm rents. 
In the plantation regions of the South, however, the value of the 
land is based directly on contract rent. The purchaser of a planta- 
tion expects to lease his land and bases the price which he is willing 
to pay for the plantation on the rents that the southern tenants can 
pay. But it is well known that custom is not an effective force in 
determining these rents. The tenants — for the most part negroes — 
pay the full farm rent, and these tenant rents are the basis o( land 
values. 
These conclusions are supported by the statistical studies on pages 
16 to 20. Table 4 shows that average cash rents are highly correlated 
with productivity factors; and it was pointed out on page 17 that 
these correlations would doubtless have been considerably higher 
had adequate data on all the. factors which determine productivity 
been available. They would also have been higher had such data 
been available for the cash-rented farms. It will be remembered 
