Malthus' Opinions on Rent
Table of Contents
I admire Malthus’s Essay on Population.
It has been assaulted by opponents but it has proven its strength.
Its just reputation will spread with the cultivation of that science of which it is so eminent an ornament.
Malthus too—has satisfactorily explained the principles of rent, and shewed that it rises or falls in proportion to the relative advantages, either of fertility or situation, of the different lands in cultivation, and has thereby thrown much light on many difficult points connected with the subject of rent, which were before either unknown, or very imperfectly understood; yet he appears to me to have fallen into some errors, which his authority makes it the more necessary, whilst his characteristic candour renders it less unpleasing to notice.
One of these errors lies in supposing rent to be a clear gain and a new creation of riches.
I agree with the rent of Malthus, but not with that of Buchanan.
In this view it (rent) can form no general addition to the stock of the community, as the neat surplus in question is nothing more than a revenue transferred from one class to another.
From the mere circumstance of its thus changing hands, it is clear that no fund can arise, out of which to pay taxes.
The revenue which pays for the produce of the land, exists already in the hands of those who purchase that produce; and, if the price of subsistence were lower, it would still remain in their hands, where it would be just as available for taxation as when, by a higher price, it is transferred to the landed proprietor.
After various observations on the difference between raw produce and manufactured commodities, Mr. Malthus asks, “Is it possible then, with M. de Sismondi, to regard rent as the sole produce of labour, which has a value purely nominal, and the mere result of that augmentation of price which a seller obtains in consequence of a peculiar privilege; or, with Mr. Buchanan, to consider it as no addition to the national wealth, but merely transfer of value, advantageous only to the landlords, and proportionably injurious to the consumers?“50
Rent is a creation of value, not a creation of wealth.
If the price of corn, from the difficulty of producing any portion of it, should rise from 4l. to 5l. per quarter, a million of quarters will be of the value of 5,000,000l. instead of 4,000,000l., and as this corn will exchange not only for more money but for more of every other commodity, the possessors will have a greater amount of value; and as no one else will in consequence have a less, the society altogether will be possessed of greater value, and in that sense rent is a creation of value. But this value is so far nominal that it adds nothing to the wealth, that is to say, to the necessaries, conveniences, and enjoyments of the society.
We should have precisely the same quantity, and no more of commodities, and the same million quarters of corn as before; but the effect of its being rated at 5l. per quarter, instead of 4l., would be to transfer a portion of the value of the corn and commodities from their former possessors to the landlords. Rent then is a creation of value, but not a creation of wealth.
It adds nothing to the resources of a country, it does not enable it to maintain fleets and armies; for the country would have a greater disposable fund if its land were of a better quality, and it could employ the same capital without generating a rent.
Malthus writes:
The immediate cause of rent is the excess of price above the cost of production at which raw produce sells in the market
But in another place he says,
The causes of the high price of raw produce are 3:
-
The quality of the earth, by which it can be made to yield a greater portion of the necessaries of life than is required for the maintenance of the persons employed on the land.
-
That quality peculiar to the necessaries of life of being able to create their own demand, or to raise up a number of demanders in proportion to the quantity of necessaries produced.
-
The comparative scarcity of the most fertile land.
In speaking of the high price of corn, Malthus does not mean the price per quarter or per bushel, but rather the excess of price for which the whole produce will sell, above the cost of its production, including always in the term “cost of production,” profits as well as wages.
One hundred and fifty quarters of corn at 3l. 10s. per quarter, would yield a larger rent to the landlord than 100 quarters at 4l., provided the cost of production were in both cases the same.
High price, if the expression be used in this sense, cannot then be called a cause of rent; it cannot be said “that the immediate cause of rent is obviously the excess of price above the cost of production, at which raw produce sells in the market,” for that excess is itself rent.
Malthus defined rent as:
that portion of the value of the whole produce which remains to the owner of the land, after all the outgoings belonging to its cultivation, of whatever kind, have been paid, including the profits of the capital employed, estimated according to the usual and ordinary rate of the profits of agricultural stock at the time being.
Whatever sum this excess may sell for, is money rent; it is what Malthus means by “the excess of price above the cost of production at which raw produce sells in the markets;”
Therefore in an inquiry into the causes which may elevate the price of raw produce, compared with the cost of production, we are inquiring into the causes which may elevate rent.
In reference to the first cause of the rise of rent, Mr. Malthus has the following observations: “We still want to know why the consumption and supply are such as to make the price so greatly exceed the cost of production, and the main cause is evidently the fertility of the earth in producing the necessaries of life. Diminish this plenty, diminish the fertility of the soil, and the excess will diminish; diminish it still further, and it will disappear.”
The excess of necessaries will diminish and disappear, but that is not the question. The question is, whether the excess of their price above the cost of their production will diminish and disappear, for it is on this, that money rent depends.
Is Malthus warranted in his inference, that because the excess of quantity will diminish and disappear, therefore “the cause of the high price of the necessaries of life above the cost of production is to be found in their abundance, rather than in their scarcity; and is not only essentially different from the high price occasioned by artificial monopolies, but from the high price of those peculiar products of the earth, not connected with food, which may be called natural and necessary monopolies?”
Are there no circumstances under which the fertility of the land, and the plenty of its produce may be diminished, without occasioning a diminished excess of its price above the cost of production, that is to say, a diminished rent? If there are, Mr. Malthus’s proposition is much too universal; for he appears to me to state it as a general principle, true under all circumstances, that rent will rise with the increased fertility of the land, and will fall with its diminished fertility.
Malthus would be right, if, in proportion as the land yielded abundantly,557 a greater share of the whole produce were paid to the landlord; but the contrary is the fact: when no other but the most fertile land is in cultivation, the landlord has the smallest share of the whole produce, as well as the smallest value, and it is only when inferior lands are required to feed an augmenting population, that both the landlord’s share of the whole produce, and the value he receives, progressively increase.
Suppose that the demand is for a million of quarters of corn, and that they are the produce of the land actually in cultivation. Now, suppose the fertility of all the land to be so diminished, that the very same lands will yield only 900,000 quarters. The demand being for a million of quarters, the price of corn would rise, and recourse must necessarily be had to land of an inferior quality sooner than if the superior land had continued to produce a million of quarters. But it is this necessity of taking inferior land into cultivation which is the cause of the rise of rent.
Rent is not in proportion to the absolute fertility of the land in cultivation, but in proportion to its relative fertility.
Whatever cause may drive capital to inferior land, must elevate rent; the cause of rent being, as stated by Malthus in his third proposition, “the comparative scarcity of the most fertile land.” The price of corn will naturally rise with the difficulty of producing the last portions of it;
But as the cost of production will not increase, as wages and profits taken together will continue always of the same value, it is evident that the excess of price above the cost of production, or, in other words, rent, must rise with the diminished fertility of the land, unless it is counteracted by a great reduction of capital, population, and demand.
It does not appear then that Mr. Malthus’s proposition is correct: rent does not immediately and necessarily rise or fall with the increased or diminished fertility of the land; but its increased fertility renders it capable of paying at some future time an augmented rent.
Land possessed of very 559little fertility can never bear any rent; land of moderate fertility may be made, as population increases, to bear a moderate rent; and land of great fertility a high rent; but it is one thing to be able to bear a high rent, and another thing actually to pay it.
Rent may be lower in a country where lands are exceedingly fertile than in a country where they yield a moderate return, it being in proportion rather to relative than absolute fertility—to the value of the produce, and not to its abundance. Mr. Malthus says, that the “cause of the excess of price of the necessaries of life above the cost of production, is to be found in their abundance rather than their scarcity, and is essentially different from the high price of those peculiar products of the earth, not connected with food, which may be called natural and necessary monopolies.”
In what are they essentially different? Would not the abundance of those peculiar products of the earth cause a rise of rent, if the demand for them at the same time increased? and can rent ever rise, whatever the commodity produced may be, from abundance merely, and without an increase of demand?
The second cause of rent mentioned by Mr. Malthus, namely, “that quality peculiar to the necessaries of life, of being able to create their own demand, or to raise up a number of demanders in proportion to the quantity of necessaries produced,” does not appear to me to be any way essential to it. It is not the abundance of necessaries which raises up demanders, but the abundance of demanders which raises up necessaries.
We are under no necessity of producing permanently any greater quantity of a commodity than that which is demanded. If by accident any greater quantity were produced, it would fall below its natural price, and therefore would not pay the cost of production, together with the usual and ordinary profits of stock: thus the supply would be checked till it conformed to the demand, and the market price rose to the natural price.
Mr. Malthus appears to me to be too much inclined to think that population is only increased by the previous provision of food,—“that it is food that creates its own demand,"—that it is by first providing food that561 encouragement is given to marriage, instead of considering that the general progress of population is affected by the increase of capital, the consequent demand for labour, and the rise of wages; and that the production of food is but the effect of that demand.
It is by giving the workman more money, or any other commodity in which wages are paid, and which has not fallen in value, that his situation is improved. The increase of population, and the increase of food will generally be the effect, but not the necessary effect of high wages.
The amended condition of the labourer, in consequence of the increased value which is paid him, does not necessarily oblige him to marry and take upon himself the charge of a family—he may, if it please him, exchange his increased wages for any commodities that may contribute to his enjoyments—for chairs, tables, and hardware; or for better clothes, sugar, and tobacco. His increased wages then will be attended with no other effect than an increased demand for some of those commodities; and as the race of labourers will not be materially increased, his wages will continue permanent562ly high.
But although this might be the consequence of high wages, yet so great are the delights of domestic society, that in practice it is invariably found that an increase of population follows the amended condition of the labourer; and it is only because it does so, that a new and increased demand arises for food. This demand then is the effect of an increase of population, but not the cause—it is only because the expenditure of the people takes this direction, that the market price of necessaries exceeds the natural price, and that the quantity of food required is produced; and it is because the number of people is increased, that wages again fall.
What motive can a farmer have to produce more corn than is actually demanded, when the consequence would be a depression of its market price below its natural price, and consequently a privation to him of a portion of his profits, by reducing them below the general rate?
If the necessaries of life, the most important products of land, had not the property of creating an increase of demand proportioned to their increased quantity, such increased quan563tity would occasion a fall in their exchangeable value.
However abundant might be the produce of a country, its population might remain stationary.
This abundance without a proportionate demand, and with a very high corn price of labour, which would naturally take place under these circumstances, might reduce the price of raw produce, like the price of manufactures, to the cost of production.
Might reduce the price of raw produce to the cost of production?” Is it ever for any length of time either above or below this price?
Does not Mr. Malthus himself, state it never to be so?
Corn, in reference to the quantity actually produced, is sold at its necessary price like manufactures, because I consider it as a truth of the highest importance, which has been overlooked by the economists, by Adam Smith, and all those writers, who have represented raw produce as selling always at a monopoly price.
Every extensive country may thus be considered as possessing a gradation of machines for the production of corn and raw materials, including in this gradation not only all the various qualities of poor land, of which every territory has generally an abundance, but the inferior machinery which may be said to be employed when good land is further and further forced for additional produce.
As the price of raw produce continues to rise, these inferior machines are successively called into action; and as the price of raw produce continues to fall, they are successively thrown out of action. The illustration here used serves to shew at once the necessity of the actual price of corn to the actual produce, and the different effect which would attend a great reduction in the price of any particular manufacture, and a great reduction in the price of raw produce.
How are these passages to be reconciled to that which affirms, that if the necessaries of life had not the property of creating an increase of demand proportioned to their increased quantity, the abundant quantity produced would then, and then only, reduce the price of raw produce to the cost of production?
If corn is never under its natural price, it is never more abundant than the actual population require it to be for their own consumption; no store can be laid up for the 566consumption of others;
It can never then by its cheapness and abundance be a stimulus to population.
In proportion as corn can be produced cheaply, the increased wages of the labourers will have more power to maintain families. In America, population increases rapidly, because food can be produced at a cheap price, and not because an abundant supply has been previously provided. In Europe population increases comparatively slowly, because food cannot be produced at a cheap value. In the usual and ordinary course of things, the demand for all commodities precedes their supply.
By saying, that corn would, like manufactures, sink to its price of production, if it could not raise up demanders, Mr. Malthus cannot mean that all rent would be absorbed; for he has himself justly remarked, that if all rent were given up by the landlords, corn would not fall in price; rent being the effect, and not the cause of high price, and there being always one quality of land in cultivation which pays no rent whatever, the corn from which replaces by its price, only wages and profits.
I have no hesitation in stating, that, independently of the irregularities in the currency of a country, and other temporary and accidental circumstances, the cause of the high comparative money price of corn is its high comparative real price, or the greater quantity of capital and labour which must be employed to produce it; and that the reasons why the real price of corn is higher, and continually rising in countries which are already rich, and still advancing in prosperity and population, is to be found in the necessity of resorting constantly to poorer land, to machines which require a greater expenditure to work them, and which consequently occasion each fresh addition to the raw produce of the country to be purchased at a greater cost; in short, it is to be found in the important truth, that corn in a progressive country, is sold at the price necessary to yield the actual supply;568 and that, as this supply becomes more and more difficult, the price rises in proportion.
Malthus explains the causes of the rise in the price of raw produce in rich and progressive countries, which I agree to.
But it appears to me to be at variance with some of the propositions maintained by him in some parts of his Essay on Rent.