§ 30. Stoppage of the Bank in 1797. The Bullion Committee condemn the RESTRICTIVE Theory Success of the EXPANSIVE Theory in 1825 42. 41. An Inquiry into the Banking System necessary Natural Laws of Trade. THE PRINCIPLES OF ECONOMICAL PHILOSOPHY. CHAPTER XI. ON RENT (continued). TRUE DEFINITION OF RENT-INCONSISTENCIES OF SMITH-PERRONET THOMPSON AND MALTHUS-DE FONTENAY-CORN RENTS-METAYER RENTS-RENT OF MINES-RENT OF SHOPS. 1. Several writers have seen the unphilosophical character of the system of Smith, Ricardo, and Mill. Thus Wakefield says1 "Those parts of the present very long chapter, which really belong to the subject of rent, are generally considered to form the most defective and erroneous portion of the text. Though this treatise abounds in interesting details, in admirable illustrations and in incidental reflections of the greatest value, which last perhaps contain the germs of the whole truth, still, it leaves no distinct impression as to the nature and causes of rent." What the editor of Bentham's Rationale of Reward has said of Adam Smith's entire work, seems to be especially applicable to this chapter. The author has not "simplified his subject by referring everything to one principle; a principle which should bring all his reasonings into a very small circle, and serve to unite into one bundle those observations which cannot be so easily grasped when they are disunited. Had he clearly recognized such a principle, he would have made it the centre of his system: it would have been the foundation upon which he would have erected his whole superstructure, and he would have been spared a multitude of repetitions and windings." His own conceptions are seldom preNote to Wealth of Nations, B. I., ch. 11. B cise sometimes, they are not only vague but contradictory. At one time he seems to fancy that rent exists because "as soon as the land of any country has become private property, the landlords, like all other men, love to reap where they never sowed, and demand a rent even for its natural produce;" because, in short, the owners of land choose that rent shall be paid at another time he declares that rent is the highest payment for the use of land, which the tenant can afford to make under actual circumstances, and, consequently, that the amount of rent is not at all determined by the landlord's pleasure. Here he supposes that prices rise because rent increases; there, that rent increases because prices rise. The distinctions, too, which he draws between different sorts of produce, as affording, and not affording rent, and between different circumstances under which the same sort of produce will, and will not, afford rent, though in a great measure perhaps agreeable to truth, still, being made without reference to any guiding principle, have the air of being drawn rather with the view to a display of ingenuity than of truths founded on fact and reason. The richest materials are all but wasted for want of a leading principle whereby to arrange and connect them." It has already been abundantly shewn that these remarks are perfectly true, and the precise purpose of the present work is to establish a system founded upon unity of principle, and to shew that all Economic phenomena are reducible to a single great general law, precisely like the phenomena in any other great Inductive Science. 66 2. The subject has been thrown into great confusion by an erroneous definition of Rent. Rent," says Ricardo, "is that portion of the produce of the earth which is paid to the landlord for the use of the original and indestructible powers of the soil." We have already shewn that this definition is absurd, because the earth has no indestructible powers except extent. From the absurd theory that rent can only arise from differences of soil, it is sometimes defined as "the difference between the unequal returns to different parts of the capital employed on the soil."1 Rent, however, is nothing but reditus, or renditus, income, return, or revenue. It is merely a name which is usually applied to the return or income afforded by some kinds of fixed capital, such as lands, houses, water-courses, copyrights, patents, dies for coining, 1 Mill, Principles of Political Economy, B. III., ch. 5, § 2. telegraph wires, &c. In former times the sum paid for the use of money by the Government, or the funds, was called Rent. Thus when Charles II. seized upon the bankers' money in the Exchequer, he promised them a yearly Rent of 6 per cent. This name, though discontinued with respect to the English funds, is still applied to the French funds, which are called Rentes, and a French fundholder is called a Rentier. The word Rent, however, is not applied to all kinds of fixed Capital, but more usually only to that of an immovable nature, such as lands, houses, water-courses, telegraph wires, &c. When the capital is movable though fixed, the word Hire is usually employed. Thus we say to "hire" a horse, a carriage, or plate, or furniture, though, as the horse, the carriage, the plate, or the furniture remains the property of the letter, it is fixed capital to him. Thus it is seen that Ricardo's objection, that Rent only applies to the sum paid for the use of the original and indestructible powers of the earth, entirely fails: and the definition of it as the "portion of the produce of the earth" is equally arbitrary and erroneous. When we pay rent for a house, or a water-course, or a copyright, or patent, or a telegraph wire, how is that Rent a "portion of the produce of the earth"? 3. We have already shewn that Smith is quite contradictory to himself on the subject of Rent: in one part he says that Rent is a cause of price; and in another part that price is the cause of Rent. He is also usually considered to have demonstrated that Labour is the cause of all value. But his chapter on Rent contains many striking contradictions to that doctrine. Thus he says a landlord "sometimes demands rent for what is altogether incapable of human improvement. Kelp is a species of sea-weed which when burnt yields an alkaline salt useful for making glass, soap, and for several other purposes. It grows in several parts of Great Britain, particularly in Scotland, upon such rocks only as lie within the high water mark, which are twice every day covered by the sea, and of which the produce, therefore, was never augmented by human industry. The landlord, however, whose estate is bounded by a kelp shore of this kind demands a Rent for it as much as for his corn fields." Now, if the landlord is enabled to demand a Rent for such a kelp shore, it is quite clear that the kelp must have a value beyond that of the labour employed in obtaining it, and in preparing it for the market. For if all the money realized by the sale of it were required to defray the labour employed, how could there be any surplus for rent? And whence did this value come? Most clearly from the Intensity of the Demand and the Limitation of the Supply. It is quite clear that the landlord's rent could only come from the excess of the value of the product above the cost of production, or the labour of bringing to market. 4. Smith has given various other instances of a similar principle-" A good stone quarry in the neighbourhood of London would afford a considerable rent "-"The paving of the streets of London has enabled the owners of some barren rocks on the coast of Scotland to draw a rent from what never afforded any before. The woods of Norway and of the coasts of the Baltic find a market in many parts of Great Britain, which they could not find at home, and thereby afford some rent to their proprietors." Now these instances, which might be greatly multiplied, in which the value of the whole product is clearly and manifestly separable into the cost of the labour of production, and the value of the natural object itself show the profound folly of McCulloch's doctrine" In its natural state matter is very rarely possessed of any immediate or direct utility, and is always destitute of value" "Nature is not niggard or parsimonious. Her rude products, powers, and capacities are all afforded gratuitously to man. She neither demands nor receives an equivalent for her favours. An object which may be appropriated or adapted to our use without any voluntary labour on our part, may be of the very highest utility, but as it is the free gift of nature it is quite impossible it can have the smallest value." 5. The products we have been considering existed anterior to any labour being bestowed on them; they were the pure result of the operation of nature, and we have seen that they have a value anterior to, and independent of, any labour being bestowed upon them. But the same principle is manifestly true when human labour precedes the operations of nature. Thus when the husbandmau has prepared and laboured the ground, and has placed the |