BUT WHAT of rent of land? Did rent arise because agricultural commodities exchanged on the market at a higher value, relatively to their labour equivalence, than manufactures? Did it arise because agricultural values equalled not only wages plus a normal rate of profit on capital employed, but wages plus profit plus rent as well? In other words, was rent extracted because exchange on the market between agriculture and industry caused the former to give less than an equivalent for what it received in exchange? Ricardo formally answered “No” to this question by an ingenious analytical device. How, indeed, could he admit the inconsistency of a “natural order, producing “unnatural” exchange equivalents? But the answer was entirely dependent on the ingenuity of the device, and not independent of it. This device was the concept of the differential, so dear to the economist heart ever since.

Rent arose because of differences in the fertility of different soils. AJ the market for com expanded, the more fertile soils being fully tilled, cultivation extended to inferior soils where the expenditure of labour required to produce a bushel of com was greater than on the superior land. The value of corn was determined by the labour expended at the margin of cultivation, i.e. under the least favourable natural conditions. But since the price of corn in the market equalled the cost on the inferior land, the corn grown on the better land, where the cost per bushel was less, yielded a surplus. This constituted economic rent and accrued to the landowner: directly if he was both owner and cultivator, indirectly through the competition of farmers for the better land if the owner leased to a tenant. Rent therefore figured as a product of Nature’s bounty, which the landowning class was able to annex as attribute of its right of ownership. And as the progress of society increased the valuation placed upon these scarce qualities of Nature, resort had to be made to less and less fertile soils, the margin of cultivation was extended, and rent tended to rise. With the march of industrialism wages would tend to remain at, or near, subsistence level (owing to the law of population and the competition of labourers for employment), the rate of profit (with the progressive accumulation of capital, fall of price and rise in cost of agricultural production) would tend to fall, and at the same time rents would tend to rise.

The exclusion of rent from the problem of market value – excluding it as a price-determining element with the dictum, which has sown so much confusion, “that rent does not enter into cost of production” – was entirely formal. It was a trick of analytical framing, a trick of definition, the simplest of tautologies, and nothing more. If price equalled cost at the margin, then rent had nothing to do with it, for the simple reason that rent did not appear at the margin. But it still remained true that, if one spoke of the average cost of producing agricultural products, rent arose because a smaller quantity of cost-equivalents was yielded by agriculture in market exchange against a given cost equivalent yielded by manufacture. In other words, rent arose because the price of com was raised above the average cost of producing that corn. But there was this much to be said for the Ricardian tautology: the reason for this raised agricultural price was the limitation of natural resources and was not the work of alterable man-made institutions or manmade restrictions. The landlord, as owner of scarce natural properties, was a passive not a deliberating agent in the process; and the emergence of rent was consistent with, and not a violation of, a “natural order” of exchange, – or value – ratios.

But Ricardo was less concerned with the qualitative characteristics of rent and profit than with the factors which influenced changes in them, and with emphasising the class antagonism which lay between them. And here he was most conspicuously champion of the new industrial order. His theory of rent as a surplus at the expense of the industrial classes, and a tax on their income, was heavy theoretical artillery against the landowning interests and against legislation, such as the Corn Laws, which by raising rent lowered profit. He was the bourgeois economist par excellence because he presented, more explicitly and fully than anyone before him, the “natural economic order” as a conceptual unity, and presented progress as essentially consisting in the process of capitalist industrialisation. And with him bourgeois Political Economy reached its zenith. His immediate followers did little more than repeat and elaborate his ideas. J. S. Mill (1806-1873), for all his undoubted qualities, was an essentially cautious and unoriginal mind, which played the rĂ´le of careful editor, commentator and interpreter to Political Economy, rather than an inventor of new ideas.