breathes. Although men of business do not use a theory of rent, and may have never heard the name of such a theory, yet unconsciously they follow the theory; and the theory will explain the practical consequences connected with the renting of land, as completely as if all who were engaged in such business transactions were political economists of the Ricardian type. The point, therefore, to be determined is, not whether the theory is used, but whether the theory is universally true when rents are determined by competition. Restatement of the theory.Let us again expound the theory; and we think it will be admitted that each of the positions which it assumes is incontrovertible. It cannot be denied that the land of each country varies so greatly in productiveness, that there always exists some land which is either so barren or so disadvantageously situated that it is just on the margin of cultivation, and can only pay a nominal rent. Land which is more productive will pay a rent, and such rent must represent the difference in the value between this better land and that land which is so barren that it can only pay a nominal rent. But this value is represented by the difference in the net produce obtained from the two lands in question, and hence the rent of any particular land may be estimated as the difference between the amount which it produces and the amount of produce raised from the worst land in cultivation. This is the ordinary enunciation of Ricardo's theory; the terms however, in which this enunciation is expressed require some explanation. In the first place, it should be remarked that net produce, not gross produce, is meant.
Illustration of the theory by an example.The necessity of making this distinction may be illustrated by an example. Let us, for instance, suppose that there are two farmers, A and B, and that one of these, A, occupies a much more productive farm than the other, B. Now the gross produce of a farm is the whole produce which is raised from it, without deducting the expenses of cultivation. But the surplus produce which remains to the farmer cannot be ascertained until from this gross produce are deducted all the expenses connected with the farm. A certain sum must also be deducted as interest for the capital invested in the farm,