expenses of producing and placing on the market that portion of the supply for which there is a demand, which is produced and placed on the market at the greatest expense.
On the hypothesis of free competition this result will follow. Producers cannot continue to produce at a loss; and, therefore, if the demand for the produce of land is to ensure a supply sufficient to meet it, a price must be offered, which will recoup the expenses incurred by those producers, who are situated in the most disadvantageous position. They cannot afford to produce at a loss, and, if they asked for more, fresh competitors would, on the hypothesis of free competition, leave some other industry and enter theirs. But the market-price thus determined will be the price for the whole of the supply of the same quality which is forthcoming. There is no reason, on the hypothesis of free competition, why the producers, who enjoy greater advantages of production, should be content with a lower when they can obtain the higher price, which the buyers must offer, if all the supply they demand is to be forthcoming. And so the producers, who are more favourably placed, obtaining the same price as those who are less advantageously situated for commodities which have cost less to produce and to place on the market, have a surplus in hand, which competition for the enjoyment of their advantages compels them to hand over to those who have their control and disposal.
It is this surplus which is termed 'rent': it is, broadly defined, a payment for differential advantages. Regarded thus broadly, it seems to involve certain conclusions. In the first place, a similar surplus may arise in the case of other kinds of wealth but land. In the second place the differential advantages, of which it is a measure, may conceivably vary in different degrees and opposing directions, according to the special form of advantage which is under consideration; and, thirdly, the theory postulates the action of free competition. We may conveniently confine our attention for the present to the second and third of these conclusions, and, in the first instance, to the circumstances of agricultural land used for farming purposes.
Some of that land is more fertile than other land, and, therefore, the expenses of raising tarm produce are less from some than they are from other land. The farmers of the least fertile land must secure for the sale of its produce in the market a price sufficient to cover their expenses of production; and the farmers of the more fertile land, obtaining the same price and incurring less expense, have a surplus in hand, which competition for the enjoyment of their position compels them to transfer to the land-
