href="#n47707fba74084236ad8c7e27917a6f87" type="note">5
That there are some circumstances connected with rent, which have an affinity to a natural monopoly, will be readily allowed. The extent of the earth itself is limited, and cannot be enlarged by human demand. And the inequality of soils occasions, even at an early period of society a comparative scarcity of the best lands; and so far is undoubtedly one of the causes of rent properly so called. On this account, perhaps, the term partial monopoly might be fairly applicable. But the scarcity of land, thus implied, is by no means alone sufficient to produce the effects observed. And a more accurate investigation of the subject will show us how essentially different the high price of raw produce is, both in its nature and origin, and the laws by which it is governed, from the high price of a common monopoly.
The causes of the high price of raw produce may be stated to be three.
First, and mainly, that 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.
Secondly, 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.
And, thirdly, the comparative scarcity of the most fertile land.
The qualities of the soil and of its products, here noticed as the primary causes of the high price of raw produce, are the gifts of nature to man. They are quite unconnected with monopoly, and yet are so absolutely essential to the existence of rent, that without them, no degree of scarcity or monopoly could have occasioned that excess of the price of raw produce, above the cost of production, which shows itself in this form.
If, for instance, the soil of the earth had been such, that, however well directed might have been the industry of man, he could not have produced from it more than was barely sufficient to maintain those, whose labour and attention were necessary to its products; though, in this case, food and raw materials would have been evidently scarcer than at present, and the land might have been, in the same manner, monopolized by particular owners; vet it is quite clear, that neither rent, nor any essential surplus produce of the land in the form of high profits, could have existed.
It is equally clear, that 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 quantity would occasion a fall in their exchangeable value. However abundant might be the produce of a country, its population might remain stationary And 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.
It has been sometimes argued, that it is mistaking the principle of population, to imagine, that the increase of food, or of raw produce alone, can occasion a proportionate increase of population. This is no doubt true; but it must be allowed, as has been justly observed by Adam Smith, that 'when food is provided, it is comparatively easy to find the necessary clothing and lodging. And it should always be recollected, that land does not produce one commodity alone, but in addition to that most indispensable of all commodities—food—it produces also the materials for the other necessaries of life; and the labour required to work up these materials is of course never excluded from the consideration.6
It is, therefore, strictly true, that land produces the necessaries of life, produces food, materials, and labour, produces the means by which, and by which alone, an increase of people may be brought into being, and supported. In this respect it is fundamentally different from every other kind of machine known to man; and it is natural to suppose, that it should be attended with some peculiar effects.
If the cotton machinery, in this country, were to go on increasing at its present rate, or even much faster; but instead of producing one particular sort of substance which may be used for some parts of dress and furniture, etc. had the qualities of land, and could yield what, with the assistance of a little labour, economy, and skill, could furnish food, clothing, and lodging, in such proportions as to create an increase of population equal to the increased supply of these necessaries; the demand for the products of such improved machinery would continue in excess above the cost of production, and this excess would no longer exclusively belong to the machinery of the land.7
There is a radical difference in the cause of a demand for those objects which are strictly necessary to the support of human life, and a demand for all other commodities. In all other commodities the demand is exterior to, and independent of, the production itself; and in the case of a monopoly, whether natural or artificial, the excess of price is in proportion to the smallness of the supply compared with the demand, while this demand is comparatively unlimited. In the case of strict necessaries, the existence and increase of the demand, or of the number of demanders, must depend upon the existence and increase of these necessaries themselves; and the excess of their price above the cost of their production must depend upon, and is permanently limited by, the excess of their quantity above the quantity necessary to maintain the labour required to produce them; without which excess of quantity no demand could have existed, according to the laws of nature, for more than was necessary to support the producers.
It has been stated, in the new edition of the Wealth of nations, that the cause of the high price of raw produce is, that such price is required to proportion the consumption to the supply.8 This is also true, but it affords no solution of the point in question. 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 cause of the high price of the necessaries of life above the cost of production, is to be found in their abundance, rather than 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.
The produce of certain vineyards in France, which, from the peculiarity of their soil and situation, exclusively yield wine of a certain flavour, is sold of course at a price very far exceeding the cost of production. And this is owing to the greatness of the competition for such wine, compared with the scantiness of its supply; which confines the use of it to so small a number of persons, that they are able, and rather than go without it, willing, to give an excessively high price. But if the fertility of these lands were increased, so as very considerably to increase the produce, this produce might so fall in value as to diminish most essentially the excess of its price above the cost of production. While, on the other hand, if the vineyards were to become less productive, this excess might increase to almost any extent.
The obvious cause of these effects is, that in all monopolies, properly so called, whether natural or artificial, the demand is exterior to, and independent of, the production itself. The number of persons who might have a taste for scarce wines, and would be desirous of entering into a competition for the purchase of them, might increase almost indefinitely, while the produce itself was decreasing; and its price, therefore, would have no other limit than the numbers, powers, and caprices, of the competitors for it.
In the production of the necessaries of life, on the contrary, the demand is dependent upon the produce itself; and the effects are, in consequence, widely different. In this case, it is physically impossible that the number of demanders should increase, while the quantity of produce diminishes, as the demanders only exist by means of this produce. The fertility of soil, and consequent abundance of produce from a certain
It is, however, certain, that if either these materials be wanting, or the skill and capital necessary to work them up be prevented from forming, owing to the insecurity of property, to any other cause, the cultivators will soon slacken in their exertions, and the motives to accumulate and to increase their produce, will greatly diminish. But in this case there will be a very slack demand for labour; and, whatever may be the nominal cheapness of provisions, the labourer will not really be able to command such a portion of the necessaries of life, including, of course, clothing, lodging, etc. as will occasion an increase of population.
I have supposed some check to the supply of the cotton machinery in this case. If there was no check whatever, the effects wold show themselves in excessive profits and excessive wages, without an excess above the cost of production.
Vol. iv. p. 35.
