THE LAWS OF DISTRIBUTION

Land, labor, and capital are the factors of production.  The term land includes all natural opportunities or forces; the term labor, all human exertion; and the term capital, all wealth used to produce more wealth.  In returns to these three factors is the whole produce distributed.  That part which goes to landowners is called rent; that part which constitutes the reward of human exertion is called wages; and the part which constitutes the return for the use of capital is called interest.  These terms mutually exclude each other.  The income of any individual may be made up from any one, two, or all three of these sources; but in the effort to discover the laws of distribution we must keep them separate.

The law, or relation, which . . . determines what rent or price can be got by the owner is styled the law of rent . . . .  This accepted law of rent . . . is sometimes styled "Ricardo's law of rent." . . . It is:

The rent of land is determined by the excess of its produce over that which the same application can secure from the least productive land in use.

This law . . . of course applies to land used for other purposes than agriculture . . . in truth, manufactures and exchange yield the highest rents, as is evinced by the greater value of land in manufacturing and commercial cities.

The increase of rent which goes on in progressive countries is at once seen to be the key which explains why wages and interest fail to increase with increase of productive power.  For the wealth produced in every community is divided into two parts by what may be called the rent line, which is fixed by the margin of cultivation, or the return which labor and capital could obtain from such natural opportunities as are free to them without the payment of rent.  From the pan of the produce below this line wages and interest must be paid.  All that is above goes to the owners of land.  Thus, where the value of land is low, there may be a small production of wealth, and yet a high rate of wages and interest, as we see in new countries.  And, where the value of land is high, there may be a very large production of wealth, and yet a low rate of wages and interest, as we see in old countries.

The increase of rent explains why wages and interest do not increase.  The cause which gives to the landholder is the cause which denies to the laborer and capitalist . . . . Hence, the rate of wages and interest is everywhere fixed, not so much by the productiveness of labor as by the value of land.  Wherever the value of land is relatively low, wages and interest are relatively high; wherever land is relatively high, wages and interest are relatively low . . . .  And hence, that the increase of productive power does not increase wages, is because it does increase the value of land.  Rent swallows up the whole gain and pauperism accompanies progress.

To see human beings in the most abject, the most helpless and hopeless condition, you must go, not to the unfenced prairies and the log cabins of, new clearings in the backwoods where man single-handed is commencing the struggle with nature, and land is yet worth nothing, but to the great cities, where the ownership of a little patch of ground is a fortune.