AU ESSAY ON THE ORIGIN AND DEVELOPMENT OF THE THEORY OF RENT A THESIS SUBMITTED TO THE FACULTY OF ATLANTA UNIVERSITY IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE DEGREE OF MASTER OF ARTS BY LAMAR HARRIS, JR. DEPARTMENT OF ECONOMICS ATLANTA, GEORGIA AUGUST 1961 (UUL T t ACKNOWLEDGMENTS The writer wishes to express sincere thanks and appreciation to Dr. Hugo Skala, his advisor, and Head of the Department of Economics, without whose diligent assistance and guidance this work would not have been possible; and to Dr. Edward B. Williams for his untiring efforts in assisting with the completion of.this work. I wish to thank my wife, Gloria Jean, for her assistance with this work and for her devotion and inspiration. Thanks are also due Mrs. Mary Ellen James for her patience and understanding in the final typing of this thesis. ii TABLE OF CONTENTS Page ACKNOWLEDGMENTS il INTRODUCTION 1 Chapter I. MOVEMENTS, EVENTS, AND WRITERS PRECEDING THE CLASSICISTS . 3 The Beginning of Commercial Renting . 3 The Black Deaths * 3 The Enclosure Movement U The Agricultural Revolution U Forerunners to the Classicists 7 Sir William Petty 7 The Physiocrats 9 Turgot 11 II. THE CLASSICISTS 13 Adam Smith 13 The Period Preceding Maithus and Ricardo 16 Thomas Robert Malthus 19 David Ricardo 21 III. LATER WRITINGS ON THE THEORY OF RENT 26 Henry C. Carey, Nineteenth Century - American School ... 26 Frederic Bastiat, Ninettenth Century - French Writer ... 27 John Stuart Mill, Nineteenth Century - Classical School . 28 Karl Rodbertus, Nineteenth Century - State Socialist ... 29 Richard Jones, Nineteenth Century - British Historical Critic ........ 30 Carl Menger, Nineteenth and Twentieth Centuries - Austrian School .... 31 Alfred Marshall, Nineteenth and Twentieth Centuries - Classical School ... 31 Conclusion 32 SUMMARY 38 BIBLIOGRAPHY h2 iii INTRODUCTION Problem.—The problem of this thesis is to treat the theory of rent from the following points of view: (1) the practical situation out of which the theory developed, (2) formulation of the theory, (3) changes which have occurred in the theory since its formulation, and (k) to reveal some recent practical determinants of rent. Scope.—-This thesis is concerned first with the practical situations from the fourteenth to the eighteenth centuries. Secondly, it is concerned with the latter part of the eighteenth and the early part of the nineteenth centuries, the period in which the theory was formulated. Lastly, it is concerned with the later writings on the theory and the practical deter¬ minants of rent during the nineteenth and twentieth centuries. The theory of rent ignored relations between feudal landlords and their serfs, later tenants, who had to work on the estates of their land¬ lords as a part of rent. The problems that existed between the landlords, their serfs, and rent were left to be solved by law or political systems. Because these problems did not affect the theory of rent, land reforms are out of the scope of this thesis. Procedure.—Various economic history books were used in the systema¬ tic arrangement of the material gathered for the studyj for example, A History of Economic Ideas by Edmund Whittaker, and History of Economic Thought by Lewis Haney. Schools and Streams of Economic Thought by Whit¬ taker, and A History of Economic Ideas by Robert Lekachman have also been invaluable. Curtler’s A Short History of English Agriculture provided 1 2 indispensable data concerning English agricultural conditions from the fourteenth to the nineteenth century. Original source books from Adam Smith's Wealth of Nations to Alfred Marshall's Principles of Economics were used to gather the data for systematic arrangement. Essays by Richard Jones and Karl Rodbertus were also used. CHAPTER I MOVEMENTS, EVENTS AND WRITERS PRECEDING THE CLASSICISTS It is evident that something in the practical nature of land led to the formulation of the rent theoiy by English Classical Writers in eco¬ nomics, when tenants began to rent land during the fourteenth, fifteenth, and sixteenth centuries in England. "It has been common to date commercial renting from this period."'*' It is believed that the Black Deaths in the fourteenth century and the enclosure movement, associated with the pros¬ perity of sheep fanning in the sixteenth century had widespread influence in this connection. The famous Black Deaths occurred in the middle of the fourteenth century and is said to be the worst plague that has ever visited England. Curtler describes the results of the Black Deaths as causing a revolution in agriculture and the beginning of the modern tenant farmers ... It raged in 13U8-9, and killed from one-third to one-half of the people... It also accelerated the breakup of the manoral system. A large number of free labourers were swept away, and their labour lost to the lord of the manor? the service of the Villeins was largely di¬ minished from the same cause? many of the tenants, both free and unfree, and the land thrown on the lords hands... Owing to the dearth of labourers for hire, and the loss of many of the services of their demesne lands... Their chief remedy was to let their demesne lands... in the period 1307-1376 the manor underwent a great change. The eco¬ nomic position of the Villeins, the administration of the demesne, and the whole organization of the manor were revolutionized. Much of the 1 W. H. R. Curtler, A Short History of English Agriculture (Oxford, 1909), p. h1. 3 h tenant's land had reverted to the lord, partly by the deaths due to the pestilence, partly because the tenants had left the manors they had run away and left their burdensome holdings in order to get higher wages as free labourers. This of course led to a diminution of labour rents, so the landlord let most of the demesne for a term of years, a process which went on all over England; and thus we have the origin of the modem tenant farmer.! The enclosure movement in the sixteenth century had the effect of conferring freedom on even more laborers. A considerable number of these freemen became tenants of the modem type, holding land by virtue of pay¬ ments that they contracted to make in return. The enclosure was of four kinds : ^ 1. Enclosing the common arable fields for grazing, generally in large tracts, 2. Enclosing the common arable by dividing them into smaller fields. 3* Enclosing the common pasture for grazing or tillage, U. Enclosing the common meadows or mowing grounds, It was the enclosure of the common arable fields for grazing; and to a lesser degree the enclosure of the common pasture for grazing or tillage which were so frequent a source of complaint during the fifteenth and six¬ teenth centuries. The first displaced the small holder, who had gained their livelihood by various types of work connected with tillage, and the third deprived a large number of laborers of their common rights. The enclosure movement was a sign of agricultural progress. The history of the enclosure is part of the history of the great agricultural revolution by which the manorial system was converted into the modem system as we know it today, the tripartition of landlord, tenant farmer, - • Ibid., pp. 1*2-U5» 2 5 and laborers. During the sixteenth century rents began to rise rapidly. From the early part of the sixteenth century, according to Curtleij rent increased ninefold. Farmers began to compete with each other for the possession of land and this raised rents unfairly: "...Landlords raised rents unfairly, for they were quite entitled to what rent they could get in the open market, the farmer being presumably wise enough not to offer rent which would pre¬ clude a profit. It was also noticed that a change in the price of com would in¬ fluence the level of rent. "...Between 1617 and 1621 the price of wheat fell from U3s. 3d to 21s, a quarter, and immediately affected the payment of rent. The fall in the price of com caused a fall in the rent of land. It was during the early part of the seventeenth century that the principle formulated by the classical writers began to operate. At this time, the tenant farmers income covered (l) subsistence wages and (2) the ordinary return on capital — anything that was left went as rent to the ■a landowner. The means by which medieval landholdings or feudal estates were transformed into modern property ownership were either, (l) separated into small proprietorships by abolition or commutation of the cultivators dues or (2) became personal property of the lords by the termination of the 1 Ibid., p. 127. 2 Ibid., p. 13U. 3 Edmund Whittaker, A History of Economic Ideas (New York, l&O)* p* UU8. 6 connection of the serf with the soil. In England most of the land was rented to tenant farmers, but on the continent extensive areas were farmed by noblemen and, in France especially, considerable sales to townsmen and others took place.^ The history of agriculture in the seventeenth and eighteenth centu¬ ries is important for several reasons. It first saw the application of capital in large quantities to farming, the improvements of the time being largely initiated by rich landowners. They were often ably assisted hy tenant farmers. These tenant farmers were now men with considerable capi¬ tal, and they helped amalgamate the small farms into larger ones. With the agricultural revolution in process, the tendency to consolidate small holdings into large farms grew and was looked upon as a decided mark of progress. This agricultural revolution was largely a result of the In¬ dustrial Revolution that then took place in England. Owing to mechanical inventions and the consequent growth of the factory system, the great manu¬ facturing towns arose, demanding a large quantity of food.