Criticism of Ricardo's Theory According to what is certainly the most usual opinion, the differential rent of better lands, or of better powers of land, is to be explained simply by the fact that there are not sufficient of such to meet the demand; that, in fact, as is frequently said, they "have a monopoly." But it may easily be seen that this is not sufficient for an explanation. We must add two other assumptions.
First, the lands or powers of land last taken into cultivation must be available in superfluous amount. In order e.g, that first quality lands may bear a differential rent, not only must these lands be insufficient to meet the demand, but there must be besides them "free" lands of the second quality.
The limitation or "monopoly" of first-class lands is the proximate occasion of rent, and rent would emerge in any case, even if there should be no other qualities of land. Then the interposition of second-class lands, which are more than enough to meet the demand, and are consequently rentless, has the effect of keeping down the rent of first-class lands -- which night otherwise rise indefinitely -- to the amount of difference existing between the qualities of the two. If second-class lands were not "free," they also would bear rent; and this rent, again, could only be kept down to the differential rent through the intervention of a third class. In short, if there is to be a net differential rent, there must be a last, rentless, and therefore "free" category of lands (or powers of land) alongside the better and limited ones. There must be both limitation and superfluity of land.
Second, there must also be "monopoly" of capital and labour.
Why does any one prefer the better classes of land? Because on them capital and labour prove more productive. But why should it be of consequence that capital and labour prove more productive?
Because, as a general rule, we do not have enough of either. If it were quite a matter of indifference what return was obtained from definite amounts of capital and labour, because it was always possible to make up any deficiency by employing other quantities of the same, it would also be a matter of indifference from which class of land they got their return -- assuming, of course, that there was never any scarcity of at any rate the poorest quality of land. And if, in face of such superfluity of the poorest class of land, the better and best classes are marked out and preferred, it is because man has to economise his labour and capital. The differential rent measures exactly the advantage which the better and best classes of land secure in the accomplishment of that task.
Thus we see that, wherever a net differential rent exists, land is partially limited (in the better and best classes), partially over-abundant (in the poorer classes), while capital and labour are always limited.(1*) To have overlooked this circumstance is the first defect in Ricardo's theory. He states positively that the amount of labour (and under this he includes capital), which may be expended in production can be had, as a rule, for the asking -- may be increased at will; while the rent-bearing classes of land are to be had only in limited amounts. This defect is connected with another and still greater one and one that applies not to Ricardo alone; he has no general theory of economy, of value, and of imputation. All his ingenuity is expended upon details, such, for example, as the explanation of land rent, and this in itself shows that these details can only have been looked at and conceived of in a one-sided fashion.
A further defect of the differential theory is that it does not suffice for all cases. It sometimes happens that even the last cultivated lands, or powers of land, return a rent, and for this Ricardo has no explanation, or, to speak more exactly, no law. Whenever the demand for land products has increased to such an extent that the class of land last taken into cultivation is not sufficient to meet it, while, at the same time, the value of the land products has not risen sufficiently to permit of a new and still lower class being put under the plough, the last cultivated land returns a rent, although it becomes differential only when the next class of land has actually been put under cultivation. And when all the classes of land have been exhausted, and cultivation in general cannot be further extended, there emerges a universal land rent, -- universal not only for all lands (for in this sense the "intensity rent" might be a universal one), but even for all powers of land. This case -- of the impossibility of extending cultivation -- occurs more frequently than one would think. It is not, as would seem at first sight, a thing to be expected at the very end of the historical development of economic life, when the whole earth is over-populated. It belongs rather to the normal phenomena which occur in the course of this development. Indeed it is just as regards the past that it can be established with perfect certainty; while prophecies of what is to come must always be uncertain, and can never be made with scientific exactitude. Aslight consideration will suffice to make this clear.
Land and capital, so far as regards the conditions under which they are acquired, appear to stand in complete opposition to each other. All capital, with trifling exceptions, has been worked for by human hands, and the sum of capital is always increasing and is capable of indefinite increase. All land, on the other hand (with exceptions which are quite insignificant as compared with the whole) has been in existence from the beginning, and it is practically impossible for human power to extend its compass -- so at least a geographer or physicist would have to say. But can we say so economically? Certainly not.
