Johann Heinrich von Thunen - Rent

Johann Heinrich von Thünen Rent

Von Thunen's work in the field of distribution is most interesting, and he naturally gives much attention to rent. In a section falling under the discussion of the three-field system and immediately following one on the determination of the price of grain, von Thiinen treats of the origin of land rent (p. 181). The distant producer of rye, under the assumed conditions, must get 1+1/2 thalers per bushel, for it costs him that much. On the other hand, the producer near the city could market his product for much less — perhaps 1/2 thaler; but the latter cannot be compelled to take a lower price than the former, nor can it be expected of him. For the buyer, one bushel has as much value (Werth) as another. What the near-by producer receives above cost is his gain. And "as this gain is permanent and returns yearly, so his land [Grund und Boden] yields an annual rent. The land rent of a farm arises, therefore, from the advantage which it has in its situation and in its soil over the worst farm which must produce in order to satisfy the demand" (p. 182). The value of this advantage expressed in money or grain, indi­cates the amount of the land rent. Rent is "the amount of the landlord's income which, after deducting interest on the value of the buildings, woods, and all valuable objects which can be separated from the land, remains and so belongs to the land as such" (p. 14).

In a note, von Thiinen intimates that other investigations, which he does not report, show that there are other grounds for rent, — that even lands of equal fertility and situation with regard to market can, when completely distributed, yield a rent (p. 182).

It must be admitted that, while the significance of rent as a share in distribution is by no means so clearly indicated as is the case with Ricardo, this explanation of rent as such is clearer and more comprehensive than the latter's. If anything, von Thiinen goes to an extreme opposite to that found in Ricardo's theory, in that he emphasizes situation rather than fertility; and his statement is thus a valuable corrective of the Ricardian formu­lation.

In a concluding section on Taxes upon Land Rent (p. 276) there is an excellent statement of the effects of taxation, im­provements, etc., upon rent. The fact that rent is no fixed amount, but varies with prices and interest rate, is emphasized.

It is interesting to observe that von Thunen is not one of those who would minimize or overlook the difference between agricul­ture and manufactures, and so between rent and interest. "Agriculture," he writes, "differs essentially from industry (Gewerke) in that, when pursued on different kinds of soil, the same human activity is rewarded by very different production, whereas in industry the same activity and skill ever afford a similar labor product" (p. 271).