Book I, Chapter XI, 4

But when improving and cultivating the land enables one family's labor to provide food for two, the labor of half of society suffices to feed everyone. The other half—or at least most of them—can then be employed to provide other things and satisfy humanity's other wants and fancies. Clothing and shelter, household furnishings, and what is called equipage are the chief objects of most of these wants and fancies. A rich man consumes no more food than his poor neighbor. The quality may differ greatly, and choosing and preparing it may take more labor and skill, but the quantity is very nearly the same. Compare, however, one man's spacious palace and extensive wardrobe with the other's hovel and few rags, and you will see that the difference in their clothing, shelter, and furnishings is almost as great in quantity as in quality. Every person's desire for food is confined by the narrow capacity of the human stomach. The desire for the comforts and ornaments of buildings, dress, equipage, and household furnishings, however, seems to know no fixed limit. Those who command more food than they can consume themselves are therefore always willing to exchange the surplus—or, which amounts to the same thing, its price—for these other pleasures. What remains after a limited desire is satisfied is spent to indulge desires that cannot be satisfied and seem altogether endless. To obtain food, the poor work to satisfy the fancies of the rich; to obtain it more reliably, they compete to make their work cheaper and better. The number of workers rises as the quantity of food increases, or as the land is increasingly improved and cultivated. And because their work permits the finest divisions of labor, the quantity of materials they can work up rises in much greater proportion than their numbers. This gives rise to demand for every sort of material human ingenuity can put to use, whether for utility or ornament, in buildings, dress, equipage, or household furnishings: for the fossils and minerals beneath the earth's surface, the precious metals, and precious stones.

Food, then, is not only the original source of rent. Every other product of land that later yields rent derives that portion of its value from the growing productive power of labor in supplying food, brought about by the improvement and cultivation of the land.

Those other products of land that later yield rent, however, do not always yield it. Even in improved and cultivated countries, demand for them does not always command a price higher than what is needed to pay for labor and replace, with its ordinary profits, the stock used to bring them to market. Whether it does depends on the circumstances.

Whether a coal mine, for example, can yield any rent depends partly on how productive it is and partly on its location.

A mine of any kind may be called productive or barren according to whether a given quantity of labor can extract more or less mineral from it than the same labor could extract from most other mines of its kind.

Some coal mines, despite being well located, cannot be worked because they are barren. Their yield does not cover the expense; they provide neither profit nor rent.

At some mines, the yield is only just enough to pay for labor and to replace, with its ordinary profits, the stock used in working them. They bring the operator some profit, but the landlord no rent. No one but the landlord can work them to advantage: by operating them himself, he receives the ordinary profit on the capital he employs. Many Scottish coal mines are worked this way and cannot be worked any other way. The landlord will not let anyone else work them without paying rent, and no one can afford to pay it.

Other coal mines in the same country, though productive enough, cannot be worked because of their location. An ordinary amount of labor, or even less, could extract enough mineral to cover the costs of working them; but in a sparsely populated inland region without good roads or water transport, that amount could not be sold.

Coal is a less pleasant fuel than wood and is said to be less wholesome as well. At the place where it is consumed, therefore, coal must generally cost somewhat less than wood.

The price of wood, in turn, changes with the state of agriculture much as the price of cattle does, and for precisely the same reason. In agriculture's early stages, most of any country is covered in trees, which are then mere encumbrances, worthless to a landlord who would gladly give them away if someone would cut them down. As agriculture advances, tillage clears some woods, while the growing number of cattle causes others to die out. Cattle do not multiply in the same proportion as corn, which is entirely a product of human industry; nevertheless, they multiply under human care and protection. People store up food in seasons of plenty to sustain them in times of scarcity, feed them throughout the year more abundantly than uncultivated nature would, and destroy their enemies, leaving them free to enjoy all that nature supplies. When numerous herds are allowed to roam the woods, they prevent young trees from growing up, even if they do not destroy old ones; within a century or two, the whole forest decays. The resulting scarcity raises the price of wood. It yields a good rent, and a landlord sometimes finds that he can scarcely make better use of his finest land than to grow timber for building, whose considerable profit often compensates for the long wait before receiving it. This seems to be nearly the present state of affairs in parts of Great Britain, where planting trees is found as profitable as growing corn or pasture. The landlord's advantage from planting cannot anywhere exceed the rent those crops would yield, at least not for any considerable time; and in a highly cultivated inland region, it will often come close to that rent. On the coast of a well-improved country, however, where coal can readily be had for fuel, importing building timber from less cultivated countries can sometimes be cheaper than growing it at home. In the new town of Edinburgh, built within these few years, there is perhaps not a single piece of Scottish timber.

Whatever wood costs, if coal is priced so that a coal fire costs nearly as much as a wood fire, we may be sure that coal has reached the highest price it can command in that place and those circumstances. This seems to be the case in some inland parts of England, especially Oxfordshire, where even ordinary people's fires commonly burn coal and wood together, so the difference in the expense of these two fuels cannot be large. In coal-producing regions, coal is everywhere far below this highest price. Otherwise it could not bear the cost of long-distance transport by land or water. Only a small quantity could be sold, and coal operators and proprietors find it more profitable to sell a large quantity at somewhat above the lowest price than a small quantity at the highest. Moreover, the most productive coal mine determines the price of coal at all the other mines nearby. Its proprietor and operator find that by selling somewhat below all their neighbors, one can get a higher rent and the other a higher profit. Their neighbors are soon forced to charge the same price, even if they are less able to afford it, and even though it invariably reduces—and sometimes entirely destroys—both rent and profit. Some operations are abandoned altogether; others yield no rent and can be worked only by their proprietors.

The lowest price at which coal can be sold for any considerable time, like the lowest price of any other commodity, is just enough to replace the stock needed to bring it to market, along with its ordinary profits. At a coal mine from which the landlord can collect no rent, and which he must either work himself or leave idle, coal's price must generally be close to this minimum.

Even where coal does yield rent, rent generally accounts for a smaller share of its price than it does for most other raw products of the land. Rent for an estate above ground is commonly reckoned at a third of its gross produce, and is generally fixed, regardless of occasional changes in the harvest. At a coal mine, a fifth of the gross produce is a very high rent and a tenth the usual one; rent is seldom fixed but depends on occasional variations in the yield. These variations are so large that in a country where a price of thirty years purchase is considered moderate for a landed estate, ten years purchase is considered a good price for a coal mine.

The value of a coal mine to its proprietor often depends as much on location as on productivity. The value of a metal mine depends more on productivity and less on location. Both common metals and, still more, precious metals, once separated from their ores, are valuable enough generally to bear the expense of very long transport over land and the longest transport by sea. Their market is not limited to the countries near the mine but extends throughout the world. Copper from Japan is traded in Europe; iron from Spain is traded in Chili and Peru. Silver from Peru finds its way not only to Europe but onward from Europe to China.

The price of coal in Westmoreland or Shropshire has little effect on its price at Newcastle, and its price in the Lionnois has none at all. Coal from mines so far apart can never compete. But the products of the most distant metal mines often can, and ordinarily do.

The price of common metals, and still more of precious metals, at the world's most productive mines must therefore affect their price, to some extent, at every other mine. The price of copper in Japan must have some influence on its price at European copper mines. The price of silver in Peru—or the amount of labor or other goods it will buy there—must have some influence on its price at silver mines not only in Europe but also in China. Following the discovery of Peru's mines, most European silver mines were abandoned. Silver lost so much of its value that their output could no longer cover the cost of working them, or replace, with a profit, the food, clothing, shelter, and other necessities consumed in doing so. The mines of Cuba and St. Domingo suffered the same fate, as did even Peru's ancient mines after those at Potosi were discovered. Since the price of every metal at every mine is thus regulated to some degree by its price at the most productive mine currently being worked in the world, at most mines it can do little more than pay the cost of extraction and can seldom provide the landlord with very high rent. At most mines, accordingly, rent seems to account for only a small share of the price of common metals, and an even smaller share of that of precious metals. Labor and profit make up most of both prices.

According to the Rev. Mr Borlace, vice-warden of the stannaries, the average rent of the Cornwall tin mines, the most productive known in the world, may be reckoned at a sixth of gross output. Some yield more, he says, and some less. A sixth of gross output is also the rent at several very productive lead mines in Scotland.

At the silver mines of Peru, Frezier and Ulloa tell us, the proprietor often demands nothing from the operator beyond an agreement to grind the ore at his mill and pay the ordinary multure, or milling charge. Until 1736, however, the king of Spain levied a tax amounting to one fifth of the standard silver. Until then this might be considered the real rent of most Peruvian silver mines, the richest ever known. Without the tax, this fifth would naturally have gone to the landlord, and many mines unable to bear the tax could have been worked. The duke of Cornwall's tax on tin is thought to be more than five per cent. or one twentieth of its value; and whatever the precise share, it too would naturally go to the mine's proprietor if tin were free of duty. Add one twentieth to one sixth, and the whole average rent of Cornwall's tin mines stood to the whole average rent of Peru's silver mines as thirteen to twelve. But Peru's silver mines can no longer pay even this low rent: the tax on silver was reduced in 1736 from one fifth to one tenth. Even this silver tax gives a greater incentive to smuggle than the tax of one twentieth on tin, and smuggling is surely easier with a precious metal than with a bulky commodity. Accordingly, the king of Spain's tax is said to be very poorly paid and the duke of Cornwall's very well paid. Rent thus probably makes up a larger part of the price of tin at the most productive tin mines than it does of silver at the world's most productive silver mines. Once the stock employed in working the different mines has been replaced, together with its ordinary profits, the remainder going to the proprietor seems greater for the common metal than for the precious one.

Nor are the profits of Peru's silver-mine operators ordinarily very large. Those same highly respected and well-informed authors tell us that anyone who undertakes to work a new Peruvian mine is universally regarded as destined for bankruptcy and ruin, and people therefore shun and avoid him. Mining there, it seems, is viewed much as it is here: as a lottery whose prizes do not make up for its blanks, though the size of some prizes tempts many adventurers to squander their fortunes on such unpromising schemes.

But when better farming allows one family's labor to feed two families, half the society can grow enough food for everyone. The other half, or at least most of them, can provide other things and satisfy people's other needs and desires. Clothing, housing, household furniture, and what is called equipage are the main objects of these needs and desires. A rich person does not eat more food than a poor neighbor. The quality can differ greatly, and choosing and preparing it may take more work and skill. But the quantity is nearly the same. Compare the rich person's spacious palace and large wardrobe with the poor person's hut and few rags. The difference in the quantities of their clothes, housing, and furniture is almost as great as the difference in quality. A person's appetite for food is limited by the small size of the human stomach. But the desire for comfortable and decorative buildings, clothes, equipage, and furniture seems to have no fixed limit. People who control more food than they can eat are therefore always willing to exchange the extra food, or the money they receive for it, for such things. Once their limited appetite is satisfied, they spend the remainder to satisfy wants that seem endless. To obtain food, poor people work to satisfy the rich people's desires. To obtain it more reliably, they compete to make their work both cheaper and better. As land is improved and farmed more thoroughly, more food is produced and the number of workers grows. Their work allows labor to be divided into very small tasks. As a result, the quantity of materials they can process grows much faster than their number. This creates demand for every kind of material people can find useful or decorative in buildings, clothing, equipage, or furniture. It includes fossils and minerals from underground, precious metals, and precious stones.

Thus food is not only the original source of rent. Every other product of land that later brings in rent owes that part of its value to improved labor productivity in growing food, made possible by better use and cultivation of land.

But those other products of land do not always bring in rent. Even in developed, cultivated countries, demand for them does not always make their price high enough to pay labor costs, replace the stock used to bring them to market, and provide the ordinary profit on that stock, with something left over. Whether it does depends on several circumstances.

Whether a coal mine can bring in rent, for instance, depends partly on how productive it is and partly on its location.

A mine of any kind can be called productive or unproductive depending on whether a given amount of labor extracts more or less mineral from it than the same labor extracts from most other mines of that kind.

Some coal mines are well located but so unproductive that they cannot be worked. Their output does not cover their costs. They can provide neither profit nor rent.

The output of other mines just covers labor costs and replaces the stock used to work them, along with its ordinary profit. The operator earns some profit, but the landlord gets no rent. Only a landlord can work such a mine profitably: as its operator, he earns the normal profit on the capital he puts into it. Many Scottish coal mines operate this way and could not operate any other way. The landlord will not let someone else work the mine without paying rent, and no one can afford to pay it.

Other Scottish coal mines are productive enough but cannot be worked because of their location. An ordinary amount of labor, or even less, could extract enough coal to cover the cost of mining. But in a sparsely populated inland area without good roads or water transport, that coal could not be sold.

Coal is less pleasant to burn than wood, and people also say it is less healthy. Coal must therefore usually cost somewhat less than wood where it is burned.

The price of wood, in turn, changes as farming develops, much as the price of cattle does, and for exactly the same reason. When agriculture is just beginning, woods cover most land. They are merely an obstacle, worth nothing to the landlord, who would gladly give them away to anyone willing to cut them down. As agriculture advances, cultivation clears some woods and growing cattle herds cause others to decline. Cattle do not multiply as fast as corn, which is entirely produced through human work. Still, people help cattle multiply. They store food from abundant seasons to feed them during shortages. Throughout the year they give them more food than wild land supplies. They also destroy the animals that prey on them, allowing them to use freely all that nature provides. When large herds wander through woods, they may not destroy old trees, but they prevent new ones from growing. In a century or two, the whole forest dies out. Wood then becomes scarce and its price rises. It brings in good rent. The landlord sometimes finds that even his best land can scarcely be used more profitably than to grow building timber. The large profit often makes up for the long wait before any return. This seems to describe several parts of Great Britain today, where planting trees is found to be as profitable as growing corn or keeping pasture. A landlord's advantage from planting trees can nowhere exceed the rent he could get from those uses for any long period. In a well-cultivated inland region it is often nearly as much. But on the coast of a well-developed country, if coal is readily available for fuel, it may be cheaper to import building timber from less cultivated countries than to grow it locally. In Edinburgh's new town, built in the last few years, there may not be a single piece of Scottish timber.

Whatever wood costs, if a coal fire costs nearly as much as a wood fire, we can be sure coal is as expensive as it can be in that place and situation. That seems true in some inland parts of England, particularly Oxfordshire. Even ordinary people there commonly mix coal and wood in their fires, so the cost difference between the two fuels cannot be large. In coal-producing areas, coal is everywhere far below this maximum price. Otherwise it could not be transported any distance, by land or water, at a price buyers would pay. Only a small amount could be sold. Coal operators and owners find it more profitable to sell a large amount at a little above the lowest possible price than a small amount at the highest price. The most productive coal mine also sets the coal price at neighboring mines. Its owner can get more rent, and its operator more profit, by selling for somewhat less than all their neighbors. The neighbors must soon charge the same price, though they can less easily afford it. Doing so always cuts their rent and profit and sometimes eliminates both. Some mines close entirely. Others can bring in no rent and can be worked only by their owners.

As with every other product, the lowest price at which coal can be sold for a substantial time just covers replacing the stock used to bring it to market and earning ordinary profit on that stock. At a mine that yields the landlord no rent, which he must work himself or leave idle, coal will usually cost about that much.

Even where coal brings in rent, rent generally accounts for less of its price than it does for most other raw products of land. Rent from land above ground commonly amounts to what is considered a third of total output. It is generally a fixed amount regardless of temporary changes in the harvest. For a coal mine, a fifth of total output is very high rent, while a tenth is normal. The amount is seldom fixed and changes with the mine's output. These changes are so large that in a country where paying thirty years' rent is considered a moderate price for ownership of landed property, paying ten years' rent is considered a good price for a coal mine.

A coal mine's value to its owner often depends as much on its location as on its productivity. A metal mine's value depends more on its productivity and less on its location. Once separated from the ore, both ordinary metals and, especially, precious metals are valuable enough to bear the cost of very long transport over land and even the longest sea journeys. Their market extends far beyond the countries near the mine, across the whole world. Japanese copper is traded in Europe, and Spanish iron in Chili and Peru. Silver from Peru goes not only to Europe but also from Europe to China.

The coal price in Westmoreland or Shropshire has little effect on the coal price at Newcastle, and the price in the Lionnois has none. Coal from mines so far apart cannot compete in the same market. Metal from distant mines often can, and usually does.

So the price of ordinary metals, and still more of precious metals, at the world's most productive mines must affect their price to some extent at every other mine. The price of Japanese copper must influence its price at European copper mines. The price of silver in Peru—how much labor or other goods it buys there—must influence its price at silver mines in Europe and even China. After the Peruvian mines were discovered, most European silver mines were abandoned. Silver's value had fallen so far that their output could no longer pay the cost of mining or replace, with a profit, the food, clothes, shelter, and other necessities used in that work. The same happened to the mines of Cuba and St. Domingo, and even to Peru's old mines, after the discovery of those at Potosi. Because the price of each metal at every mine is influenced by its price at the most productive operating mine in the world, the price at most mines can do little more than cover mining costs. It seldom gives the landlord very high rent. Accordingly, rent seems to account for only a small part of the price of ordinary metals at most mines, and an even smaller part of the price of precious metals. Labor and profit account for most of both prices.

The Rev. Mr Borlace, vice-warden of the stannaries, says the average rent at Cornwall's tin mines, the most productive known, may be reckoned as a sixth of total output. Some mines pay more, he says, and some less. Several very productive lead mines in Scotland also pay a sixth of total output in rent.

Frezier and Ulloa tell us that the owner of a silver mine in Peru often requires nothing from the mine's operator except that he grind the ore at the owner's mill and pay the usual multure, or grinding charge. Until 1736, however, the king of Spain taxed standard silver at one fifth. That tax could then be considered the actual rent from most Peruvian silver mines, the richest ever known. Without the tax, that fifth would naturally have gone to the landowner, and many mines that could not pay the tax could have been worked. The duke of Cornwall's tax on tin is thought to be more than five per cent. or one twentieth part of its value. Whatever its amount, it too would naturally go to the mine owner if tin were untaxed. Add one twentieth to one sixth and you find that the ratio of the whole average rent from Cornwall's tin mines to the whole average rent from Peru's silver mines was thirteen to twelve. But Peru's silver mines cannot now pay even that low rent. In 1736 the silver tax was reduced from one fifth to one tenth. Even that tax gives more incentive to smuggle than a one-twentieth tax on tin. Smuggling precious silver must also be much easier than smuggling bulky tin. Accordingly, the Spanish king's tax is said to be paid very poorly, while the duke of Cornwall's is paid very well. It is therefore likely that rent makes up a larger part of the price of tin from the most productive tin mines than of silver from the most productive silver mines in the world. After the stock used to work the mines has been replaced with its ordinary profit, the amount left for the owner appears larger for the ordinary metal than for the precious one.

Operators of silver mines in Peru do not usually earn great profits either. The same highly respected and well-informed authors tell us that anyone who undertakes to work a new mine there is universally viewed as headed for bankruptcy and ruin. People avoid him for that reason. Mining there, as here, seems to be regarded as a lottery in which the prizes do not make up for the losing tickets. Yet the size of some prizes tempts many people to waste their fortunes on these unlikely ventures.