Tenant Farmers Face Low Crop Prices, Same High Rents
|February 10, 2014||Posted by Staff under Economic Principles|
This 2014 excerpt of Fond du Lac Reporter, Feb 8, is by Mike Rankin.
Cash rent values for land increased substantially over the past several years in response to higher commodity prices.
Throughout this period there was always the concern of what would happen when commodity prices returned to more normal levels. Barring a 2014 weather disaster, that time has come.
Are landlords going to be willing to back off on land rent prices? Maybe in some cases, but history tells us that price reductions often don’t happen to the degree of price increases.
Ed. Notes: Taking the above at face value, it seems that landowners can charge tenants more as tenants earn more, but tenants can’t pay over less to landowners as tenant earnings drop. Obviously, owners have more leverage over tenants than vice versa. Thus in the current context of custom regarding property, the laws of economics (i.e., Ricardo’s Law of Rent) are overridden by the laws of politics (i.e., property “rights”). Or should we say, the laws of economics are not constant, so they’re not laws of nature (like the Law of Gravity) after all.
However, even gravity might not be quite so simply summed up in its law. Since gravity can bend light, perhaps the attraction is mutual and light can bend gravity, to some degree. If that’s the case, then the law of gravity depends on the context in which gravity operates, just as Ricardo’s Law of Rent depends on the social context in which it operates.
There is a social convention that would make Ricardo’s Law universal and that is to view rent not as the windfall profit of the landowner but as the common wealth of the community. That is, owning land would no longer mean you get to keep its rental value but that you had to pay the sum to your society. When owners must pay Land Dues and neighbors get to receive Rent Shares, then owners and tenants are put on an equal footing. If an owner demands too big a share of the profit even when the profit is shrinking, then the tenant can move elsewhere. The owner would have to pay the Land Dues without any extra coming in. Hence what happens in reality when owners pay land taxes (sort of like Land Dues) is that owners and tenants negotiate portions that both parties can more happily live with.
Actually, it gets better than that. Many owners find the slimmer shares to not be worth the bother and sell off their excess land to their former tenants, lowering absentee ownership, raising owner occupancy. Then the new owners no longer must negotiate with a landlord but with a local government. In a democracy, keeping Land Dues at fair market levels would not be difficult, judging by the strength of homeowners in America who often lower or cap the property tax.
Thus Ricardo’s Laws could be rescued as a law, as long as one puts it in context. Indeed, context should be considered a fourth factor in production, just as important as land, labor, and capital. The returns to the three traditional factors — rents, wages, and “interest” — depend upon the return to this fourth proposed factor of context, which would be taxes (or dues or fees or … can you suggest a good all-encompassing term?) Taxes set rents and rents determine the amounts of wages and interests. It’s a law you won’t find in economics … which is why geonomics is superior.