We start with a happy village populated by Folks who cultivate corn in plots of land which grow the same amount for an equal application of labor and tools.
One day, a new people arrive, the Barbos. They need land too, to grow crops, but the Folks say they were there first. “Go yonder,” the Folks tell the Barbos. "Beyond the margin of production is unused land you can settle on."
“What is the margin?” they ask.
“It is the least productive land in use,” say the Folks. “Beyond that is submarginal land, which is less productive, and not in use. You may have it rent-free.”
“Our income will be lower there than yours,” said the Barbos.
“That’s right,” said the Folks. “We were here first, so this better land is ours. It may not seem fair to you, but it is first-come first-served.”
“Why that rule?” asked the Barbos.
“That’s just the way it is,” answered the Folks. “We Folks are being very generous, because we could have claimed the submarginal land too and not let you use any. Be grateful.”
The Barbos settle in the submarginal land, which then becomes the new margin. Their wages are lower than the wages of the Folks. But now if a farmland owner in the Folks land wants to hire labor, he can hire a Barbos, since they have a lower wage. So then competition among workers brings down the wage of the Folks workers to that of the Barbos.
“I hate the Barbos!” said Mraklochk, one of the Folks. “They brought down our wages!”
“And rent is up!” complained another of the Folks. “My cousin Chkungka has been renting land from Ungachku the landlord to farm on, and the rent went up!”
“Why?” asked Gurklam, another Folks guy.
“If the wage is lower, more of the output goes to rent,” he answered
“Rent up and wages down! I hate the Barbos!” Mraklochk exclaimed.
Then Pruchklu came into town with a strange-looking contraption. “It is a new and better plow,” he explained. "It will double production. I will sell them for two bushels, and it is worth it, because when production doubles, even after paying for the plow, you will have higher wages.”
All the Folks farmers bought a plow, but noticed that the plow wears out after the harvest, so each time corn is planted, one needs a new plow. But it is worth that to double the output.
Chkungka was unhappy. “Why the frown?” asked Mraklochk.
“My output doubled, and I did get higher wages, but the rent went up even more, so most of the gain went to pay Ungachku the higher rent!”
“It’s those Barbos!” said Mraklochk. “I hate the Barbos!”
But the Barbos were also unhappy. One Barbos named Max exclaimed:
“It is not fair for the Folks to get most of the wealth while we Barbos stay poor. I say we form an army and have a revolution! Let us take over the lands of the Folks!”
The Folks became alarmed. They elected a leader named Conserchgu. “This is our land,” he exclaimed. “Let us defend our land from those evil Barbos!”
“I hate the Barbos!” said Mraklochk. “Let’s go fight them!”
Another Folks man named Hankchgu pleaded for a third way. “The Barbos are angry because we sent them to the submarginal land. But that did not do the Folks workers any good. Instead of fighting, why don’t we all share the land equally. Let us collect the rent that is soaking up the output and share it equally.”
“No!” said Ungachku the landlord. “It is my property. You want to steal it! Thief!”
“Maybe the first-come first-served was not such a good rule,” said Hankchgu. “Maybe you are the thief taking what properly belongs to us all.”
“You want to overturn all our traditions!” said Ungachku the landlord. “You are a Barbos lover!”
“Barbos lover! Barbos lover!” said a mob of Folks.
“I hate the Barbos!” said Mraklochk.
The Barbo Max had a secret meeting with Hankchgu of the Folks. “Let us join forces and defeat Conserchgu and his mob, and then we can all live in equality ever after,” said Max.
“Agreed,” said Hankchgu.
But Conserchgu and his army came and killed Max and put Hankchgu in prison for a year.
When Hankchgu was released, a small number of Folks said they agreed with Hankchgu.
“The workers still have low wages, while the landlords get more rent just because the margin went to less productive land and we got better plows,” said Hankchgu. “We lost for now, but let us keep the idea of sharing the rent alive, and try to persuade others, and then just maybe, the Folks and the Barbos will one day be able to live in prosperity and harmony.”
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FRED E. FOLDVARY, Ph.D., is an economist and has been writing weekly editorials for Progress.org since 1997. Foldvary's commentaries are well respected for their currency, sound logic, wit, and consistent devotion to human freedom. He received his B.A. in economics from the University of California at Berkeley, and his M.A. and Ph.D. in economics from George Mason University. He has taught economics at Virginia Tech, John F. Kennedy University, Santa Clara University, and currently teaches at San Jose State University.
Foldvary is the author of The Soul of Liberty, Public Goods and Private Communities, and Dictionary of Free Market Economics. He edited and contributed to Beyond Neoclassical Economics and, with Dan Klein, The Half-Life of Policy Rationales. Foldvary's areas of research include public finance, governance, ethical philosophy, and land economics.
Foldvary is notably known for going on record in the American Journal of Economics and Sociology in 1997 to predict the exact timing of the 2008 economic depression—eleven years before the event occurred. He was able to do so due to his extensive knowledge of the real-estate cycle.