The Principles of Political Economy

Henry Sidgwick

Book III

Chapter VI


§5. It is more plausible to hold that such a remedy is possible where the changes are mainly in one direction, and result in an ``unearned increment'' continually obtained by the owners of a certain kind of property, through its increasing scarcity in relation to the demand for it. The chief case of this is land in a country where population is continually growing thicker. We have seen, indeed, that the rise in the value of merely agricultural land, which the increasing demand for agricultural produce tends to bring about, may be more than counteracted by any kind of sudden and extensive improvements in production, especially by the cheapening of transport and the opening of Dew channels of supply through trade from abroad. But the rise of land near towns, or otherwise conveniently situated for the purpose either of building or direct enjoyment; is not on the whole affected by this cause. Hence, taking all the varied utilities of land into account, I should infer that the aggregate rental of almost all existing civilized countries will, at the close of any period sufficiently long to allow for transient oscillations, have received a considerable ``unearned increment'';---provided that the existing tendencies to increase of population continue to operate without material change. And, so far as this increment can be definitely foreseen and measured, it would certainly be an important approximation to equality of opportunities if the landowners could be prevented from appropriating it by any legislation not otherwise inequitable. It should, however, be observed that if the landowner has no claim to the portion of increased rent that is not due to the labour or forethought of himself or his predecessors in ownership, no other individual member of the community can urge any more claim; hence any attempt to secure any portion of this increment for the particular persons to whom he happens to have let his land, by prescribing ``fair rents'' below the market-rate, cannot be justified on this score. The equitable claim must be taken to be that of the community.

I do not doubt the abstract validity of this claim: but there appear to me to be the following grave objections against any attempt to enforce it, in the case of land that has once passed completely into private ownership,---even apart from the inevitable uncertainty of any practical conclusion that assumes the continuance of the existing tendencies to increase of population. In the first place, we have every reason to suppose that at least a great part of the future unearned increment of rent is already discounted in the present market-price of land: and it would be manifestly unjust to mulct the particular persons who keep their wealth in the form of land, by taking from them a portion of the market-value of their property. It could only be unearned additions to the existing market-value of the land that could fairly be taken by the state---or rather whatever part of such additions could be shown to be due to unforeseen increase of rental: and there would be much difficulty in separating this portion clearly from the earned increment. For In many cases the increased utility and value of the land would often be found to be only partly unearned, as it would be due to favourable circumstances well turned to account; and in such cases I do not know how we could pronounce what proportion of the increment was to be set down to circumstances and what to the insight and enterprise of the man who skilfully availed himself of them. And if a landowner were liable at any time to have to prove that the additional value of any part of his land was not ``unearned'', in order to prevent its being taken from him by an extra tax, the utilization of land by private enterprise would receive a severe check. Further, if the state confiscated unearned increment, justice would require it to give compensation for ``undeserved decrement'': and this, again, would involve an equal difficulty of valuation, and a dangerous withdrawal of the motive that a landowner whose land is declining in value now has to exert himself to discover some new means of turning it to account.

The only practicable way, I think, of attaining the end in view would be for the state to assume the ultimate ownership of land generally, and reward the skill and enterprise of individuals in whose hands its value increases,---according to the method before proposed in the case of railways, &c.---by allowing them to reap the whole advantage of such increase for a certain limited period. Justice would of course require that adequate compensation should be given to existing owners; and it has been urged that the financial operation that would be required, in order to buy back nearly the whole land of a fully occupied country from its private owners, would be beyond the resources even of England; or at least that the community would lose by the increased rate of interest that would have to be paid more than it could possibly gain by unearned increment. But this difficulty may I conceive be avoided, as Cliffe Leslie suggested, by deferring the time at which the community would enter upon the ownership of the land. The question rather is whether the diminution in production to be expected from (1) the inertness and jobbery incident to public management, (2) the inevitable divergence of interests of owner and lessee respectively, and (3) the loss of the special satisfactions, and any special stimulus to labour and care, which individuals now derive from the sense of ownership, is not likely to outweigh any gain in equity of distribution; even allowing for any advantages that may be fairly hoped from governmental administration, in spite of its drawbacks---e.g. from greater economy in the collection of rents, especially of small farms, the more uniform application of principles accepted by experts, and the power of borrowing on better terms. I should not hesitate to answer this question affirmatively in reference to most existing communities at the present time: though it is quite possible that the management of governmental business may in the future be so much improved as to render it clearly expedient to ``nationalise the land''.

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