For the theory of value which we represent, on the other hand, it is a matter of entire indifference whether the circumstances are such that rent remains purely differential, and thus does not enter into the value of products, or are such as cause rent to become general, and thus to enter of necessity into the value of products. The one case fits into our system as well as the other.
Further, there are certain exceptions to the proposition that a differential rent cannot enter into the value of products.
Alongside of those employments of land which may be regarded as the principal ones, and of those forms of rent which might be called the original ones, there exist others which are secondary and derivative. The principal employment of fertile land is in agriculture, but the building of a factory upon land suitable for cultivation is an example of a secondary employment, -- of an employment, to express it otherwise, for which land in general will be less required, and which in itself would never exhaust the available supply of lands, as the agricultural demand might easily do. If a fertile field is employed as site for a factory the agricultural rent which, in other circumstances, might be expected from it, will have to be surrendered. The sacrifice of this rent means an outlay of costs which cannot be neglected in calculating the costs of the factory's products. Whatever the amount of the rent, it must be deducted from the value of the products made on that building ground, and it is not till the remainder covers the costs of capital and labour that the calculation is complete.
The case is similar with the ground-rents of dwelling-houses.
Ground-rent in a large town is never a simple differential rent.
At the periphery of the town, house-rent finds its measure in agricultural rent, and rises towards the business centre, according to desirability of situation. The more valuable for cultivation the land round about the town is, the dearer will be the houses in that town. To this extent agricultural rent acts as a universal element of costs in the calculation of house-rents.
The differential rents received from favoured sites do not make houses dearer, but are rather a result of the high valuation placed upon houses in a favourable situation. And in so far as the need for dwelling-houses and the need for business premises compete with each other, does the one employment of land act upon the other as an element of costs.
In following out this line of thought we see that Ricardo's proposition gradually loses its applicability almost entirely, as the cultivation of land becomes very artificial, and the uses of land multiply. The various employments begin to compete with each other, and one has always to make choice among several; thus the differential rents which are surrendered take effect as costs.
Ricardo's proposition that the rent of land does not enter into costs, can be legitimately applied only to land devoted of necessity to one distinct use, such as mines, vineyards, and the like.
