CHAPTER VII

THE PROBLEM OF RENT

THE SHARE OF LAND IN DISTRIBUTION

IY the preceding chapter, capital was considered in a
double light. The problem of current demand and
supply was examined mainly in relation to free capital, and
the results reached were largely dependent on being able to
regard the supply as consisting of interchangeable and
equivalent units. The earnings of the least productive
units, the units which, at current borrowing rates, are on the
margin between net profit and net loss to the borrower, were
found to register the marginal utility of capital. To pay
more for these would be unprofitable, while, if they were
yielding substantial net returns, further borrowing would be
profitable—they would not be on the margin. The characteristic
 of interchangeability ensures the rate paid for these
being the rate paid for all other units, if we may assume the
borrowing and lending to take place in a well-organised
market under active competition.
But capital was also regarded from another standpoint.
[t was seen that invested capital cannot be treated on
the interchangeable equivalent units basis. Occupying the
field, it is partly protected from the competition of other
anits of capital, which may enable it to secure payment for
its services at a rate higher than that securable by free
capital, while it cannot be readily placed in competition with
capital more advantageously placed, and may, as a result, be
compelled to accept a lower rate of payment for its services
than that paid for free capital.
In the present chapter we are to deal with a factor in