114 ECONOMIC PRINCIPLES

reveal a state of increasing returns. Thus the hypotheses
on which consideration of marginally profitable outlay, and
marginal cost of production as determining the rental value
of land, was based are simply not applicable to the present
conditions of cultivation in such cases, for example, as parts
of Western Canada. Where, as in those districts, fertile land
is abundantly available at a small price, there can obviously
be a response of supply to demand. If it be worth while,
the supply of cultivable land can be increased with a degree
of readiness comparable with that manifested by capital in
countries like England. New land |is brought under cultivation
 partly for the sake of securing rights of property in it,
and any future increase of value which may accrue. With
due regard to the modifying influence of this consideration,
we may say that the cost of adapting new land to the bearing
of crops is a part of the necessary expenses of production of
those crops, and, as such, influences the price of the produce.
Rent of land is only, in a strict sense, of importance
where land is hired by the cultivator from the owner. In so
far as the influences which determine its amount are different
in nature from those determining the amount of the other
distributive shares, interest, wages, profits, its separate
consideration is warranted, even where no payment corresponding
 to it passes from one person to another. As a
determining influence in the value of land, it is further of
importance, whether the distinction of cultivator and owner
occur in practice or not. The net annual surplus from
cultivation, over and above the personal remuneration of a
cultivating owner, is the measure of the advantage of ownership.
 The value of the land is the capitalised value of the
surplus. It will, therefore, depend on the rate of interest,
which expresses the proportion between an amount of capital
and the perpetual income which it can purchase. Probabilities
 of change in the net surplus of the land, or in the
rate of interest, including such probabilities as may have
to do with future changes altering entirely the kind of
serviceability of the land, making agricultural land into
building land, for example, will have their influence in
modifying the proportion between the present net surplus