Sec. 3] FOUR INCOME-CAPITAL RATIOS 187

latter; and that, whereas different qualities of land bear
different rents, representing the difference in advantage
between a particular grade of land and no-rent land, all
parts of capital bear the same rate of interest. These
errors come from unconsciously regarding the land in
terms of quantity and the so-called “capital” in terms of
value: in other words, from considering the income from
land in the sense of value productivity, but that from capital
 in the very different sense of value return. If, in making
 our comparisons, we abide consistently by either one
of these ratios, the imagined distinction between rent and
interest and between land and capital will vanish. It is
quite true that the value productivity of land differs with
different grades of land; but it is equally true that the
value productivity of machinery, or of any other element of
capital, so varies. New, high-grade, and efficient machinery
bears exactly the same relation to machinery which is out
of date and inefficient that fertile land bears to sterile.
Similarly, different persons have different degrees of productivity,
 some having high and others low earning power.
Tt was on this basis, in fact, that Francis Walker applied
the Ricardian theory of rent to the explanation of entrepreneur’s
 profits.
On the other hand, if we fix our attention on value return,
we find it indeed true that the value return called the rate of
interest on “capital” (however narrowly capital may be
conceived) is uniform, but we find it equally true that the
value return on land is also uniform; for land which yields
a high rent will have a correspondingly high value, and, in
consequence, the ratio of the rental to the value will be
exactly the same as for lower grades.
Other examples of confusion might be cited. We find
some of them in the cruder theories of interest. The
“naive” productivity theory," for instance, confuses phys-!

 See Bohm-Bawerk, Capital and Interest, English translation, 1888,
Pp. 120-141.