Spencer Heath Archive

Item 1068

1930s

Rent expresses the value of public services. It is determined by the demand for public services and the supply of them.

The demand for public services rises and falls with the profits (wages and interest) of private industry. When these profits fail there is less demand for public services as an aid to private production (exchanges) and rent must fall.

The supply of public services increases with the amount of total economic rent efficiently used to defray the cost of the services. Any other funds employed to provide or maintain public services do not add anything to the value of public services because services so provided cost the community in taxes and rates far more than the services are worth — so they do not effectively increase the supply and cannot add to rent, but do reduce it.

Public services can be obtained only by paying rent.

Land values (Rents) or the values of receiving public services, are not created by population increase but by that thing which makes population increase, which is the making of profits (wages and interest). Assuming an adequate and productive population, where exchanges of labor and services are least restrained there profits are highest, there is demand for public services and there will producers pay the highest rents for public services so far as these are provided out of rents. But they will not pay again in rents for any public services the value of which has already been offset by taxation.

Therefore, land values, considered as current rents, in the long run are highest where profits are highest and where the largest portion of public cost is defrayed out of economic rent. Such a community is likely to attract population and the consequently increasing productiveness will raise rents but when mounting taxes and restrictions at last take the profits away from producers, there will be less demand for public services and rents must fall. And so it is in every depression — the higher the taxes on business the lower rents fall.

Where wealth is fast increasing and wages and profits high, this draws population with increased demand for land that has public services attached to it.

If the cost of these services does not come out of rent, speculation is induced.

Speculation causes hopes to be capitalized and this imposes a mounting carrying charge on production. When profits nearly disappear under taxation and restriction and under the fast-mounting overhead of capitalized hopes (speculation) a business depression is due.

When taxes, restrictions and fictitious capitalization are reduced to a point where profits again can be made men will risk productive enterprises and prosperity reappears. But it brings with it again higher taxes on production and higher capitalization of hopes and these charges will bring profits down again.