Tracking Rent: Hide-and-Go-Seek Economics
[Reprinted from The Freeman, September, 1938]
A New York bank issues a table .. of income distribution under the
title "Your Securities and Income taxes." These statistics,
like most of the figures on income which are issued by governments,
are misleading, because 'the sources of income are merely .bookkeeping
terms, rather than fundamental factors of production. Ledgers record
results in convenient phrases that do not necessarily reflect economic
An analysis of these "sources" of income would be more
revealing if the bases of these categories were available. But, enough
is known of prevailing accountancy methods to show how difficult it is
to evaluate such figures so as throw light on the social problem of
wealth distribution -- that is, to indicate the tendency of wages, as
a proportion of production, to the minimum of mere existence, and the
tendency of rent to absorb a constantly increasing share of
For instance "Interest." Undoubtedly included in this item
are the returns to the owners of government bonds. Since the wealth
invested in these bonds is not used in the production of more wealth,
the returns to the owner is not economic interest but taxes. A
government bond is a lien on the taxing power of the government, and
the recipient of "interest" is merely a tax-collector, once
"Interest" received from corporation bonds is to a very
large degree rent, since bonds are mostly mortgages on natural
resources. The holder of railroad bonds is part owner of the land
holdings of that railroad, and his income derived from this monopoly
privilege. He is just as much a receiver, of rent as is the man who
owns a mortgage on land and collects the "interest". Insofar
as the money deposited in a savings bank is loaned on land values, the
"interest" received by the depositor is rent.
Similarly, it is evident that much of what is called "dividends"
is not return from the use of capital in productive enterprise but
from tribute collected for the use of land. Those who own securities
in the United States Steel Corporation are collecting, in their
dividends, rent of the mines owned or controlled by this company. Even
a life insurance policy holder receives rent in his "dividend."
In every item of "income" listed in this table (with the
possible exception of the one called "other income") there
may be, and probably is, more or less payment for the use of land.
Even the item of "Salaries, wages, commissions, fees, etc"
contains the element of rent; for the lawyer who negotiates a transfer
of realty obtains a fee which may come from rent, and surely the agent
who its paid for collecting rent from tenants is paid out of his
On the other hand, the income called "rentals" contains a
return to capital and to labor -- that is, interest and wages. In
fact, since building values are, on the whole, greater than the values
of the lands on which they rest, the "rentals" represent a
return on capital (and wages for building management) more than the
collection of rent.
From these observations it becomes apparent that such income figures,
which are the only kind available, furnish no clue as to the amount of
wealth production which flows to the three economically fundamental
classes: those who contribute labor, those who own capital, those who
own land. There are difficulties in determining, such incomes. First,
because there is no measurement of rent independent of price indices.
Secondly, because many capitalists are also landlords and laborers.
But, a fairly accurate return to rent, wages and interest could be
ascertained by an analysis of the incomes of a representative
cross-section of large industries, or even of ten thousand individuals
in various occupations and various sections of the country. An income
tax blank could be devised for this purpose, and the resulting answers
would furnish a reasonable guide to the relative distribution of
Since no accurate statistics, or even indicative data, on the subject
of incomes are available, we must resort to the deductive method for
conclusions. Thus, we are forced to rely upon the irrefutable
correlation of the laws of rent, wages an interest -- to which we find
that every increase in the productive power of capital and of labor
tends to increase the demand for, and price of, land. Which leads to
the conclusion that rent must tend to absorb a constantly increasing
amount of the wealth produced, at the expense of wages and interest.