The Denison review. [volume] (Denison, Iowa) 1867-current, 1914-01-28
The Three Elements in Land Prices

anu nave Deell lOi years, whether lam
S in the corn belt will continue to ad
2 vance, how far it will advance, whel
? it will reach the highest point, AM
, whether it will hold firm at that poin
/ or whether it will fall, and if so, how
} far, and when it will reach the loves
: point and again begin to advance. II
/ expect us seriously to answer any o
? these questions would be to endow u:
with the spirit of prophecy. Not wish
ing to buy land. and having no lane
; for sale, We might be in position tt
answer these questions at least i'm
partially. merely giving our opinion
J for what it is worth. Our own private
!; opinion of our opinion on this is that
it would not be worth much; and
hence we don't give it.
These often repeated. questions
however, have set us to analysing the
subject, to try to answer to our own
satisfaction at least this problem:
What determines the price of land
anywhere in the wide world? AS far
as we can think it out, there are at
least three elements in land prices:
the speculative, the productive, the
social
By the speculative we mean the
prices that mean pay because they be-
lieve the present price will go higher.
In other words, their estimate of the
future unearned increment. BY "un-
earned increment" we mean the ad-
vance in price because of the limita-
ton in the supply, the settling up of
the country, the growth of the cities.
the improvement in the roads, the
opening up of new and better mar
kets; in short, the increase that will
come, apart from that due to improve
ments that the owner himself will
make on the land.
This is the speculative element in
land prices; and between the years
1889 and 1909 it has been very great
in the corn belt-1O.S per cent per an
mum, if we are to trust the census re-
ports. We don't doubt it. There have
been good reasons for it. 1t has been
continuous, though we think at less
rapid rate, for the four years since
the date of that census. The limit of
the best land has been reached. The
population of the entire country has
been increased. Eaters have increased
much more rapidly than producers.
The railroads have given better op
portunities for marketing.
The question that is troubling
good many people now is: Has the
price of land gone higher than condi-
tons warrant? Has it been pure spec
ulation, guessing at the future; or
have the prices been justified? How
| will the new tariff affect the price of
land How will the new currency bill
affect it? There are some who be-
lieve 1--WE do not say reason) that be-
| cause land prices have been advanc-
| ing for fourteen years and longer,
they will continue to advance. Others
believe that for that very reason they
have reached their limit and will not
continue.
There is this to be said about spec
ulative value; that the farmer had lit
tie or nothing to do with it one way
or another He did not make the land
in the first place. The cities grew
without his help except in the way of
feeding them. He did not build the
railroads: or if he did, it was a gratu-
ity and not an investment. The up
ward swing of the speculative wave
came along. caught him up and car
ried him with it. When it stops, he
will stop; and if it should recede, it
will carry him with it.
The second element in the price of
land is it's productive value, it's capac-
ity for producing crops. The actual
productive value of land has had
something to do with prices in the
last fourteen years, but not very much
The farm growing thirty bushels of
corn to the acre has been selling, 9th
er things being equal, about as high
as the neighboring farm that pro-
duces fifty bushels. The potential
producing value has had a good deal
more to do with prices. That is, rich
lands in the state of rich lands have
sold relatively higher than rich lands
in poor state or poor part of a
state, because potentially more pro-
ductive; but the percentage of in
crease has not varied greatly whether
the land was in a poor section or a
rich one. All this shows that the ad-
vance has been almost altogether spec
ulative.
Speaking generally, land that now
sells at 500 an acre does not produce
more bushels of grain than it did
when it sold at $50, $40 or $50. 1t
rents for more money, because crops
bring more money, due to the same
influences that have increased the
price of land; but its productive value,
it's bushels and tons of crops, have
not increased, but on the whole de.
clined slowly. 1t is easily conceiv.
able that in the not far distant future
now that protection has been almost
entirely removed from farm products
now that protection has been almost
entirely removed from farm products
and we are in free competition with
virgin soils in other parts of the world
the prices Of farm products may fall
or at least not advance further, and
be sold at ocean ports in competition
with importations from foreign coun
tries. If so, rents may fall and prof
it's fall, and the producing value of ou1
farms as measured in dollars and
cents fall likewise.
Therefore, if present prices of land
= L H. IL