13 Rent
The value that can fairly be charged for the use of a plot of land is the subject of much debate, and to many it seems an arbitrary amount demanded by landlords, always at the disadvantage of his tenants. Previous discussion has mentioned that the rent of land is negotiated, like the price of any other good, and that landlord and tenant each consider their interests - and that the advantage or disadvantage depends on supply, demand, and the value of the land in producing revenue.
There can be no fixed assessment of the value of land - as it will increase or decrease over time. Bastiat will consider some of the factors.
Proximity to markets is a significant factor. Land that is closer to the city (or wherever its products will be taken for sale) is worth more due to decreased transportation expense. As a city grows to be nearer to a given plot of land, its value will increase. Should a city depopulate or shrink, the value of nearby land will fall. Proximity to roads and canals likewise influence the value of land.
The productive capability of the land will determine its value. When capital investments are made that decrease the cost of production (such as sowing a field) or increase productive capability (irrigation or fertilization), the land becomes worth more. Land that is polluted or depleted over time becomes worth less.
The use of a given plot of land is determined by the way in which it is used. The farmer, rancher, miner, logger, factory-builder, and all prospective clients have their own idea of what the land can earn for them, and how much rent they can afford to pay based on their profit from using it. As new uses for land are discovered, different bidders enter the auction to determine its price. The landowner himself may consider his own potential use of the land in considering whether to take a tenant's price.
Taxation affects the rent that will be demanded by the landowner. He will expect the rent paid by his tenants to enable him to pay the expense of taxation, and if tax is increase he will wish to increase the rent he receives proportionally.
Government services also impact the value of land - though this is generally reflected in taxes. Land that is under protection of local police or guardsmen is more appealing than land that is not, even if the amount of taxes is the same. (EN: while this is less of an issue in the present day, access to public service such as water, electricity, sewage, etc. is significant.)
In instance where subsidies are given to owners of land for dedicating it to specific uses, the landlord may offer discounted rent to tenants who mean to use it for that purpose.
Having enumerated a number of factors that determine the value of land, Bastiat then observes trends that he feels to be general, but not inevitable.
Namely, technique and technology are constantly advancing the productivity of human labor. A farm can produce more yield per acre, and this enables tenants to offer more rent per acre, increasing the value of land. And manufacturing, which produces a great volume of goods on very little land, is increasing.
Competition in the marketplace is increasing the value of land. The producers who are most intelligent and efficient in their work are able to make greater profit, and are able to provide better rent. The competition for land, like that of any other goods, directs it to those who can make the best use of it.
Populations are growing, which means that land is in greater need to provide more goods. New towns are sprouting up and existing cities are widening their borders. Transportation is improving. All of this makes more land proximate, in time or distance, to these urban centers.
The most important point, which he reiterates, is this: land has no value in itself. It is valued only by the profit that can be made by using it.