#WealthofTweets: Book 1.11.a

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Of the Rent of Land

(Note: Chapter 11 is in 3 parts.)
15 Jan • 23 tweets • adamsmithworks/status/1350088274564493317

OK! It's time for # WealthOfNations Book I, Chapter 11! Which is longer than all of Book II. Are you ready? Are we ready? Can anybody really be ready? # WealthOfTweets #SmithTweets

And it's all about...the rent of land, or the price paid for the use of the land where production takes place. Gripping! It's naturally a monopoly price, says Smith. (I.xi.a.1,5) #WealthOfTweets #SmithTweets

You might think, says Smith, that the rent of land is partly the result of improvements to the land (I.xi.a.2) but you'd be wrong. #WealthOfTweets #SmithTweets

It's really all about the price of what's produced and therefore what the tenant can afford to pay. Because of the monopoly thing, surplus value goes to the landlord. (I.xi.a.6–9) #WealthOfTweets #SmithTweets

This means that rent is related to price in a special way, if you're #AdamSmith. High wages and profit are the 𝘤𝘢𝘶𝘴𝘦 of high prices, but because landlords hoover up surplus value, high rents are the 𝘳𝘦𝘴𝘶𝘭𝘵 of high prices. (I.xi.a.8) #WealthOfTweets # SmithTweets

What kind of produce always affords rent? Food! It's 'cause everyone's gotta eat. (Really, that's the explanation.) (I.xi.b.1) #WealthOfTweets #SmithTweets

The need for food, which takes a lot of land to produce back in the 18thC, is also the cause of trade between town and country. And so, as we learnt thoroughly in I.iii, roads, canals, etc. that make the country accessible matter, too! (I.xi.b.5) #WealthOfTweets #SmithTweets

We, the SmithTweeters, are so happy for the opportunity to read this book through with you. But OMG SMITH WE DON'T NEED TO KNOW THE PRICE OF EVERY HECKIN THING YOU SEE AROUND YOU. Ahem. (I.xi.b.6–37) #WealthOfTweets #SmithTweets

These price comparisons are meant to convey the importance of covering the costs of improvements/insurance and of the relative price differences between, say, beef and wheat when thinking about how land is going to be improved and used. (I.xi.b.6–27) #WealthOfTweets #SmithTweets

So long as all production has to compete for land with non-optional food production (everyone's gotta eat!), land rents will all be at least partly regulated by the prices and production of the common crops that sustain the people. (I.xi.b.28) #WealthOfTweets #SmithTweets

Special case: if there isn't enough land to meet the demand for something, e.g., the most fashionable/scarce wines, the price will exceed the cost of wages, profit, and transport. This makes landlords happy, 'cause they get the rest. (I.xi.b.31–34) #WealthOfTweets #SmithTweets

And, as Adam Smith would have predicted, this leads landlords to call for restrictions on the development of land to produce those goods. Or they might burn excess product. Smith doubts this is the secret to sustained high rents. (I.xi.b.27–33) #WealthOfTweets #SmithTweets

Now Smith spends some time speculating on whether there might be better crops for landlords to encourage than beef and corn. Rice has high yields, but boglands where rice is grown don't have a lot of other uses. (I.xi.b.35–38) #WealthOfTweets #SmithTweets

Does # AdamSmith ever miss an opportunity to complain about oatmeal? (I.xi.b.41) #WealthOfTweets #SmithTweets

OK. OK. We don't mean to get excited but we're about to launch a digression on potatoes! #DigressionOnPotatoes (I.xi.b.39–42) #WealthOfTweets #SmithTweets


DID YOU KNOW that this part of #WealthOfNations is (at least partly) responsible for the introduction of potatoes into India?#DigressionOnPotatoes (I.xi.b.39–42) #WealthOfTweets #SmithTweets

The British East India Company (Smith was no fan) was influenced by Smith's claim that potatoes would produce more food (reducing famine) and make for better (and more beautiful!) workers #DigressionOnPotatoes (I.xi.b.39–42) #WealthOfTweets #SmithTweets

So the East India Company pushed for potato cultivation to try to raise their rents. It didn't really make sense if you knew as much about India as, say, Indians did. But when did that ever stop colonists? #DigressionOnPotatoes (I.xi.b.39–42) #WealthOfTweets #SmithTweets

We do not think that Smith would have been a fan of the use of this part of the text to further and justify imperialism. But we hope he might have enjoyed a masala dosa. #DigressionOnPotatoes (I.xi.b.39–42) #WealthOfTweets #SmithTweets

Just to be clear: Potatoes would have made it to India anyway, and Indians would have found the best way to use them. But it's SO WEIRD that the way they were actually introduced is related to these few paragraphs. #DigressionOnPotatoes (I.xi.b.39–42) #WealthOfTweets #SmithTweets

So the next time you enjoy aloo matar, think of Adam Smith, the colonized peoples who managed to make something their own in spite of physical, legal, and cultural oppression, and weird happenstance. #DigressionOnPotatoes (I.xi.b.39–42) #WealthOfTweets #SmithTweets

(Please note, that we, the SmithTweeters, understand that this is the appropriate length for a digression. It will matter in the upcoming weeks that you know that we know this.) #DigressionOnPotatoes #DigressionOnSilver #DigressionWhatDoesItMean #WealthOfTweets #SmithTweets

• • •We're back with more # WealthOfNations Book I, Chapter 11! Oh boy! #WealthOfTweets # SmithTweets

If you're a keener, you might have observed yesterday that people need more than just food. Like, say, clothing and shelter. # AdamSmith is ON IT. (I.xi.c.2) #WealthOfTweets #SmithTweets

Before land was improved, there was lots of material for clothing and housing, but not enough food for all the people. Once the land is improved to grow food, clothing and shelter become scarce (and valuable). (I.xi.c.3) #WealthOfTweets #SmithTweets

Uh. OK. Jeez. Smith is not exactly going to shine here. Please remember our thoughts on Smith when he talks about developing nations. #WealthOfTweets #SmithTweets

Hunters and gatherers must have had so much extra material for clothing and shelter that some of it was thrown away. But once they were given access to an expanded market, they could trade their surplus and it became valuable. (I.xi.c.4) #WealthOfTweets #SmithTweet

The fact that produce has value, so long as it can make it to market, might encourage the first enclosure and private ownership of land, which introduces rents. (I.xi.c.4–5) # RoadsRiversAndCanalsStillMatter #WealthOfTweets #SmithTweets

Food is really the binding constraint, Smith reminds us. But once you've got it sorted, clothing and housing tends to follow. (I.xi.c.6) #WealthOfTweets #SmithTweets

Wait. Adam Smith thinks you can build a house in a day? #WeWouldLikeToHireYourContractingService (I.xi.c.6) #WealthOfTweets #SmithTweets

Once you start improving the land, less labor is needed to feed the same number of people, and so they can turn their resources to fulfilling other wants and fancies. It's that special sauce: The Division of Labor at work. (I.xi.c.7) #WealthOfTweets #SmithTweets

(This applies, by the way, to rich and poor people more or less equally. How much someone eats isn't affected by how rich they are, say Smith. So it's not like rich people can eat all the food and leave nothing for the rest.) (I.xi.c.7) #WealthOfTweets #SmithTweets

The rich consume other things at a higher rate than the poor. By producing frivolous trinkets for the rich, even the poor can earn enough to make sure they're fed, clothed, and sheltered. It's not perfect, but it gets the job done. (I.xi.c.7) #WealthOfTweets #SmithTweets

All this matters because it explains why food isn't just the original source of rent, but the thing that makes rent from every other sort of production possible. (I.xi.c.8) #WealthOfTweets #SmithTweets

Coal mines were not always a great investment, sometimes not even producing enough income to pay rent. Plus their produce tends to be for local markets. On the other hand, metal mines produce for the world market and tend to pay rent. (I.xi.c.10–23) #WealthOfTweets #SmithTweets

Because they're operating in a world market, metal mines' revenue was a result of their richness. Less rich mines could be outcompeted by the discovery of more rich mines, for example Peruvian silver mines. (I.xi.c.23–25) #WealthOfTweets#SmithTweets

Taxes on mines work a lot like rent, except when revenues won't cover rent the landlord can work the mine, whereas when revenues won't cover tax the mine won't be worked at all (or the metal will be smuggled to avoid the tax.) (I.xi.c.25–28)#WealthOfTweets #SmithTweets

The lowest price for precious metals depends on covering the cost of stock and labor. But the highest price? That's all about scarcity! At least, if you're Smith. The demand, he says, comes from their beauty. (I.xi.c.29–31) #WealthOfTweets #SmithTweets

Precious stones are like precious metals: They're pretty. 💎💎 (I.xi.c.32) #YouHeardItHereFirst #WealthOfTweets #SmithTweets

Finding lots of precious metals or precious stones won't make the world much richer: They're only so valuable because they're scarce. If we get more, they'll just become cheaper. #ButWaitDoesntThatMakeUsWealthier (I.xi.c.34) #WealthOfTweets #SmithTweets

(This, Smith says, is why the less developed gold- and silver-rich countries discovered by Spain were so ill-prepared for Spanish lust for gold and silver. Pretty gold pebbles on the ground were worth less than food. #DiamondWaterParadox (I.xi.c.36)) #WealthOfTweets #SmithTweets

Above ground production, though, makes us richer. The more land is improved, the more valuable other land becomes. More food➡more people➡more wants and fancies➡production even on land that won't yield food. (I.xi.c.35–36) #WealthOfTweets #SmithTweets

And if you can make enough money from your production, what can you get from that land? Rent! (I.xi.c.35–36) # WealthOfTweets #SmithTweets
Tune in tomorrow for...more stuff about rent!! #WealthOfTweets #SmithTweets

Does anyone else feel like #AdamSmith has been talking about Rent for a really long time already? Like 525, 600 minutes, maybe? Here we go again! # WealthOfTweets #SmithTweets

So land that produces food will always produce rent. (Yes. We are still talking about rent. We are talking about rent forever. This is our life now.) (I.xi.d.1) #WealthOfTweets #SmithTweets

The more food we produce, the more people can be alive! 🎉The more people, the more demand for stuff. And so the production of food, which always pays rent, supports the production of everything else that can pay rent. (I.xi.d.1) #RentRentRent #WealthOfTweets #SmithTweets

The sorts of produce that might or might not pay the rent will depend on the produce that always pays the rent. Are there just two categories of things, then? Food and not- food? (I.xi.d.1) #RentRentRent #WealthOfTweets #SmithTweets

This is how it's mostly always been, says Smith: Arts and industry advance and the things that go beyond the necessities of life come to be more and more in demand and therefore become dearer and dearer. #YesDear (I.xi.d.1) #WealthOfTweets #SmithTweets

But sometimes the supply for these things increases more than the demand because of "particular accidents". A bunch of those accidents have to do with the market for silver. #OhItsComing (I.xi.d.2) #WealthOfTweets

So here's how it is. Say you've got a quarry. The neighborhood around your quarry gets richer, your quarry becomes more valuable. That neighborhood's your market. For a silver mine, your market is always the whole world. #OhItsComing (I.xi.d.2–3) #WealthOfTweets #SmithTweets

If the whole world gets richer but the quantity of silver discovered doesn't keep up, silver will become more expensive relative to staple crops. # OhItsComing (I.xi.d.4) #WealthOfTweets #SmithTweets

If the whole world gets richer but the quantity of silver discovered happens to increase by a lot, silver becomes cheaper relative to staple crops. #OhItsComing (I.xi.d.5–6) #WealthOfTweets #SmithTweets

We hope that you like this kind of comparison, friends, because you're in for a lot of it. # OhItsComing # WealthOfTweets #SmithTweets Tomorrow we (begin to) bring you: (っ◔◡◔)っ ♥ The Digression on Silver ♥