Does Von Thunen Meet Ricardo?

Author(s): Aharon Kellerman and Donald W. Jones

Source: Annals of the Association of American Geographers, Vol. 69, No. 4 (Dec., 1979), pp.
639-642
Published by: Taylor & Francis, Ltd. on behalf of the Association of American Geographers
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 640 COMMENTARY
When land of the third quality is taken into cultiva-
tion, rent immediately commences on the second,
and it is regulated as before by the differences in
their productive powers. At the same time, the rent
of the first quality will rise, for that must always be
above the rent of the second by the difference be-
tween the produce which they yield with a given
quantity of capital and labour. With every step in
the progress of population, which shall oblige a
country to have recourse to land of a worse quality,
to enable it to raise its supply of food, rent, on all
the more fertile land, will rise. . . . with an equal
employment of capital and labour.
Wicksteed says :4
Capital-plus-labour being constant it follows that, at
any rate after a certain point, each successive dose
of land will increase the vield less than the last dose
did. For were this not the case it would be possible
for a definite amount of capital-plus-labour to
spread itself with advantage over an indefinite area
of land. We shall therefore come to a point when
a further increment of land would increase the total
yield by less than its own rent at the current rate.
It should be noted here that Wicksteed's law
of variable proportions applies only, "when
each of the factors of production is renumerated
at a rate determined by its marginal efficiency."5
This is not assumed by Jones.
We may assume, therefore, contrary to Jones'
"Ricardian" model, that rents per acre will rise
when additional land is put into production as
a result of demand increase, at least until some
point, other factors of production ceteris
paribus.
After the presentation of his "generalized
Ricardian model" Jones defines the major prob-
lem with the ThUnian model and diagram which
he attempts to solve. "It can appear from ma-
nipulation of the diagram that increases in the
use of land (bringing inferior, or more distant,
land into use) are always and necessarily asso-
ciated with increases in rent per unit of land.
This conflicts with the results of the generalized
Edgar S. Dunn, Jr., The Location of Agricultural Pro-
duction (Gainesville: University of Florida Press,
1954), pp. 28-34; and by R. Barlowe, Land Resource
Economics: The Economics of Real Property, 2nd ed.
(Englewood Cliffs, N.J.: Prentice-Hall, 1972), pp.
163-67.
4 Philip H. Wicksteed, An Essay on the Co-ordina-
tion of the Laws of Distribution (London: Macmillan,
1894). Reprinted with corrections (London: London
School of Economics and Political Science, Series of
Reprints of Scarce Tracts in Economic and Political
Science, No. 12, 1932), p. 20.
5 L.C.R., editorial remarks, in Wicksteed, op. cit.,
footnote 4.
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December
Ricardian model." It seems to me that no such
conflict exists. If we assume an increase in de-
mand resulting in the cultivation of additional
land then, according to the "manipulation of the
diagram," rents per acre will increase in propor-
tion to former rent rates (the rent curve is
shifted outwards) which is exactly what Ri-
cardo says, ceteris paribus, of course. If we as-
sume, on the other hand, that additional land is
brought into production without response to
increasing demand, then the additional land will
produce negative rents (the rent curve will con-
tinue linearly into the negative rent surface of
the diagram). Rents per acre of formerly culti-
vated land will remain the same as long as we
do not assume any market response to oversup-
ply of agricultural products. Assuming such a
response, will cause a decline in rents system-
wide proportionally to former rent rates. Of
course, assuming any further changes in rent-
factors will result in additional rent changes.
Jones' conclusions do not make Von ThUnen
look better, Ricardo-wise, if we remember that
he assumed the Ricardian model to operate
under conditions of change in quantity of land,
other factors of production ceteris paribus.
Jones concludes :6
Consequently, for Von Thiinen as well as for Ri-
cardo an increase in demand for the output of land
(an increase in the derived demand for land) will,
with no increase in the quantity of land cultivated,
unambiguously produce an increase in rent on every
unit of land. To the extent that additional land can
be brought into production in response to this in-
crease in demand, increases in rent on units of land
previously used will be lessened and can actually
fall, depending upon the ease with which the new
land can be used. This "ease" is described economi-
cally by the slope of the supply curve of land, and
in the model developed here depends only upon
transportation costs.
These conclusions, referring to both Ricardo
and Von ThUnen, do not fit the model assump-
tions, since they assume changes in transporta-
tion costs as Jones suggested (bottom of p.
212). If we adopt the Ricardian model or the
ThUnian model which do not assume any trans-
portation rate response to increase in demand
resulting in more cultivated land, then rents per
acre will rise (at least to some point). More-
over, since transportation costs are supposed by
Jones to cause rent lessening or decline, how
will this fit Ricardo who does not assume trans-
6 Jones, op. cit., footnote 1, p. 213.
 1979 COMMENTARY
portation costs at all? We must return, then, to
the basic difference between Ricardo who uses
quality of land as the major rent factor and Von
Thiinen who refers to distance as the major rent
factor. Jones did not show how changes in
transportation costs make any sense in a Ri-
cardian framework, and he did not provide any
rationale why an increase in demand should
cause changes in transportation rates in a
Thiinian model.
COMMENT IN REPLY
KELLERMAN'S basic objection seems to be
to my equation of transportation costs and
differential fertility, although I am not certain
why he objects. It appears that he accepts all
my arguments as I stated them, but for some
reason says that I made different ones and pro-
ceeds to attack those.
In his second paragraph, Kellerman confuses
movements along a supply curve or a demand
curve with shifts, inward or outward, of the
curve itself. The first of my statements which
Kellerman cites simply presents the law of vari-
able proportions: the marginal product of a
factor declines as more of it is added to a con-
stant quantity of another factor, and the mar-
ginal product of the fixed factor increases.
There is nothing in this statement about supply
or demand schedules; it is a purely technical
relation. Later in that paragraph, Kellerman
cites my statement that, given technical rela-
tions, a supply increase (an outward shift in a
supply curve) decreases price if the demand
curve is unchanged, and that price increases if
a demand curve shifts out with a fixed supply
curve. A supply increase, given demand, will in-
crease the quantity transacted and lower price;
a demand increase, given supply, will increase
the quantity transacted and increase the price.
So what else is new?
Kellerman then cites Ricardo's case of an in-
creased demand for food increasing the derived
demand for land, given a fixed supply curve of
land. The quantity used and the price go up.
His next appeal is to Wicksteed, and here, I
suppose we could say we have it from the
horse's mouth that, given a fixed quantity of all
other inputs, an increase in the quantity of one
input will decrease the marginal product of the
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641
Finally, in what seems to be a misprint, Jones
attributes labor to demand in a Ricardian (?)
definition of rent :7
The income accruing to owners of land was called
rent and was determined by the quantity of labor
applied to the land; thus rent was determined strictly
by the demand for output, or the derived demand
for land.
7 Jones, op. cit., footnote 1, p. 205.
variable input. This is, of course, exactly what
I said in the first citation which Kellerman
makes from my paper, although Kellerman says
I'm wrong for saying it, in the first sentence of
his third paragraph. That Kellerman somehow
thinks I did not assume marginal productivity
factor pricing in that statement is curious since
I even call rents marginal products in the sen-
tence he indicts. There are two separate rela-
tionships involved here, and I don't think Kel-
lerman is separating them. In the statement from
Ricardo we have an example of the fact that
the more of an article (land, in this case) that
is demanded, the higher its price would be. On
the other hand, we demand it simply to use it,
and the more of it we use with a fixed quantity
of other factors, the less productive it is, and
consequently the less we are willing to pay for
additional increments of it.
Kellerman's fifth paragraph claims that
"Jones' Ricardian' model" says that rents per
acre will fall when additional land is used as a
result of a demand increase. Toward the bottom
of the second paragraph on page 206 of my
paper I say that, "The Ricardian, or price-theo-
retic model, tells us that a pure supply increase
will decrease rent per acre and a pure demand
increase will increase it." What could be
clearer?
Kellerman's sixth paragraph attacks my state-
ment that the diagrammatic ThUnen model can
appear to tell us that all land use increases are
associated with price increases, which need not
be true. Kellerman then describes a demand in-
crease, which should by all rights produce a
price increase and an increase in the quantity
used, which I have nowhere denied. Then for
some unfathomable reason, he runs on to an
 642 COMMENTARY
increase in land use which is motivated by, pre-
sumably, nothing, so that some prices become
negative. Why would anyone want to assume no
market response to an oversupply of agricul-
tural products, especially when somebody is
losing money? Even with a system of agricul-
tural price supports, something has to change:
taxation, quotas, export subsidies, or some com-
bination. But beyond this unfathomable coun-
terlogical assumption, what does this scenario
have to do with my statement? Is it simply to
say that if we presume that someone will behave
in a sufficiently perverse manner that normal
results will be overturned? All right.
The citation from my paper (pp. 212-13)
says that in both the Ricardian and ThUnian
models a flatter supply curve of land will damp
price increases deriving from demand increases.
Since the only source of cost in supplying land
in the ThUnen model is transportation costs, a
cheaper transportation rate implies a flatter
supply curve. If the rate is changed (dr in the
paper), the supply curve is shifted; that is how
I examine a supply change. There is absolutely
nothing in. the paper to suggest that there is
"any transportation rate response to increase in
demand," as Kellerman claims. Of course
"Jones ... did not provide any rationale why an
increase in demand should cause changes in
transportation rates in a Thilnian model"; I
never said it did!
Kellerman's last criticism is most cryptic of
all, but it seems to be simply an aside-that I
"attribute labor to demand in a Ricardian (?)
definition of rent," whatever that means. If
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December
Kellerman suggests that I imply the existence
of a derived demand for labor he is correct, but
I see nothing to criticize in that. Is he criticizing
the notion that, if supply is fixed, rent is purely
demand-determined? I also stand behind that
statement.
Kellerman's underlying problem in following
my demonstration of the equivalence of Ri-
cardo's and Thiinen's statements about land use
and land pricing revolve around the economic
equation of transportation costs and declining
fertility for the purposes of making a supply
curve rise. My point is that the two sources of
cost change are conceptually identical; each
would effectively reduce the standardized quan-
tity of land inputs available. A decrease in the
transportation rate in the Thiinen model is
equivalent to a fertility improvement in Ri-
cardo's scheme. However, as Ricardo presented
his production and income distribution theory,
he never thought about a shift in the supply
schedule of land, only demand schedule shifts
resulting in utilization of larger quantities of
land on the same supply curve.
In summary, I find that Kellerman has no
quarrel with anything I said. The things he
claims I did do and should not have, I did not
do; and the things he says I did not do but
should have, I did.
DONALD W. JONES
Dr. Jones is Assistant Professor of Geogra-
phy at the University of Chicago in Chicago, IL
60637.