1. Skip to navigation
  2. Skip to content
  3. Skip to sidebar

The Ludwig von Mises Institute

Advancing Austrian Economics, Liberty, and Peace

Advancing the scholarship of liberty in the tradition of the Austrian School

Search Mises.org

XXII. THE NONHUMAN ORIGINAL FACTORS OF PRODUCTION


3. The Submarginal Land


The services a definite piece of land can render in a definite period of time are limited. If they were unlimited, men would not consider land a factor of production and an economic good. However, the quantity of soil available is so vast, nature is so prodigal, that land is still abundant. Therefore, only the most productive pieces of land are utilized. There is land which people consider--either with regard to its physical productivity or with regard to its location--as too poor to be worth cultivating. Consequently the marginal soil, i.e., the poorest soil cultivated, yields no rent in the Ricardian sense.[7] Submarginal land would be considered entirely worthless if one were not to appraise it positively in anticipation of its being utilized in later days.[8]

The fact that the market economy does not have a more ample supply of agricultural products is caused by the scarcity of capital [p. 641] and labor, not by a scarcity of cultivable land. An increase in the surface of land available would--other things being equal--increase the supply of cereals and meat only if the additional land's fertility exceeded that of the marginal land already previously cultivated. On the other hand, the supply of agricultural products would be increased by any increase in the amount of labor and capital available, provided the consumers do not consider another employment of the additional amount of capital and labor more appropriate to fill their most urgent wants. [9]

The useful mineral substances contained in the soil are limited in quantity. It is true that some of them are the outgrowth of natural processes which are still going on and increasing the existing deposits. However, the slowness and length of these processes makes them insignificant for human action. Man must take into account that the available deposits of these minerals are limited. Every single mine or oil source is exhaustible; many of them are already exhausted. We may hope that new deposits will be discovered and that technological procedures will be invented which will make it possible to utilize deposits which today cannot be exploited at all or only at unreasonable costs. We may also assume that the further progress of technological knowledge will enable later generations to utilize substances which cannot be utilized today. But all these things do not matter for the present-day conduct of mining and oil drilling. The deposits of mineral substances and their exploitation are not characterized by features which would give a particular mark to human action dealing with them. For catallactics the distinction between soil used in agriculture and that used in mining is merely a distinction of data.

Although the available quantities of these mineral substances are limited, and although we may academically concern ourselves with the possibility that they will be entirely exhausted one day, acting men do not consider these deposits rigidly limited. Their activities take into account the fact that definite mines and wells will become exhausted, but they do not pay heed to the fact that at an unknown later date all the deposits of certain minerals may come to an end. For to present-day action the supply of these substances appears to be so abundant that one does not venture to exploit all their deposits to the full extent which the state of technological knowledge permits. The mines are utilized only as far as there is no more urgent employment available for the required quantities of capital and labor. There are therefore submarginal deposits that are not utilized at all. [p. 642]

In every mine operated the extent of the production is determined by the relation between the prices of the products and those of the required nonspecific factors of production.

-------------

[7] There are areas in which practically every corner is cultivated or otherwise utilized. But this is the outcome of institutional conditions barring the inhabitants of these regions from access to more fertile unused soil.

[8] The appraisal of a piece of soil must not be confused with the appriasal of the improvements, i.e., the irremovable and inconvertible results of the investment of capital and labor that facilitate its utilization and raise future outputs per unit and future inputs.

[9] These observations, of course, refer only to conditions in which there are no institutional barriers to the mobility of capital and labor.

Previous Page * Next Page

Table of Contents