The process by which the landlord and tenant enter into a lease is not well understood.The price system does not function in the normal sense,for land is not necessarily rented to the tenant offering the highest rent payment.However,there is only a difference of modest degree in the role of price rationing in the share-rental market and in the cash-rental market.[30]
In the course of his analysis,Johnson had obtained-and abandoned-a condition which is quite sufficient to reveal the market terms of a share contract.Referring to the theoretical formulation,he wrote:
Is it likely that a tenant operating under these conditions will allocate his resources in exactly the same way that he would if paying a cash rent independent of the actual output?The answer is apparently in the negative.There is only one average rent per acre for which the resource allocations will be the same under a variable-share proportion and a fixed rent per acre.And there is no reason to believe that this particular rent would emerge under competitive conditions.[31]
Why not?As shown in the last chapter,the identity of the average rent under fixed and share contracts exists,in equilibirum,when rent per acre is at a maximum.This maximum rent per acre is unique because it is obtained when the marginal nonland cost equals the marginal product of nonland inputs.The associated land size per tenant,values of nonland inputs and rental percentage,will be the terms stipulated in the share contract.Thus,it is somewhat puzzling that Johnson also wrote:
With a short-term lease renters are obviously aware that landlords have the alternative of renting their land for a cash rent independent of current output.Consequently,the tenant must plan to produce an average output per acre that will provide a rental payment,if yields are average,equal to the possible cash rent……[32]
The apparent contradiction between this and the earlier quotation can perhaps be reconciled as follows:In rejecting the theoretical identity of the average rent under fixed and share contracts,Johnson was following a model in which this identity cannot be obtained.In accepting the identity,empirically his observation led him to search for another interpretation.As we saw when we discussed Marshall,the theoretical identity can be derived only if the rental percentage is treated as a variable.My own impression of Johnson's insightful work is that he maintains that although share rent is less productive than fixed rent according to a model with considerable limitations they may nonetheless be identical in practice.For this reason perhaps,he called for"an empirical verification……of[the effects of]share leases upon resource allocation."[33]
[1].At page proof,George J.Stigler informed me that Mill did recognize rent as a cost of production,whereas Marshall was reluctant.
[2].See Marshall,Principles of Economics（8th ed.,1920；London;Macmillan＆Co.,1956）,pp.534-37.
[3].Ibid.,bk.4,chap.3；and bk.6,chap.10,p.536.
[4].Ibid.,pp.535-36.
[5].Marshall was aware,like other writers before him,that fixed rents and owner cultivators existed together with metayers in Europe.Various estimates on the frequency of metayer farms differ greatly.
[6].Marshall,Principles of Economics,p.536.
[7].Ibid.
[8].Higgs,"'Metayage'in Western France,"The Economic Journal（March,1894）,pp.1-13.
[9].Ibid.,p.9 and n.1.
[10].See ibid.,pp.9-13.
[11].Marshall,Principles of Economics,p.536,n.2.
[12].Though Marshall was aware that the rental percentage was not the same everywhere（p.535,n.1）,he noted that for customary reasons variation of it"could seldom be done without an appearance of violence"（p.533）.No evidence of"violence"was offered.
The theoretical difficulty Marshall encountered as a result of not varying the rental percentage was made evident when he wrote（p.536,n.2）：
If[the landlord]cannot modify the amount[of capital],but still control the amount of the tenant's labour,then with certain shapes of the produce curve,the cultivation will be more intensive than it would be on the English plan[fixed rent]；but the landlord's share will be somewhat less.This paradoxical result has some scientific interest,but little practical importance.
[13].See chapter 2,and section C of this chapter.Note,however,that if several crops are grown,multiple rental percentages may exist in one share contract due to different factor intensities required for different crops.See chapter 4,section B.
[14].Marshall,Principles of Economics,bk.6,chap.10.
[15].Transferability of rights among individual owners implies exclusivity in use,at least to some degree.Transfers of resource rights in the marketplace are not confined to outright transfers,but also include various leasing arrangements.A legal restriction on one form or another of these transfers may impose a higher cost of transaction,but still may not constitute a set of constraints different enough to affect resource use significantly.That freely alienable rights existed for the French metayage is evident in Young,Travels,Maxwell edition,"Editor's Notes."
When N.Georgescu-Roegen analyzed share tenancy,he referred to it as a form of land tenure under"feudalism."But we have yet to identify the property right constraint defining"feudalism."Georgescu-Roegen also employed the tax-equivalent approach and reached the conclusion that sharecropping was inefficient.See his"Economic Theory and Agrarian Economics,"Oxford Economic Papers（February,1960）,pp.23-26.
[16].Rainer Schickele,"Effects of Tenure Systems on Agricultural Efficiency,"Journal of Farm Economics（February,1941）,pp.185-207.
[17].Earl O.Heady,"Economics of Farm Leasing Systems,"Journal of Farm Economics（August,1947）,pp.659-78.
[18].Schickele,"Effects of Tenure Systems,"p.193.
[19].Ibid.,p.195.
[20].Heady,"Farm Leasing Systems,"p.672.
[21].Ibid.,p.673.
[22].Charles Issawi,"Farm Output under Fixed Rents and Share Tenancy,"Land Economics（February,1957）,p.76.
[23].D.Gale Johnson,"Resource Allocation under Share Contracts,"Journal of Political Economy（April,1950）,pp.111-23.
