When the cultivator has to give to his landlord half of the returns to each dose of capital and labor that he applies to the land,it will not be to his interest to apply any doses the total return to which is less than twice enough to reward him.If,then,he is free to cultivate as he chooses,he will cultivate far less intensively than on the English plan[fixed rent]；he will apply only so much capital and labor as will give him returns more than twice enough to repay himself:so that his landlord will get a smaller share even of those returns than he would have on the plan of a fixed payment.[4]
What is important here is that Marshall saw that according to this analysis the share tenant will be getting a residual return and the landlord will be getting a smaller rental income than under fixed rent.What is strange is that Marshall did not question why the landlord does not choose instead a fixed rent contract or selling his landownership to the tenant outright.[5] And what is natural is that Marshall was reluctant to let the tenant's residual earning remain unexplained:
If the tenant has no fixity of tenure,the landlord can deliberately and freely arrange the amount of capital and labor supplied by the tenant and the amount of capital supplied by himself to suit the exigencies of each special case.[6]
Marshall's view was that the metayer tenant"has practical fixity of tenure,"[7] and he referred to an article by Henry Higgs.[8] Higgs noted that the rental shares do differ,and that"rigid as metayer may at first sight seem to be,it is susceptible of considerable elasticity."[9] He nonetheless shared the"custom"idea with Sismondi and Mill.Higgs based his judgment on an empirical survey he had conducted in France,which unfortunately involved a sample of only a single farm.[10] It is the notion of"fixity of tenure,"perhaps,that led Marshall to mention the possibility of adjustments only in a footnote:
If the landlord controls the amount[of capital]freely and in his own interest,and can bargain with his tenant as to the amount of labor he applies,it can be proved geometrically that he will so adjust it as to force the tenant to cultivate the land just as intensively as he would under the English tenure[fixed rent]；and his share will then be the same as under it.[11]
Marshall provided no geometric proof,and it is an interesting conjecture whether he would have altered this footnote had he done so.This conjecture is interesting because the results he conceived are correct only in certain special cases,but as a matter of generality they are incorrect.They are incorrect because Marshall did not allow the rental percentage to vary.[12] Let me explain.Following Marshall,suppose the horizontal axis of figure 4 measures not only labor but nonland inputs in general（and assume away the associated substitution problem）.Suppose also the initial amount of nonland inputs is at tx.Given a certain（not any）rental percentage,and given that the landlord has been providing a sufficiently large amount of nonland"capital"input,then he may adjust the nonland inputs provided by either contracting party so that（a）the rental income under share rent is the same as under fixed rent and（b）the tenant's residual earning is exhausted-without varying the given rental percentage.As such,Marshall is correct.But suppose that the tenant is to pro-vide all the nonland inputs,or that the landlord has been provid-ing a part of the nonland inputs but the amount is too small;then,except by accident,the rental percentage must be varied（in addition to adjusting nonland inputs over land）to obtain the results Marshall visualized.To view the problem from another angle:given the ratio of nonland inputs to land that is consistent with wealth maximization,and given that the relative shares of nonland inputs contributed by the contracting parties are stipulated,there exists one and only one rental percentage which is consistent with equilibrium.[13] This difficult paragraph will become clearer when we come to the next section.
It should be noted that Marshall,like Smith,Jones,and Mill before him,attempted to"rank"various land tenure arrangements according to some notion of economic efficiency.[14] They did not tackle the issue by identifying a specific set of property right constraints subject to which several forms of land tenure arrangements may imply the same resource use.In their discussions of share tenancy,the freely alienable rights implicit in their analyses suggest that the constraint of private property rights was assumed.[15] But whereas Smith and Jones viewed a share lease,though wasteful,as transitional.Mill and Marshall laid the blame on"custom."Smith's prediction that fixed rents would replace share rents had failed to come true;and,as noted earlier,the terms of a share contract might yield the impression of being customarily fixed.
Among contemporary writers who performed similar"rank-ings"and also relied on the notion of"custom"are Rainer Schic-kele[16] and Earl O.Heady.[17] Schickele and Heady furthered the tax approach in their analyses of a share lease,but in a way somewhat different from Marshall.Using a diagram identical to figure 4,they concluded that equilibrium is at points,where the marginal tenant cost equals the marginal tenant receipt;that is,
=
（1-r）.The amount of tenant input committed will be t1.According to Schickele,if tenant input is increased from t1to t2,then area ABC represents a"present"from the tenant to the landowner[18]—since the added tenant receipt（area t1ACt2）is less than the added tenant cost（area t1ABt2）by this amount.Schickele did not,however,proceed with the paradox:if tenant input is at t1,then area MEA（tenant's residual earning）represents a"present"from the landowner to the tenant.It follows from this line of reasoning that if tenant input is somewhere between t1and t2,both parties will be offering"presents"to each other!
