[Letter] Nov.22,1888,Smith College [to F.H. Giddings]

Nov. 22, 1888, Smith College.

Dear Friend,
        Et tu Brute! Well
I give up. It looks as if
the state would have my
home stead at a rate that
ought to make the state
happy. On the other hand
my Vermont relatives would
by the same means be
lifted to comfort if not to
affluence. Shall we begin at
the beginning or simply have
a little desultory conversation?
I think the latter plan will be
better for tonight, as I have
been doing quite a little
work, for me. The Minnesota
law allows to owners who
lose land by defective titles
an amount of damage from
warrantors equal to the purchase
price and interest to time of
loss. The Massachusetts
law give them an indemnity
equal to the existing value
of the land. Which plan
should the state adopt in
indemnifying owners of land
that it takes from them?
The Mass. plan could be
the cheaper for the state I
suppose. In fortunate
localities land has advanced
faster than compound
interest; in the country as
a whole I suppose it has
hardly kept up with full
interest. The question in
other respects is whether
the state shall equalize the
gains of different owners of
land. There seems to me
to be an element in the
relation between the state
and its citizens that makes
it more equitable to pursue
the Massachusetts plan
and the land at its
valuation. The state, having
the great fund of 'unearned
increment' to dispose of,
seeks to diffuse the
benefits of it as widely as
possible among its citizens
and at the same time
secure to itself a yeomanry
as a source of political
strength. It offers to
convey titles to its land
in fee simple and to
make sales free. By so
doing it attains its end.
The benefits of land
tenure have been widely
diffused and a yeomanry has
been created. The consideration
offered by the state was
titles in fee simple. The
definition of fee simple is
to be found in law and
precedent. If a right of
repurchase had been
reserved the title would not
have been in fee simple.
Is it not equitable to
adhere to this plan? I
do not quite see what
trouble can come from
the compounding of a
future rise. In so far
as I can see that is a
means of equalizing the
advantages of different
holders in the series of
owners. I have also observed
that it works in that way
in practice. For eighteen
years during which I have
known Minneapolis, men
have been eagerly buying land
and, allowing for loans, our
place in the series of purchases
is about as good as another.
Perhaps on general principles a
new place shows a greater relative
rise in its earlier years, and
so the early holders make
a little more than others.
The same is true of general
business in new places.
The fact of discounting
prospective prices seems to
me to act like the
discounting of any
anticipated gain in price,
as an equalizing agency.
Present owners pay
premium, buying now,
and get a premium when
they sell hereafter. I
suggest a study of
arithmetical figures,
which, however, I have
not elaborated to any
extent. I have tiled to
make it very favorable to
Mr. George.

     Yours Very Truly,
           J. B. Clark

Annual     Capitalized       Prospective              Present      Purchase price as
rent in    value of          increase of              worth of     based on rent,
ordinary   rent.             value per                ten years'   and on increase in
sense      Interest at 10%   annum as based on mere   rise 60%     value due to simple rent
                             rental
1880 $100   $1000              100                      600          1600
1890  200    2000              150                     1000          3000
1900  350    3500              233                     1398          4896
1910  583    5830                                                     etc.

 There are further elements in a complete representation
of the facts. The conditions above assumed are favorable to Mr. George,
Rate of increase of rent is made to decline, to accord with
general facts of new places. Gains from land owning become
thus larger at beginning. Equalizing rate of increase makes
profit equal in all parts of the series, does it not?
The point is simply this; compounding for future rise in value
does not destroy any one's profit. Aside from changes in
rate of rise one part of the series is as good as another to invest in.