Iftheaggregatesupplyoftenantlabortofarmingisupwardsloped,theincreasedfarmingintensitywillbidupthewagerate,makingthecurveWtinfigure7swingupward.Thepredictedresourcereallocationwilltherebybesomewhatdampened,butnotentirelycancelled.Totheextentthatthetenantsworkharderorforlongerhours,thetenants'inesfromfarmingwillriseattheexpenseofleisureandfort.Totheextentthatthelandowners'inesfromlandareconfinedstrictlyto
oftheannualyield,theirineswillfall.Totheextentthatresourcesaredirectedfromotherindustriestoagricultureasawhole,thetotalagriculturaloutputwillrise.[2]Butthediscrepanciesinthemarginalproductsofresourcesinthevarioussectorsimplyeconomicallyinefficientuseoftheexistingresourcesofthesociety.
[1].Notethataslongasthelawofdiminishingreturnstotenantlaborholds,rentalineforthelandownerundertheshareconstraintwillneverbeashighasitwasinitially.
[2].Thisimpliesthatthepricesoffarmproductswillfallrelativetothoseofothergoods,whichfurtherreducesthevalueofthemarginalproductsoftenantinputs.Thegeneralimplicationsofresourcereallocationremainunchanged,however.
C.FixedTotalorPercentageRentRestriction?AConfusionbetweenthe1949and1951Provisions
Beforeweproceedtotesttheimplicationofincreasedfarmingintensityinthenexttwochapters,itisessentialtopointoutthat,underthesharerestrictioninTaiwanfrom1949to1951,thereexistednolawprohibitingthelandownersfromreducinglandsizepertenantoracceptingmoretenantinputspetitivelyofferedbytenants.Accordingtoseveralwriters,however,therentalrestrictioninTaiwanwasafixedandnotapercentagerestriction,whichwouldmeanthatthelandowner'sincentiveforincreasingtenantinputsoverlandwaseliminated.[1]Thisconfusioninlawrequiresclarification.Tociteatypicalexample,letusturntoSidneyKlein:
Theincentivesamongtenantstoinvesttheirhard-earnedpreciousinesweregreat.…Undertherentreductionstatutes,theirrentwasfixedat37.5percentofthestandardorexpectedyieldandnottheactualyieldharvested,sothatwhentheysoldtheharvestabovethestandardyieldtheycouldkeepalltheproceedsforthemselves.[2]
Kleinisessentiallysayingthatthelandowner'srentalreceiptwasfixedaccordingtosomestandardafterthesharereduction,andthereforethetenant'sincentivewashighbecausehecouldkeeptheresidual.Butaswesawatthebeginningofthischapter,anyincreaseintenantinputwillnotpay,sincetheinitialrentalpercentageimpliesthatthemarginaltenantcostequalsthemarginalproductoftenantinput.Thus,ifrentwerereducedtoafixedtotal,thetenantwouldnotinvestmoreintheexistingfarm;andeventhoughheiswillingtomitmoreinputtoacquiretheleaseright,thelandownerwouldbeindifferenttoanyincrementalinput.Onlyiftherentalpercentageceilingissetlowerwillthetenantmitmoreinputsunderpetition,sinceitwillbetothelandowner'sinterestthathedoso.
Klein,likeseveralothers,confusestwodifferentlaws:(1)thenew1951RentReductionAct,versus(2)theenforcementof
at37.5percentwhichwascarriedoutinApril1949.Underthe1949provisions,theowner'ssharewasreducedto37.5percentoftheannualyield,notofastandardyield.
Beforeweturntothelawproper,letmequicklydismissKlein'sinterpretationbyreferringtothejudgmentofthelawmaker.Writingin1951andspeakingofthe37.5percentmaximumrentalshareregulationsof1949,ChengChenstated:
Theenforcementoftheprogramtookonlyaperiodofthreemonths,fromApriltoJune1949,whennewcontractsweresignedItwasalmostincrediblethattheprogramwassosmoothlyputintoexecution.…Themostimportantfactorwasthatriceproductionincreasedby20percentin1949paredwiththepreviousyear,therebyinmostcasespreventingthelandlordsfromsufferinggreatlossesastheyreceivedapproximatelythesimilaramountoffoodstuffsasrentasbefore.[3]
Furthermore,accordingtotheofficialreport,inaparisonofthefirstphaseofTaiwanlandreformwithasimilarreformmeasurewhichbeganearlierinafewprovincesinmainlandChina,itisdiscernedthatthebasicdifferenceliesinthepercentagerateofreduction:InmainlandChinaitwasa25percentreductionoftheoriginalcontractualrentrates;inTaiwantherentalmaximumwasaflat37.5percentoftheyield''actuallyharvested."[4]Also,theenforcementofthesharerestrictioninTaiwanwasconductedbyinspectingtheyieldatharvesttime.[5]Iftherentalrestrictionwereindeedonafixedandnotapercentagebasis,theyieldneednotbecheckedatall.
Letustracecarefullyhowthisrentalsharerestrictionhasbeenerroneouslyinterpretedasarentalrestrictionat37.5percentofafixedstandard.Turningtotheactualprovisionsof1949,wefind:
Beforethelandvalueisassessedaccordingtolaw,theleaseofallprivatefarmlandshallconformtotheorder…datedMarch29,1947,whichprovidesthattheamountoffarmrentshallnotexceed37.5percentofthetotalannualyieldofthemaincrops.Iftherentoriginallyagreedexceeds37.5percent,itshallbereducedto37.5percent;andifitislessthan37.5percent,itshallremainunchanged.
Themaincropsreferredtointheprecedingparagraphshallbechieflythecropscustomarilyacceptedaspaymentofrent.[6]