Hamish McRae refers to the persistence of the North-South economic divide and questions the wisdom of taking money from the South and giving it to the North (Independent, 2 May). The difference in productivity between north and south is an example of the principle described by David Ricardo in the nineteenth century. Ricardo observed that farmers could grow more corn in some fields than in others, the difference between the yield from a particular field and that from the worst field in use (the "marginal field") giving rise to a set of land rental values. The principle applies to all commercial activity. Any street busker knows that he needs to set up pitch in a busy place. Productivity in the north is inevitably lower than in the more favourably located regions closer to centres of population. This is due to many factors, the most important of which are transport and energy costs. The difference is apparent in rents across the country. The high rental values in London and ...
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