Fixed Rent Contracts in English Agriculture, 1750-1850: A Conjecture

This article conjectures a parsimonious explanation for the choice of fixed cash rent contracts in late eighteenth- and early nineteenth-century English agriculture. Tenant farmers, it is suggested, bore the brunt of the income risk because they were less risk averse than landowners. The latter's acute risk aversion may have been produced by acute loss aversion brought about by their substantial fixed liabilities, part of which arose from signalling status. Limited quantitative evidence that landlords gave their tenants a risk premium, in the form of a low rent, is presented. Landowners apparently did not make especially frequent use of the formal short-term credit market as an alternative means of smoothing income, perhaps because the transactions costs of doing so were non-trivial.