Monday, 11 July 2016

Capital III, Chapter 39 - Part 10

The three different examples can be considered as three different scenarios in three different countries existing side by side, or as different conditions existing in the same country existing over a period of time.

Whatever the sequence, it will always appear, at any point in time, that the process is in a descending line from the most fertile land to the least, because in analysing the production of rent, it will always start from the land producing most rent and end with the land producing no rent.

Marx says that the price of production, on the worst land, is always the one that regulates the price of grain. For the reasons given previously, I question whether the price of production on the worst land is equal to the market price, because I see no reason why this land must produce the average profit, any more than the least efficient producers in any other industry determine the market price, as opposed to the average producer.

It is only when supply exceeds demand, Marx says, where this ceases to be the case.

“If B, C and D should produce more than demand requires, A would cease to be the regulator. Storch has this point hazily in mind when he adopts the best soil type as the regulating one. (H. Storch, Cours d'économie politique, ou Exposition des principes qui determinent la prospérité des nations, Tome II, St.-Petersbourg, 1815, pp. 78-79. — Ed.) In this manner, the American price of grain regulates the English price.” (p 658)

Differential rent arises because the fertility of the land varies, and the most fertile land is limited in supply. Where the same quantity of capital is employed on similar sizes of land, of different fertility, a greater product arises on the more fertile land, producing a surplus profit.

The differential rent can arise whether increasing demand is met by a progressive movement from the most fertile land, to the least fertile, or vice versa, or indeed whether increased demand is met by the introduction of new land, which is neither the least nor the most fertile.

Depending on whether there is a movement from the best to the worst land, or vice versa, prices will be either rising, falling, or will remain constant, as additional supply expands to meet demand. Where the demand is met by rising productivity, on existing land, prices will be falling.

Where prices are falling due to more fertile, but not the most fertile land, being introduced total production will rise, and total rent may also rise. In addition, some of the worst land, which did not produce rent, may now do so, but rent may also fall on some of the better land. If prices are falling, due to a general rise in productivity, rent on the better soils may remain the same or fall, whilst rent on the best soil rises.

If the quantity of output is given, the amount of differential rent on that output is determined by the price of the output, e.g. wheat. Similarly, if the price of wheat is given, the amount of rent is determined by the magnitude of products from one piece of land compared to another.

Where productivity causes this difference between the best and worst soils, to grow, rent increases and vice versa.

The assumption by West, Malthus and Ricardo, that the progression must always be from the best to worst land, is thereby disproved. As described earlier, this false position was not just behind Malthus' theory of population, it was also behind his and Ricardo's theories of the falling rate of profit.

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