Capital III, Chapter 39 - Part 2

Marx now turns to his own theory of rent, and the errors of Ricardo and others. The main thing to bear in mind is that differential rent exists because the same amount of capital and labour, applied to equal sized pieces of land, produce different quantities of output. This differential rent exists whether the process involves increasingly inferior land being brought into cultivation, in addition to existing more fertile land, or vice versa, or indeed a combination of the two.

The theory of Differential Rent was actually developed by James Anderson, a practical Scottish farmer, who introduced it, only incidentally, in a polemical pamphlet he wrote in 1777, opposing the introduction of Corn Laws, which, at that time, were aimed at encouraging the importation of cheaper grain, as opposed to the later Corn Laws, which had the opposite intention. Anderson's ideas in regard to rent never obtained any attention at the time, because of being only incidental to his main aim, and because Smith's “Wealth of Nations” had only been published the year before, and attracted all the attention.

As with all of his work, Malthus simply plagiarised Anderson's work, but falsified it, in order to be able to turn it to his main purpose of acting as paid apologist for the landed aristocracy. Ricardo picked up the theory from Malthus, but arrived at the opposite practical conclusions, in respect of land ownership. Where Malthus wanted to keep food prices high so as to continue the provision of high rents for landowners, Ricardo wanted low food prices, in order to reduce the value of labour-power, and so boost profits, and low rents, because rent was a deduction from profit and thereby held back development of the productive forces, which was Ricardo's primary concern.

Ricardo and others assumed that the process must involve only increasingly less fertile land being brought into cultivation. The process, they assumed, was that as demand rises, so that the existing land cannot supply enough to meet it, market prices rise. As prices rise to a level where less fertile land can supply commodities at this price, and make the average profit, so this land will be brought into cultivation.

The most fertile land, still selling its output at this higher price would then make surplus profit, giving rise to differential rent. It is this assumption, of the need to bring into cultivation ever less fertile land that Malthus used to support his theory of population, and which is also behind Ricardo's theory of a falling rate of profit.

Marx shows that this is wrong. Firstly, there are many reasons why the land in cultivation may not be the most fertile, and indeed may be the least fertile. As demand increases, and more land is brought into cultivation, so this land may be more, not less fertile and productive. Secondly, in a global market, especially as transport costs fall, market prices will be based on global production. If commodities become available from other countries, where the land is more fertile, these may dictate market prices, which then fall so that land which previously produced rent can no longer do so.

Thirdly, the fertility of existing land in cultivation can change over time, as a result of developments in agriculture, as well as the continued cultivation of the land – and vice versa, land that was fertile may become less so, as a result of over farming. Anderson himself, in contradiction to Malthus, argued that the fertility of the land could be continuously improved, beyond what might be required to meet the needs of a rising population.

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