Tuesday 5 July 2016

Capital III, Chapter 39 - Part 4

Marx gives an example with four types of land, A-D, where A is the least fertile, producing no rent. Marx's table gives figures for money in shillings, and for weight in fractions of a quarter. I have converted fractions to decimals, and denominated prices as Pounds rather than shillings, because it makes further calculation and comprehension easier. One shilling equals £0.05. I am also denominating weight in Kilos rather than Quarters.

Type of Soil
Product
Capital Advanced
£'s
Profit
Rent
Kilos
£'s
Kilos
£'s
Kilos
£'s
A
B
C
D
1.00
2.00
3.00
4.00
60.00
120.00
180.00
240.00
50.00
50.00
50.00
50.00
0.167
1.167
2.167
3.167
10.00
70.00
130.00
190.00

1.00
2.00
3.00

60.00
120.00
180.00
Total
10.00
600.00
200.00
6.667
400.00
6 .00
360.00

The price of production, i.e. the cost price plus average profit, for wheat produced on land type A, is £60 per kilo. This is the general price of production, which regulates the market price for wheat. The production from this land is required to meet the needs of demand for wheat in the market.

Marx argues that unless the capital employed on this land obtains the average profit, it would not be employed. So, the assumption is that the capital so employed obtains the average profit.

I'm not actually sure this argument holds. Its true that in examining the formation of a general rate of profit, the assumption is that capital will move from where the rate of profit is below the average to where it is above the average, and its by this process that an average rate of profit is continuously in the process of being determined. But, even here, no such average rate of profit actually exists for each industry, because not only does it continually change, but the existence of various frictions prevents capital from moving from one sphere to another. Marx has already referred to some of those frictions in his earlier chapter in relation to the small farmers. Basically, they are more or less happy to obtain any profit at all, i.e. to simply make more than they would as agricultural wage labourers, and sometimes they do not even achieve that.

More significantly, within each industry, there are a range of firms operating at levels of efficiency at, above or below the average, and which, therefore obtain rates of profit at, above or below the average. The total supply of the industry is comprised of the individual supply of these different capitals operating at these different levels of efficiency, and obtaining different rates of profit as a result. It is not clear to me, therefore, why this should be any different in agriculture.

In other words, there seems to be no reason why a portion of the total agricultural supply should not come from farms operating on less fertile land, and whose rate of profit is actually below the average rate of profit, just as in industry, some firms continue to operate despite obtaining below average rates of profit. All that is required is that the individual capital cannot easily be reallocated to some alternative, higher profit sphere. In fact, for the reasons Marx himself outlined earlier, this is more likely to be the case in agriculture, with small capitalist, and particularly peasant farmers, than it is in manufacturing industry.

At some future point, I will set out my own theory of rent dealing with these issues, but for now I proceed on the basis of Marx's theory and analysis.

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