Saturday, 23 July 2016

Capital III, Chapter 40 - Part 6

Marx then describes three further potential cases.

Firstly, if additional capital is invested on any type of soil, but only produces the same rate of profit as capital invested on land type A, then no additional surplus profit is produced, and so no additional rent arises.

Secondly, if there is rising marginal productivity of capital, so that any additional investment results in larger rises in output, this will create additional surplus profits, provided the regulating price of production remains the same.

But, the regulating price of production, under such conditions, may change for various reasons, related to this additional production. The additional, lower cost production may push production, from land type A, out. So, the regulating price falls. But, this lower price of production of wheat may then cause the value of labour-power to fall. Wages drop and profits rise, causing the general rate of profit to rise and thereby impacting the price of production of wheat.

Similarly, if wheat enters as constant capital into the costs of producers such as bakers, brewers and cotton spinners, this lower cost will reduce the value of the advanced capital, and thereby bring about a rise in the general rate of profit.

“If the increased productivity of the additional capital had taken place upon the best soils C and D, it would depend entirely upon the degree of increased productivity and the amount of additional new capital to what extent the formation of increased surplus-profit (and thus increased rent) would be associated with the fall in prices and the rise in the rate of profit. The latter may also rise without a fall in wages, through a cheapening of the elements of constant capital.” (p 682)

Even with a falling marginal productivity of capital, additional investment, in the better land, that causes output to rise by a greater amount than would result from the worst land, can cause the price of production to fall. That would be the case where this additional, lower cost supply is sufficient to push the supply from land type A out.

“... then the regulating price of production falls and it will depend upon the relation between the reduced price of 1 qr and the increased number of quarters forming surplus-profit whether the surplus-profit expressed in money, and consequently the differential rent, rises or falls.” (p 682)

This situation, of capital being invested with falling marginal productivity is also compatible with a situation where four new independent capitals of £2.50 each are invested on land types that fall between A-D. So, these may produce returns of 1.5, 2.33, 2.66 and 3 Kilos respectively. Each of these capitals would then produce surplus profit, although in each case, that surplus profit would be less than that produced on the next more fertile soil.

Under Differential Rent I, if the price of production remains constant, and the differences in fertility between land types remains constant, the average rent per hectare and average rate of rent may increase, if the rent increases. That would be the case where, for example, the output from each type of land doubled.

“On the other hand, under the same conditions, the amount of rent calculated per acre may increase although the rate of rent, measured relative to invested capital, remains the same.” (p 683)

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