Capital III, Chapter 42 - Part 1

Differential Rent II. Second Case: Falling Price of Production

In this chapter, Marx examines the various situations where additional capital is invested, but where the result is a falling price of production. This can only be because the additional investment increases supply sufficiently so that the output of land type A is no longer required. So that land type B or better becomes the regulator, or else that there is a rising marginal productivity of capital, so that any additional investment in A causes its price of production to fall.

Marx compares these situations to the original situation, and that where the amount of land cultivated doubled, or as was shown to be the same thing, where the amount of capital per hectare doubled, with a constant marginal rate of return on capital, as set out in Chapter 41. For ease of comparison, these two tables are reproduced here, against each new set of examples.

I. Productivity of the additional investment of capital remains the same.

In this case, further investment in land type A is excluded, because, with the marginal productivity of capital constant, any additional investment in A will have no effect on the price of production. The price of production here can only fall if additional capital is invested in land types B-D, so that supply increases enough to make the output of A no longer required.

Depending upon where the additional capital is employed, and the degree to which output expands, the new regulating price of production will be determined by B, C or D. In fact, on this basis, if all the investment occurred on D, so that its output sufficed to produce enough to meet demand, the basis of differential rent would disappear. Marx, however, does not deal with that potential result.

Table 1.

Type of soil	Ha.	Capital £	Profit £	Price of Prod. £	Output Kilos	Selling price £	Proceeds £	Rent		Rate of Surplus profit
								Kilos	£
A	1	2.50	0.50	3.00	1	3.00	3.00	0	0	0
B	1	2.50	0.50	3.00	2	3.00	6.00	1	3.00	120%
C	1	2.50	0.50	3.00	3	3.00	9.00	2	6.00	240%
D	1	2.50	0.50	3.00	4	3.00	12.00	3	9.00	360%
Total	4	10.00	2.00	12.00	10		30.00	6	18.00

Table 2.

Type of soil	Ha.	Capital £	Profit £	Price of Prod.	Output Kilos	Selling price £	Proceeds £	Rent		Surplus profit
								Kilos	£
A	1	2.50 + 2.50 = 5	1.00	6.00	2	3.00	6.00	0	0	0
B	1	2.50 + 2.50 = 5	1.00	6.00	4	3.00	2.00	2	6.00	120%
C	1	2.50 + 2.50 = 5	1.00	6.00	6	3.00	18.00	4	12.00	240%
D	1	2.50 + 2.50 = 5	1.00	6.00	8	3.00	24.00	6	18.00	360%
Total	4	20.00	4.00	24.00	20		60.00	12	36.00	180%

Its assumed here that the supply of 18 kilos is enough to meet demand, rather than 20, as was previously the case, i.e. the demand curve has shifted to the left. The 2 kilos produced by land type A (Table 2) is then no longer required. Because the price of production has fallen, and is now determined by land type B, the amount of of surplus profit and rent falls from £36 to £9. B now produces no surplus profit or rent.

Table 3

Type of soil	Ha.	Capital £	Profit £	Price of Prod.	Output Kilos	Selling price per Kilo    £	Proceeds £	Rent		Rate of Surplus Profit
								In Grain Kilos	In Money £
B	1	5.00	1.00	6.00	4	1.50	6.00	0	0	0%
C	1	5.00	1.00	6.00	6	1.50	9.00	2	3.00	60%
D	1	5.00	1.00	6.00	8	1.50	12.00	4	6.00	120%
Total	3	15.00	3.00	18.00	18		27.00	6	9.00	60%

Although the money rent has fallen to a quarter of its previous level, the rent in grain has only halved from 12 kilos to 6 kilos, reflecting the lower value of the grain. Total output has only fallen by 10% from 20 to 18 kilos. The surplus profit, measured against the capital now employed, has fallen from 180% to 60%.

If this is compared with Table 1, the rent in grain remains 6 Kilos, but it declines in money terms, because the price of grain falls. The differences in relation to B, C and D here are accountable for, in terms of differential rent 1, because the same amount of capital is invested in each type of land (£5), so any differences are due to the relative fertility of each type of land, not different quantities of capital.

A different situation exists where different types of land have different amounts of capital invested on them.

Back To Chapter 41

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