## Friday, 29 July 2016

### Capital III, Chapter 42 - Part 2

In the next example, Marx looks at the situation where more capital is invested in land type C than in B and D.

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 18.00 180%

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 12.00 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%

Table 4.

 Type of soil Ha. Capital £ Profit £ Price of Prod. £ Output Kilos Selling Price £ 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 7.50 1.50 9.00 9 1.50 13.50 3 4.50 60% D 1 5.00 1.00 6.00 8 1.50 12.00 4 6.00 120% Total 3 17.50 3.50 21.00 21 31.50 7 10.50 60%

As a result of additional investment, the output of C rises from 6 to 9 Kilos, and its surplus product rises from 2 to 3 Kilos. Its money rent rises from £3 to £4.50, because the price of production is still determined by land type B.

In Table I, the rent on land C was £6. So, despite a trebling of the capital invested, it has fallen. Compared with Table 2, the rent has fallen even more from £12.

The total rental in grain of 7 Kilos has risen compared with Table 1, where it was 6 Kilos, but fallen compared with Table 2, where it was 12 Kilos. But, the money rent of £10.50 is less than the money rent in both Table 1 (£18) and Table 2 (£36), because of the fall in the price of production.

Had the additional £2.50 of investment been made on land B, it would have raised output, but not changed rent, because B sets the price of production, and the added investment would not have reduced it, or increased it, so no additional surplus profit would have been created. Marx does not deal with the fact that here supply has risen to 21 Kilos, where he assumed demand was only 18 Kilos at this price. Either he has to assume a further shift in demand, assume 3 Kilos of land type B's output is taken out, or else recognise supply exceeds demand, causing market prices to fall!

If the additional investment had been made on land type D, the price of production would not change, but the amount of surplus profit would rise, compared with Table 3.

Table 5.

 Type of soil Ha. Capital £ Profit £ Price of Prod. £ Output Kilos Selling Price £ 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 7.50 1.50 9.00 12 1.50 18.00 6 9.00 120% Total 3 17.50 3.50 21.00 22 33.00 8 12.00

Total output here rises to 22 Kilos. As pointed out in relation to the previous example, Marx does not deal with the fact that he has previously assumed demand at this price to be only 18 Kilos. With an output of 22 Kilos, therefore, the output of land type B, of 4 Kilos, is not needed. That would mean that land type C would become the regulator of the production price, which would fall accordingly.

Either Marx had not recognised that, in formulating this example, or else he has to assume a further shift to the right of the demand curve so that demand at this price rises from 18 to 22 Kilos. Alternatively, the excess of supply over demand, by these 4 Kilos, would cause the market price to fall.

Depending upon elasticity of demand the required increase may be achieved with only a modest fall in price. In that case, producers on land B will make a profit, but it will below the average profit. Producers on the other lands will continue to make surplus profits, but less than before.

Of course, if demand did not increase, and land type B went out of production, which is the assumption Marx makes in requiring it to make average profits, land type C would become the market regulator, so that the price of production fell. But, the price of production would be falling here, thereby causing demand to rise, at the same time that supply was contracting, as the supply of 4 Kilos from land B was taken out.

Total output in Table 4, compared to Table 1, rises from 10 Kilos to 22 Kilos, although the capital invested only rises from £10 to £17.50, and only 3 Hectares are cultivated rather than 4.

Compared with Table 2, the output is greater by 2 Kilos.

The rent in grain is now double on land D what it was in Table 1 – 6 Kilos rather than 3 Kilos. The money rent stays the same at £9. Compared with Table 2, the grain rent on D remains 6 Kilos, but with the lower price of production, the money rent halves from £18 to £9.

The following tables summarise the differences for each land type of these different scenarios.

Land Type A.

Table 2a, is the situation where double the amount of land is cultivated in each land type.

 Example Ha. Capital £ Profit £ Price of Prod. £ Output Kilos Selling Price £ Proceeds £ Rent Rate of Surplus Profit Kilos £ Table 1 1 2.50 0.50 3.00 1 3.00 3.00 0 0 0 Table 2 1 5.00 1.00 6.00 2 3.00 6.00 0 0 0 Table 2a 2 5.00 1.00 6.00 2 3.00 6.00 0 0 0 Table 3 0 0 0 0 0 0 0 0 0 0 Table 4 0 0 0 0 0 0 0 0 0 0 Table 5 0 0 0 0 0 0 0 0 0 0

Land Type B

 Example Ha. Capital £ Profit £ Price of Prod. £ Output Kilos Selling Price £ Proceeds £ Rent Rate of Surplus Profit Kilos £ Table 1 1 2.50 0.50 3.00 2 3.00 6.00 1 3.00 120% Table 2 1 5.00 1.00 6.00 4 3.00 12.00 2 6.00 120% Table 2a 2 5.00 1.00 6.00 4 3.00 12.00 2 6.00 120% Table 3 1 5.00 1.00 6.00 4 1.50 6.00 0 0 0 Table 4 1 5.00 1.00 6.00 4 1.50 6.00 0 0 0 Table 5 1 5.00 1.00 6.00 4 1.50 6.00 0 0 0

Land Type C

 Example Ha. Capital £ Profit £ Price of Prod. £ Output Kilos Selling Price £ Proceeds £ Rent Rate of Surplus Profit Kilos £ Table 1 1 2.50 0.50 3.00 3 3.00 9.00 2 6.00 240% Table 2 2 5.00 1.00 6.00 6 3.00 18.00 4 12.00 240% Table 2a 2 5.00 1.00 6.00 6 3.00 18.00 4 12.00 240% Table 3 1 5.00 1.00 6.00 6 1.50 9.00 2 3.00 60% Table 4 1 7.50 1.50 9.00 9 1.50 13.50 3 4.50 60% Table 5 1 5.00 1.00 6.00 6 1.50 9.00 2 3.00 60%

Land Type D

 Example Ha. Capital £ Profit £ Price of Prod. £ Output Kilos Selling Price £ Proceeds £ Rent Rate of Surplus Profit Kilos £ Table 1 1 2.50 0.50 3.00 4 3.00 12.00 3 9.00 360% Table 2 1 5.00 1.00 6.00 8 3.00 24.00 6 18.00 360% Table 2a 2 5.00 1.00 6.00 8 3.00 24.00 6 18.00 360% Table 3 1 5.00 1.00 6.00 6 1.50 9.00 2 3.00 60% Table 4 1 5.00 1.00 6.00 8 1.50 12.00 4 6.00 120% Table 5 1 7.50 1.50 9.00 12 1.50 18.00 6 9.00 120%

Total Land

 Example Ha. Capital £ Profit £ Price of Prod. £ Output Kilos Selling Price £ Proceeds £ Rent Rate of Surplus Profit Kilos £ Table 1 4 10.00 2.00 12.00 10 3.00 30.00 6 18.00 180% Table 2 4 20.00 4.00 24.00 20 3.00 60.00 12 36.00 180% Table 2a 8 20.00 4.00 24.00 20 3.00 60.00 12 36.00 180% Table 3 3 15.00 3.00 18.00 18 1.50 27.00 6 9.00 60% Table 4 3 17.50 3.50 21.00 21 1.50 31.50 7 10.50 60% Table 5 3 17.50 3.50 21.00 22 1.50 33.00 8 12.00 68.6%