## Saturday, 30 July 2016

### Capital III, Chapter 42 - Part 3

If land type A is pushed out of production, so that land type B has become the regulator of the price of production, it no longer produces rent. With the lower price of production, there is less money rent for any given amount of grain rent. The only way that money rent levels can be increased to the levels originally seen in Table 1, is by raising the amount of surplus profit, which requires additional investment in rent producing land. How much additional investment is required depends on which land it is invested in.

To bring the level of rent up to that in Table 1. £6 of additional surplus product is required, or 4 Kilos at £1.50 per Kilo. £5 invested in land type C produces 2 Kilos, whereas £5 invested in D produces the 4 Kilos required.

Both of these alternatives are shown in the following tables, with Table 1 showing the initial position.

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 6.

 Type of soil Ha. Capital £ Profit £ Price of Prod. £ Output Kilos Selling Price £ Proceeds £ Rent Rate of Surplus Profit Kilos £ B 1 5.00 1.00 6.00 4 1.50 6.00 0 0 0% C 1 15.00 3.00 18.00 18 1.50 27.00 6 9.00 60% D 1 7.50 1.50 9.00 12 1.50 18.00 6 9.00 120% Total 3 27.50 5.50 33.00 34 51.00 12 18.00

Shows the total rent produced at £18, the same as in Table 1, but the total capital invested is now £27.50, as opposed to £10. In order to increase the surplus profit to produce the rent of £18, £15 of capital has to be invested in land type C.

Table 7.

 Type of soil Ha. Capital £ Profit £ Price of Prod. £ Output Kilos Selling Price £ Proceeds £ Rent Rate of Surplus Profit Kilos £ 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 12.50 2.50 15.00 20 1.50 30.00 10 15.00 120% Total 3 22.50 4.50 27.00 30 45.00 12 18.00

Again shows the total rent produced being £18. Because the additional surplus profit is derived by additional investment in the more fertile land type D, less additional investment is required. Total investment now only rises to £22.50. Only £5 is invested in land type C the same as in land B. Investment in land type D rises to £12.50, which now produces the required additional surplus product, and surplus profit.

The money rent is now £18, the same as in Table 1, which is half that of the rent seen in Table 2, where either the amount of land in cultivation is doubled, or where the amount of capital invested per Hectare doubles, with a constant marginal productivity of capital. Table 2 is reproduced below.

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 = 5.00 1.00 6.00 2 3.00 6.00 0 0 0 B 1 2.50 + 2.50 = 5.00 1.00 6.00 4 3.00 2.00 2 6.00 120% C 1 2.50 + 2.50 = 5.00 1.00 6.00 6 3.00 18.00 4 12.00 240% D 1 2.50 + 2.50 = 5.00 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%

The situation in Tables 6 and 7 compared with Table 1 shows that the price of production has been halved from £3 per Kilo to £1.50 per Kilo, and so the money rent of £18 means the grain rent has doubled from 6 Kilos to 12 Kilos. The grain rent is now the same as in Table 2, but similarly, because the price of grain has been halved, this represents only half the amount of money rent.

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

Land Type A

 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 6 0 0 0 0 0 0 0 0 0 0 Table 7 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 6 1 5.00 1.00 6.00 4 1.50 6.00 0 0 0 Table 7 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 1 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 6.00 240% Table 6 1 15.00 3.00 18.00 18 1.50 27.00 6 9.00 60% Table 7 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 6 1 7.50 1.50 9.00 12 1.50 18.00 6 9.00 120% Table 7 1 12.50 2.50 15.00 20 1.50 30.00 10 15.00 120%

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 6 4 27.50 5.50 33.00 34 1.50 51.00 12 18.00 65.45% Table 7 4 22.50 4.50 27.00 30 1.50 45.00 12 18.00 80%