## Sunday, 31 July 2016

### Capital III, Chapter 42 - Part 4

The rate of rent is similar to the rate of interest. It is the amount of rent as a percentage of the advanced capital. In addition to the rate of rent, the other measure of rent is the rent per hectare. The following tables summarise the rate of rent, and the rent per hectare for each type of land, for each of the different scenarios described in Parts 1-3.

Each table is represented by its equivalent, designated with an a).

Table 1a.

 Type of soil Ha. Capital £ Output Kilos Selling Price £ Proceeds £'s Profit Rent Rent Per Ha. Rate of Rent % £'s Kilos A 1 2.50 1 3.00 3.00 0.50 0 0 0 0 B 1 2.50 2 3.00 6.00 3.50 3.00 3.00 1 120 C 1 2.50 3 3.00 9.00 6.50 6.00 6.00 2 240 D 1 2.50 4 3.00 12.00 9.50 9.00 9.00 3 360 Total 4 10.00 10 3.00 30.00 20.00 18.00 4.50 1.50 180

Consideration of this table shows how the total rent might rise, whilst the rate of rent and rent per hectare might fall. For example, if more of land type B were brought into cultivation, the total rent would rise, but because the rent per hectare and rate of rent for this type of land is below the average, it would act to lower that average figure. That is only a similar effect as if more land were brought into cultivation that produced no rent.

Table 2a.

 Type of soil Ha. Capital £ Output Kilos Selling Price £ Proceeds £'s Profit Rent Rent Per Ha. Rate of Rent % £'s Kilos A 1 5.00 2 3.00 6.00 1.00 0 0 0 0 B 1 5.00 4 3.00 12.00 7.00 6.00 6.00 2.00 120 C 1 5.00 6 3.00 18.00 13.00 12.00 12.00 4.00 240 D 1 5.00 8 3.00 24.00 19.00 18.00 18.00 6.00 360 Total 4 20.00 20 3.00 60.00 40.00 36.00 9.00 3.00 180

This table shows the different effect of adding equal amounts of additional capital to existing land under cultivation, with constant marginal productivity of capital. The output on each land type doubles, and so for each rent producing land, the amount of rent doubles. The consequence is that the rent per hectare doubles, because only the same area is under cultivation, but the rate of rent remains constant, because although the rent has doubled, the capital employed has also doubled.

Table 2a(i) shows the corresponding effect where the amount of capital per hectare advanced remains £2.50, but double the area is cultivated in each land type.

Table 2a(i).

 Type of soil Ha. Capital £ Output Kilos Selling Price £ Proceeds £'s Profit Rent Rent Per Ha. Rate of Rent % £'s Kilos A 2 5.00 2 3.00 6.00 1.00 0 0 0 0 B 2 5.00 4 3.00 12.00 7.00 6.00 3.00 1.00 120 C 2 5.00 6 3.00 18.00 13.00 12.00 6.00 2.00 240 D 2 5.00 8 3.00 24.00 19.00 18.00 9.00 3.00 360 Total 8 20.00 20 3.00 60.00 40.00 36.00 4.50 1.50 180

Here, the rate of rent remains constant, because although the same amount of capital per hectare is invested, twice the number of hectares are cultivated, so double the amount of capital is invested. As with 2a, the amount of rent doubles, but with double the capital invested, that means the rate of rent remains constant relative to 1a. But, now, because double the amount of land is cultivated in each category, the rent per hectare also remains constant relative to 1a.

From the perspective of the landlord, therefore, an increase in the intensity of agriculture is always advantageous, because it increases the rent per hectare, whereas a more extensive agriculture may increase the total rent without any increase in the rent per hectare. The same is true with other more intensive forms of land use, which is why landowners are always keen to encourage more intensive house building, particularly on brownfield sites.

Table 3a.

 Type of soil Ha. Capital £ Output Kilos Selling Price £ Proceeds £'s Profit Rent Rent Per Ha. Rate of Rent % £'s Kilos B 1 5.00 4 1.50 6.00 1.00 0 0 0 0 C 1 5.00 6 1.50 9.00 4.00 3.00 3.00 2.00 60 D 1 5.00 8 1.50 12.00 7.00 6.00 6.00 4.00 120 Total 3 15.00 18 1.50 27.00 12.00 9.00 3.00 2.00 60

This might seem to contradict the previous statement that a more intensive land use is advantageous to the landowner. But, that is only the case here, because its assumed that the total output of 18 kilos is sufficient to meet demand, as opposed to the 24 kilos of output assumed in relation to Table 2. Its only on that basis that the production from land type A, drops out of cultivation, so that the regulating price of production falls from £3 per kilo to £1.50 per kilo, with a consequent reduction in rents on each type of land.

In other words, the fall in the mass of rent, and consequent drop in the rent per hectare and rate of rent here is not a consequence of more intensive cultivation, but of an increase in supply from the more fertile soils relative to demand. Had demand remained at 24 kilos, as in Table 2, then land type A output would have still been needed, the regulating price of production would have remained at £3 per kilo. In fact, its likely that the consequence of a drop in the regulating price of production from £3 per kilo to £1.50 per kilo, with a consequent effect on the market price, would cause demand to rise.

But, as Marx points out, in his critique of Ricardo, it is not necessary for a rise in demand to cause a rise in market prices, for capitalist farmers to increase investment, as indicated above. The general tendency of capital is to accumulate. Each farmer will seek to accumulate capital, because only by doing so will they increase the mass of profit they can claim, and only by increasing the mass of their capital, will they be able to obtain a greater share of the market. Supply, reflecting an increased mass of capital employed, may increase, therefore, whether market prices are rising, remaining constant or falling. This will simply also reflect a continual expansion of the size of the market, as the mass of demand itself rises, along with increases in population and so on.

Table 4a.

 Type of soil Ha. Capital £ Output Kilos Selling Price £ Proceeds £'s Profit Rent Rent Per Ha. Rate of Rent % £'s Kilos B 1 5.00 4 1.50 6.00 1.00 0 0 0 0 C 1 7.50 9 1.50 13.50 6.00 4.50 4.50 3.00 60 D 1 5.00 8 1.50 12.00 7.00 6.00 6.00 4.00 120 Total 3 19.50 21 1.50 31.50 14.00 10.50 3.50 2.33 54.85

In contrast to the situation in 1a, where it was indicated that an increase in cultivation of land that paid only the average amount of rent per hectare could result in an increase in the total amount of rent, but a fall in the average rent per hectare, here land C does pay the average rent per hectare, and an increase in its output results in an increase in the total rent, and an increase in the rent per hectare. But, this is because this additional output is the result of more intensive farming, i.e. additional capital invested in land type C, rather than an increase in the amount of land type C brought into cultivation. For the same reason, the rate of rent in this case remains the same.

Table 5a.

 Type of soil Ha. Capital £ Output Kilos Selling Price £ Proceeds £'s Profit Rent Rent Per Ha. Rate of Rent % £'s Kilos B 1 5.00 4 1.50 6.00 1.00 0 0 0 0 C 1 5.00 6 1.50 9.00 4.00 3.00 3.00 2.00 60 D 1 7.50 12 1.50 18.00 10.50 9.00 9.00 6.00 120 Total 3 19.50 22 1.50 33.00 15.50 12.00 4.00 2.66 61.54

Because the additional investment of capital occurs here on the most fertile land, there is a correspondingly greater increase in the mass of profit, and of rent. The land under cultivation does not change so the rent per hectare must rise. The rate of rent, for each type of land does not change, but the rate of rent for the whole capital employed rises from 54.85% to 61.54%, because more capital is now employed on land type C, which has the highest rate of rent, compared to the other types of land.

Table 6a.

 Type of soil Ha. Capital £ Output Kilos Selling Price £ Proceeds £'s Profit Rent Rent Per Ha. Rate of Rent % £'s Kilos B 1 5.00 4 1.50 6.00 1.00 0 0 0 0 C 1 15.00 18 1.50 27.00 12.00 9.00 9.00 6.00 60 D 1 7.50 12 1.50 18.00 10.50 9.00 9.00 6.00 120 Total 3 27.50 34 1.50 51.00 23.50 18.00 6.00 4.00 65.45

As with Table 5a, the additional investment in the higher fertility land results in a rise in the rent per hectare, and in the rate of rent. However, the proportionate rise in the rate of rent is lower, because there is a much bigger rise in the investment in land type C, trebled from £5 to £15, than on the most fertile soil, than on land type D, which rises only by 50% from £5 to £7.50.

Table 7a.

 Type of soil Ha. Capital £ Output Kilos Selling Price £ Proceeds £'s Profit Rent Rent Per Ha. Rate of Rent % £'s Kilos B 1 5.00 4 1.50 6.00 1.00 0 0 0 0 C 1 5.00 6 1.50 9.00 4.00 3.00 3.00 6.00 60 D 1 12.50 20 1.50 30.00 17.50 15.00 15.00 6.00 120 Total 3 22.50 30 1.50 45.00 22.50 18.00 6.00 4.00 80.00

Here more capital is employed on the most fertile soil than on all other types of land combined. Although, the total output and so revenue declines, the total amount of profit produced falls only marginally, whilst because the amount of surplus profit produced on land type C rises significantly, as a result of the additional investment, the total rent on all land remains constant. The amount of land under cultivation remains constant, and so with the same amount of rent, the rent per hectare remains constant at £6. However, this rent is produced by a small mass of capital employed, because the output, revenue and profits are produced from the more fertile land. As a result, the rate of rent rises to 80%, reflecting the production of this constant mass of rent, by a smaller mass of capital employed.