Capital III, Chapter 42 - Part 5

“If we take soil D in Table IVd, (Table 7 in Part 3, AB) we find that the price of production corresponding to the capital outlay here = £15, of which £12½ is invested capital. The money-rent = £15. In Table I, for the same soil D, the price of production was = £3, the invested capital = £2½, and the money-rent = £9; that is, the latter was three times the price of production and almost four times the capital. In Table IVd, the money-rent for D, £15, is exactly equal to the price of production and larger than the capital by only 1/5. Nevertheless, the money-rent per acre is ⅔ larger, namely, £15 instead of £9.” (p 698)

The variations in grain rent compared to money rent are due to the changes in the price of production.

“In Table I, the grain-rent of 3 qrs = ¾ of the total product of 4 qrs; in Table IVd it is 10 qrs, or one-half the total product (20 qrs) per acre of D. This shows that the money-value and grain value of the rent per acre may rise, although it constitutes a smaller aliquot part of the total yield and has fallen in proportion to the invested capital.” (p 698-9)

Because money-rent is equal to the grain rent multiplied by the price of production, just as revenue is equal to output multiplied by price of production, grain rent as a percentage of output, must be equal to money rent as a percentage of revenue.

“Now, the reason why in spite of the fall in price by £1½ per quarter, i.e., a fall of 50%, and in spite of the reduction in competing soil from 4 to 3 acres, the total money-rent remains the same and the total grain-rent is doubled, while, calculated per acre, both the grain-rent and money-rent rise, is that more quarters of surplus-product are produced. The price of grain falls by 50%, and the surplus-product increases by 100%. But in order to obtain this result, the total production under the conditions assumed by us must be trebled, and the investment of capital in the superior soils must be more than doubled. At what rate the latter must increase depends in the first place upon the distribution of additional capital investments among the better and best soils, always assuming that the productivity of the capital invested in each soil type increases proportionately to its magnitude.” (p 699)

There are a number of factors determining how much additional capital is required to produce the same money-rent. If the price of production falls, by a smaller amount, less additional capital is required. If land type A represents only a small proportion of total output, a smaller amount of capital is required to be invested on better lands, to increase output, so as to push land A out of production. So, less capital is required to make land type B, and its lower price of production, the regulator.

But, also if the absolute level of A is low, a smaller amount of capital invested elsewhere, will more easily replace this output. Similarly, how much additional capital is required, given constant marginal productivity of capital, will depend on the relative level of output between land A and other types of land.

“If the capital eliminated from A had been = £5, the tables to be compared for this case would be tables II and Ivd (Tables 2 and 7, AB). The total product would have increased from 20 to 30 qrs. The money-rent would be only half as large, or £48 instead of £36; the grain-rent would be the same, namely = 12 qrs.” (p 699) 

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 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

“If a total product of 44 qrs = £66 could be produced upon D with a capital = £27½ — corresponding to the old rate for D, 4 qrs per £2½ capital — then the total rental would once more reach the level attained in Table II, and the table would appear as follows:” (p 699)

Type of Soil	Capital £	Output Kilos	Grain-Rent Kilos	Money-Rent £
B	5.00	4.00	0	0
C	5.00	6.00	2.00	3.00
D	27.50	44.00	22.00	33.00
Total	37.50	54.00	24.00	36.00

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%

“Hence, if the price falls — while productivity remains the same — as a result of the investment of additional money-capital in the better soils which yield rent, that is, all soils better than A, then the total capital has a tendency not to increase at the same rate as production and grain-rent; thus the increase in grain-rent may compensate for the loss in money-rent due to the falling price. The same law also manifests itself in that the invested capital must be proportionately larger as more is invested in C than D, i.e., in soils yielding less rent rather than in soils yielding more rent. The point is simply this: in order that the money-rent may remain the same or rise, a definite additional quantity of surplus-product must be produced, and the greater the fertility of the soils yielding surplus-product, the less capital this requires.” (p 700)

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