## Differential Rent II. Third Case: Rising Price of Production

Marx had not provided examples in his manuscript to elaborate this third case of Differential Rent II, where the price of production is rising. All the examples, in this chapter, have, therefore, been provided by Engels.

[“A rising price of production presupposes that the productivity of the poorest quality land yielding no rent decreases. The assumed regulating price of production cannot rise above £3 per quarter unless the £2½ invested in soil A produce less than 1 qr, or the £5 — less than 2 qrs, or unless an even poorer soil than A has to be taken under cultivation.”] (p 710)

Engels describes a situation where there could be constant or rising marginal productivity of capital, but where the returns form the original investment are declining. The example he gives is of the diminution of the quality of the top soil, resulting from superficial ploughing. However, with additional investment into deeper ploughing, so that the subsoils are turned over, the fertility of the soil may be improved above its original condition.

An illustration is given in Table 12.

Table 12 (Table VII from Chapter 43)

 Typeof Soil Ha. Invested Capital£ Profit £ PriceofProd.£ OutputKilos SellingPrice£ Proceeds£ Grain-RentKilos Money-Rent£ RateofRent A 1 2.50 + 2.50 1.00 6.00 0.50 + 1.25 = 1.75 3.43 6.00 0 0 0% B 1 2.50 + 2.50 1.00 6.00 1.00 + 2.5 = 3.5 3.43 12.00 1.75 6.00 120% C 1 2.50 + 2.50 1.00 6.00 1.50 + 3.75 = 5.25 3 .43 18.00 3.50 12.00 240% D 1 2.50 + 2.50 1.00 6.00 2.00 + 5.00 = 7 3.43 24.00 5.25 18.00 360% 20.00 4.00 17.50 60.00 10.50 36.00 240%

The money rent and value of output are the same as in Table 2.

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%

As the price of production and quantity of output are inversely proportional, the rise in the former cancels out the effect of the fall in the latter.

Nothing changes if we assume that the marginal productivity of the additional investment is the same as the first investment rather than rising.

This is shown in Table 13 (Table VIII from Chapter 43)

Table 13

 Rent Typeof Soil Ha. Invested Capital£ Profit£ PriceofProd.£ OutputKilos SellingPrice£ Proceeds£ InGrainKilos InMoney£ Rate ofSurplus-Profit A 1 2.50 + 2.50 = 5.00 1.00 6.00 0.50 + 1.50 = 2.50 4.00 6.00 0 0 0% B 1 2.50 + 2.50 = 5.00 1.00 6.00 1.00 + 2.00 = 3.00 4.00 12.00 1.50 6.00 120% C 1 2.50 + 2.50 = 5.00 1.00 6.00 1.50 + 3.00 = 4.50 4.00 18.00 3.00 12.00 240% D 1 2.50 + 2.50 = 5.00 1.00 6.00 2.00 + 4.00 = 6.00 4.00 24.00 4.50 18.00 360% 4 20.00 4.00 15.00 60.00 9.00 36.00 240%
Again the rise in the price of production compensates for the lower productivity, so that the value of output and money rent are unchanged.

Table 14 (IX) shows the situation when the marginal productivity of the second investment falls, while the first investment remains constant.

Table 14

 Rent TypeofSoil Ha. InvestedCapital£ Profit£ PriceofProd. OutputKilos SellingPrice£ Proceeds£ InGrainKilos InMoney£ Rate ofRent A 1 2.50 + 2.50 = 5.00 1.00 6.00 1.00 + 0.50 = 1.50 4.00 6.00 0 0 0 B 1 2.50 + 2.50 = 5.00 1.00 6.00 2.00 + 1.00 = 3.00 4.00 12.00 1.50 6.00 120% C 1 2.50 + 2.50 = 5.00 1.00 6.00 3.00 + 1.50 = 4.50 4.00 18.00 3.00 12.00 240% D 1 2.50 + 2.50 = 5.00 1.00 6.00 4.00 + 2.00 = 6.00 4.00 24.00 4.50 18.00 360% 20.00 4.00 15.00 60.00 9.00 36.00 240%
As the product of the first investment is held constant, Differential Rent I is unaffected. Table 14 (IX) shows where the marginal productivity of the second investment falls by a half.

“Table IX is the same as Table VIII, except for the fact that the decrease in productivity in VIII occurs for the first, and in IX for the second investment of capital.” (p 712)

Table 15 (X) shows the same situation, but with the marginal productivity of the second investment falling by 0.75 rather than 0.50.

Table 15

 Rent TypeofSoil Ha. InvestedCapital£ Profit£ PriceofProd. OutputKilos SellingPrice£ Proceeds£ InGrainKilos InMoney£ Rate ofRent A 1 2.50 + 2.50 = 5.00 1.00 6.00 1.00 + 0.25 = 1.25 4.80 6.00 0 0 0% B 1 2.50 + 2.50 = 5.00 1.00 6.00 2.00 + 0.50 = 2.50 4.80 12.00 1.25 6.00 120% C 1 2.50 + 2.50 = 5.00 1.00 6.00 3.00 + 0.75 = 3.75 4.80 18.00 2.50 12.00 240% D 1 2.50 + 2.50 = 5.00 1.00 6.00 4.00 + 1.00 = 5.00 4.80 24.00 3.75 18.00 360% 20.00 4.00 24.00 12.50 60.00 7.50 36.00 240%
As can be seen, the money rent and rate of rent are the same as in Tables 2, 12 and 13.

That is because the quantity of output and selling price are inversely proportional, and the capital invested is the same.