Capital III, Chapter 44 - Part 1

Differential Rent Also on the Worst Cultivated Soil 

There are a number of ways that Differential Rent may arise on even the worst soil.

If demand is sufficiently high, the required supply may only be possible by additional investment of capital. That would be the case if there were no additional areas of land that could be cultivated, for example. The excess of demand over supply pushes the market price higher, say from £3 to £3.50 per kilo. It might be possible to obtain the additional supply by bringing into cultivation a new more inferior soil type A-1, but its price of production may be £4 per kilo. Alternatively, additional investments in land type A might produce the required output, but if the marginal productivity of capital is falling, the price of production may again be £4 per kilo.

Provided land type B can, therefore, produce the required additional output (its assumed that C-D cannot produce any more here) at a price of production of less than £4, then it will be profitable to do so.

If land type B then receives this additional investment, and so produces the required output, with a price of production of £3.50, this will become the new regulating price. But, land type A will still be producing its output with an individual price of production of £3 per quarter, and so will itself now make a surplus profit of £0.50 per kilo, which will now form rent.

Land type B only has a price of production of £3.50 for its marginal production. All of its previous production has been produced at a lower cost, and so its surplus profit, as well as the surplus profit made on C and D rises.

“As soon as differential rent II comes into force through successive investments of capital, the limits of the rising price of production may be regulated by better soil; and the worst soil, the basis of differential rent I, may also yield rent. This, even with a single differential rent, all cultivated land would yield rent. ” (p 739)

Marx provides the following two tables.

Table 1.

Type of Soil	Ha.	Price of Production £	Output Kilos	Selling Price £	Proceeds £	Grain- Rent Kilos	Money- Rent £
A	1.00	3.00	1.00	3.00	3.00	0	0
B	1.00	6.00	3.50	3.00	10.50	1.50	4.50
C	1.00	6.00	5.50	3.00	16.50	3.50	10.50
D	1.00	6.00	7.50	3.00	22.50	5.50	16.50
Total	4.00	21.00	17.50		52.50	10.50	31.50

Table 2.

Type of Soil	Ha.	Price Of Production £	Output Kilos	Selling Price £	Proceeds £	Grain- Rent Kilos	Money- Rent £
A	1.00	3.00	1.00	3.50	3.50	0.14	0.50
B	1.00	9.50	4.50	3.50	15.75	1.79	6.25
C	1.00	6.00	5.50	3.50	19.25	3.79	13.25
D	1.00	6.00	7.50	3.50	26.25	5.79	20.25
Total	4.00	24.50	18.50		64.75	11.50	40.25

But Engels points out that this is not quite correct.

“This, again, is not quite correctly calculated. First of all, the cost of the 4½ qrs for farmer B is, in the first place, £9½: in price of production and, secondly, £4½ in rent, i.e., a total of £14; average per quarter = £3½. This average price of his total production thus becomes the regulating market-price. Thus, the rent on A would amount to £1/9 instead of £½, and that on B would remain £4½ as heretofore; 4½ qrs at £3½ = £14 and, if we deduct £9½ in price of production, £4½ remain for surplus-profit. We see, then, that in spite of the required change in numerical values this illustration shows how, by means of differential rent II, better soil, already yielding rent, may regulate the price and thus transform all soil, even hitherto rentless, into rent-bearing soil.” (p 740)

Engels, in turn, is not quite right here. If B's total cost of production is £14, for 4.5 kilos, the average cost per kilo is £3.11 not £3.50, and it is this average cost of £3.11, which then accordingly becomes the regulating price.

If we correct the table accordingly, we then have.

Table 3.

Type of Soil	Ha.	Price Of Production £	Output Kilos	Selling Price £	Proceeds £	Grain- Rent Kilos	Money- Rent £
A	1.00	3.00	1.00	3.11	3.11	0.04	0.11
B	1.00	9.50	4.50	3.11	14.00	1.45	4.50
C	1.00	6.00	5.50	3.11	17.11	3.57	11.11
D	1.00	6.00	7.50	3.11	23.33	5.57	17.33
Total	4.00	24.50	18.50		57.55	10.63	33.05

The consequence of the higher price of grain might be a general rise in wages, which in turn reduces the average rate of profit, which will have a feedback effect into these prices of production. However, this may not happen.

“The rate of profit may remain the same if wages do not rise — either because they are depressed to the physical minimum, i.e., below the normal value of labour-power; or because the other articles of consumption needed by the labourer and supplied by manufacture have become relatively cheaper; or because the working day has become longer or more intensive, so that the rate of profit in non-agricultural lines of production, which, however, regulates the agricultural profit, has remained the same or has risen; or, finally, because more constant and less variable capital is employed in agriculture, even though the amount of capital invested is the same.” (p 740-1)

The other way soil type A could become rent producing land is if the additional output could only be supplied by bringing into cultivation land type A-1, as even less fertile soil. If it cannot produce the required supply for less than £4 per kilo then this becomes the regulating price, and land type A produces rent of £1 per kilo. But, then land type A-1 has replaced land type A as the worst land. This is then a case of Differential Rent I rather than II.

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