If demand is high enough, therefore, the market price may rise to £3.50, and it will still be profitable to increase supply by additional investment in some of land type A. This would then produce a surplus profit of £0.25 per kilo. But, also all of the other land of type A that does not receive additional investment will be producing still at £3 per kilo, giving a surplus profit of £0.50 per kilo. The surplus profit on all other land types would also, thereby, rise.
However, to the extent that there was still uncultivated land type A, there would be an incentive to bring it into cultivation at £3 per kilo, which would then remove the surplus profit. In other words, the situation could only exist temporarily until competition from the additionally cultivated land type A forced down market prices.
“Competition from new fields of A would hold the price of production at £3 until all land of type A, whose favourable location enables it to produce a quarter at less than £3¾, would be exhausted. This is then what we would assume, although the landlord, so long as an acre of land yields rent, will not let a tenant farmer have another acre rent-free.” (p 744)
Whether the landlord was able to extract a rent from land type A would then depend on timing. If prices remain at £3.50 for long enough so that surplus profits were being made and during this period, leases expired, and now rents were fixed, the landlord could fix them on this basis.
The price of production always rises, where additional capital has to be invested as a replacement for the free gifts of nature. The gifts of nature have no value, and so pass none into the products they help to create. If that same effect can only be achieved by the expenditure of labour, this means the value of the product must have been increased by this amount.
“But if in the course of development, a larger output is demanded than that which can be supplied with the help of this natural power, i.e., if this additional output must be created without the help of this natural power, or by assisting it with human labour-power, then a new additional element enters into capital. A relatively larger investment of capital is thus required in order to secure the same output. All other circumstances remaining the same, a rise in the price of production takes place.” (p 745)
Land has no value. It is a free gift of nature. But, not all land is the same. One piece of land has fertile soil, another does not; one piece of land is well drained another is not; one piece of land is flat and easier to cultivate, another is not, and so on.
But, as production and science develops, these differences are not fixed for all time. Less fertile soil can be made fertile by chemical treatment; land can be drained or irrigated; machinery can be used to sculpture the topography, removing unevenness. All of these involve the expenditure of labour-time and the investment of capital, which thereby becomes incorporated in the land.
The land itself may have no value, but the capital expended on it, which thereby becomes incorporated in it, does. Rent may accrue on the land, but also interest may accrue on this capital value, incorporated in it.
“However, land yields rent after capital is invested not because capital is invested, but because the invested capital makes this land more productive than it formerly was. Assuming that all the land of a given country requires this investment of capital, every piece of land which has not received it must first pass through this stage, and the rent (interest yielded in the given case) borne by land already provided with investment of capital constitutes differential rent just as though it naturally possessed this advantage and the other land had first to acquire it artificially.
This rent too, which may be resolved into interest, becomes pure differential rent as soon as the invested capital is amortised. Otherwise, one and the same capital would have to exist twice as capital.” (p 746)
Opponents of Ricardo, and the Labour Theory of Value, Marx says, pointed out that here it was Nature rather than labour which determines value, “but at the same time they credit this determination to the location of the land, or — and to an even greater extent — the interest on capital put into the land during its cultivation.” (p 746)
But, the fact is that value is a function of labour productivity. A given amount of value can be represented in a large or a small quantity of products depending upon whether labour productivity is high or low. Whether it is high or low depends upon conditions under which it is employed.
Labour employed in conditions where nature provides various advantages will be more productive than where the labour is employed in conditions where nature does not provide those advantages. In a given period of time, the labour in both cases will produce the same amount of value. The difference is that in the former case this amount of value will be represented by a greater quantity of output.
“It is immaterial whether this productivity is due to Nature or to society. Only in the case when the productivity itself costs labour, and consequently capital, does it increase the price of production by a new element — which Nature by itself does not do.” (p 747)
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