## Wednesday, 24 August 2016

### Capital III, Chapter 45 - Part 9

The price of production of a commodity equals k, the cost-price, plus p, the average profit, calculated on the advanced capital. On this basis, the value of a commodity might be stated as k + p +d, where d is the difference between the price of production and the value. Where the value is higher than the price of production, d will be a positive number, and vice versa.  In Theories of Surplus Value, Chapter 12, where Marx discusses rent further, he defines d, as the Differential Value.

On this basis, its clear that for agricultural products, their price may be higher than their price of production, k + p, but lower than their value, k + p + d.

“It follows, furthermore, that a permanent increase in the price of agricultural products may take place up to a certain point, before their price reaches their value. It follows likewise that the excess in the value of agricultural products over their price of production can become a determining element of their general market-price solely as a consequence of the monopoly in landed property. It follows, finally, that in this case the increase in the price of the product is not the cause of rent, but rather that rent is the cause of the increase in the price of the product. If the price of the product from a unit area of the worst soil = P + r, then all differential rents will rise by corresponding multiples of r, since the assumption is that P + r becomes the regulating market-price.” (p 763)

Suppose the aggregate social capital, excluding agriculture, is made up 85 c + 15 v. With a 100% rate of surplus value, the price of production is 115. Assuming the agricultural capital is made up 75 c + 25 v, the value of its product, and regulating market price would be 125. If we assume the same mass of capital in both sectors, then the total surplus value is equal to 40, or 20% on the total social capital of 200. Equalising profit, we then get the product of each sector selling for 120. Agricultural prices of production are below these values, and vice versa.

But, on the basis that landed property prevents capital flowing freely into the agricultural sector, so as to take advantage of the higher profits, prices in this sector remain higher than they otherwise would have been. By the same token, less capital flows out of the industrial sector, so the supply of industrial commodities remains higher than it would have been, and their prices remain lower than they would have been. Agricultural prices will be somewhere between 120 and 125, whereas industrial prices will be somewhere between 115 and 120.

“Although landed property may drive the price of agricultural produce above its price of production, it does not depend on this, but rather on the general state of the market, to what degree market-price exceeds the price of production and approaches the value, and to what extent therefore the surplus-value created in agriculture over and above the given average profit shall either be transformed into rent or enter into the general equalisation of the surplus-value to average profit. At any rate this absolute rent arising out of the excess of value over the price of production is but a portion of the agricultural surplus-value, a conversion of this surplus-value into rent, its being filched by the landlord; just as the differential rent arises out of the conversion of surplus-profit into rent, its being filched by the landlord under a generally regulating price of production.” (p 764)

These are the only two real forms of rent. A rent may arise due to a monopoly arising from a demand for some commodity that cannot be satisfied by supply being expanded, in response to higher prices and profits. For example, in the case of artwork, which is limited by the capacity of the artist to reproduce a piece of work. Here the monopoly price arises because of the capacity and willingness of buyers to bid up the market price.

“Its analysis belongs under the theory of competition, where the actual movement of market-prices is considered.” (p 764)