If production of wheat takes place on land type I, which pays only absolute ground rent, a rise in demand might cause a more fertile land II to be brought into cultivation. The price of wheat would remain the same, or else I could no longer make average profit. Now, II makes surplus profit and pays differential rent. If demand rises further, more land that is even more fertile, types III and IV might be introduced.
But, the price of wheat would not fall. The surplus profit would be absorbed by rent. Consequently, unlike industry, this more efficient production would not result in lower prices, lower food costs for workers, and a higher general rate of profit.
If production was taking place initially, only on the most fertile land, IV, production on land type III could only occur if agricultural prices rose. Only then would those prices enable capital on III to pay absolute ground-rent, whilst obtaining the average profit. Capital on land type IV would then make surplus profit, so that it began also to pay a differential rent, which absorbed it. Similarly, prices would have to rise further before production on land type II became possible. At that point, both II and III would pay differential rent. Finally, prices would have to rise again before land type I could be cultivated and pay absolute rent.
As a consequence, of this progressive move to less fertile lands, the price of food and raw materials would rise. That would cause the value of labour-power to rise, and the rate of surplus value to fall. The value of raw materials would rise, pushing up the value of constant capital, and causing a further drop in the general rate of profit.
“Under these conditions [it is again possible for] the Ricardian law [to apply]. But not necessarily, even according to his interpretation. It is merely possible in certain circumstances. In reality the movements are contradictory.” (p 105)
For Rodbertus, rent arises from a naturally higher rate of profit in agriculture, which does not pay for the cost of raw materials. For Marx, absolute rent arises from the historical difference in the organic composition of capital between agriculture and industry, and differential rent arises on the basis of different degrees of fertility. But, the development of agriculture, science and capital can remove those differences. Agriculture could become as capital intensive as industry, and science and capital accumulation could even out the differences of fertility between different soil types etc.
“True, the difference in so far as it is merely due to variation in actual fertility of the land remains even if the absolute rent disappeared. But—quite apart from the possible ironing out of natural variations—differential rent is linked with the regulation of the market-price and therefore disappears along with the price and with capitalist production. There would remain only the fact that land of varying fertility is cultivated by social labour and, despite the difference in the amount of labour employed, labour can become more productive on all types of land. But the amount of labour used on the worse land would by no means result in more labour being paid for [the product] of the better land as now with the bourgeois. Rather would the labour saved on IV be used for the improvement of III and that saved from III for the improvement of II and finally that saved on II would be used to improve I. Thus the whole of the capital eaten up by the landowners would serve to equalise the labour used for the cultivation of the soil and to reduce the amount of labour in agriculture as a whole.” (p 105-6)
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