Monday, 12 February 2018

Theories of Surplus Value, Part II, Chapter 13 - Part 8

Marx does not deal here with the rent that an industrial capitalist might pay for the land on which their factory sits. The reason is that, in Marx's terms, this is not economically speaking rent, but lease-money.

If agricultural products are sold at their price of production, no rent exists, because this land regulates the market value of the product. If agricultural products are sold at their exchange-value, but this is above the price of production, there may be absolute rent, but this rent is then only a deduction from surplus value, equal to the difference between the price of production, and the market value. But, for the farmer, as for the industrial capitalist, the rent is predetermined. It appears as another cost of production, that enters as a component part of the natural price of their commodities.

“The farmer, however, calculates just like the capitalist: First the outlay, secondly wages, thirdly the average profit, finally the rent, which likewise appears to him as fixed. This is for him the natural price of wheat, for instance. Whether he obtains it, depends, in turn, on the prevailing state of the market.” (p 320) 

In the same way, excess profits do not form a part of the value of the commodity, because the excess is only the difference between the individual price of production, and the general price of production, in that sphere.

“Accordingly, Ricardo is in substance right when, in opposition to Adam Smith, he declares that rent never enters into cost-price. But again he is wrong in that he proves this, not by differentiating between cost-price and value, but by identifying the two, as Adam Smith did, for neither rent nor profit, nor wages form constituent parts of value, although value is dissolvable into wages and profits and rent, and, furthermore, the three parts are of equal importance, if all three exist.” (p 320)

Ricardo's error is that he equates the price of production with the value of the product, and natural price. He argues that the market value is determined by the output of the worst land, in which no rent is levied.

“This however is wrong. The price of the product grown on the worst land equals its cost-price, either because this product is sold below its value—therefore not as Ricardo says, because it is sold at its valueor because the agricultural product belongs to that type, to that class, of commodities in which, by way of exception, value and cost-price are identical. This is the case when the surplus-value which is made in a particular sphere of production on a given capital, of say £100, happens to coincide with the surplus-value which on the average falls to the same relative portion of the total capital (say £ 100).” (p 320)

Adam Smith, by contrast, on the basis of his assumption that price of production and value are identical, is justified in arguing that rent, as much as wages and profit, is a constituent part of the value of commodities. In other words, when he slips into his cost of production theory of value, whereby the value of commodities is composed of the revenue into which that value is resolved. But, of course, Smith is wrong in his assumption, and in his cost of production theory of value. And, his position is then, also, inconsistent when he then argues that, unlike wages and profit, rent does not enter as a constituent part of the value of commodities.

“He commits this inconsistency because observation and correct analysis compel him nevertheless to recognise that there is a difference in the determination of the natural price of non-agricultural produce and the market-value of agricultural produce. But more about this when discussing Smith’s theory of rent.” (p 321) 

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