What Smith, like Ricardo, fails to recognise is that the value of commodities, and their sufficient price are not the same thing. The sufficient price is the wages plus the average profit, but the value of the commodity (if we discount the constant capital, or accept Smith's false assumption that constant capital resolves into wages and profit) comprises the wages plus the produced surplus value. The produced surplus value may be greater or smaller than the average profit, depending on the organic composition of the capital, and depending upon the rate of turnover of the capital. Consequently, the agricultural products may be sold at their value, which is higher than their sufficient price, and it is this difference which provides the fund for the payment of rent.
“His positive point, compared with Ricardo, is that he realises it depends on the circumstances, whether or not landed property can assert itself economically.” (p 361)
Its important to follow Smith's argument step by step, Marx says. Marx examines what Smith says in relation to timber. The argument was described earlier. Initially, there are extensive forests with small populations; the timber is not required for construction or other such purposes; the supply vastly exceeds the demand, so timber prices are low, and for landlords the timber is a nuisance. As agriculture expands, the population expands. The demand for timber for shelter, furniture and other products rises. Forests are cleared to make way for additional food production. The demand for timber slowly increases, whilst the excess supply diminishes as forests are cleared. As a result, “The price of wood varies with the state of agriculture, for the same reasons as does the price of cattle.” (p 361)
Indeed, as cattle herds grow, this cattle consumes corn and other arable products, for which land is cleared, but also the cattle gnaw and destroy young trees.
“The scarcity of wood, thus created, raises its price. Hence it can afford so high a rent that tilled land (or land that could be used for tillage) is converted into woodland. This is the case in Great Britain. The rent of wood can never, for any length of time, rise above that of corn or pasture, but it may reach that level ([O.U.P., Vol. I, pp. 189-90; Garnier,] l.c., pp. 347-49).” (p 361)
Marx comments,
“Thus in fact, the rent of woodland is by nature identical with that of pasture. It belongs therefore in this category, although wood does not serve for food. The economic category does not depend on the use-value of the product, but on whether or not it is convertible into arable land and vice versa.” (p 361)
But, as I have written elsewhere, I am not convinced by this argument. It is certainly true that where food prices rise, forests can be cleared for additional food production, but if timber prices rise, it would require decades before any land turned over to forests began to produce timber. In fact, Marx makes the point in Capital that it is precisely because of this very long turnover time for capital involved in timber production that the activity has rarely been undertaken by private capital.
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