Sunday, 4 March 2018

Theories of Surplus Value, Part II, Chapter 13 - Part 27

Finally, Marx cites Ricardo's comments in Chapter XXII, in relation to Malthus' views on rent.

““Rent is a creation of value … but not a creation of wealth” (l.c., p. 485).” (p 341)

What Ricardo means here is that rent arises because the value of corn rises due to diminishing returns. As demand rises, additional supply comes from production on less fertile soil, so the market value of corn rises. Surplus profit then arises on the more fertile soils and is appropriated as rent. So rent is a creation of value. But, it is not a creation of wealth, he says, because the rent is not a source of new value. It is not a contributor to the value of production, but only an appropriation of that existing value.

““In speaking of the high price of corn, Mr. Malthus evidently does not mean the price per quarter or per bushel, but rather the excess of price for which the whole produce will sell, above the cost of its production, including always in the term “cost of its production”, profits as well as wages. One hundred and fifty quarters of corn at £3 10s. per quarter, would yield a larger rent to the landlord than 100 quarters at £4, provided the cost of production were in both cases the same” (l.c., p. 487). “Whatever the nature of the land may be, high rent must depend on the high price of the produce; but, given the high price, rent must be high in proportion to abundance and not to scarcity” (l.c., p. 492).” (p 341) 

In other words, its not high prices per se that generates rent, or higher rents, but high profits resulting from these high prices.

““As rent is the effect of the high price of corn, the loss of rent is the effect of a low price. Foreign corn never enters into competition with such home corn as affords a rent...” (p 341) 

In other words, corn produced on land that produces rent is already producing a surplus profit, because its price of production is lower than the market value. If foreign corn is imported, it will compete against the more expensive domestically produced corn, grown on land that produces no rent. It is this more expensive production that will be forced out.

“the fall of price invariably affects the landlord till the whole of his rent is absorbed;—if it fall still more, the price will not afford even the common profits of stock; capital will then quit the land for some other employment, and the corn, which was before grown upon it, will then, and not till then, be imported. From the loss of rent, there will be a loss of value, of estimated money value, but, there will be a gain of wealth. The amount of the raw produce and other productions together will be increased; from the greater facility with which they are produced, they will, though augmented in quantity, be diminished in value” (l.c., p. 519).” (p 341) 

This is a restatement of Ricardo's Law of Comparative Advantage. As a result of the lower corn price, the landlord loses money-rent, but wealth rises, because a greater quantity of corn is represented by a given amount of value. This is also the same point made by Marx that real wealth is a function of use value, not value. The amount of use value here rises, because the imported corn, is produced more efficiently, resulting in a saving of labour required for its production. The labour and capital formerly used for the production of that corn domestically can then be used for alternative production, so that the consequence is an overall increase in the total quantity of use values produced. By allocating capital and labour to where it can be used most effectively, and then exchanging the resultant commodities, a comparative advantage is obtained, as a result of the increase in use values produced, and the consequent fall in the value of each unit of production.

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