Capital Vol. III Part VI
Transformation of Surplus-Profit into Ground-Rent

Chapter 43. Differential Rent II.
Third Case: Rising Price of Production

[A rising price of production presupposes that the productivity of the poorest quality land yielding no rent decreases. The assumed regulating price of production cannot rise above 3 per quarter unless the 2 invested in soil A produce less than 1 qr, or the 5 — less than 2 qrs, or unless an even poorer soil than A has to be taken under cultivation.

For constant, or even increasing, productivity of the second investment of capital this would only be possible if the productivity of the first investment of capital of had decreased. This case occurs often enough. For instance, when with superficial ploughing the exhausted top soil yields ever smaller crops, under the old method of cultivation, and then the subsoil, turned up through deeper ploughing, produces better crops than before with more rational cultivation. But, strictly speaking, this special case does not apply here. The decrease in productivity of the first 2 of invested capital signifies for the superior soils, even when the conditions are assumed to be analogous there, a decrease in differential rent I; yet here we are considering only differential rent II. But since this special case cannot occur without presupposing the existence of differential rent II, and represents in fact the reaction of a modification of differential rent I upon II, we shall give an illustration of it [see Table VII — Ed.].

The money-rent and proceeds are the same as in Table II. The increased regulating price of production makes good what has been lost in quantity of produce; since this price and the quantity of produce are inversely proportional, it is evident that their mathematical product will remain the same.

TABLE VII
Type
of Soil
Acres Invested Capital
Profit Price
of
Prod.
Output
Qrs
Sell-
ing
Price
Pro-
ceeds
Grain-
Rent
Qrs
Money
-Rent
Rate
of
Rent
A 1 2 + 2 1 6 + 1 = 1 3 3/7 6 0 0 0%
B 1 2 + 2 1 6 1 + 2 = 3 3 3/7 12 1 6 120%
C 1 2 + 2 1 6 1 + 3 = 5 3 3/7 18 3 12 240%
D 1 2 + 2 1 6 2 + 5 = 7 3 3/7 24 5 18 360%
20 17 60 10 36 240%

In the above case, it was assumed that the productiveness of the second investment of capital was greater than the original productivity of the first investment. Nothing changes if we assume the second investment to have only the same productivity as the first, as shown in the following table:

TABLE VIII
Rent
Type
of Soil
Acres Invested Capital
Profit
Price
of
Prod.
Output
Qrs
Sell-
ing
Price
Pro-
ceeds
In
Grain
Qrs
In
Money
Rate of
Surplus-
Profit
A 1 2 + 2 = 5 1 6 + 1 = 2 4 6 0 0 0%
B 1 2 + 2 = 5 1 6 1 + 2 = 3 4 12 1 6 120%
C 1 2 + 2 = 5 1 6 1 + 3 = 4 4 18 3 12 240%
D 1 2 + 2 = 5 1 6 2 + 4 = 6 4 24 4 18 360%
20 15 60 9 36 240%

Here, too, the price of production rising at the same rate compensates in full for the decrease in productivity in the case of yield as well as money-rent.

The third case appears in its pure form only when the productivity of the second investment of capital declines, while that of the first remains constant — which was always assumed in the first and second cases. Here differential rent I is not affected, i.e., the change affects only that part which arises from differential rent II. We shall give two illustrations: in the first we assume that the productivity of the second investment of capital has been reduced to , in the second to .

TABLE IX
Rent
Type
of
Soil
Acres Invested
Capital
Profit
Price
of
Prod.
Output
Qrs
Sell-
ing
Price
Pro-
ceeds
In
Grain
Qrs
In
Money
Rate of
Rent
A 1 2 + 2 = 5 1 6 1 + = 1 4 6 0 0 0
B 1 2 + 2 = 5 1 6 2 + 1 = 3 4 12 1 6 120%
C 1 2 + 2 = 5 1 6 3 + 1 = 4 4 18 3 12 240%
D 1 2 + 2 = 5 1 6 4 + 2 = 6 4 24 4 18 360%
20 15 60 9 36 240%

Table IX is the same as Table VIII, except for the fact that the decrease in productivity in VIII occurs for the first, and in IX for the second investment of capital.

TABLE X
Rent
Type
of
Soil
Acres Invested
Capital
Profit
Price
of
Prod.
Output
Qrs
Sell-
ing
Price
Pro-
ceeds
In
Grain
Qrs
In
Money
Rate of
Rent
A 1 2 + 2 = 5 1 6 1 + = 1 4 4/5 6 0 0 0%
B 1 2 + 2 = 5 1 6 2 + = 2 4 4/5 12 1 6 120%
C 1 2 + 2 = 5 1 6 3 + = 3 4 4/5 18 2 12 240%
D 1 2 + 2 = 5 1 6 4 + 1 = 5 4 4/5 24 3 18 360%
20 24 12 60 7 36 240%

In this table, too, the total proceeds, the money-rent and rate of rent remain the same as in tables II, VII and VIII, because produce and selling price are again inversely proportional, while the invested capital remains the same.

But how do matters stand in the other possible case when the price of production rises, namely, in the case of a poor quality soil not worth cultivating until then that is taken under cultivation?

Let us suppose that a soil of this sort, which we shall designate by a, enters into competition. Then the hitherto rentless soil A would yield rent, and the foregoing tables VII, VIII and X would assume the following forms:

TABLE VIIa
Rent
Type
of
Soil
Acres Invested
Capital
Profit
Price
of
Prod.
Output
Qrs
Sell-
ing
Price
Pro-
ceeds
In
Grain
Qrs
In
Money
Increase
a 1 5 1 6 1 4 6 0 0 0
A 1 2 + 2 1 6 + 1 = 1 4 7 1 1
B 1 2 + 2 1 6 1 + 2 = 3 4 14 2 8 1 + 7
C 1 2 + 2 1 6 1 + 3 = 5 4 21 3 15 1 + 2 7
D 1 2 + 2 1 6 2 + 5 = 7 4 28 5 22 1 + 3 7
30 19 76 11 46

TABLE VIIIa
Rent
Type
of
Soil
Acres Invested
Capital
Profit
Price
of
Prod.
Output
Qrs
Sell-
ing
Price
Pro-
ceeds
In
Grain
Qrs
In
Money
Increase
a 1 5 1 6 1 4 4/5 6 0 0 0
A 1 2 + 2 1 6 + 1 = 1 4 4/5 7 1/5 1 1/5 1 1/5
B 1 2 + 2 1 6 1 + 2 = 3 4 4/5 14 2/5 1 8 2/5 1 1/5 + 7 1/5
C 1 2 + 2 1 6 1 + 3 = 4 4 4/5 21 3/5 3* 15 3/5 1 1/5 + 2 7 1/5
D 1 2 + 2 1 6 2 + 4 = 6 4 4/5 28 4/5 4 22 4/5 1 1/5 + 3 7 1/5
5 30 16 78 10** 48

[* In the German 1894 edition this reads: 2. — Ed.]
[** Ibid.: 9 — Ed.]

TABLE Xa
Rent
Type
of
Soil
Acres Invested
Capital
Profit
Price
of
Prod.
Output
Qrs
Sell-
ing
Price
Pro-
ceeds
In
Grain
Qrs
In
Money
Increase
a 1 5 1 6 1 1/8 5⅓ 6 0 0 0
A 1 2 + 2 1 6 1 + = 1 5⅓ 6⅔
B 1 2 + 2 1 6 2 + = 2 5⅓ 13⅓ 1 3/8 7⅓ ⅔ + 6⅔
C 1 2 + 2 1 6 3 + = 3 5⅓ 20 2 5/8 14 ⅔ + 2 6⅔
D 1 2 + 2 1 6 4 + 1 = 5 5⅓ 26⅔ 3 7/8 20⅔ ⅔ + 3 6⅔
30 13 5/8 72⅔ 8 42⅔

By interpolating soil a there arises a new differential rent I; upon this new basis, differential rent II likewise develops in an altered form. Soil a has different fertility in each of the above three tables; the sequence of proportionally increasing fertilities begins only with soil A. The sequence of rising rents also behaves similarly. The rent of the worst rent-bearing soil, previously rentless, is a constant which is simply added to all higher rents. Only after deducting this constant does the sequence of differences clearly become evident for the higher rents, and similarly its parallel in the fertility sequence of the different soils. In all the tables, the fertilities from A to D are related as 1 : 2 : 3 : 4, and correspondingly the rents:

in VIIa, as 1 : (1 + 7) : (1 + 2 7) : (1 + 3 7),

in VIIIa, as 1 1/5 : (1 1/5 + 7 1/5) : (1 1/5 + 2 7 1/5) : (1 1/5 + 3 7 1/5),

and in Xa, as ⅔ : (⅔ + 6⅔) : (⅔ + 2 6⅔) : ⅔ + 3 6⅔).

In brief, if the rent from A = n, and the rent from the soil of next higher fertility = n + m, then the sequence is as follows: n : (n + m) : (n + 2m) : (n + 3m), etc. — F. E.]


[Since the foregoing third case had not been elaborated in the manuscript — only the title is there — it was the task of the editor to fill in the gap, as above, to the best of his ability. However, in addition, it still remains for him to draw the general conclusions from the entire foregoing analysis of differential rent II, consisting of three principal cases and nine subcases. The illustrations presented in the manuscript, however, do not suit this purpose very well. In the first place, they compare plots of land whose yields for equal areas are related as 1 : 2 : 3 : 4; i.e., differences, which exaggerate greatly from the very first, and which lead to utterly monstrous numerical values in the further development of the assumptions and calculations made upon this basis. Secondly, they create a completely erroneous impression. If for degrees of fertility related as 1 : 2 : 3 : 4, etc., rents are obtained in the sequence 0 : 1 : 2 : 3, etc., one feels tempted to derive the second sequence from the first, and to explain the doubling, tripling, etc., of rents by the doubling, tripling, etc., of the total yields. But this would be wholly incorrect. The rents are related as 0 : 1 : 2 : 3 : 4 even when the degrees of fertility are related as n : (n + 1) : (n + 2) : (n + 3) : (n + 4). The rents are not related as the degrees of fertility, but as the differences of fertility — beginning with the rentless soil as the zero point.

The original tables had to be offered to illustrate the text. But in order to obtain a perceptual basis for the following results of the investigation, I present below a new series of tables in which the yields are indicated in bushels (1/8 quarter, or 36.35 litres) and shillings ( = marks).

The first of these, Table XI, corresponds to the former Table I. It shows the yields and rents for soils of five different qualities, A to E, with a first capital investment of 50 shillings, which added to 10 shillings profit = 60 shillings total price of production per acre. The yields in grain are made low: 10, 12, 14, 16, 18 bushels per acre. The resulting regulating price of production is 6 shillings per bushel.

The following 13 tables correspond to the three cases of differential rent II treated in this and the two preceding chapters with an additional invested capital of 50 shillings per acre in the same soil with constant, falling and rising prices of production. Each of these cases, in turn, is presented as it takes shape for:

1) constant, 2) falling, and 3) rising productivity of the second investment of capital in relation to the first. This yields a few other variants, which are especially useful for illustration purposes.

For case I: Constant price of production — we have:

Variant 1: Productivity of the second investment of capital
remains the same (Table XII).
Variant 2: Productivity declines. This can take place only when
no second investment of capital is made in soil A, i.e., in
such a way that a) soil B likewise yields no rent (Table XIII)
or b) soil B does not become completely rentless (Table XIV).
Variant 3: Productivity increases (Table XV). This case likewise excludes a second investment of capital in soil A.

For case II: Falling price of production — we have:

Variant 1: Productivity of the second investment of capital remains the same (Table XVI).
— " — 2: Productivity declines (Table XVII). These two variants require that soil
A be eliminated from competition, and that soil B become rentless and
regulate the price of production.
— " — 3: Productivity increases (Table XVIII). Here Soil A remains the regulator.

For case III: Rising price of production — two eventualities are possible: soil A may remain rentless and continue to regulate the price, or poorer soil than A enters into competition and regulates the price, in which case A yields rent.

First eventuality: Soil A remains the regulator.

Variant 1: Productivity of the second investment remains the same (Table XIX).
This is admissible under the conditions assumed by us, provided the productivity of the first investment decreases.
— " — 2: Productivity of the second investment decreases (Table XX).
This does not exclude the possibility that the first investment may retain the same productivity.
— " — 3: Productivity of the second investment increases (Table XXI
[In the German 1894 edition this reads: XIX. — Ed.]). This, again, presupposes falling productivity of the first investment.

Second eventuality: An inferior quality soil (designated as a) enters into competition; soil A yields rent.

Variant 1: Productivity of the second investment remains the same (Table XXII).
Variant 2: Productivity declines (Table XXIII).
— " — 3: Productivity increases (Table XXIV).

These three variants conform to the general conditions of the problem and require no further comment.

The tables now follow:

TABLE XI
Type of
Soil
Price of
Production
Sh.
Output
Bushels
Selling
Price
Sh.
Proceeds
Sh.
Rent
Sh.
Rent
Increase
A 60 10 6 60 0 0
B 60 12 6 72 12 12
C 60 14 6 84 24 2 12
D 60 16 6 96 36 3 12
E 60 18 6 108 48 4 12
120 10 12

For second capital invested in the same soil:

First Case: Price of production remains unaltered.

Variant 1: Productivity of the second investment of capital remains the same.

TABLE XII
Type
of
Soil
Price of
Production
Sh.
Output
Bushels
Selling
Price
Sh.
Proceeds
Sh.
Rent
Sh.
Rent
Increase
A 60 + 60 = 120 10 + 10 = 20 6 120 0 0
B 60 + 60 = 120 12 + 12 = 24 6 144 24 24
C 60 + 60 = 120 14 + 14 = 28 6 168 48 2 24
D 60 + 60 = 120 16 + 16 = 32 6 192 72 3 24
E 60 + 60 = 120 18 + 18 = 36 6 216 96 4 24
240 10 24

Variant 2: Productivity of the second investment of capital declines; no second investment in soil A.

1) Soil B ceases to yield rent.

TABLE XIII
Type
of
Soil
Price of
Production
Sh.
Output
Bushels
Selling
Price
Sh.
Pro-
ceeds
Sh.
Rent
Sh.
Rent
Increase
A 60 10 6 60 0 0
B 60 + 60 = 120 12 + 8 = 20 6 120 0 0
C 60 + 60 = 120 14 + 9⅓ = 23⅓ 6 140 20 20
D 60 + 60 = 120 16 + 10⅔ = 26⅔ 6 160 40 2 20
E 60 + 60 = 120 18 + 12 = 30 6 180 60 3 20
120 6 20

[* In the German 1894 edition this reads: 20. — Ed.]

2) Soil B does not become completely rentless.

TABLE XIV
Type
of
Soil
Price of
Production
Sh.
Output
Bushels
Selling
Price
Sh.
Proceeds
Sh.
Rent
Sh.
Rent
Increase
A 60 10 6 60 0 0
B 60 + 60 = 120 12 + 9 = 21 6 126 6 6
C 60 + 60 = 120 14 + 10 = 24 6 147 27 6 + 21
D 60 + 60 = 120 16 + 12 = 28 6 168 48 6 + 2 21
E 60 + 60 = 120 18 + 13 = 31 6 189 69 6 + 3 21
150 4 6 + 6 21

Variant 3: Productivity of the second investment of capital increases; here, too, no second investment in Soil A.

TABLE XV
Type
of
Soil
Price of
Production
Sh.
Output
Bushels
Selling
Price
Sh.
Proceeds
Sh.
Rent
Sh.
Rent
Increase
A 60 10 6 60 0 0
B 60 + 60 = 120 12 + 15 = 27 6 162 42 42
C 60 + 60 = 120 14 + 17 = 31 6 189 69 42 + 27
D 60 + 60 = 120 16 + 20 = 36 6 216 96 42 + 2 27
E 60 + 60 = 120 18 + 22 = 40 6 243 123 42 + 3 27
330 4 42 + 6 27

Second Case: Price of production declines.

Variant 1: Productivity of the second investment of capital remains the same. Soil A is excluded from competition and soil B becomes rentless.

TABLE XVI
Type
of
Soil
Price of
Production
Sh.
Output
Bushels
Selling
Price
Sh.
Proceeds
Sh.
Rent
Sh.
Rent
Increase
B 60 + 60 = 120 12 + 12 = 24 5 120 0 0
C 60 + 60 = 120 14 + 14 = 28 5 140 20 20
D 60 + 60 = 120 16 + 16 = 32 5 160 40 2 20
E 60 + 60 = 120 18 + 18 = 36 5 180 60 3 20
120 6 20

Variant 2: Productivity of the second investment of capital declines; soil A is excluded from competition and soil B becomes rentless.

TABLE XVII
Type
of
Soil
Price of
Production
Sh.
Output
Bushels
Selling
Price
Sh.
Proceeds
Sh.
Rent
Sh.
Rent
Increase
B 60 + 60 = 120 12 + 9 = 21 5 5/7 120 0 0
C 60 + 60 = 120 14 + 10 = 24 5 5/7 140 20 20
D 60 + 60 = 120 16 + 12 = 28 5 5/7 160 40 2 20
E 60 + 60 = 120 18 + 13 = 31 5 5/7 180 60 3 20
120 6 20

Variant 3: Productivity of the second investment of capital increases; soil A remains in competition; soil B yields rent.

TABLE XVIII
Type
of
Soil
Price of
Production
Sh.
Output
Bushels
Selling
Price
Sh.
Proceeds
Sh.
Rent
Sh.
Rent
Increase
A 60 + 60 = 120 10 + 15 = 25 4 4/5 120 0 0
B 60 + 60 = 120 12 + 18 = 30 4 4/5 144 24 24
C 60 + 60 = 120 14 + 21 = 35 4 4/5 168 48 2 24
D 60 + 60 = 120 16 + 24 = 46 4 4/5 192 72 3 24
E 60 + 60 = 120 18 + 27 = 45 4 4/5 216 96 4 24
240 10 24

Case: Price of production rises.

A) Soil A remains rentless and continues to regulate the price.

Variant 1: Productivity of the second investment of capital remains the same: this requires decreasing productivity of the first investment of capital.

TABLE XIX
Type
of
Soil
Price of
Production
Sh.
Output
Bushels
Selling
Price
Sh.
Proceeds
Sh.
Rent
Sh.
Rent
Increase
A 60 + 60 = 120 7 + 10 = 17 6 6/7 120 0 0
B 60 + 60 = 120 9 + 12 = 21 6 6/7 144 24 24
C 60 + 60 = 120 10 + 14 = 24 6 6/7 168 48 2 24
D 60 + 60 = 120 12 + 16 = 28 6 6/7 192 72 3 24
E 60 + 60 = 120 13 + 18 = 31 6 6/7 216 96 4 24
240 10 24

Variant 2: Productivity of the second investment of capital decreases; which does not exclude constant productivity of the first investment.

TABLE XXI
Type
of
Soil
Price of
Production
Sh.
Output
Bushels
Selling
Price
Sh.
Proceeds
Sh.
Rent
Sh.
Rent
Increase
A 60 + 60 = 120 5 + 12 = 17 6 6/7 120 0 0
B 60 + 60 = 120 6 + 15 = 21 6 6/7 144 24 24
C 60 + 60 = 120 7 + 17 = 24 6 6/7 168 48 2 24
D 60 + 60 = 120 8 + 20 = 28 6 6/7 192 72 3 24
E 60 + 60 = 120 9 + 22 = 31 6 6/7 216 96 4 24
240 10 24

B) An inferior soil (designated as a) becomes the price regulator and soil A thus yields rent. This makes admissible for all variants constant productivity of the second investment.

Variant 1: Productivity of the second investment of capital remains the same.

TABLE XXII
Type
of
Soil
Price of
Production
Sh.
Output
Bushels
Selling
Price
Sh.
Proceeds
Sh.
Rent
Sh.
Rent
Increase
a 120 16 7 120 0 0
A 60 + 60 = 120 10 + 10 = 20 7 150 30 30
B 60 + 60 = 120 12 + 12 = 24 7 180 60 2 30
C 60 + 60 = 120 14 + 14 = 28 7 210 90 3 30
D 60 + 60 = 120 16 + 16 = 32 7 240 120 4 30
E 60 + 60 = 120 18 + 18 = 36 7 270 150 5 30
450 15 30

Variant 2: Productivity of the second investment of capital declines.

TABLE XXIII
Type
of
Soil
Price of
Production
Sh.
Output
Bushels
Selling
Price
Sh.
Proceeds
Sh.
Rent
Sh.
Rent
Increase
A 120 15 8 120 0 0
A 60 + 60 = 120 10 + 7 = 17 8 140 20 20
B 60 + 60 = 120 12 + 9 = 21 8 168 48 20 + 28
C 60 + 60 = 120 14 + 10 = 24 8 196 76 20 + 2 28
D 60 + 60 = 120 16 + 12 = 28 8 224 104 20 + 3 28
E 60 + 60 = 120 18 + 13 = 31 8 252 132 20 + 4 28
380 5 20 + 10 28

Variant 3: Productivity of the second investment increases.

TABLE XXIV
Type
of
Soil
Price of
Production
Sh.
Output
Bushels
Selling
Price
Sh.
Proceeds
Sh.
Rent
Sh.
Rent
Increase
A 120 16 7 120 0 0
A 60 + 60 = 120 10 + 12 = 21 7 168 48 15 + 33
B 60 + 60 = 120 12 + 15 = 27 7 202 82 15 + 2 33
C 60 + 60 = 120 14 + 17 = 31 7 236 116 15 + 3 33
D 60 + 60 = 120 16 + 20 = 36 7 270 150 15 + 4 33
E 60 + 60 = 120 18 + 22 = 40 7 303 183 15 + 5 33
581 5 15 + 15 33

These tables lead to the following conclusions:

In the first place, the sequence of rents behaves exactly as the sequence of fertility differences — taking the rentless regulating soil as the zero point. It is not the absolute yield, but only the differences in yield which are the factors determining rent. Whether the various soils yield 1, 2, 3, 4, 5 bushels, or whether they yield 11, 12, 13, 14, 15 bushels per acre, the rents in both cases form the sequence 0, 1, 2, 3, 4 bushels, or their equivalent in money.

But far more important is the result with respect to the total rent yields for repeated investment of capital in the same land.

In five out of the thirteen analysed cases, the total rent doubles when the investment of capital is doubled; instead of l0x12 shillings it becomes 10 24 shillings = 240 shillings. These cases are:

Case I, constant price, variant 1: constant production rise (Table XII).

Case II, falling price, variant 3: increasing production rise (Table XVIII).

Case III, increasing price, first eventuality (where soil A remains the regulator), in all three variants (tables XIX, XX and XXI).

In four cases the rent more than doubles, namely:

Case I, variant 3, constant price, but increasing production rise (Table XV) The total rent climbs to 330 shillings.

Case III, second eventuality (where soil A yields rent), in all three variants (Table XXII, rent = 15 30 = 450 shillings; Table XXIII, rent = 5 20 + 10 28 = 380 shillings; Table XXIV, rent = 5 15 + 15 33 = 581 shillings).

In one case the rent rises, but not to twice the amount yielded by the first investment of capital:

Case I, constant price, variant 2: falling productivity of the second investment, under conditions whereby B does not become completely rentless (Table XIV, rent = 4 6 + 6 21 = 150 shillings).

Finally, only in three cases does the total rent remain at the same level with a second investment — for all soils taken together — as with the first investment (Table XI); these are the cases in which soil A is excluded from competition and B becomes the regulator and thereby rentless soil. Thus, the rent for B not only vanishes but is also deducted from every succeeding term of the rent sequence; the result is thus determined. These cases are:

Case I, variant 2, when the conditions are such that soil A is excluded (Table XIII). The total rent is 6 20, or 10 12 = 120, as in Table XI.

Case II, variants I and 2. Here soil A is necessarily excluded in accordance with the assumptions (tables XVI and XVII) and the total rent is again 6 20 = 10 12 = 120 shillings.

Thus, this means: In the great majority of all possible cases the rent rises — per acre of rent-bearing land as well as particularly in its total amount — as a result of an increased investment of capital in the land. Only in three out of the thirteen analysed cases does its total remain unaltered. These are the cases in which the lowest quality soil — hitherto the regulator and rentless — is eliminated from competition and the next quality soil takes its place, i.e., becomes rentless. But even in these cases, the rents upon the superior soils rise in comparison with the rents due to the first capital investment; when the rent for C falls from 24 to 20, then those for D and E rise from 36 and 48 to 40 and 60 shillings respectively.

A fall in the total rents below the level for the first investment of capital (Table XI) would be possible only if soil B as well as soil A were to be excluded from competition and soil C were to become regulating and rentless.

Thus, the more capital is invested in the land, and the higher the development of agriculture and civilisation in general in a given country, the more rents rise per acre as well as in total amount, and the more immense becomes the tribute paid by society to the big landowners in the form of surplus-profits — so long as the various soils, once taken under cultivation, are all able to continue competing.

This law accounts for the amazing vitality of the class of big landlords. No social class lives so sumptuously, no other class claims the right it does to traditional luxury in keeping with its "estate," regardless of where the money for this purpose may be derived, and no other class piles debt upon debt so lightheartedly. And yet it always lands again on its feet — thanks to the capital invested by other people in the land, which yields it a rent, completely out of proportion to the profits reaped therefrom by the capitalist.

However, the same law also explains why the vitality of the big landlord is gradually being exhausted.

When the English corn duties were abolished in 1846, the English manufacturers believed that they had thereby turned the land-owning aristocracy into paupers. Instead, they became richer than ever. How did this occur? Very simply. In the first place, the farmers were now compelled by contract to invest 12 per acre annually instead of 8. And secondly, the landlords, being strongly represented in the Lower House too, granted themselves a large government subsidy for drainage projects and other permanent improvements on their land. Since no total displacement of the poorest soil took place, but rather, at worst, it became employed for other purposes — and mostly only temporarily — rents rose in proportion to the increased investment of capital, and the landed aristocracy consequently was better off than ever before.

But everything is transitory. Transoceanic steamships and the railways of North and South America and India enabled some very singular tracts of land to compete in European grain markets. These were, on the one hand, the North American prairies and the Argentine pampas — plains cleared for the plough by Nature itself, and virgin soil which offered rich harvests for years to come even with primitive cultivation and without fertilisers. And, on the other hand, there were the land holdings of Russian and Indian communist communities which had to sell a portion of their produce, and a constantly increasing one at that, for the purpose of obtaining money for taxes wrung from them — frequently by means of torture — by a ruthless and despotic state. These products were sold without regard to price of production, they were sold at the price which the dealer offered, because the peasant perforce needed money without fail when taxes became due. And in face of this competition — coming from virgin plains as well as from Russian and Indian peasants ground down by taxation — the European tenant farmer and peasant could not prevail at the old rents. A portion of the land in Europe fell decisively out of competition as regards grain cultivation, and rents fell everywhere; our second case, variant 2 — falling prices and falling productivity of the additional investment of capital — became the rule for Europe; and therefore the lament of landlords from Scotland to Italy and from southern France to East Prussia. Fortunately, the plains are far from being entirely brought under cultivation; there are enough left to ruin all the big landlords of Europe and the small ones into the bargain — F.E.]


The headings under which rent should be analysed are:

A. Differential rent.
1) Conception of differential rent. Water-power as an illustration. Transition to agricultural rent proper.
2) Differential rent I, arising from the varying fertility of various plots of land.
3) Differential rent II, arising from successive investments of capital in the same land. Differential rent II should be analysed:
a) with a stationary,
b) falling,
c) and rising price of production.
And also
d) transformation of surplus-profit into rent.
4) Influence of this rent upon the rate of profit.
B. Absolute rent.
C. The price of land.
D. Final remarks concerning ground-rent.


Over-all conclusions to be drawn from the consideration of differential rent in general are the following:

First, the formation of surplus-profit may take place in various ways. On the one hand, based on differential rent I, that is, on the investment of the entire agricultural capital in land consisting of soils of varying fertility. Or, in the form of differential rent II, based on the varying differential productivity of successive investments of capital in the same land, i.e., a greater productivity — expressed, e.g., in quarters of wheat — than is secured with the same investment of capital in the worst land — rentless, but which regulates the price of production. But no matter how this surplus-profit may arise, its transformation into rent, i.e., its transfer from farmer to landlord, always presupposes that the various actual individual production prices of the partial outputs of the individual successive investments of capital (i.e., independent of the general price of production by which the market is regulated) have previously been reduced to an individual average price of production. The excess of the general regulating production price of the output per acre over this individual average production price constitutes and is a measure of the rent per acre. In the case of differential rent I, the differential results are in themselves distinguishable because they take place upon different portions of land — distinct from one another and existing side by side — given an investment of capital per acre and a degree of cultivation considered normal. In the case of differential rent II, they must first be made distinguishable; they must in fact be transformed back into differential rent I, and this can only take place in the indicated way. For example, let us take Table III, S. 226.

Soil B yields for the first invested capital of 2 — 2 quarters per acre, and for the second investment of equal magnitude — 1 quarters; together — 3 quarters from the same acre. It is not possible to distinguish which part of these 3 quarters is a product of invested capital I and which part a product of invested capital II, for it is all grown upon the same soil. In fact, the 3 quarters is the yield from the total capital of 5; and the actual fact of the matter is simply this: a capital of 2 yielded 2 quarters, and a capital of 5 yielded 3 quarters rather than 4 quarters. The situation would be just the same if the 5 yielded 4 quarters, i.e., if the yield from both investments of capital were equal; similarly, if the yield were even 5 quarters, i.e., if the second investment of capital were to yield a surplus of 1 quarter. The price of production of the first 2 quarters is 1 per quarter, and that of the second 1 quarters is 2 per quarter. Consequently the 3 quarters together cost 6. This is the individual price of production of the total product, and, on the average, amounts to 1 14 2/7 sh. per quarter, i.e., approximately 1. With the general price of production determined by soil A, namely 3, this results in a surplus-profit of 1 per quarter, and thus for the 3 quarters, a total of 4 3/8. At the average price of production of B this corresponds to about 1 quarters. In other words, the surplus-profit from B is represented by an aliquot portion of the output from B, i.e., by the 1 quarters, which express the rent in terms of grain, and which sell — in accordance with the general price of production — for 4. But on the other hand, the excess product from an acre of B over that from an acre of A does not automatically represent surplus-profit, and thereby surplus-product. According to our assumption, an acre of B yields 3 quarters, whereas an acre of A yields only 1 quarter. Excess product from B is, therefore, 2 quarters but the surplus-product is only 1 quarters; for the capital invested in B is twice that invested in A, and thus its price of production is double. If an investment of 5 were also to take place in A, and the rate of productivity were to remain the same, then the output would be 2 quarters instead of 1 quarter, and it would then be seen that the actual surplus-product is determined by comparing 3 with 2, not 3 with 1; i.e., it is only 1 quarters, not 2 quarters. Furthermore, if a third investment of capital, amounting to 2, were made in B, and this were to yield only 1 quarter — this quarter would then cost 3 as in A — its selling price of 3 would only cover the price of production, would provide only the average profit, but no surplus-profit, and would thus yield nothing that could be transformed into rent. The comparison of the output per acre from any given soil type with the output per acre from soil A does not show whether it is the output from an equal or from a larger investment of capital, nor whether the additional output only covers the price of production or is due to greater productivity of the additional capital.

Secondly, assuming a decreasing rate of productivity for the additional investments of capital whose limit, so far as the new formation of surplus-profit is concerned, is that investment of capital which just covers the price of production, i.e., which produces a quarter as dearly as the same investment of capital in an acre of soil A, namely, at 3, according to our assumption — it follows from what has just been said: that the limit, where the total investment of capital in an acre of B would no longer yield any rent, is reached when the individual average production price of output per acre of B would rise to the price of production per acre of A.

If only investments of capital are made in B that yield the price of production, i.e., yield no surplus-profit nor new rent, then this indeed raises the individual average price of production per quarter, but does not affect the surplus-profit, and eventually the rent, formed by previous investments of capital. For the average price of production always remains below that of A, and when the price excess per quarter decreases, the number of quarters increases proportionately, so that the total excess in price remains unaltered.

In the case assumed, the first two investments of capital in B amounting to 5 yield 3 quarters, thus according to our assumption 1 quarters of rent = 4. Now, if a third investment of 2 is made, but one which yields only an additional quarter, then the total price of production (including 20% profit) of the 4 quarters = 9; thus the average price per quarter = 2. The average price of production per quarter upon B has thus risen from 1 5/7 to 2, and the surplus-profit per quarter, compared with the regulating price of A, has fallen from 1 2/7 to 1. But 1 4 = 4 just as formerly 1 2/7 3 = 4.

Let us assume that a fourth and fifth additional investment of capital, amounting to 2 each, are made in B, which do no more than produce a quarter at its general price of production. The total product per acre would then be 6 quarters and their price of production 15. The average price of production per quarter for B would have risen again — from 2 [In the German 1894 edition this reads: 1. — Ed.] to 2 4/13 — and the surplus-profit per quarter, compared with the regulating price of production of A, would have dropped again — from 1 to 9/13. But these 9/13 would now have to be calculated upon the basis of 6 quarters instead of 4 quarters. And 9/13 6 = 1 4 = 4.

It follows from this, firstly, that no increase in the regulating price of production is necessary under these circumstances, in order to make possible additional investments of capital in the rent-bearing soil — even to the point where the additional capital completely ceases to produce surplus-profit and continues to yield only the average profit. It follows furthermore that the total surplus-profit per acre remains the same here, no matter how much surplus-profit per quarter may decrease; this decrease is always balanced by a corresponding increase in the number of quarters produced per acre. In order that the average price of production might reach the level of the general price of production (hence 3 for soil B), it is necessary that supplementary investments be made whose output has a higher price of production than the regulating one of 3. But we shall see that this alone does not suffice without further ado to raise the average price of production per quarter of B to the general price of production of 3.

Let us assume that soil B produced:

1) 3 quarters whose price of production is, as before, 6, i.e., two investments of capital amounting to 2 each both yielding surplus-profit, but of decreasing amount.

2) 1 quarter at 3, an investment of capital in which the individual price of production is equal to the regulating price of production.

3) 1 quarter at 4, an investment of capital in which the individual price of production is higher by 33% than the regulating price.

We should then have 5 quarters per acre for 13 with an investment of a capital of 10 7/10; this is four times the original invested capital, but not quite three times the output of the first investment of capital.

5 quarters at 13 gives an average price of production of 2 4/11 per quarter, i.e., an excess of 7/11 per quarter, assuming the regulating price of production of 3. This excess may be transformed into rent. 5 quarters sold at the regulating price of production of 3 yield 16. After deducting the production price of 13, a surplus-profit, or rent, of 3 remains, which, calculated at the present average price of production per quarter of B, that is, at 24/11 per quarter, represents 1 25/52 quarters. The money-rent would be lower by 1 and the grain-rent by about quarter, but in spite of the fact that the fourth additional investment of capital in B not only fails to yield surplus-profit, but yields less than the average profit, surplus-profit, and rent still continue to exist. Let us assume that, in addition to investment 3), investment 2) also produces at a price exceeding the regulating price of production. Then the total production is: 3 quarters for 6 + 2 quarters for 8; total 5 quarters for 14 production price. The average price of production per quarter would be 2 6/11 and would leave an excess of 5/11. The 5 quarters, sold at 3, give a total of 16; deducting the 14 production price leaves 2 for rent. At the present average price of production upon B, this would be equivalent to 55/56 of a quarter. In other words, rent is still yielded although less than before.

This shows, at any rate, that with additional investments of capital in the better soils whose output costs more than the regulating price of production the rent does not disappear — at least not within the bounds of admissible practice — although it must decrease. It will decrease in proportion, on the one hand, to the aliquot part formed by this less productive capital in the total investment of capital, and on the other hand, in proportion to the decrease in its productiveness. The average price of its produce would still lie below the regulating price and would thus still permit surplus-profit to be formed that could be transformed into rent.

Let us now assume that, as a result of four successive investments of capital (2, 2, 5 and 5) with decreasing productivity, the average price per quarter of B coincides with the general price of production.

Price of Production Surplus for Rent
Capital
Profit
Out-
put
Qrs
Per Qr
Total
Selling
Price
Pro-
ceeds
Qrs
1) 2 2 1 3 3 6 1 3
2) 2 1 2 3 3 4 1
3) 5 1 1 4 6 3 4 - -1
4) 5 1 1 6 6 3 3 -1 -3
15 3 6 18 18 0 0

The farmer, in this case, sells every quarter at its individual price of production, and consequently the total number of quarters at their average price of production per quarter, which coincides with the regulating price of 3. Hence he still makes a profit of 20% = 3 upon his capital of 15. But the rent is gone. What has become of the excess in this equalisation of the individual prices of production per quarter with the general price of production?

The surplus-profit from the first 2 was 3, from the second 2 it was 1; total surplus-profit from ⅓ of the invested capital, that is, from 5 = 4 = 90%.

In the case of investment 3), the 5 not only fails to yield surplus-profit, but its output of 1 quarters, sold at the general price of production, gives a deficit of 1. Finally, in the case of investment 4), which likewise amounts to 5 its output of I quarter, sold at the general price of production, gives a deficit of 3. Both investments of capital together thus give a deficit of 4, which is equal to the surplus-profit of 4, realised from investments 4) and 2).

The surplus-profit and deficit balance out. Therefore the rent disappears. In fact, this is possible only because the elements of surplus-value, which formed surplus-profit or rent, now enter into the formation of the average profit. The farmers makes this average profit of 3 on 15, or 20%, at the expense of the rent.

The equalisation of the individual average price of production of B to the general price of production of A, which regulates the market-price, presupposes that the difference of the individual price of the produce from the first investments of capital below the regulating price is more and more compensated and finally balanced out by the difference of the price of the produce from the subsequent investments of capital above the regulating price. What appears as surplus-profit, so long as the produce from the first investments of capital is sold by itself, thus gradually becomes part of its average price of production, and thereby enters into the formation of the average profit, until it is finally completely absorbed by it.

If only 5 are invested in B instead of 15 and the additional 2 quarters of the last table are produced by taking 2 new acres of A under cultivation with an investment of 2 per acre, then the additional invested capital would amount to only 6, i.e., the total investment in A and B for the production of these 6 quarters would be only 11, instead of 15, and their total price of production, including profit, 13. The 6 quarters would still be sold for 18, but the investment of capital would have decreased by 3, and the rent from B would be 4 per acre, as before. It would be different if the production of the additional 2 quarters required that a soil inferior to A, for instance, A-1 and A-2, be taken under cultivation; so that the price of production per quarter would be: for 1 quarters on soil A-1 = 4, and for the last quarter on soil A-2 = 6. In this case, 6 would be the regulating price of production per quarter. The 3 quarters from B would then be sold for 21 instead of 10, which would mean a rent of 15 instead of 4, or, a rent in grain of 2 quarters instead of 1 quarters. Similarly, a quarter on A would now yield a rent of 3 = quarter.

Before discussing this point further, another observation:

The average price of a quarter from B is equalised, i.e., coincides with the general production price of 3 per quarter, regulated by A, as soon as that portion of the total capital which produces the excess of 1 quarters is balanced by that portion of the total capital which produces the deficit of 1 quarters. How soon this equalisation is effected, or how much capital with under-productiveness must be invested in B for this purpose, will depend, assuming the surplus-productivity of the first investments of capital to be given, upon the relative under-productiveness of the later investments compared with an investment of the same amount in the worst, regulating soil A, or upon the individual price of production of their produce, compared with the regulating price.


The following conclusions can now be drawn from the foregoing:

First: So long as the additional capitals are invested in the same land with surplus-productivity, even if the surplus-productivity is decreasing, the absolute rent per acre in grain and money increases, although it decreases relatively, in proportion to the advanced capital (in other words, the rate of surplus-profit or rent). The limit is established here by that additional capital which yields only the average profit, or for whose produce the individual price of production coincides with the general price of production. The price of production remains the same under these circumstances, unless the production from the poorer soils becomes superfluous as a result of increased supply. Even when the price is falling, these additional capitals may within certain limits still produce surplus-profit, though less of it.

Secondly: The investment of additional capital yielding only the average profit, whose surplus-productivity therefore = 0, does not alter in any way the amount of the existing surplus-profit, and consequently of rent. The individual average price per quarter increases thereby upon the superior soils; the excess per quarter decreases, but the number of quarters which contain this decreased excess increases, so that the mathematical product remains the same.

Thirdly: Additional investments of capital, the produce of which has an individual price of production exceeding the regulating price — the surplus-productivity is therefore not merely = 0, but less than zero, or a negative quantity, that is, less than the productivity of an equal investment of capital in the regulating soil A — bring the individual average price of production of the total output from the superior soil closer and closer to the general price of production, i.e., reduce more and more the difference between them which constitutes the surplus-profit, or rent. An increasingly greater part of what constituted surplus-profit or rent enters into the formation of the average profit. But nevertheless, the total capital invested in an acre of B continues to yield surplus-profit, although the latter decreases as the amount of capital with under-productiveness increases and to the extent of this under-productiveness. The rent, with increasing capital and increasing production, in this case decreases absolutely per acre, not merely relatively with reference to the increasing magnitude of the invested capital, as in the second case.

The rent can be eliminated only when the individual average price of production of the total output from the better soil B coincides with the regulating price, so that the entire surplus-profit from the first more productive investments of capital is consumed in the formation of average profit.

The minimum limit of the drop in rent per acre is that point at which it disappears. But this point does not occur as soon as the additional investments of capital are under-productive, but rather as soon as the additional investment of under-productive capital becomes so large in magnitude that its effect is to cancel the over-productiveness of the first investments of capital, so that the productiveness of the total invested capital becomes the same as that of the capital invested in A, and the individual average price per quarter of B becomes therefore the same as that per quarter of A.

In this case too, the regulating price of production, 3 per quarter, would remain the same, although the rent had disappeared. Only beyond this point would the price of production have to rise in consequence of an increase either in the extent of under-productiveness of the additional capital or in the magnitude of the additional capital of equal under-productiveness. For instance, if, in the above table 2 quarters were produced instead of 1 quarters upon the same soil at 4 per quarter, we would have had a total of 7 quarters for 22 price of production; a quarter would have cost 3 1/7 it would thus be 1/7 above the general price of production, and the latter would therefore have to rise.

For a long time, then, additional capital with under-productiveness, or even increasing under- productiveness, might be invested until the individual average price per quarter from the best soils became equal to the general price of production, until the excess of the latter over the former — and thereby the surplus-profit and the rent — entirely disappeared.

And even then, the disappearance of rent from the better soils would only signify that the individual average price of their produce coincides with the general price of production, so that an increase in the latter would not yet be required.

In the above illustration, upon better soil B — which is however the lowest in the sequence of better or rent-bearing soils — 3 quarters were produced by a capital of 5 with surplus-productiveness and 2 quarters by a capital of 10 with under-productiveness, i.e., a total of 6 quarters; 5 of this total is thus produced by the latter portions of capital with under-productiveness. And it is only at this point that the individual average price of production of the 6 quarters rises to 3 per quarter and thus coincides with the general price of production.

Under the law of landed property, however, the latter 2 quarters could not have been produced in this way at 3 per quarter, except when they could be produced upon 2 new acres of soil A. The case in which the additional capital produces only at the general price of production, would have constituted the limit. Beyond this point, the additional investment of capital in the same land would have had to cease.

Indeed, if, the farmer once pays 4 rent for the first two investments of capital, he must continue to pay it, and every investment of capital which produced a quarter for more than 3 [In the German 1894 edition this reads: for less than 3. — Ed.] would result in a deduction from his profit. The equalisation of the individual average price, in the case of under-productiveness, is thereby prevented.

Let us take this case in the previous illustration, where the price of production for soil A, 3 per quarter, regulates the price for B.

Selling Price
Capital
Profit
Price of
Production
Output
Qrs
Price of
Production
per Qr
Per Qr
Total
Surplus-
Profit
Loss
2 3 2 1 3 6 3
2 3 1 2 3 4 1
5 1 6 1 4* 3 4 1
5 1 6 1 6 3 3 3
15 3 18 18 4 4

[* In the German 1894 edition this reads: 3. — Ed.]

The price of production for the 3 quarters in the first two investments of capital is likewise 3 per quarter for the farmer, since he has to pay a rent of 4; thus the difference between his individual price of production and the general price of production is not pocketed by him. For him, then, the excess in produce price for the first two investments of capital cannot serve to balance out the deficit incurred by the produce in the third and fourth investments of capital.

The 1 quarters from investment 3 cost the farmer 6, profit included: but at the regulating price of 3 per quarter, he can sell them for only 4. In other words, he would not only lose his whole profit, but &#163, or 10% of his invested capital of 5, over and above it. The loss of profit and capital in the case of investment 3 would amount to 4, and in the case of investment 4 to 3, i.e., a total of 4, or just as much as the rent from the better investments of capital; the individual price of production for the latter, however, cannot take part in equalising the individual average price of production of the total product from B, because the excess is paid out as rent to a third party.

If it were necessary, to meet the demand, to produce the additional 1 quarters by the third investment of capital the regulating market-price would have to rise to 4 per quarter. In consequence of this rise in the regulating market-price, the rent from B would rise for the first and second investments, and rent would he formed upon A.

Thus although differential rent is but a formal transformation of surplus-profit into rent, and property in land merely enables the owner in this case to transfer the surplus-profit of the farmer to himself, we find nevertheless that successive investment of capital in the same land, or, what amounts to the same thing, the increase in capital invested in the same land, reaches its limit far more rapidly when the rate of productiveness of the capital decreases and the regulating price remains the same; in fact a more or less artificial barrier is reached as a consequence of the mere formal transformation of surplus-profit into ground-rent, which is the result of landed property. The rise in the general price of production, which becomes necessary here within more narrow limits than otherwise, is in this case not merely the cause of the increase in differential rent, but the existence of differential rent as rent is at the same time the reason for the earlier and more rapid rise in the general price of production — in order to ensure thereby the increased supply of produce that has become necessary.

The following should furthermore be noted:

By an additional investment of capital in soil B, the regulating price could not, as above, rise to 4 if soil A were to supply the additional produce below 4 by a second investment of capital, or if new and worse soil than A, whose price of production were indeed higher than 3 but lower than 4, were to enter into competition. We see, then, that differential rent I and differential rent II, while the first is the basis of the second, serve simultaneously as limits for one another, whereby now a successive investment of capital in the same land, now an investment of capital side by side in new additional land, is made. In like manner they limit each other in other cases; for instance, when better soil is taken up.