A rising price of production presupposes that productivity falls on the poorest land — the land that pays no rent. The production price we treat as the governing one can go above £3 per qr only in one of three cases: the £2 1/2 put into A yields less than 1 qr, or the £5 yields less than 2 qrs, or a soil even worse than A has to be brought into cultivation.
If the second capital investment's productivity stays the same or even rises, this would be possible only if the productivity of the first investment of £2 1/2 had fallen. That case comes up often enough. Shallow ploughing, say: the used-up topsoil gives smaller and smaller yields under the old way of farming, and then deeper ploughing throws up subsoil which, farmed properly, yields more than before. Strictly speaking, though, this special case does not belong here. When the first investment of £2 1/2 falls off in productivity, the better soils see differential rent I fall too — even if we assume things there run the same way. Here, though, we are looking only at differential rent II. But we give an example of it anyway, because this case cannot occur unless differential rent II is already assumed to exist, and because it really is a change in differential rent I working back on differential rent II.
The money rent and the money yield are the same as in Table II. The governing production price has risen, and it exactly replaces what the output lost in quantity; and since the two vary in inverse proportion, it is obvious that price multiplied by quantity stays the same.
In the case above, the assumption was that the second capital investment was more productive than the first investment originally was. The result comes out the same if we give the second investment only the productivity that the first had at the start, as in the table below.
Here too, the production price rises in the same proportion, and this fully makes up for the fall in productivity — for the money yield and for the money rent alike.
The third case comes out in its pure form only when the second capital investment's productivity falls, while the first investment keeps producing exactly as before — the same assumption that was in force everywhere in the first and second cases. In that setup differential rent I is not touched at all. The change happens only in the share that comes from differential rent II. We give two examples: suppose the second investment's productivity cut to a half in the first, and to a quarter in the second.
Table IX is the same as Table VIII, with one difference: in VIII the fall in productivity lands on the first capital investment, and in IX it lands on the second.
In this table too, the total yield, the money rental and the rate of rent stay the same as in Tables II, VII and VIII. The reason: once again the product and the sale price varied in inverse proportion, while the capital investment stayed the same.
But how do things stand in the other case in which a rising price of production is possible — namely, if an inferior soil that had not been worth cultivating now comes into cultivation?
Suppose a soil like that — we will call it a — comes into competition. Then soil A, which has borne no rent up to now, would yield a rent, and Tables VII, VIII and X above would take on the following shape:
Bringing soil a into the picture creates a new differential rent I, and on this new basis differential rent II then develops too, in a changed form.
Soil a is fertile to a different degree in each of the three tables above. The run of fertilities that rise in proportion starts only at A, and the run of rising rents behaves accordingly.
The rent of the worst soil that carries rent, which carried none before, forms a constant. That constant is simply added on to every higher rent. Only once it is taken off do the differences among the higher rents come out clearly, and with them the way those differences run parallel to the fertility series of the soil types.
In all the tables the fertilities from A to D stand as 1 : 2 : 3 : 4, and the rents correspond, as follows:
In VIIa: 1 : 1 + 7 : 1 + 2 x 7 : 1 + 3 x 7; in VIIIa: 1 1/5 : 1 1/5 + 7 1/5 : 1 1/5 + 2 x 7 1/5 : 1 1/5 + 3 x 7 1/5; in Xa: 2/3 : 2/3 + 6 2/3 : 2/3 + 2 x 6 2/3 : 2/3 + 3 x 6 2/3.
In short: if the rent of A is n, and the rent of the soil of the next higher fertility is n + m, then the series runs n : n + m : n + 2m : n + 3m, and so on. — F. E.
The third case above was never worked out in the manuscript — only its title stands there — so it stayed the editor's job to fill it in as best he could, as the pages above have done. But something else is left to him too: to draw the general conclusions that follow from the whole investigation of differential rent II, across its three main cases and its nine sub-cases. For that purpose, though, the examples the manuscript gives fit only poorly. First, they compare pieces of land whose yields over equal areas stand in the ratio 1 : 2 : 3 : 4. Those differences exaggerate heavily from the outset, and as assumptions and calculations are built on that basis they lead to thoroughly forced numerical ratios. Second, they create a completely false appearance: when fertility grades in the ratio 1 : 2 : 3 : 4 etc. give rents in the series 0 : 1 : 2 : 3 etc., one immediately feels tempted to derive the second series from the first, and to explain the doubling, trebling and so on of the rents by the doubling, trebling and so on of the total yields. But that would be completely wrong. Rents behave as 0 : 1 : 2 : 3 : 4 even when the fertility grades behave as n : n + 1 : n + 2 : n + 3 : n + 4. Rents do not behave as the fertility grades do; they behave as the fertility differences do, counted from the rentless soil as the zero point.
The tables of the original had to be given, to explain the text. But so that the results of the investigation that follow below have a basis you can picture, I give in what follows a new series of tables, in which yields are given in bushels (1/8 quarter, or 36.35 litres) and shillings (= marks).
Table XI is the counterpart of the old Table I. For five grades of soil, A to E, it sets out the output and the rents, taking a first outlay of capital of 50s. per acre; add 10s. profit, and the total production costs come to 60s. per acre. The corn yields are set low: 10, 12, 14, 16, 18 bushels per acre. The governing production price that follows from this is 6s. per bushel.
The thirteen tables that come next cover the three cases of differential rent II that this chapter and the two before it have been dealing with. Each puts another 50s. of capital per acre onto the same land, and each runs under a production price that holds steady, falls, or rises. Inside every one of these cases the table is worked out again for the three ways the second investment of capital can go compared with the first: (1) its productivity stays the same, (2) it falls, (3) it rises. Some variants come out of this that still need illustrating on their own.
Case I: price of production constant, we have:
Variant 1: Productivity of the second capital investment stays the same (Table XII).
Variant 2: falling productivity. This can happen only if land A receives no second investment. And it does so in one of two ways: (a) land B, too, brings in no rent (Table XIII); or (b) land B does not end up wholly rentless (Table XIV).
Variant 3: Rising productivity (Table XV). This case, too, rules out a second capital investment on land A.
Case II: production price falling, we have:
Variant 1: Productivity of the second investment stays the same (Table XVI).
Variant 2: Falling productivity (Table XVII). Both of these variants mean that land A drops out of competition, land B becomes rentless, and land B governs the production price.
Variant 3: Rising productivity (Table XVIII). Here land A stays the one that governs.
Case III: production price rising, two modalities are possible. Land A can stay rentless and keep governing the price, or else a quality of land inferior to A comes into competition and governs the price — and land A then yields rent.
First modality: land A stays governing.
Variant 1: Productivity of the second investment stays the same (Table XIX). Under the assumptions, this is admissible only if the productivity of the first investment declines.
Variant 2: Falling productivity of the second investment (Table XX); this does not rule out the productivity of the first investment staying the same.
Variant 3: Rising productivity of the second investment (Table XXI); this in turn presupposes a falling productivity of the first investment.
Second modality: an inferior quality of land (denoted by a) comes into competition; land A yields rent.
Variant 1: Productivity of the second investment stays the same (Table XXII).
Variant 2: Falling productivity (Table XXIII).
Variant 3: Rising productivity (Table XXIV).
These three variants go forward under the general conditions of the problem and give no occasion for any special remarks.
The tables now follow.
For the second capital investment on the same land.
First case: with the price of production remaining constant.
Variant 1: with the productivity of the second capital investment remaining constant.
Variant 2: with the productivity of the second capital investment falling, and no second investment on land A.
(a) When land B stops bearing rent.
(b) When land B does not entirely stop bearing rent.
Variant 3: with the productivity of the second capital investment rising, and here too no second investment on land A.
Second case: the price of production falls.
Variant 1: the productivity of the second capital investment stays the same. Land A drops out of competition, and land B ceases to bear rent.
Variant 2: the productivity of the second capital investment falls; land A drops out of competition, and land B ceases to bear rent.
Variant 3: the productivity of the second capital investment rises; land A stays in competition. Land B bears rent.
Third case. The price of production rises.
A. First modality: if land A remains rentless and governs the price.
Variant 1. The productivity of the second capital investment is unchanged — and that requires the productivity of the first investment to fall.
Variant 2. The productivity of the second capital investment falls — which does not rule out the productivity of the first investment staying the same.
Variant 3. The productivity of the second capital investment rises — which, under the assumptions made, requires the productivity of the first investment to fall.
B. Second modality. If a worse soil, called a, becomes the one that governs the price, and land A therefore yields rent. This allows the productivity of the second investment to stay the same in all the variants.
Variant 1. The productivity of the second investment remains the same.
Variant 2. The productivity of the second investment falls.
Variant 3. The productivity of the second investment rises.
Here, now, is what these tables show.
First: the rents run in exactly the same proportion as the differences in fertility, taking the rentless soil that governs price as the zero point. Rent is settled not by absolute yields but only by the differences between yields. Whether the different soils give 1, 2, 3, 4, 5 bushels per acre or 11, 12, 13, 14, 15 bushels, the rents in both cases are 0, 1, 2, 3, 4 bushels in that order, or the money they fetch.
What matters far more, though, is what comes out for the total rent taken in when capital is put into the same soil more than once.
In five of the thirteen cases examined, the total rent doubles along with the capital invested: instead of 10 × 12s. it becomes 10 × 24s. = 240s. These cases are:
Case I, constant price, variant 1: constant rise in production (Table XII).
Case II, falling price, variant 3: increasing rise in production (Table XVIII).
Case III, rising price, first modality, where land A continues to govern price, in all three variants (Tables XIX, XX, XXI).
In four of the cases the rent rises to more than twice what the first capital investment yielded. These are:
Case I, variant 3: the price stays constant, but production rises by a growing amount (Table XV). The rent total comes to 330s.
Case III, second modality: here it is land A itself that yields rent, and it does so in all three variants. Table XXII: rent = 15 × 30 = 450s.; Table XXIII: rent = 5 × 20 + 10 × 28 = 380s.; Table XXIV: rent = 5 × 15 + 15 × 33 3/4 = 581 1/4s.
In one case the rent rises, but not to twice the amount that the first capital investment yielded:
Case I, constant price, variant 2: falling productivity of the second investment, under conditions in which B does not become completely rentless (Table XIV, rent = 4 × 6 + 6 × 21 = 150s.).
Finally, in only three cases does the total rent with a second capital investment, across all the soils together, stay at the same level as with the first investment (Table XI); these are the cases where land A is put out of competition and land B becomes price-governing and therefore rentless. B's rent does not simply drop away; it is also subtracted from every later member of the rent series, and that is what shapes the result. These cases are:
Case I, variant 2, where the conditions are such that land A drops out (Table XIII). The rent total is 6 × 20, i.e. = 10 × 12 = 120s., as in Table XI.
Case II, variants 1 and 2. Here, given the assumptions, land A necessarily drops out (Tables XVI and XVII), and the rent total is again 6 × 20 = 10 × 12 = 120s.
This means: in the great majority of all possible cases, rent rises — both per acre of rent-bearing land and, above all, in its total — because more capital has been invested in the soil. Only 3 of the thirteen cases examined leave the total unchanged. They are the cases where the lowest quality of soil, until then rentless and price-governing, leaves competition and the next higher quality steps into its place and so becomes rentless.
But even in these cases the rents on the best soils rise above those owed to the first capital investment; if the rent for C falls from 24 to 20, then those for D and E rise from 36 and 48 to 40 and 60s.
A total rent below the level of the first capital investment (Table XI) would be possible only if, besides land A, land B also left competition and land C became price-governing and rentless.
So the more capital is applied to the soil, and the higher the development of agriculture and of civilization in general in a country, the higher rents rise per acre and in total, and the more gigantic the tribute that society pays the great landowners in the form of surplus profits — as long as the types of soil once taken into cultivation all stay able to compete.
This law explains the amazing vitality of the class of large landowners. No other social class lives so extravagantly; no other class claims, as this one does, a right to a traditional luxury "befitting its station", no matter where the money for it comes from; no other piles debts on debts so light-heartedly. And yet it always lands on its feet — thanks to capital other people have put into the soil, which yields it rents quite out of proportion to the profits the capitalist draws from it.
But the same law also explains why this vitality of the large landowner gradually runs out.
When the English Corn Laws were repealed in 1846, English manufacturers thought they had turned the landowning aristocracy into paupers. Instead it became richer than ever before. How did that come about? Quite simply. First, from then on the farmers were contractually required to lay out £12 per acre a year instead of £8; and second, the landlords, who were very numerous even in the House of Commons, voted themselves a large state subsidy for draining and otherwise permanently improving their land. Since the worst land was not wholly driven out, but at most turned to other uses, and usually only for a time, rents rose in proportion to the increased capital investment, and the landed aristocracy was better off than ever before.
But nothing lasts. Steamships crossing the ocean, and the railways of North and South America and India, put some very peculiar stretches of land in a position to compete on the European corn markets. On one side there were the North American prairies and the Argentine pampas — steppes that nature itself had made ready for the plough, virgin soil that for years on end gave rich yields even under primitive farming and without fertilizer. And on the other side there were the lands of the Russian and Indian village communes, which had to sell part of their product, and a steadily growing part at that, to get money for the taxes that the merciless despotism of the state forced out of them — often enough by torture. What these products sold for had nothing to do with what they cost to produce: they went at the price the dealer offered, since the peasant had no choice at all — he needed money by the day the payment fell due. Against this competition — from virgin steppe soil and from Russian and Indian peasants crushed under the tax screw — the European farmer and peasant could not hold out at the old rents. Part of Europe's soil was driven for good out of competition in corn growing, rents fell everywhere, our second case, variant 2 — falling price and falling productivity of the additional capital investments — became the rule for Europe, and hence the agrarian lament from Scotland to Italy and from southern France to East Prussia. Fortunately, not all the steppe land has been taken into cultivation yet — far from it; enough still remains to ruin the whole of European large-scale landownership, and small-scale ownership into the bargain. — F. E.
These are the heads under which rent is to be treated:
A. Differential rent.
1. The concept of differential rent. Example of water-power. Transition to agricultural rent proper.
2. Differential rent I, arising from the varying fertility of different portions of land.
3. Differential rent II, arising from successive capital investments on the same land. Differential rent II is to be examined (a) with a stationary price of production, (b) with a falling price of production, (c) with a rising price of production. And further, (d) the transformation of surplus profit into rent.
4. Influence of this rent on the rate of profit.
B. Absolute rent.
C. The price of land.
D. Final considerations on ground-rent.
The overall result of looking at differential rent is this:
First: surplus profits can be formed along more than one route. One route is differential rent I — the whole agricultural capital laid out over a stretch of land that takes in soils of differing fertility. The other is differential rent II, resting on how the differential productivity of successive capital investments on the same soil varies; here the investment brings more, in quarters of wheat for instance, than the same capital investment achieves on the poorest soil, the rentless one that all the same governs the production price. However such surplus profits arise, before any of them can be turned into rent — that is, before the farmer hands it over to the landowner — one thing must always hold in advance: the several actual individual production prices that the partial products of the separate successive capital investments carry (actual in the sense of being independent of the general production price that governs the market) have first to be equalized into a single individual average production price. Rent per acre is then the excess of the general, governing production price of an acre's product over that acre's own individual average production price, and that excess measures the rent. Under differential rent I, the differential results can be told apart on their own account, since they arise on separate parts of the land lying outside and beside one another, with a capital outlay per acre assumed to be normal and the normal cultivation that goes with it. Under differential rent II, they have first to be made tellable apart — they really do have to be turned back into differential rent I — and this can happen only in the way just set out. Take Table III, for example.
Land B yields 2 qrs per acre for the first capital investment of £2 1/2, and 1 1/2 qrs for the second, equally large one; 3 1/2 qrs together on the same acre. Looking at these 3 1/2 qrs, all grown on the same soil, you cannot tell which part is the product of investment I and which of investment II. They are in fact the product of the whole capital of £5; the only real fact is that a capital of £2 1/2 produced 2 qrs, and one of £5 produced not 4 but 3 1/2. The case would be exactly the same if the £5 produced 4 qrs, so that the two investments' yields were equal, or even 5 qrs, so that the second investment would yield an excess of 1 qr.
The production price of the first 2 qrs is £1 1/2 per qr, and that of the second 1 1/2 qrs is £2 per qr. The 3 1/2 qrs together therefore cost £6. That is the individual production price of the total product, and comes to an average of £1 14 2/7 sh. per qr, say roughly £1 3/4. At the general production price of £3 set by land A, this gives a surplus profit of £1 1/4 per qr, and so for the 3 1/2 qrs a total of £4 3/8. At B's average production price this is represented by roughly 1 1/2 qrs. So B's surplus profit is represented in a proportional part of B's product, the 1 1/2 qrs that form the rent expressed in corn and that sell at the general production price for £4 1/2.
But the other way round, the extra product of an acre of B over an acre of A is not automatically a representation of surplus profit and hence of surplus product. On our assumption, acre B produces 3 1/2 qrs, acre A only 1 qr. So the excess product on B is 2 1/2 qrs, but the surplus product is only 1 1/2 qrs; for twice the capital is invested on B as on A, and so the production costs there are double. If £5 were also invested on A and the rate of productivity stayed the same, the product would be 2 qrs instead of 1, and this would show that the real surplus product is found by comparing not 3 1/2 and 1 but 3 1/2 and 2; that it is therefore not 2 1/2 but only 1 1/2 qrs.
Further, if B put in a third portion of capital of £2 1/2 that yielded only 1 qr, so that this qr cost £3, as on A, then its sale price of £3 would cover only the production costs, would yield only the average profit, but no surplus profit, and hence nothing that could be turned into rent. And the product per acre of any kind of soil, compared with the product per acre of soil A, shows neither whether it is the product of an equal capital investment or a greater one, nor whether the additional product merely covers the production price or is owed to higher productivity of the additional capital.
Second: when extra capital investments bring a falling rate of productivity, the limit — as far as the forming of new surplus profit goes — is the investment that only covers its production costs, that is, one that produces a quarter as expensively as the same investment on an acre of land A, hence £3 a quarter on our assumption. What follows from what has just been developed is that the total capital investment on B's acre would no longer form any rent only at the point where B's individual average production price of the product per acre would rise to A's production price per acre.
If B adds only investments that pay the production price — so they form no surplus profit and no new rent — then this does raise B's individual average production price per quarter, but it leaves untouched the surplus profit formed by the earlier investments, and the rent as the case may be. For the average production price always stays below A's; and when the excess price per quarter falls, the number of quarters rises in the same proportion, so the total excess price stays constant.
In the case we have assumed, B's first two investments come to £5 and produce 3 1/2 qrs, which on our assumption is 1 1/2 qrs of rent = £4 1/2. Now a third investment of £2 1/2 is added, producing only one extra quarter. The total production price of the 4 1/2 qrs (20 per cent profit included) is then £9, so the average price per quarter is £2.
The average production price per quarter on B has thus risen from £1 5/7 to £2, and the surplus profit per quarter, measured against A's governing price, has fallen from £1 2/7 to £1. But £1 × 4 1/2 = £4 1/2, exactly as before £1 2/7 × 3 1/2 = £4 1/2.
Suppose a fourth and a fifth extra investment of £2 1/2 each were also made on B, each producing its quarter only at the general production price. The total product per acre would then be 6 1/2 qrs, and its production costs £15. The average production price per quarter for B would have risen again, from £2 to £2 4/13, and the surplus profit per quarter, measured against A's governing production price, would have fallen again, from £1 to £9/13. But this £9/13 would now be reckoned on 6 1/2 quarters instead of 4 1/2. And 9/13 × 6 1/2 = £1 × 4 1/2 = £4 1/2.
From this it follows, first, that under these conditions no increase in the governing production price is needed to make extra investments on the rent-bearing types of land possible — even down to the point where the additional capital stops yielding surplus profit altogether and brings in only the average profit.
It follows further that here the total surplus profit per acre stays the same, however far the surplus profit per quarter may fall; that fall is always offset by a matching increase in the quarters produced per acre.
For B's average production price to rise to the general production price — that is, to climb to £3 here — capital would have to be added whose product has a higher production price than the governing £3. But we shall see that even this is not by itself enough to drive B's average production price per quarter up to the general production price of £3.
Suppose production on land B had been as follows:
1. 3 1/2 qrs, just as before, with a production price of £6. That is two capital investments, £2 1/2 each, and each one forms surplus profit — though the surplus profit keeps shrinking.
2. 1 qr at £3 — a capital investment whose individual production price would be equal to the governing production price.
3. 1 qr at £4 — a capital investment whose individual production price is 33 1/3 per cent higher than the governing price.
The acre would then carry 5 1/2 qrs, their production price £13, on a capital outlay of £10 7/10. That is four times the capital first laid out — and yet the product is not yet three times what the first outlay produced.
Take the 5 1/2 qrs at £13. That works out to an average production price for B of £2 4/11 per qr. Against the governing production price of £3 this leaves an excess of £7/11 per qr, and that excess can be turned into rent. Sell the 5 1/2 qrs at the governing price of £3 and £16 1/2 comes in. The production costs are £13; what is left over is £3 1/2, surplus profit or rent.
At B's present average production price of £2 4/11 per qr, that £3 1/2 stands for 1 25/52 qrs. The money rent would have fallen by £1 and the corn rent by about 1/2 qr. But the fourth additional capital investment on B produces no surplus profit at all — it produces less than the average profit — and even so, surplus profit and rent are still there.
Now suppose that not only the capital investment listed under item 3, but the one under item 2 as well, produces above the governing production price. Total production is then 3 1/2 qrs at £6 plus 2 qrs at £8, altogether 5 1/2 qrs at £14 of production costs. The average production price per qr would be £2 6/11 and would leave an excess of £5/11. Sell the 5 1/2 qrs at £3 and you get £16 1/2; subtract the £14 of production costs and £2 1/2 is left for rent. At B's present average production price, that would be 55/56 qrs. So rent still accrues — less than before, but it still accrues.
At any rate this shows us that on the better lands, when extra capital investments are put in whose product costs more than the governing production price, the rent does not vanish — at least within the limits of permissible practice. It only has to decline. And it declines in proportion to two things: the share of the whole capital outlay that this less fruitful capital makes up, and the drop in its productivity.
The average price of the whole product grown on that land would still lie below the governing price, and so would still leave a surplus profit that can be turned into rent.
Now suppose that the average price of a quarter on B comes out the same as the general production price. That comes about through four investments of capital made one after another on B — £2 1/2, £2 1/2, £5 and £5 — each less productive than the one before it.
Here the farmer sells every quarter at its own individual production price, and so the whole number of quarters at their average production price per quarter — which is the same as the £3 that governs the price. So he still makes 20 per cent on his capital of £15, that is £3. But the rent has disappeared. Where has the surplus gone, in this evening-out of each quarter's individual production price with the general production price?
The first £2 1/2 yielded £3 of surplus profit, the second £2 1/2 yielded £1 1/2. On the £5 that these two together make up — one third of the capital advanced — the surplus profit comes to £4 1/2, which is 90 per cent.
With the third investment, the £5 brings no surplus profit at all, and its product of 1 1/2 qrs, sold at the general production price, shows a deficit of £1 1/2. Finally, with the fourth investment, also of £5, its product of 1 qr, sold at the general production price, shows a deficit of £3. Both investments together therefore come to a deficit of £4 1/2 — the same as the £4 1/2 of surplus profit that the first and second investments brought in.
On one side there are surplus profits, on the other losses of profit, and the two balance out. So the rent vanishes. In fact, however, this can happen only because the elements of surplus-value that formed surplus profit or rent now enter into the formation of average profit. The farmer's average profit here is £3 on £15, or 20 per cent, and he makes it at the rent's expense.
For B's individual average production price to even out with the general production price of A — the one that governs the market price — the gap by which the individual price of the earlier investments' product sits below the governing price has to be offset more and more, and finally cancelled, by the gap by which the later investments' product comes to sit above the governing price. What shows up as surplus profit as long as the earlier investments' product is sold on its own thus bit by bit becomes part of their average production price, and so enters the formation of the average profit, until at last the average profit swallows it whole.
If, instead of laying £15 of capital on B, only £5 is laid on B, and the extra 2 1/2 qrs of the last table are produced by farming 2 1/2 new acres of A with £2 1/2 of capital per acre, then the extra capital laid out would be only £6 1/4, so the whole outlay on A and B to produce these 6 qrs would be only £11 1/4 instead of £15, and their total production costs including profit £13 1/2. The 6 qrs would still all sell for £18; but the capital laid out would have fallen by £3 3/4, and the rent on B would come to £4 1/2 per acre, as before.
It would be a different story if, to produce the extra 2 1/2 qrs, recourse had to be had to worse soil than A, to A-1 and A-2, so that the production price per qr came to £4 for 1 1/2 qrs on A-1 and £6 for the last qr on A-2. In that case £6 would be the governing production price per qr. B's 3 1/2 qrs would sell for £21 instead of £10 1/2, which would give a rent of £15 instead of £4 1/2, and in corn 2 1/2 qrs instead of 1 1/2 qrs. In the same way, on A the one quarter would now carry a rent of £3 = 1/2 qr.
Before we go further into this point, one more remark.
B's average price per quarter levels out and comes to coincide with the general production price of £3 per qr. governed by A, as soon as the part of the total capital that turns out the excess 1 1/2 qrs is counterbalanced by the part of the total capital that turns out the 1 1/2 qrs falling short. How soon this equalization is reached, or how much capital of deficient productivity must be invested in B to bring it about, depends — with the surplus productivity of the first investments taken as given — on the relative underproductivity of the capital invested later, compared with an equally large investment on the poorest price-governing land A, or on the individual production price of its product compared with the governing price.
To start with, this follows from everything that has come before.
First. So long as extra capitals are laid out on the same soil with surplus productivity — even a shrinking one — the absolute corn rent and money rent per acre grow, while relatively, measured against the capital advanced (that is, as the rate of surplus profit or of rent), they fall.
The limit here is set by that extra capital which yields only the average profit, or whose product carries an individual production price equal to the general one.
Under these circumstances the production price stays the same, unless the increased supply makes production from the poorer types of soil superfluous. Even with a falling price, these extra capitals can still produce a surplus profit, even if a smaller one, within certain limits.
Second. Laying out extra capital that produces only the average profit — whose surplus productivity is therefore zero — changes nothing in the amount of surplus profit formed, and so nothing in the rent. It does make the individual average price per quarter rise on the better soils. The excess per quarter shrinks, but the number of quarters carrying that smaller excess grows, so the two together give the same product as before.
Third. Extra capital investments whose product has an individual production price above the governing price — where surplus productivity is not merely zero but less than zero, a minus, that is, less than the productivity of the same capital laid out on the governing soil A — bring the individual average price of the better soil's total product ever closer to the general production price. So they keep shrinking the difference between the two, and that difference is what forms the surplus profit, or the rent. More and more of what formed surplus profit or rent goes into forming the average profit.
Yet even so, the total capital laid out on an acre of B goes on yielding surplus profit — though a shrinking one, as the mass of underproductive capital grows and as that underproductivity deepens.
Here the rent falls absolutely per acre, as capital grows and production increases; it does not, as in the second case, fall only relatively, against the growing size of the capital invested.
Rent can be extinguished on one condition only: the individual average production price of the whole product grown on the better soil B has to meet the governing price — which means the entire surplus profit from the first, more productive capital investments has been used up in forming the average profit.
The rent per acre can fall, but it has a floor: the point where it disappears. That point is not reached as soon as extra capital put into the land starts producing with deficient productivity. It comes only when the deficiently productive part of that extra capital grows so large that its effect cancels out the surplus productivity of the first investments, the whole capital invested becomes as productive as the capital on A, and the individual average price per quarter on B therefore equals the price per quarter on A.
Even then, the governing price of production would remain the same — £3 per quarter — although the rent would have vanished. Only past that point would the production price have to rise, because of an increase either in the degree of deficient productivity of the extra capital, or in the amount of extra capital at the same deficient productivity. Suppose, for instance, that in the table above 2 1/2 quarters were produced at £4 per quarter on the same soil instead of 1 1/2: we would then have 7 quarters in all for £22 in production costs. A quarter would cost £3 1/7, so it would stand 1/7 above the general production price, which would then have to rise.
So extra capital could go on being applied with deficient productivity — and even with productivity falling further and further — for a long time, until the individual average price per quarter on the best lands came to equal the general production price, and until the excess of the latter over the former, and with it surplus profit and rent, had completely disappeared.
And even in that case, when rent on the better types of soil is wiped out, the individual average price of their product would only then coincide with the general production price; so no rise in that general price would yet be required.
In the example above, on the better soil B — which is still the lowest in the series of better, rent-bearing types of soil — 3 1/2 quarters were produced by a capital of £5 with surplus productivity, and 2 1/2 quarters by a capital of £10 with deficient productivity. That is 6 quarters in all, so 5/12 of them came from the portions of capital applied with deficient productivity. And only at this point does the individual average production price of the 6 quarters rise to £3 per quarter, coinciding with the general production price.
But under the law of landed property, those last 2 1/2 qrs could not have been produced that way at £3 a quarter. The one exception would be if they could be produced on 2 1/2 new acres of type A land. A capital investment that produced only at the general production price would have set the limit; past that point, any further capital put into the same land would have had to stop.
Once the farmer owes £4 1/2 in rent for the first two capital investments, he has to keep paying it. And any further capital investment that produces its quarter less productively would take part of his profit out of his pocket. What blocks the individual average price from being evened out is that fixed rent he must go on paying, and it does so when productivity falls short.
Let us take this case in the earlier example, where £3 per qr, the production price on land A, is what governs the price for B.
For the farmer, the production costs of the 3 1/2 qrs from the first two capital investments also come to £3 a quarter. That is because he owes £4 1/2 in rent: the difference between his own production price and the general production price does not go into his pocket. So for him the surplus in the price of what the first two investments produce cannot be used to make up the shortfall on what the third and fourth investments produce.
The 1 1/2 qrs from capital investment (3) cost the farmer £6, profit included; but at the £3 a quarter that governs the market he can sell them for only £4 1/2. So he would lose his whole profit and £1/2 on top of that — 10 per cent of the £5 of capital he put in. His loss of profit and capital would be £1 1/2 on the third investment and £3 on the fourth, making £4 1/2 in all — exactly what the rent on the better capital investments comes to. And the individual production price of those better investments cannot go into the individual average production price of B's whole product as a balancing item, because their surplus is paid away as rent to a third party.
If the need were there for the extra 1 1/2 qrs to be produced by the third capital investment, the governing market price would have to rise to £4 a quarter. That rise would push up B's rent on the first and second capital investments, and a rent would form on A.
So although differential rent is nothing but the formal transformation of surplus profit into rent — landed property here only enables the owner to shift the farmer's surplus profit over to himself — it still turns out that piling capital onto the same stretch of land, which is the same thing as increasing the capital invested there, finds its limit much sooner when the productivity of capital is falling and the governing price stays the same. In fact it runs into a more or less artificial barrier, and that barrier comes from the merely formal transformation of surplus profit into ground-rent, which is what landed property brings about. The rise in the general production price, which becomes necessary here at a narrower limit than would otherwise be needed, is therefore not just the reason the differential rent rises: the existence of differential rent as rent is at the same time a reason the general production price rises earlier and faster, so as to secure, in that way, the supply of the increased product that has become necessary.
There is a further point to note:
The governing price could not, as in the case above, rise to £4 through extra capital on land B, if land A were to supply the extra product from a second capital investment for under £4, or if newer, worse land than A came into competition, land whose production price would be above £3 but under £4. So one sees how differential rent I and differential rent II, while the first is the basis of the second, at the same time set limits to each other, and this mutual limiting is what makes capital go at one time in successive investments onto the same stretch of land, at another time side by side onto new additional land. They limit each other in other cases too, for example where better land comes into use.
A rising price of production presupposes that productivity falls on the poorest land — the land that pays no rent. The production price we treat as the governing one can go above £3 per qr only in one of three cases: the £2 1/2 put into A yields less than 1 qr, or the £5 yields less than 2 qrs, or a soil even worse than A has to be brought into cultivation.
If the second capital investment's productivity stays the same or even rises, this would be possible only if the productivity of the first investment of £2 1/2 had fallen. That case comes up often enough. Shallow ploughing, say: the used-up topsoil gives smaller and smaller yields under the old way of farming, and then deeper ploughing throws up subsoil which, farmed properly, yields more than before. Strictly speaking, though, this special case does not belong here. When the first investment of £2 1/2 falls off in productivity, the better soils see differential rent I fall too — even if we assume things there run the same way. Here, though, we are looking only at differential rent II. But we give an example of it anyway, because this case cannot occur unless differential rent II is already assumed to exist, and because it really is a change in differential rent I working back on differential rent II.
The money rent and the money yield are the same as in Table II. The governing production price has risen, and it exactly replaces what the output lost in quantity; and since the two vary in inverse proportion, it is obvious that price multiplied by quantity stays the same.
In the case above, the assumption was that the second capital investment was more productive than the first investment originally was. The result comes out the same if we give the second investment only the productivity that the first had at the start, as in the table below.
Here too, the production price rises in the same proportion, and this fully makes up for the fall in productivity — for the money yield and for the money rent alike.
The third case comes out in its pure form only when the second capital investment's productivity falls, while the first investment keeps producing exactly as before — the same assumption that was in force everywhere in the first and second cases. In that setup differential rent I is not touched at all. The change happens only in the share that comes from differential rent II. We give two examples: suppose the second investment's productivity cut to a half in the first, and to a quarter in the second.
Table IX is the same as Table VIII, with one difference: in VIII the fall in productivity lands on the first capital investment, and in IX it lands on the second.
In this table too, the total yield, the money rental and the rate of rent stay the same as in Tables II, VII and VIII. The reason: once again the product and the sale price varied in inverse proportion, while the capital investment stayed the same.
But how do things stand in the other case in which a rising price of production is possible — namely, if an inferior soil that had not been worth cultivating now comes into cultivation?
Suppose a soil like that — we will call it a — comes into competition. Then soil A, which has borne no rent up to now, would yield a rent, and Tables VII, VIII and X above would take on the following shape:
Bringing soil a into the picture creates a new differential rent I, and on this new basis differential rent II then develops too, in a changed form.
Soil a is fertile to a different degree in each of the three tables above. The run of fertilities that rise in proportion starts only at A, and the run of rising rents behaves accordingly.
The rent of the worst soil that carries rent, which carried none before, forms a constant. That constant is simply added on to every higher rent. Only once it is taken off do the differences among the higher rents come out clearly, and with them the way those differences run parallel to the fertility series of the soil types.
In all the tables the fertilities from A to D stand as 1 : 2 : 3 : 4, and the rents correspond, as follows:
In VIIa: 1 : 1 + 7 : 1 + 2 x 7 : 1 + 3 x 7; in VIIIa: 1 1/5 : 1 1/5 + 7 1/5 : 1 1/5 + 2 x 7 1/5 : 1 1/5 + 3 x 7 1/5; in Xa: 2/3 : 2/3 + 6 2/3 : 2/3 + 2 x 6 2/3 : 2/3 + 3 x 6 2/3.
In short: if the rent of A is n, and the rent of the soil of the next higher fertility is n + m, then the series runs n : n + m : n + 2m : n + 3m, and so on. — F. E.
The third case above was never worked out in the manuscript — only its title stands there — so it stayed the editor's job to fill it in as best he could, as the pages above have done. But something else is left to him too: to draw the general conclusions that follow from the whole investigation of differential rent II, across its three main cases and its nine sub-cases. For that purpose, though, the examples the manuscript gives fit only poorly. First, they compare pieces of land whose yields over equal areas stand in the ratio 1 : 2 : 3 : 4. Those differences exaggerate heavily from the outset, and as assumptions and calculations are built on that basis they lead to thoroughly forced numerical ratios. Second, they create a completely false appearance: when fertility grades in the ratio 1 : 2 : 3 : 4 etc. give rents in the series 0 : 1 : 2 : 3 etc., one immediately feels tempted to derive the second series from the first, and to explain the doubling, trebling and so on of the rents by the doubling, trebling and so on of the total yields. But that would be completely wrong. Rents behave as 0 : 1 : 2 : 3 : 4 even when the fertility grades behave as n : n + 1 : n + 2 : n + 3 : n + 4. Rents do not behave as the fertility grades do; they behave as the fertility differences do, counted from the rentless soil as the zero point.
The tables of the original had to be given, to explain the text. But so that the results of the investigation that follow below have a basis you can picture, I give in what follows a new series of tables, in which yields are given in bushels (1/8 quarter, or 36.35 litres) and shillings (= marks).
Table XI is the counterpart of the old Table I. For five grades of soil, A to E, it sets out the output and the rents, taking a first outlay of capital of 50s. per acre; add 10s. profit, and the total production costs come to 60s. per acre. The corn yields are set low: 10, 12, 14, 16, 18 bushels per acre. The governing production price that follows from this is 6s. per bushel.
The thirteen tables that come next cover the three cases of differential rent II that this chapter and the two before it have been dealing with. Each puts another 50s. of capital per acre onto the same land, and each runs under a production price that holds steady, falls, or rises. Inside every one of these cases the table is worked out again for the three ways the second investment of capital can go compared with the first: (1) its productivity stays the same, (2) it falls, (3) it rises. Some variants come out of this that still need illustrating on their own.
Case I: price of production constant, we have:
Variant 1: Productivity of the second capital investment stays the same (Table XII).
Variant 2: falling productivity. This can happen only if land A receives no second investment. And it does so in one of two ways: (a) land B, too, brings in no rent (Table XIII); or (b) land B does not end up wholly rentless (Table XIV).
Variant 3: Rising productivity (Table XV). This case, too, rules out a second capital investment on land A.
Case II: production price falling, we have:
Variant 1: Productivity of the second investment stays the same (Table XVI).
Variant 2: Falling productivity (Table XVII). Both of these variants mean that land A drops out of competition, land B becomes rentless, and land B governs the production price.
Variant 3: Rising productivity (Table XVIII). Here land A stays the one that governs.
Case III: production price rising, two modalities are possible. Land A can stay rentless and keep governing the price, or else a quality of land inferior to A comes into competition and governs the price — and land A then yields rent.
First modality: land A stays governing.
Variant 1: Productivity of the second investment stays the same (Table XIX). Under the assumptions, this is admissible only if the productivity of the first investment declines.
Variant 2: Falling productivity of the second investment (Table XX); this does not rule out the productivity of the first investment staying the same.
Variant 3: Rising productivity of the second investment (Table XXI); this in turn presupposes a falling productivity of the first investment.
Second modality: an inferior quality of land (denoted by a) comes into competition; land A yields rent.
Variant 1: Productivity of the second investment stays the same (Table XXII).
Variant 2: Falling productivity (Table XXIII).
Variant 3: Rising productivity (Table XXIV).
These three variants go forward under the general conditions of the problem and give no occasion for any special remarks.
The tables now follow.
For the second capital investment on the same land.
First case: with the price of production remaining constant.
Variant 1: with the productivity of the second capital investment remaining constant.
Variant 2: with the productivity of the second capital investment falling, and no second investment on land A.
(a) When land B stops bearing rent.
(b) When land B does not entirely stop bearing rent.
Variant 3: with the productivity of the second capital investment rising, and here too no second investment on land A.
Second case: the price of production falls.
Variant 1: the productivity of the second capital investment stays the same. Land A drops out of competition, and land B ceases to bear rent.
Variant 2: the productivity of the second capital investment falls; land A drops out of competition, and land B ceases to bear rent.
Variant 3: the productivity of the second capital investment rises; land A stays in competition. Land B bears rent.
Third case. The price of production rises.
A. First modality: if land A remains rentless and governs the price.
Variant 1. The productivity of the second capital investment is unchanged — and that requires the productivity of the first investment to fall.
Variant 2. The productivity of the second capital investment falls — which does not rule out the productivity of the first investment staying the same.
Variant 3. The productivity of the second capital investment rises — which, under the assumptions made, requires the productivity of the first investment to fall.
B. Second modality. If a worse soil, called a, becomes the one that governs the price, and land A therefore yields rent. This allows the productivity of the second investment to stay the same in all the variants.
Variant 1. The productivity of the second investment remains the same.
Variant 2. The productivity of the second investment falls.
Variant 3. The productivity of the second investment rises.
Here, now, is what these tables show.
First: the rents run in exactly the same proportion as the differences in fertility, taking the rentless soil that governs price as the zero point. Rent is settled not by absolute yields but only by the differences between yields. Whether the different soils give 1, 2, 3, 4, 5 bushels per acre or 11, 12, 13, 14, 15 bushels, the rents in both cases are 0, 1, 2, 3, 4 bushels in that order, or the money they fetch.
What matters far more, though, is what comes out for the total rent taken in when capital is put into the same soil more than once.
In five of the thirteen cases examined, the total rent doubles along with the capital invested: instead of 10 × 12s. it becomes 10 × 24s. = 240s. These cases are:
Case I, constant price, variant 1: constant rise in production (Table XII).
Case II, falling price, variant 3: increasing rise in production (Table XVIII).
Case III, rising price, first modality, where land A continues to govern price, in all three variants (Tables XIX, XX, XXI).
In four of the cases the rent rises to more than twice what the first capital investment yielded. These are:
Case I, variant 3: the price stays constant, but production rises by a growing amount (Table XV). The rent total comes to 330s.
Case III, second modality: here it is land A itself that yields rent, and it does so in all three variants. Table XXII: rent = 15 × 30 = 450s.; Table XXIII: rent = 5 × 20 + 10 × 28 = 380s.; Table XXIV: rent = 5 × 15 + 15 × 33 3/4 = 581 1/4s.
In one case the rent rises, but not to twice the amount that the first capital investment yielded:
Case I, constant price, variant 2: falling productivity of the second investment, under conditions in which B does not become completely rentless (Table XIV, rent = 4 × 6 + 6 × 21 = 150s.).
Finally, in only three cases does the total rent with a second capital investment, across all the soils together, stay at the same level as with the first investment (Table XI); these are the cases where land A is put out of competition and land B becomes price-governing and therefore rentless. B's rent does not simply drop away; it is also subtracted from every later member of the rent series, and that is what shapes the result. These cases are:
Case I, variant 2, where the conditions are such that land A drops out (Table XIII). The rent total is 6 × 20, i.e. = 10 × 12 = 120s., as in Table XI.
Case II, variants 1 and 2. Here, given the assumptions, land A necessarily drops out (Tables XVI and XVII), and the rent total is again 6 × 20 = 10 × 12 = 120s.
This means: in the great majority of all possible cases, rent rises — both per acre of rent-bearing land and, above all, in its total — because more capital has been invested in the soil. Only 3 of the thirteen cases examined leave the total unchanged. They are the cases where the lowest quality of soil, until then rentless and price-governing, leaves competition and the next higher quality steps into its place and so becomes rentless.
But even in these cases the rents on the best soils rise above those owed to the first capital investment; if the rent for C falls from 24 to 20, then those for D and E rise from 36 and 48 to 40 and 60s.
A total rent below the level of the first capital investment (Table XI) would be possible only if, besides land A, land B also left competition and land C became price-governing and rentless.
So the more capital is applied to the soil, and the higher the development of agriculture and of civilization in general in a country, the higher rents rise per acre and in total, and the more gigantic the tribute that society pays the great landowners in the form of surplus profits — as long as the types of soil once taken into cultivation all stay able to compete.
This law explains the amazing vitality of the class of large landowners. No other social class lives so extravagantly; no other class claims, as this one does, a right to a traditional luxury "befitting its station", no matter where the money for it comes from; no other piles debts on debts so light-heartedly. And yet it always lands on its feet — thanks to capital other people have put into the soil, which yields it rents quite out of proportion to the profits the capitalist draws from it.
But the same law also explains why this vitality of the large landowner gradually runs out.
When the English Corn Laws were repealed in 1846, English manufacturers thought they had turned the landowning aristocracy into paupers. Instead it became richer than ever before. How did that come about? Quite simply. First, from then on the farmers were contractually required to lay out £12 per acre a year instead of £8; and second, the landlords, who were very numerous even in the House of Commons, voted themselves a large state subsidy for draining and otherwise permanently improving their land. Since the worst land was not wholly driven out, but at most turned to other uses, and usually only for a time, rents rose in proportion to the increased capital investment, and the landed aristocracy was better off than ever before.
But nothing lasts. Steamships crossing the ocean, and the railways of North and South America and India, put some very peculiar stretches of land in a position to compete on the European corn markets. On one side there were the North American prairies and the Argentine pampas — steppes that nature itself had made ready for the plough, virgin soil that for years on end gave rich yields even under primitive farming and without fertilizer. And on the other side there were the lands of the Russian and Indian village communes, which had to sell part of their product, and a steadily growing part at that, to get money for the taxes that the merciless despotism of the state forced out of them — often enough by torture. What these products sold for had nothing to do with what they cost to produce: they went at the price the dealer offered, since the peasant had no choice at all — he needed money by the day the payment fell due. Against this competition — from virgin steppe soil and from Russian and Indian peasants crushed under the tax screw — the European farmer and peasant could not hold out at the old rents. Part of Europe's soil was driven for good out of competition in corn growing, rents fell everywhere, our second case, variant 2 — falling price and falling productivity of the additional capital investments — became the rule for Europe, and hence the agrarian lament from Scotland to Italy and from southern France to East Prussia. Fortunately, not all the steppe land has been taken into cultivation yet — far from it; enough still remains to ruin the whole of European large-scale landownership, and small-scale ownership into the bargain. — F. E.
These are the heads under which rent is to be treated:
A. Differential rent.
1. The concept of differential rent. Example of water-power. Transition to agricultural rent proper.
2. Differential rent I, arising from the varying fertility of different portions of land.
3. Differential rent II, arising from successive capital investments on the same land. Differential rent II is to be examined (a) with a stationary price of production, (b) with a falling price of production, (c) with a rising price of production. And further, (d) the transformation of surplus profit into rent.
4. Influence of this rent on the rate of profit.
B. Absolute rent.
C. The price of land.
D. Final considerations on ground-rent.
The overall result of looking at differential rent is this:
First: surplus profits can be formed along more than one route. One route is differential rent I — the whole agricultural capital laid out over a stretch of land that takes in soils of differing fertility. The other is differential rent II, resting on how the differential productivity of successive capital investments on the same soil varies; here the investment brings more, in quarters of wheat for instance, than the same capital investment achieves on the poorest soil, the rentless one that all the same governs the production price. However such surplus profits arise, before any of them can be turned into rent — that is, before the farmer hands it over to the landowner — one thing must always hold in advance: the several actual individual production prices that the partial products of the separate successive capital investments carry (actual in the sense of being independent of the general production price that governs the market) have first to be equalized into a single individual average production price. Rent per acre is then the excess of the general, governing production price of an acre's product over that acre's own individual average production price, and that excess measures the rent. Under differential rent I, the differential results can be told apart on their own account, since they arise on separate parts of the land lying outside and beside one another, with a capital outlay per acre assumed to be normal and the normal cultivation that goes with it. Under differential rent II, they have first to be made tellable apart — they really do have to be turned back into differential rent I — and this can happen only in the way just set out. Take Table III, for example.
Land B yields 2 qrs per acre for the first capital investment of £2 1/2, and 1 1/2 qrs for the second, equally large one; 3 1/2 qrs together on the same acre. Looking at these 3 1/2 qrs, all grown on the same soil, you cannot tell which part is the product of investment I and which of investment II. They are in fact the product of the whole capital of £5; the only real fact is that a capital of £2 1/2 produced 2 qrs, and one of £5 produced not 4 but 3 1/2. The case would be exactly the same if the £5 produced 4 qrs, so that the two investments' yields were equal, or even 5 qrs, so that the second investment would yield an excess of 1 qr.
The production price of the first 2 qrs is £1 1/2 per qr, and that of the second 1 1/2 qrs is £2 per qr. The 3 1/2 qrs together therefore cost £6. That is the individual production price of the total product, and comes to an average of £1 14 2/7 sh. per qr, say roughly £1 3/4. At the general production price of £3 set by land A, this gives a surplus profit of £1 1/4 per qr, and so for the 3 1/2 qrs a total of £4 3/8. At B's average production price this is represented by roughly 1 1/2 qrs. So B's surplus profit is represented in a proportional part of B's product, the 1 1/2 qrs that form the rent expressed in corn and that sell at the general production price for £4 1/2.
But the other way round, the extra product of an acre of B over an acre of A is not automatically a representation of surplus profit and hence of surplus product. On our assumption, acre B produces 3 1/2 qrs, acre A only 1 qr. So the excess product on B is 2 1/2 qrs, but the surplus product is only 1 1/2 qrs; for twice the capital is invested on B as on A, and so the production costs there are double. If £5 were also invested on A and the rate of productivity stayed the same, the product would be 2 qrs instead of 1, and this would show that the real surplus product is found by comparing not 3 1/2 and 1 but 3 1/2 and 2; that it is therefore not 2 1/2 but only 1 1/2 qrs.
Further, if B put in a third portion of capital of £2 1/2 that yielded only 1 qr, so that this qr cost £3, as on A, then its sale price of £3 would cover only the production costs, would yield only the average profit, but no surplus profit, and hence nothing that could be turned into rent. And the product per acre of any kind of soil, compared with the product per acre of soil A, shows neither whether it is the product of an equal capital investment or a greater one, nor whether the additional product merely covers the production price or is owed to higher productivity of the additional capital.
Second: when extra capital investments bring a falling rate of productivity, the limit — as far as the forming of new surplus profit goes — is the investment that only covers its production costs, that is, one that produces a quarter as expensively as the same investment on an acre of land A, hence £3 a quarter on our assumption. What follows from what has just been developed is that the total capital investment on B's acre would no longer form any rent only at the point where B's individual average production price of the product per acre would rise to A's production price per acre.
If B adds only investments that pay the production price — so they form no surplus profit and no new rent — then this does raise B's individual average production price per quarter, but it leaves untouched the surplus profit formed by the earlier investments, and the rent as the case may be. For the average production price always stays below A's; and when the excess price per quarter falls, the number of quarters rises in the same proportion, so the total excess price stays constant.
In the case we have assumed, B's first two investments come to £5 and produce 3 1/2 qrs, which on our assumption is 1 1/2 qrs of rent = £4 1/2. Now a third investment of £2 1/2 is added, producing only one extra quarter. The total production price of the 4 1/2 qrs (20 per cent profit included) is then £9, so the average price per quarter is £2.
The average production price per quarter on B has thus risen from £1 5/7 to £2, and the surplus profit per quarter, measured against A's governing price, has fallen from £1 2/7 to £1. But £1 × 4 1/2 = £4 1/2, exactly as before £1 2/7 × 3 1/2 = £4 1/2.
Suppose a fourth and a fifth extra investment of £2 1/2 each were also made on B, each producing its quarter only at the general production price. The total product per acre would then be 6 1/2 qrs, and its production costs £15. The average production price per quarter for B would have risen again, from £2 to £2 4/13, and the surplus profit per quarter, measured against A's governing production price, would have fallen again, from £1 to £9/13. But this £9/13 would now be reckoned on 6 1/2 quarters instead of 4 1/2. And 9/13 × 6 1/2 = £1 × 4 1/2 = £4 1/2.
From this it follows, first, that under these conditions no increase in the governing production price is needed to make extra investments on the rent-bearing types of land possible — even down to the point where the additional capital stops yielding surplus profit altogether and brings in only the average profit.
It follows further that here the total surplus profit per acre stays the same, however far the surplus profit per quarter may fall; that fall is always offset by a matching increase in the quarters produced per acre.
For B's average production price to rise to the general production price — that is, to climb to £3 here — capital would have to be added whose product has a higher production price than the governing £3. But we shall see that even this is not by itself enough to drive B's average production price per quarter up to the general production price of £3.
Suppose production on land B had been as follows:
1. 3 1/2 qrs, just as before, with a production price of £6. That is two capital investments, £2 1/2 each, and each one forms surplus profit — though the surplus profit keeps shrinking.
2. 1 qr at £3 — a capital investment whose individual production price would be equal to the governing production price.
3. 1 qr at £4 — a capital investment whose individual production price is 33 1/3 per cent higher than the governing price.
The acre would then carry 5 1/2 qrs, their production price £13, on a capital outlay of £10 7/10. That is four times the capital first laid out — and yet the product is not yet three times what the first outlay produced.
Take the 5 1/2 qrs at £13. That works out to an average production price for B of £2 4/11 per qr. Against the governing production price of £3 this leaves an excess of £7/11 per qr, and that excess can be turned into rent. Sell the 5 1/2 qrs at the governing price of £3 and £16 1/2 comes in. The production costs are £13; what is left over is £3 1/2, surplus profit or rent.
At B's present average production price of £2 4/11 per qr, that £3 1/2 stands for 1 25/52 qrs. The money rent would have fallen by £1 and the corn rent by about 1/2 qr. But the fourth additional capital investment on B produces no surplus profit at all — it produces less than the average profit — and even so, surplus profit and rent are still there.
Now suppose that not only the capital investment listed under item 3, but the one under item 2 as well, produces above the governing production price. Total production is then 3 1/2 qrs at £6 plus 2 qrs at £8, altogether 5 1/2 qrs at £14 of production costs. The average production price per qr would be £2 6/11 and would leave an excess of £5/11. Sell the 5 1/2 qrs at £3 and you get £16 1/2; subtract the £14 of production costs and £2 1/2 is left for rent. At B's present average production price, that would be 55/56 qrs. So rent still accrues — less than before, but it still accrues.
At any rate this shows us that on the better lands, when extra capital investments are put in whose product costs more than the governing production price, the rent does not vanish — at least within the limits of permissible practice. It only has to decline. And it declines in proportion to two things: the share of the whole capital outlay that this less fruitful capital makes up, and the drop in its productivity.
The average price of the whole product grown on that land would still lie below the governing price, and so would still leave a surplus profit that can be turned into rent.
Now suppose that the average price of a quarter on B comes out the same as the general production price. That comes about through four investments of capital made one after another on B — £2 1/2, £2 1/2, £5 and £5 — each less productive than the one before it.
Here the farmer sells every quarter at its own individual production price, and so the whole number of quarters at their average production price per quarter — which is the same as the £3 that governs the price. So he still makes 20 per cent on his capital of £15, that is £3. But the rent has disappeared. Where has the surplus gone, in this evening-out of each quarter's individual production price with the general production price?
The first £2 1/2 yielded £3 of surplus profit, the second £2 1/2 yielded £1 1/2. On the £5 that these two together make up — one third of the capital advanced — the surplus profit comes to £4 1/2, which is 90 per cent.
With the third investment, the £5 brings no surplus profit at all, and its product of 1 1/2 qrs, sold at the general production price, shows a deficit of £1 1/2. Finally, with the fourth investment, also of £5, its product of 1 qr, sold at the general production price, shows a deficit of £3. Both investments together therefore come to a deficit of £4 1/2 — the same as the £4 1/2 of surplus profit that the first and second investments brought in.
On one side there are surplus profits, on the other losses of profit, and the two balance out. So the rent vanishes. In fact, however, this can happen only because the elements of surplus-value that formed surplus profit or rent now enter into the formation of average profit. The farmer's average profit here is £3 on £15, or 20 per cent, and he makes it at the rent's expense.
For B's individual average production price to even out with the general production price of A — the one that governs the market price — the gap by which the individual price of the earlier investments' product sits below the governing price has to be offset more and more, and finally cancelled, by the gap by which the later investments' product comes to sit above the governing price. What shows up as surplus profit as long as the earlier investments' product is sold on its own thus bit by bit becomes part of their average production price, and so enters the formation of the average profit, until at last the average profit swallows it whole.
If, instead of laying £15 of capital on B, only £5 is laid on B, and the extra 2 1/2 qrs of the last table are produced by farming 2 1/2 new acres of A with £2 1/2 of capital per acre, then the extra capital laid out would be only £6 1/4, so the whole outlay on A and B to produce these 6 qrs would be only £11 1/4 instead of £15, and their total production costs including profit £13 1/2. The 6 qrs would still all sell for £18; but the capital laid out would have fallen by £3 3/4, and the rent on B would come to £4 1/2 per acre, as before.
It would be a different story if, to produce the extra 2 1/2 qrs, recourse had to be had to worse soil than A, to A-1 and A-2, so that the production price per qr came to £4 for 1 1/2 qrs on A-1 and £6 for the last qr on A-2. In that case £6 would be the governing production price per qr. B's 3 1/2 qrs would sell for £21 instead of £10 1/2, which would give a rent of £15 instead of £4 1/2, and in corn 2 1/2 qrs instead of 1 1/2 qrs. In the same way, on A the one quarter would now carry a rent of £3 = 1/2 qr.
Before we go further into this point, one more remark.
B's average price per quarter levels out and comes to coincide with the general production price of £3 per qr. governed by A, as soon as the part of the total capital that turns out the excess 1 1/2 qrs is counterbalanced by the part of the total capital that turns out the 1 1/2 qrs falling short. How soon this equalization is reached, or how much capital of deficient productivity must be invested in B to bring it about, depends — with the surplus productivity of the first investments taken as given — on the relative underproductivity of the capital invested later, compared with an equally large investment on the poorest price-governing land A, or on the individual production price of its product compared with the governing price.
To start with, this follows from everything that has come before.
First. So long as extra capitals are laid out on the same soil with surplus productivity — even a shrinking one — the absolute corn rent and money rent per acre grow, while relatively, measured against the capital advanced (that is, as the rate of surplus profit or of rent), they fall.
The limit here is set by that extra capital which yields only the average profit, or whose product carries an individual production price equal to the general one.
Under these circumstances the production price stays the same, unless the increased supply makes production from the poorer types of soil superfluous. Even with a falling price, these extra capitals can still produce a surplus profit, even if a smaller one, within certain limits.
Second. Laying out extra capital that produces only the average profit — whose surplus productivity is therefore zero — changes nothing in the amount of surplus profit formed, and so nothing in the rent. It does make the individual average price per quarter rise on the better soils. The excess per quarter shrinks, but the number of quarters carrying that smaller excess grows, so the two together give the same product as before.
Third. Extra capital investments whose product has an individual production price above the governing price — where surplus productivity is not merely zero but less than zero, a minus, that is, less than the productivity of the same capital laid out on the governing soil A — bring the individual average price of the better soil's total product ever closer to the general production price. So they keep shrinking the difference between the two, and that difference is what forms the surplus profit, or the rent. More and more of what formed surplus profit or rent goes into forming the average profit.
Yet even so, the total capital laid out on an acre of B goes on yielding surplus profit — though a shrinking one, as the mass of underproductive capital grows and as that underproductivity deepens.
Here the rent falls absolutely per acre, as capital grows and production increases; it does not, as in the second case, fall only relatively, against the growing size of the capital invested.
Rent can be extinguished on one condition only: the individual average production price of the whole product grown on the better soil B has to meet the governing price — which means the entire surplus profit from the first, more productive capital investments has been used up in forming the average profit.
The rent per acre can fall, but it has a floor: the point where it disappears. That point is not reached as soon as extra capital put into the land starts producing with deficient productivity. It comes only when the deficiently productive part of that extra capital grows so large that its effect cancels out the surplus productivity of the first investments, the whole capital invested becomes as productive as the capital on A, and the individual average price per quarter on B therefore equals the price per quarter on A.
Even then, the governing price of production would remain the same — £3 per quarter — although the rent would have vanished. Only past that point would the production price have to rise, because of an increase either in the degree of deficient productivity of the extra capital, or in the amount of extra capital at the same deficient productivity. Suppose, for instance, that in the table above 2 1/2 quarters were produced at £4 per quarter on the same soil instead of 1 1/2: we would then have 7 quarters in all for £22 in production costs. A quarter would cost £3 1/7, so it would stand 1/7 above the general production price, which would then have to rise.
So extra capital could go on being applied with deficient productivity — and even with productivity falling further and further — for a long time, until the individual average price per quarter on the best lands came to equal the general production price, and until the excess of the latter over the former, and with it surplus profit and rent, had completely disappeared.
And even in that case, when rent on the better types of soil is wiped out, the individual average price of their product would only then coincide with the general production price; so no rise in that general price would yet be required.
In the example above, on the better soil B — which is still the lowest in the series of better, rent-bearing types of soil — 3 1/2 quarters were produced by a capital of £5 with surplus productivity, and 2 1/2 quarters by a capital of £10 with deficient productivity. That is 6 quarters in all, so 5/12 of them came from the portions of capital applied with deficient productivity. And only at this point does the individual average production price of the 6 quarters rise to £3 per quarter, coinciding with the general production price.
But under the law of landed property, those last 2 1/2 qrs could not have been produced that way at £3 a quarter. The one exception would be if they could be produced on 2 1/2 new acres of type A land. A capital investment that produced only at the general production price would have set the limit; past that point, any further capital put into the same land would have had to stop.
Once the farmer owes £4 1/2 in rent for the first two capital investments, he has to keep paying it. And any further capital investment that produces its quarter less productively would take part of his profit out of his pocket. What blocks the individual average price from being evened out is that fixed rent he must go on paying, and it does so when productivity falls short.
Let us take this case in the earlier example, where £3 per qr, the production price on land A, is what governs the price for B.
For the farmer, the production costs of the 3 1/2 qrs from the first two capital investments also come to £3 a quarter. That is because he owes £4 1/2 in rent: the difference between his own production price and the general production price does not go into his pocket. So for him the surplus in the price of what the first two investments produce cannot be used to make up the shortfall on what the third and fourth investments produce.
The 1 1/2 qrs from capital investment (3) cost the farmer £6, profit included; but at the £3 a quarter that governs the market he can sell them for only £4 1/2. So he would lose his whole profit and £1/2 on top of that — 10 per cent of the £5 of capital he put in. His loss of profit and capital would be £1 1/2 on the third investment and £3 on the fourth, making £4 1/2 in all — exactly what the rent on the better capital investments comes to. And the individual production price of those better investments cannot go into the individual average production price of B's whole product as a balancing item, because their surplus is paid away as rent to a third party.
If the need were there for the extra 1 1/2 qrs to be produced by the third capital investment, the governing market price would have to rise to £4 a quarter. That rise would push up B's rent on the first and second capital investments, and a rent would form on A.
So although differential rent is nothing but the formal transformation of surplus profit into rent — landed property here only enables the owner to shift the farmer's surplus profit over to himself — it still turns out that piling capital onto the same stretch of land, which is the same thing as increasing the capital invested there, finds its limit much sooner when the productivity of capital is falling and the governing price stays the same. In fact it runs into a more or less artificial barrier, and that barrier comes from the merely formal transformation of surplus profit into ground-rent, which is what landed property brings about. The rise in the general production price, which becomes necessary here at a narrower limit than would otherwise be needed, is therefore not just the reason the differential rent rises: the existence of differential rent as rent is at the same time a reason the general production price rises earlier and faster, so as to secure, in that way, the supply of the increased product that has become necessary.
There is a further point to note:
The governing price could not, as in the case above, rise to £4 through extra capital on land B, if land A were to supply the extra product from a second capital investment for under £4, or if newer, worse land than A came into competition, land whose production price would be above £3 but under £4. So one sees how differential rent I and differential rent II, while the first is the basis of the second, at the same time set limits to each other, and this mutual limiting is what makes capital go at one time in successive investments onto the same stretch of land, at another time side by side onto new additional land. They limit each other in other cases too, for example where better land comes into use.