But under these conditions the regulating price of produc- tion can fall only, because instead of the price of production of A that of the next best soil B, or of any better soil than A, becomes the l-egulator; so that the capital is withdrawn from A^ OT perhaps from B and A, in case the price of pro- duction of C should become the regulating one and all inferior soil should be eliminated from the competition of the wheat raising soils. The prerequisite for this wouid be, under the assumed conditions, that the additional product of the ad- ditional investments of capita-!, should satisfy the demand, so Differential Rent II. Second Case, 8ii that the product of the inferior soils A, etc., would become superfluous for the formation of a full supplyi Take, for instance. Table II, but in such a way that 18 quarters instead of 20 will satisfy the demand. Soil A would drop out; D and its price of production of 30 shillings would become regulating. In that case the differential rent would assume the following form: Table IV.
1 t < « ft- c U O It Rertt Rate of Surplus Profit B C D 1 1 1 8 5 6 6 1 1 1 6 6 6 4 6 8 VA I'A 6 9 12 0 T'ls 15 8 18 18 27 In other words, compared to Table II the ground-rent would have fallen in money from 36 pounds sterling to 9 pounds sterling and in grain from 12 quarters to 6 quarters, whereas the total output would have fallen only by 2, from 20 to 18. The rate of surplus-profit, calculated on the cap- ital, would have fallen by two-thirds, from 180% to 60%. The fall of the price of production in this case is accompanied by a decrease of the rent in grain and money.
Compared to Table I there is merely a decrease in the money rent; the rent in grain in both cases is 6 quarters. But in the one case these bring 18 pounds sterling, in the other only 9 pounds sterling. So far as the soils C and D are concerned, the rent in grain compared to Table I remains the same., In fact, owing to the additional production put forth by the uniformly working additional capital, the product of A has been pushed out of the market, the soil A has been eliminated from the competition of the producing agents, and a new differential rent No. 1 has thus been formed, in which the better soil B plays the same role as formerly the inferior soil A. Consequently the rent of B disappears on the one side; on the other side nothing has been altered in the differences Capitalist Production.
of B, C and D by the investment of additional capital, ac- cording to our assumption. For this reason that part of the product, which is converted into rent, is reduced.
If the above result, the satisfaction of the demand "with A left out, should have been accomplished by the investment of more than double the capital upon C or D, or upon both, then the matter would assume a different aspect. Let us suppose, that a third investment of capital is made upon C.
Table IV a.
< 3 Profit £ Cost of Produc- tion £ Prod- uct Qrs.
Scllingr Price £ Yield £ Rent Rate of Surplus Profit 1 Grain Qrs.
Money £ B C D 1 1 1 5 5 1 1 6 9 6 4 9 8 1% 1% 6 12 0 3 4 0 6 0 T'!s 3 21 21 SVA 7 In this case, compared to Table IV, the product of C has risen from 6 quarters to 9, the surplus product from 2 quarters to 3, the money rent from 3 pounds sterling to 4i pounds sterling. Compared to Table II, in which the money rent was 12 pounds sterling, and Table I, in which it was 6 pounds steriing, it has fallen off. The total rental in grain is 7 quarters. It has fallen compared to Table II, in which it was 12 quarters, but has risen compared to Table I, in which it was 6 quarters. In money the rent is lOo pounds sterling and has fallen compared to both of the other Tables, in which it was 18 and 36 pounds sterling respectively.
If the third investment of capital, amounting to 2i pounds sterling, had been applied to soil B, it would indeed have altered the quantity of production, but would not have touched the rent, since the successive investments, according to our assumption, do not produce any differences upon the same soil, and soil B does not produce any rent.
Again, if we assume that the third investment of capital takes place upon D instead of C, we get Differential Rent II. Second Case. Table IV b.
Selling Price £ Rent Rate of Surplus Profit '0 in Yield £ Qrs.
£ B C D 1 1 1 5 5 1 1 6 6 9 6 12 VA 6 9 18 0 2 6 0 3 9 0 T'ls 3 3^ 21 22 33 8 12 Here the total product is 22 quarters, more than double that of Table I, although the invested capital is only 17^ pounds sterling as against 10 pounds sterling, in other words, not twice the size. The total product is also larger by 2 quarters than that of Table II, although the capital in it is larger, namely 20 pounds sterling.
Compared to Table I, the rent in grain upon soil D has increased from 2 quarters to 6, whereas tlie money rent has remained the same, 9 pounds sterling. Compared to Table II the grain rent of D is the same, namely 6 quarters, but the money rent has fallen from 18 pounds sterling to 9 pounds sterling.
Comparing the total rents, the grain rent of IV b is 8 quar- ters, larger tlian that of I which is 6 and than that of IV a which is 7 quarters; but it is smaller than that of II which is 12 quarters. The money rent of IV b, 12 pounds sterling, is larger than that of IV a, which is lOi pounds sterling, and smaller than that of Table I, which is 18 pounds sterling and that of Table II, which is 36 pounds sterling.
In order that the total rental under the conditions of Table IV b, after the elimination of the rent upon B, may be equal to that of Table I, we need 6 pounds sterling of surplus product more, that is, 4 quarters at 1^ pounds sterling, which is the new price of production. Then we shall have once more a total rental of 18 pounds sterling, the same as in Table I. The magnitude of the required additional capital will differ, according to whether we invest it upon C or D, or distribute it between these two.
In the case of C 5 pounds sterling of capital result in a Capitalist Production.
surplus product of 2 pounds sterling, consequently 10 pounds sterling of additional capital will result in 4 quarters of ad- ditional surplus product. In the case of D 5 pounds sterling of additional capital would suffice for the purpose of produc- ing 4 quarters of additional grain rent, under the conditions assumed here, namely that the productivity of the additional investments of capital will remain the same. We should then get the following Tables: Table IV c.
Selling Price £ Yield £ Rent Rate of Sur- plus Profit Qrs.
< Capita!
Profit £ Cost of Produc- tion £ Prod- uct Qrs.
Selling Price £ Yield £ Rent Soils Qrs.
The most important thing is to compare the above Tables with Table I.
We find that the total money rental has remained the same, namely 18 pounds sterling, while the price of production has fallen by one-half, from 60 shillings to 30 shillings per quarter, and that the grain rent has been correspondingly doubled, from 6 quarters to 12. The rent upon B has disap- peared; the money rent upon C has risen by one-half in IV c, but fallen by one-half in IV d; upon D the money rent has remained the same, 9 pounds sterling, in IV c, and has risen Differential Rent II. Second Case. 815 from 9 pounds sterling to 15 pounds sterling in IV d. The production has risen from 10 quarters to 34 in IV c, and to 30 quarters in IV d; the profit from 2 pounds sterling to 5| pounds sterling in IV c and to 4| pounds sterling in IV d. The total investment of capital has risen in one case from 10 pounds sterling to 27^ pounds sterling, and in the other from 10 pounds sterling to 22| pounds sterling, in either case by more than one-half. The rate of rent, that is, the rent calculated on the invested capital, is everywhere the same in all the Tables from IV to IV d for the respective kinds of soils, for this was implied by the assumption that every kind of soil should retain the same rate of productivity with the two successive investments of caj)ital. But compared to Table I, this rate has fallen, both for the average of all kinds of soil and for each one of them individually. In Table I it was 180% on an average, whereas in IV c it is (18 -^- 27|) X 100 = 65-3^% and in IV d it is (18 ~ 224) X 100 = 80%. The average money rent per acre has risen. Formerly, in Table I, its average was 4^ pounds sterling per acre upon all four acres, whereas now, in IV c and IV d, it is 6 pounds sterling per acre upon the three acres. Its average upon the rent paying soil was formerly 6 pounds sterling, whereas now it is 9 pounds sterling per acre. Hence the money value of the rent per acre has risen, and represents now double the grain product that it did formerly; but the 12 quarters of grain rent are now less than one-half of the total product of 33 and 27 quarters respectively, whereas in Table I the 6 quarters represent f ths of the total product of 10 quarters. Consequently, although the rent as an aliquot part of the total product has fallen, and has also fallen when cal- culated on the invested capital yet its money-value, calculated per acre, has risen and still more its value as a product. If we take soil D in Table IV d, we find that the cost of produc- tion expended in it amounts to 15 pounds sterling, of which 12^ pounds sterling are invested capital. The money rent is 15 pounds sterling. In Table I, for the same soil D, the cost of production was 3 pounds sterling, the invested capital 24- pounds sterling the money rent 9 pounds sterling, that is, the 8i6 Capitalist Production.
money rent aDioiinted to three times the cost of production and almost four times the capital. In Table IV d, the money rent for D, 15 pounds sterling, is exactly equal to the cost of production and only by ith larger than the capital. Xeverthe- less the money rent per acre is two-thirds larger, namely 15 pounds sterling instead of 9 j^ounds sterling. In Table I the grain rent of 3 quarters constitutes three quarters of the total product of 4 quarters; in Table IV d it is 10 quarters, or one- half of the total product of 20 quarters of one acre of D. This shows that the money value and grain value of the rent per acre may rise, although it forms a smaller aliquot part of the total yield and has fallen in proportion to the invested cap- ital.
The value of the total product in Table I is 30 pounds ster- ling. The rent is 18 pounds sterling, more than one-half of it. The value of the total product of IV d is 45 pounds sterling, the rent is 18 pounds sterling, or less than one-half of it.
The reason, why in spite of the fall of the price by 1^ pounds sterling per quarter, a fall of 50%, and in spite of the re- duction of the competing soil from 4 acres to 3, the total rent remains the same and the grain rent is doubled, while on a calculation per acre both the grain rent and money rent rise, is that more surplus product is created. The price of grain "falls by 50%, the surplus product increases by 100%. But in order to accomplish this result, the total production under the conditions assumed by us must be trebled, and the invest- ment of capital upon the superior soils must be more than doubled. In what proportion this last factor must increase, depends in the first place upon the distribution of the ad- ditional investments of capital among the superior and best kinds of soil, always assuming that the productivity of the capital upon every kind of soil increases proportionately to its size.
If the fall of the price of production were smaller, less additional capital would be required for the production of the same money rent. If the supply required for the purpose of throwing soil A out of cultivation — and this depends not Differential Rent II. Second Case.
merely upon the product per acre of A, but also upon the proportional share taken by A in the entire cultivated area — were larger, and with it also the amount of additional cap- ital required upon better soils than A, then, other circum- stances remaining the same, the money rent and the grain rent would have increased still more, although both of them would disappear upon the soil B.
If the eliminated capital of A had been 5 pounds sterling, we should have to compare Tables II and IV d: The total product would have increased from 20 quarters to 30. The money rent would be only half as large, that is, 18 pounds sterling instead of 36 pounds sterling; the gTain rent would be the same, namely 12 quarters.
If a total product of 44 quarters, valued at 66 pounds sterling, could be produced upon D with a capital of 27^ pounds sterling — ■ corresponding to the old rate of D, 4 quarters per 2^ pounds sterling of capital — then the total rental would once more reach the level of Table II, and we should get the following diagram: Soils Capital p. St.
Product quarters Grain Rent quarters Money Rent p. St.
B C D 5 5 4 6 44 0 3 22 0 3 33 54 25 36 The total production would be 54 quarters as against 20 quarters in Table II, and the money rent would be the same, 36 pounds sterling. But the total capital would be 37^ pounds sterling, whereas it was 20 in Table 11. The invested total capital would almost be doubled, while produc- tion would be nearly trebled; the grain rent would have been doubled, the money rent would have remained the same. Hence, if the price falls as a result of the investment of additional money-capital, while productivity remains the same, upon the better soils which pay rent, that is, all soils above A, then the total capital has a tendency not to increase in the same proportion as the production and the grain rent; so that the increase of the grain rent may offer 2Z 8i8 Capitalist Production.
a compensation for the loss in money rent due to the falling price. The same law also manifests itself through the fact that the invested capital must be larger in proportion as it is more largely invested upon C than D, upon the soils pay- ing a smaller rent rather than upon the soils paying a larger rent. The point is simply this: In order that the money rent may remain the same or rise, a certain additional quantity of surplus product must be created, and this re- quires less capital in proportion as the productivity of the soils yielding a surplus product is greater. If the difference between B and C, C and D were still greater, still less additional capital would be required. The proportion is de- termined 1) by the proportion in which the price falls, in other words, by the difference between soil B, which is not paying any rent now, and soil A, which formerly was the soil that did not pay any rent; 2) by the proportion between the differences of the better soils from B upward; 3) by the amount of newly invested additional capital, and 4) by its distribution among the different qualities of soil.
In fact, we see that this law expresses merely the same thing which we ascertained already in the case of the first illustration: When the price of production is given, no mat- ter what may be its figure, the rent may increase in con- sequence of additional investments of capital. For owing to the elimination of A, we have now a new differential rent Xo. I with B as the worst soil and 1^ pounds sterling per quarter as the new price of production. This applies to Tables IV as well as to Table II. It is the same law, only that we have as a basis soil B instead of A, and a price of production of 1^ pounds sterling instead of 3 pounds sterling.
The important thing here is this: To the extent that so and so much additional capital was necessary for the purpose of withdrawing the capital from soil A and satisfying the supply without it, we find that this may be accompanied by an unaltered, a rising, or a falling rent per acre, if not upon all soils, then at least upon some and so far as the average of the cultivated lands is concerned. We have seen that the Diiferential Rent II. Second Case. 819 grain rent and the money rent do not maintain a uniform ratio to one another. However, it is merely due to tradition that grain rent is still playing any role at all in political economy. One might demonstrate equally well that a manu- facturer can buy much more of his own yarn with his profit of 5 pounds sterling than he could formerly with a profit of 10 pounds sterling. It shows at any rate, that the landlords, when they are at the same time owners or partners of manu- facturing establishments, sugar factories, distilleries, etc., may still make a considerable profit even when the money rent is falling, in their capacity as producers of their o^vn raw materials. ^^^ II. The Rate of Productivity of the Additional Capitals Decreases.
This does not carry anything new into the problem, in so far as the price of production may also fall in this case as in the previously considered one, when additional investments of capital upon better soils than A make the product of A super- fluous and withdraw the capital from A, or lead to the em- ployment of A for the production of other things. We have analysed this eventuality exhaustively. We have shown that in this case the rent in grain and money per acre may in- crease, decrease, or remain unchanged.
For the purpose of easy comparison we reproduce i^'^The above Tables IV a to IV d had to be figured over on account of an error of calculation which ran through all of them. While this did not affect the theoretical conclusions drawn from these Tables, it carried monstrous figures concerning the production per acre into them. Even these would not be objection- able on principle. In all maps showing geographical conditions in relief or giving a view of altitudes in profile it is customary to choose a much larger scale for the vertical than for the horizontal lines. Nevertheless, should any one feel that his agrarian heart is injured thereby, he is at liberty to multiply the number of acres with any figure that will satisfy him. One might also choose 10, 12, 14, 16 bushels (8 bushels = 1 quarter) per acre instead of 1, 2, 3, 4 quarters in Table I, and in that case the figures of the other Tables which are developed out of them would remain within the limits of probability; it will be found that the result, the pro- portion of increase in the rent compared to the increase in capital, comes to the same thing. This has been done in the following Tables, which were added by the editor. — F. E.
Capitalist Production. Table I.
Soils Acres Capital P.St.
Prod- uct P. St.
Cost of Produc- tion per Quarter Prod- uct Qrs.
Grain Rent Qrs.
Money Rent P.St.
Soils Acres Capital P.St Profit P.St.
Product quarters Selling Price P. St Yield P.St.
Grain Rent Qrs.
Money Rent P. St.
Rate of Surplus Profit B C D 1 1 1 2M-f2H 1 1 1 6 0 4 0 0 Totals 3 15 16 Average Here the rate of productivity of the additional capitals is decreasing, and the decrease is different upon different soils, while the regulating price of production has fallen from 3 pounds sterling to ly pounds sterling. The investment of capital has risen by one-half, from 10 pounds sterling to 15 pounds sterling. The money rent has fallen by almost one- half, from 18 pounds sterling to 9y pounds sterling, while the grain rent has fallen only by one-twelfth, from 6 quarters to 5^ quarters. The total product has risen from 10 to 16, or by 160%. The grain rent constitutes a little more than one-third of the total product. The advanced capital has a ratio of 15 to 9 f to the money rent, whereas formerly this ratio was 10 to 18.
Differential Rent II. Second Case. 821 III. The Bate of Productivity of the Additional Capitals Increases.
This differs from Case I in the beginning of this chapter, in which the price of production falls while the rate of productivity remains the same, merely by the fact that soil A is thrown more quickly out of competition, if an increase of the product is required to effect this.
This may work its effects differently, according to the distribution of the investments over the various soils, no mat- ter whether productivity be rising or falling. In proportion as these different effects balance the differences, or accentuate them, the differential rent of the better soils, and with it the total rental, will fall or rise, as we have seen in discussing differential rent ISTo. I. For the rest, everything depends upon the size of the area and of the capital, which are thrown out of competition together with soil A, and upon the relative advance of capital required with a rising productivity for the purpose of supplying the capital which is to cover the demand.
The only point which it is worth while to analyse here, aod which alone carries us back to the investigation of the way in which this differential profit is converted into differential rent, is the following: In the first case, in which the price of production remains the same, the additional capital which may be invested in the soil A is immaterial for the differential rent as such, since this soil A does not yield any rent now any more than it did before, the price of its product remains the same and continues to regulate the market.
In the second case of Variant No. I, in which the price of production falls while the rate of productivity remains the same, soil A will necessarily be thrown out, and still more so in Variant No. II, in which both the price of production and the rate of productivity fall, since otherwise the additional capital upon soil A would have to raise the price of production. But here, in Variant No. Ill of the second case, in which the price of production falls, because 822 Capitalist Production.
the productivity of the additional capital rises, tliis additional capital may eventually be invested upon the soil A as well as upon the better soils.
We will assume that an additional capital of 2^ pounds sterling, when invested upon the soil A, produces 1^ quarter instead of 1 quarter.
Table VI.
Profit P. St.
Cost of Prod'n P.St Product Qrs.
Selling Price P.St.
Yield P.St.
Rent Rate of Surplus Profit o Qrs.
P. St.
According to our assumption the regulating price of pro- duction falls. If it were to remain constant, at 3 pounds sterling, then the worst soil which used to pay no rent with an investment of 2^ pounds sterling, would then yield a rent, although no worse soil would have been drawn into cultivation. This would have been accomplished by increas- ing tlie productivity of this soil, but only for a part, not for the original capital invested in it. The first 3 pounds ster- ling of cost of production bring 1 quarter; the second bring 1^ quarter; but the entire product of 2^ quarters is now sold at its average price.
Since the rate of productivity increases with the additional investment of capital, this implies an improvement. This may consist of a general increase of the capital per acre (more fertilizer, more mechanical labor, etc.), or it may be due ex- clusively to this additional investment that any difference in the quality and productiveness of the investment is brought about. In both cases the investment of 5 pounds sterling of capital per acre brings forth a product of 2^ quarters, whereas Differential Rent II. Second Case. 823 the investment of one-half of this capital, or 2i pounds ster- ling, brought forth a product of only 1 quarter. The product of the soil A, leaving aside the question of transient market conditions, could not continue to be sold at a higher price of production instead of at the new average price unless a con- siderable area of the class A would remain under cultivation with a capital of only 2^ pounds sterling. But as soon as the new scale of 5 pounds sterling of capital per acre would become universal, and with it an improvement of cultivation, the regulating price of production would have to fall to 2 8-11 pounds sterling. The difference between the two portions of capital would disappear, and in that case the cultivation of one acre of soil A with a capital of only 2^ pounds sterling would be abnormal, would not correspond to the new condi- tions of production. It would then no longer be a difference between the yields of different portions of capital upon the same acre, but between a sufficient and an insufficient invest- ment of capital per acre. This shows, 1), that an insuffi- cient capital in the hands of a large number of capitalist farmers (it must be a large "number, for a small number would simply be compelled to sell beh)w their price of production) produces the same effect as a differentiation of soils in a de- scending line. The inferior cultivation upon inferior soil increases the rent upon the superior soils; it may even create a rent upon better cultivated soil of the inferior kind, which would otherwise yield no rent. It shows, 2), that differen- tial rent, to the extent that it arises from successive invest- ments of capital in the same total area, resolves itself in real- ity into an average, in which the effects of the different in vestments of capital are no longer visible and distinguishable, so that the worst soil does not yield any rent, but rather, a), the average price of the total product of, say, one acre of A is made the new regulating price, and, b), the effects of the different investments of capital appear as changes in the total quantity of capital per acre, which is required under the new conditions for the adequate cultivation of the soil, and thus the individual successions of invested capital as well as their respective effects are indistinguishably amalgamated. It is 824 Capitalist Production.
the same with the individual differential rents of the superior kinds of soil. In every case they are determined by the dif- ference of the average products of the various soils, compared to the product of the worst soil, with the increase of capital which has become the normal one.
'No soil yields any product without an investment of cap- ital. Even in the case of simple differential rent, or differen- tial rent No. I, some capital must be invested. When we say that one acre of class A, which regulates the price of produc- tion, gives so and so much of a product at that and that price, and that the superior soils B, C and D yield so much differ- ential product and so much money rent at the regulating price of production, it is always understood that a certain amount of capital is invested in A which is normal under the prevailing conditions. In the same way a certain minimum capital is required for every individual line of industry, in order that commodities may be produced at their price of pro- duction.