Friday, September 22, 2023

Some Notes On Marx On Rent

Marx writes about rent extensively in Part II of Theories of Surplus Value and in volume 3 of Capital. I read Theories of Surplus Value decades ago. I have been trying to read the chapters of volume 3 on rent, that is, chapters 37 to 47.

In general, these chapters do not use Hegelian terminology, but are just a matter of mathematical economics. Marx conflates analyses I would keep separate. Maybe this is a matter of a dynamic analysis set in historical time. I suppose I do not have standing to complain about everything being argued through numerical examples.

In Chapter 37, Marx clarifies that he is discussing ground rent on unimproved land or land with permanent improvements. Capitalist farmers are assumed, along with landed property. He talks about the incentives to tenants not to make improvements. Once a lease runs out, improvements will allow the landlord to raise rents. If the improvements are permanent, these improvements will henceforth enter into ground rents. Marx notes the accounting where the price of land is equal to the discounted value of yearly rents. Even so, the portion of surplus value paid out in rent should not be confused with interest.

Table 1: My Preferred Terminology and Marx's
My Technical TermMarx's Technical Term
Extensive rentDifferential rent I
Intensive rentDifferential rent II
?Absolute rent
External intensive rent?

Chapter 38 starts the analysis of differential rent of the first kind, and Chapter 39 has numeric examples in tables. Marx discusses the case of waterfalls providing power to a factory. Those capitalists without access to the waterfalls, I guess, use steam power. He combines an analysis of physical fertility with nearness to markets. Marx says the most fertile land is not cultivated first. Improvements in transportation can change the ranking of lands. I like the example of the Erie Canal. More than one kind of agricultural product can be produced, but one is dominant in Marx's analysis. Anyways, he considers different arbitrary orders in which lands may be cultivated when discussing extensive rent. Also he considers cases where more of a type of land is discovered; supplies of land are not fixed in the very long run. Prices of production prevail. Capital investments are in monetary terms, despite Marx having shown in earlier chapters that prices of production of, say, seed, fertilizers, ploughs may vary with distribution.

Marx has something like a long-run demand curve for consumer goods:

The ... assumption is that total demand keeps pace with the increase in the total product. First, one need not imagine such an increase coming about abruptly, but rather gradually... Secondly, it is not true that the consumption of necessities of life does not increase as they become cheaper. The abolition of the Corn Laws in England proved the reverse to be the case (F. Newman, Lectures on Political Economy, London, 1851, p.158. — Ed.); the opposite view stems solely from the fact that large and sudden differences in harvests, which are mere results of weather, bring about at one time an extraordinary fall, at another an extraordinary rise, in grain prices. While in such a case the sudden and short-lived reduction in price does not have time to exert its full effect upon the extension of consumption, the opposite is true when a reduction arises from the lowering of the regulating price of production itself, i.e., is of a long-term nature. Thirdly, a part of the grain may be consumed in the form of brandy or beer; and the increasing consumption of both of these items is by no means confined within narrow limits. Fourthly, the matter depends in part upon the increase in population and in part on the fact that the country may be grain-exporting, as England still was long after the middle of the 18th century, so that the demand is not solely regulated within the confines of national consumption. Finally, the increase and price reduction in wheat production may result in making wheat, instead of rye or oats, the principal article of consumption for the masses, so that the demand for it may grow if only for this reason, just as the opposite may take place when production decreases and prices rise. -- Karl Marx, Capital, volume 3, Chapter 39.

Chapter 40 is the start of Marx's discussion of intensive rent, or differential rent of the second kind. He does not discuss it separately from differential rent, but adds it to his analysis. Intensive rent involves the returns to capital, in monetary units, when added to land of a given type. Marx does not treat in agriculture in a complete system. The approach I take to intensive rent is quite different. I am not sure I could always justify Marx's examples with a consistent system of equations, where the number of price and rent variables matches the number of processes, and the wage and the rate of profit frontier provides one degree of freedom. I allow for non-existence and non-uniqueness in these models.

With Marx's approach, he must consider in his numeric examples the possibility of the discovery of any type of land, changes in technology on any type, and the results of additional does of 'capital' on any type of land. He breaks these possibilities into three overarching subcases: A constant price of production of the dominant agriculture product, a falling price of production, and a rising price of production. These cases are discussed in Chapters 41, 42, and 43, respectively. Marx has subcases, in which an additional dose of capital has constant, decreasing, or rising productivity. Which land is on the margin can change. To tell the truth, I did not pay much attention to the details. In Chapter 42, Engels says an error exists in the tables that does not influence the conclusions.

I will update this post when I read further. I am interested if Marx justifies the existence of no cultivated land with no rent by the theory of intensive rent. And where does absolute rent come from?

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