The production price may fall while productivity on the additional investments of capital remains constant, falls or rises.
This assumes that the product from the various types of land, corresponding to their respective quality, grows to the same extent as does the capital invested on them. This implies, given that the differences between types of land remain the same, a growth in surplus profit proportionate to the growth in capital investment. In this case, therefore, any surplus investment of capital on land A does not affect the differential rent. On this land, the rate of surplus profit is zero; it therefore remains zero, since it is assumed that the productivity of the extra capital and hence the rate of surplus profit remains constant.
The governing production price can fall under these assumptions only when the governing factor ceases to be the production price of A, the latter’s place being taken by the next better land B or some other land better than A; i.e. capital is withdrawn from A – or even from A and B, if the production price of land C becomes the governing one – so that all inferior land drops out of the competition between wheat-bearing lands. The condition for this, under the given assumptions, is that the extra product of the additional capital investments satisfies the demand, and hence the production of the inferior land A, etc. is superfluous for the supply required.
Let us take Table II (p. 825), for example, but assume that instead of 20 qrs, 18 qrs now satisfies the demand. A would drop out; B, with its production price of 30s. per qr, would become the price-governing land. The differential rent then assumes the following form:
Table IV
Type of land |
Acres |
Capital (£) |
Profit (£) |
Price of prod. (£) |
Output (qrs) |
Selling price per qr (£) |
Proceeds (£) |
Rent |
Rate of surplus profit |
|
|
|
|
|
|
|
|
|
in corn (qrs) |
in money (£) |
|
B |
1 |
5 |
1 |
6 |
4 |
1 1/2 |
6 |
0 |
0 |
0 |
C |
1 |
5 |
1 |
6 |
6 |
1 1/2 |
9 |
2 |
3 |
60% |
D |
1 |
5 |
1 |
6 |
8 |
1 1/2 |
12 |
4 |
6 |
120% |
Total |
3 |
15 |
3 |
18 |
18 |
|
27 |
6 |
9 |
|
The total rent, therefore, compared with Table II, would have fallen from £36 to £9, and in corn from 12 qrs to 6 qrs, though the total production has fallen only by 2 qrs, from 20 qrs to 18 qrs. The rate of surplus profit, reckoned on the capital, would have fallen to a third of its former level, from 180 per cent to 60 per cent. Thus a decline in both corn and money rent goes together here with the fall in the production price.
Compared with Table I, there is simply a decline in the money rent; the corn rent in both cases is 6 qrs, but in the one case this amounts to £18, in the other case to £9. For land C, the corn rent has remained the same as in Table I. In fact, the product of A has been displaced in the market by the additional production obtained from the uniformly operating additional capital, and land A thus excluded as a competing agent of production, as a result of which a new differential rent I has been formed in which the better land B plays the same role as the inferior land A did before. B’s rent therefore disappears, although nothing has changed in the differences between B, C and D, according to our assumption, because of the investment of additional capital. The part of the product that is transformed into rent falls.
If the above result – the satisfaction of the demand with the exclusion of A – had been brought about by the investment of more than twice the capital on C or D or both of these, things would have taken a different course. Say that a third capital investment was made on C, for example:
Type of land |
Acres |
Capital (£) |
Profit (£) |
Price of prod (£) |
Output (qrs) |
Selling price (£) |
Proceeds (£) |
Rent |
Rate of surplus profit |
|
|
|
|
|
|
|
|
|
in corn (qrs) |
in money (£) |
|
B |
1 |
5 |
1 |
6 |
4 |
1 1/2 |
6 |
0 |
0 |
0 |
C |
1 |
7 1/2 |
1 1/2 |
9 |
9 |
1 1/2 |
13 1/2 |
3 |
4 1/2 |
60% |
D |
1 |
5 |
1 |
6 |
8 |
1 1/2 |
12 |
4 |
6 |
120% |
Total |
3 |
17 1/2 |
3 1/2 |
21 |
21 |
|
31 1/2 |
7 |
10 1/2 |
|
Here the product on C has risen from 6 qrs in Table IV to 9 qrs, the surplus product from 2 qrs to 3 qrs, the money rent from £3 to £4 1/2. As against Table II, however, where the money rent was £12, and Table I, where it was £6, this rent has now fallen. The total rental in corn, = 7 qrs, has fallen in comparison with Table II, where it was 12 qrs, and risen in comparison with Table I, where it was 6 qrs; in money (£10 1/2) it has fallen against both (£18 and £36).
If a third capital investment of £2 1/2 had been applied to land B, this would certainly have altered the amount of production, but it would have left the rent unaffected, since the successive capital investments are assumed not to produce any difference on the same type of land, and land B does not yield any rent.
If we assume on the other hand that the third capital investment takes place on D instead of on C, we get:
Table IVb
Type of land |
Acres |
Capital (£) |
Profit (£) |
Price of prod. (£) |
Output (qrs) |
Selling price (£) |
Proceeds (£) |
Rent |
Rate of surplus profit |
|
|
|
|
|
|
|
|
|
in corn (qrs) |
in money (£) |
|
B |
1 |
5 |
1 |
6 |
4 |
1 1/2 |
6 |
0 |
0 |
0 |
C |
1 |
15 |
3 |
18 |
18 |
1 1/2 |
27 |
6 |
9 |
60% |
D |
1 |
7 1/2 |
1 1/2 |
9 |
12 |
1 1/2 |
18 |
6 |
9 |
120% |
Total |
3 |
27 1/2 |
5 1/2 |
33 |
34 |
|
51 |
12 |
18 |
|
Here the total product is 22 qrs, more than double that of Table I, even though the capital advanced is only £17 1/2 as against £10, i.e. less than double. The total product is also 2 qrs greater than that in Table III even though in the latter case the capital advanced is greater, i.e. £20.
On land D the corn rent has grown from 3 qrs in Table I to 6 qrs, while the money rent has remained the same at £9. The corn rent for D has remained the same as in Table II, at 6 qrs, but the money has fallen from £18 to £9.
Taking the total rents, the corn rent in IVb is 8 qrs, greater than in Table I, where it is 6 qrs, and in IVa, where it is 7 qrs; it is less however than in Table II, where it is 12 qrs. The money rent in Table IVb = £12 is greater than that in IVa = £10 1/2, and less than that in Table I = £18, and Table II = £36.
In order for the total rental under the conditions of IVb to be the same as in Table I, even though the rent on B disappears, we must have a further £6 surplus profit, i.e. 4 qrs at £1 1/2, which is the new production price. We then again have a total rental of £18, as in Table I. The size of the excess capital required for this will vary according to whether we invest it on C or D, or divide it between the two.
On C, £5 capital yields 2 qrs surplus product, and so £10 additional capital will give 4 qrs additional surplus profit. On D, £5 additional capital will be sufficient to produce the 4 qrs additional corn rent, given the fundamental premise that productivity remains the same for the additional capital investments. We then get the following results.
Table IVc
Type of land |
Acres |
Capital (£) |
Profit (£) |
Price of prod. (£) |
Output (qrs) |
Selling price (£) |
Proceeds (£) |
Rent |
Rate of surplus profit |
|
|
|
|
|
|
|
|
|
qrs |
£ |
|
B |
1 |
5 |
1 |
6 |
4 |
1 1/2 |
6 |
0 |
0 |
0 |
C |
1 |
15 |
3 |
18 |
18 |
1 1/2 |
27 |
6 |
9 |
60% |
D |
1 |
7 1/2 |
1 1/2 |
9 |
12 |
1 1/2 |
18 |
6 |
9 |
120% |
Total |
3 |
27 1/2 |
5 1/2 |
33 |
34 |
|
51 |
12 |
18 |
|
Table IVd
Type of land |
Acres |
Capital (£) |
Profit (£) |
Price of prod. (£) |
Output (qrs) |
Selling price (£) |
Proceeds (£) |
Rent |
Rate of surplus profit |
|
|
|
|
|
|
|
|
|
qrs |
£ |
|
B |
1 |
5 |
1 |
6 |
4 |
1 1/2 |
6 |
0 |
0 |
0 |
C |
1 |
5 |
1 |
6 |
6 |
1 1/2 |
9 |
2 |
3 |
60% |
D |
1 |
12 1/2 |
2 1/2 |
15 |
20 |
1 1/2 |
30 |
10 |
15 |
120% |
Total |
3 |
22 1/2 |
4 1/2 |
27 |
30 |
|
45 |
12 |
18 |
|
The total money rental would be exactly half of what it was in Table II, where the excess capital was invested at unchanged prices of production.
The most important thing is to compare the above tables with Table I.
We find that the total money rental remains the same, i.e. £18, despite a fall of a half in the production price, from 60s. per qr to 30s., and the corn rent has accordingly doubled, i.e. from 6 qrs to 12 qrs. The rent on B has disappeared; on C the money rent has risen by a half in IVc, and fallen by a half in IVd; on D it has remained the same, £9, in IVc, and risen from £9 to £15 in IVd. Production has risen in IVc from 10 qrs to 34 qrs, and in IVd to 30 qrs; profit from £2 to £5 in IVc and £4 1/2 in IVd. The total capital investment has risen in the one case from £10 to £27 1/2, in the other from £10 to £22 1/2, i.e. in both cases to more than double. The rate of rent, the rent reckoned on the capital advanced, is the same throughout in Tables IV to IVd, which already implies that the rate of productivity for the two successive capital investments is taken as remaining the same for each type of land. Compared with Table I, however, it has fallen both for the average of all types of land and for each individual type. In I it was an average of 180 per cent, in IVc it is 18/27 1/2 × 100 = 65 5/11 per cent, and in IVd, 18/22 1/2 × 100 = 80 per cent. The average money rent per acre has risen. Its previous average, in Table I, was £4 1/2 per acre over 4 acres, while in IVc and IVd it is now £6 per acre on 3 acres. Its average on the rent-bearing land was formerly £6 per acre and is now £9. The money value of the rent per acre has thus risen, and represents twice the corn product as before; but the 12 qrs corn rent are now less than half of the total product of 34 or 30 qrs, whereas in Table I the 6 qrs made up three-fifths of the total product of 10 qrs. Thus even though the rent has fallen, taken as an aliquot part of the total product, and similarly if reckoned on the capital laid out, its money value reckoned per acre has risen, and its value in product still more. If we take land D in Table IVd, the production costs here are £15, the capital laid out being £12 1/2. The money rent is £15. In Table I, the production costs on the same land D were £3, the capital laid out £2 1/2, the money rent £9, the latter thus being three times the production costs and almost four times the capital. In Table IVd, the money rent of £15 for D is almost exactly equal to the production costs and only a fifth greater than the capital. Yet the money rent per acre is two-thirds greater, £15 instead of £9. In Table I the corn rent of 3 qrs is three-quarters the total product of 4 qrs; in IVd, at 10 qrs, it is half the total product (20 qrs) of the acre of D. This shows how the money value and corn value of the rent per acre can increase, even though this forms a smaller aliquot part of the total yield and has fallen in relation to the capital advanced.
In Table I, the value of the total product is £30; the rent £18, more than half of this. In IVd the value of the total product is £45, the rent at £18 being less than half.
The reason why despite the fall of £1 1/2 per qr in the price, i.e. a fall of 50 per cent, and despite the contraction of the land in competition from 4 acres to 3, the total money rent remains the same while the corn rent doubles, corn rent and money rent both rising when reckoned per acre, lies in the fact that more quarters of surplus product are produced. The corn price falls by 50 per cent, the surplus product grows by 100 per cent. But in order to bring about this result, the total production must grow by a factor of three, under the conditions we have set, and the capital investment on the better types of land must more than double. The proportion in which the latter must grow depends first and foremost on how the extra capital is divided between the better and the best types of land, always assuming that the productivity of capital on each type of land grows in proportion to its size.
If the fall in the production price was less, less extra capital would be required to produce the same money rent. If a greater supply was needed to drive A out of cultivation – and this depends not only on the product per acre of A but also on the proportionate share that A takes out of the total cultivated area – if therefore a greater mass of extra capital was also required on the better land than A, the money rent and corn rent would have grown still further, other things being equal, even though both disappeared on land B.
If the capital that disappeared from A had been £5, the two tables to be compared in this case would be II and IVd. The total product would have grown from 20 qrs to 30 qrs. The money rent would only be half as large, £18 instead of £36; the corn rent would be the same at 12 qrs.
If a total product of 44 qrs = £66 could be produced on D with a capital of £27 1/2 – corresponding to the old ratio for D, 4 qrs for £2 1/2 capital – the total rental would again reach the level of Table II, and the table would now be as follows:
Type of land |
Capital (£) |
Output (qrs) |
Corn rent (qrs) |
Money rent |
B |
5 |
4 |
0 |
0 |
C |
5 |
6 |
2 |
3 |
D |
27 1/2 |
44 |
22 |
33 |
Total |
37 1/2 |
54 |
24 |
36 |
The total production would be 54 qrs as against 20 qrs in Table II, while the money rent would be the same, £36. But the total capital would be £37 1/2, whereas in Table II it was £20. The total capital advanced would have almost doubled, while production would have almost tripled; the corn rent would have doubled, the money rent would have remained the same. Thus if the price falls as a result of the investment of excess money capital on the lands yielding higher rent, i.e. all except A, while productivity remains the same, the total capital tends not to grow in the same proportion as production and the corn rent; so that the fall-off in the money rent that results from the falling price may be balanced by a rise in the corn rent. The same law is also apparent in the way that the capital advanced must be greater in the proportion that it is applied more to C than to D, more to the land bearing less rent than to that bearing more rent. This is simply for the following reason. In order for the money rent to remain the same or to rise, a definite additional quantity of surplus product must be produced, and this requires less capital, the greater the fertility of the lands yielding surplus product. If the differences between B and C, and C and D, were still greater, still less extra capital would be needed. The specific proportion depends (1) on the ratio in which the price falls, thus on the difference between B, which is now the non-rent-bearing land, and A, which it has replaced; (2) on the ratio of the differences between the better types of land, from B upwards; (3) on the amount of extra capital newly invested; and (4) on its distribution over the various qualities of land.
We see in fact that this law expresses nothing more than was already developed in the first case: that if the production price is given, whatever its level might be, the rent can rise as a result of extra capital investment. For the result of the exclusion of A from cultivation is a new differential rent I with B now as the worst land and £1 1/2 per qr as the new production price. This is as true for Table IV as for Table II. It is the same law, simply that land B is taken as the starting-point instead of land A and the production price as £1 1/2 instead of £3.
This is important here only for the following reason. In so far as so and so much extra capital was needed to withdraw capital from land A and make up the supply without it, it is clear that this may be accompanied by a rising, a falling, or a stable rent per acre, if not on all lands, then at least on some, and for the average of the lands tilled. We have seen that corn rent and money rent do not behave in the same way. It is only tradition, however, that still gives corn rent any role in economics. One might just as well prove that a manufacturer could buy far more of his own yarn with a profit of £5 than he formerly could with a profit of £10. This does show however that the landowning gentlemen, if they also happen to own or have a share in manufacturing, sugar refining, spirit distilling, etc., can still draw very considerable profits while money rents are falling, as producers of their own raw materials.34
2. A FALLING RATE OF PRODUCTIVITY FOR THE EXTRA CAPITAL
Nothing new is involved here except that the production price can also fall, as in the case last considered, if the extra capital investments on better types of land than A make A’s product superfluous and hence cause capital to be withdrawn from A, or if A is applied to the production of a different crop. This case has already been exhaustively discussed. We have shown how the corn and money rents per acre may grow, decline, or remain the same.
For convenience of comparison, we first reproduce:
Table I [a]
Type of land |
Acres |
Capital (£) |
Profit (£) |
Price prod. per qr |
Output (qrs) |
Cornrent (qrs) |
Moneyrent (£) |
Rate of surplus profit |
A |
1 |
2 1/2 |
1/2 |
3 |
1 |
0 |
0 |
0 |
B |
1 |
2 1/2 |
1/2 |
1 1/2 |
2 |
1 |
3 |
120% |
C |
1 |
2 1/2 |
1/2 |
1 |
3 |
2 |
6 |
240% |
D |
1 |
2 1/2 |
1/2 |
3/4 |
4 |
3 |
9 |
360% |
Total |
4 |
10 |
|
|
10 |
6 |
18 |
180% average |
If we assume now that a figure of 16 qrs supplied by B, C and D, with a declining rate of productivity, is sufficient to remove A from cultivation, then Table III is now transformed into the following:
Table V
Type of land |
Acres |
Invesment of capital (£) |
Profit (£) |
Output (qrs) |
Selling price (£) |
Proceeds (£) |
Cornrent (qrs) |
Moneyrent (£) |
Rate of surplus profit |
B |
1 |
2 1/2 + 2 1/2 |
1 |
2 +1 1/2 = 3 1/2 |
1 5/7 |
6 |
0 |
0 |
0 |
C |
1 |
2 1/2 + 2 1/2 |
1 |
3 + 2 = 5 |
1 5/7 |
8 4/7 |
1 1/2 |
2 4/7 |
51 1/7% |
D |
1 |
2 1/2 + 2 1/2 |
1 |
4 +3 1/2 = 7 1/2 |
1 5/7 |
12 6/7 |
4 |
6 6/7 |
137 1/7% |
Total |
3 |
15 |
|
16 |
|
27 3/7 |
5 1/2 |
9 8/7 |
94 2/7% average |
Here, with a declining rate of productivity on the extra capitals and a varying decline on the different types of land, the governing production price has fallen from £3 to £1 5/7. The capital investment has risen by half, from £10 to £15. The money rent has fallen by almost half, from £18 to £9 3/7, but the corn rent by only a twelfth, from 6 qrs to £5 1/2 qrs. The total product has risen from 10 qrs to 16 qrs, or by 60 per cent. The corn rent is somewhat over a third of the total product. The capital advanced stands in a ratio of 15:9 3/7 to the money rent, whereas the previous ratio was 10:18.
This is distinguished from variant I at the beginning of this chapter, where the production price falls while the rate of productivity remains the same, simply by the way that, if a given additional product is needed to remove land A from cultivation, this happens more speedily in the present case.
Both when the productivity of the additional capital investments is falling and when it is rising, the effect of this process can be very uneven, according to how the investments are distributed over the different types of land. Depending on whether this varying effect tends to even out the differences or to intensify them, the differential rent on the better types of land will fall or rise, and so too, therefore, will the total rental, as was already the case with differential rent I. Moreover, everything depends on the size of the land area and capital that is displaced with A, as well as on the relative amount of capital which has to be advanced, given rising productivity, to supply the excess product that is to meet the demand.
The only point worth investigating here, and this takes us directly back to the analysis of how this differential profit is transformed into differential rent, is as follows.
In the first case, where the production price remains the same, the excess capital that might be invested on land A is quite immaterial for the differential rent as such, since now as before land A bears no rent, the price of its product remaining the same and continuing to govern the market.
In the second case, variant I, where the production price falls with the rate of productivity remaining the same, land A necessarily drops out, and still more so in variant II (falling production price with a falling rate of productivity), since otherwise the excess capital on land A would necessarily increase the production price. Here, however, in variant III of the second case, where the production price falls because the productivity of the excess capital rises, this additional capital can under certain circumstances be invested as well on land A as on the better types of land.
We shall assume that an extra capital of £2 1/2 invested on land A produces 1 1/5 qrs instead of 1 qr.
Type of land |
Acres |
Capital (£) |
Profit (£) |
Price of prod. (£) |
Output (qrs) |
Selling price (£) |
Proceeds (£) |
Rent |
Rate of surplus profit |
|
|
|
|
|
|
|
|
|
qrs |
£ |
|
A |
1 |
2 1/2 + 2 1/2 = 5 |
1 |
6 |
1 + 1 1/5 = 2 1/5 |
2 8/11 |
6 |
0 |
0 |
0 |
B |
1 |
2 1/2 + 2 1/2 = 5 |
1 |
6 |
2 + 2 2/5 = 4 2/5 |
2 8/11 |
12 |
2 1/5 |
6 |
120% |
C |
1 |
2 1/2 + 2 1/2 = 5 |
1 |
6 |
3 +3 3/5 =6 3/5 |
2 1/5 |
18 |
4 2/5 |
12 |
240% |
D |
1 |
2 1/2 + 2 1/2 = 5 |
1 |
6 |
4 + 4 4/5 = 8 4/5 |
2 8/11 |
24 |
4 3/5 |
18 |
360% |
|
4 |
20 |
4 |
24 |
22 |
|
60 |
13 1/8 |
36 |
240% |
As well as the basic Table I, this table should also be compared with Table II, where the doubled capital investment is combined with constant productivity in proportion to the capital invested.
By our assumption, the governing production price falls. If it were to remain constant, at £3, the worst land, which previously, with a capital investment of only £2 1/2, did not bear any rent, would now yield a rent without the drawing into cultivation of any yet inferior land; the reason for this is that productivity would have increased on the same land, though only for a portion of the capital, and not for the original capital. The first £3 in production costs brings in 1 qr; the second £3 brings in 1 1/5 qrs; the total product of 2 1/5 qrs, however, is now sold at its average price. Since the rate of productivity grows with the extra capital investment, this implies an improvement. That may consist in the application of more capital as such to each acre (more fertilizer, more mechanized labour, etc.) or even in the fact that it is only with this extra capital that a qualitatively different and more productive investment of capital can be brought about. In both cases, a product of 2 1/5 qrs is obtained for an outlay of £5 capital per acre, whereas with half this capital investment, £2 1/2, the product was only 1 qr. Leaving aside transitory market conditions, the product of land A could continue to be sold at a higher production price, instead of at the new average price, only if a significant area of class A land continued to be cultivated with a capital of only £2 1/2 per acre. But as soon as the new proportion of £5 per acre, and hence this improved mode of operation, became universal, the governing production price would have to fall to £2 8/11. The distinction between the two portions of capital would disappear, and then an acre of A which was tilled with a capital of only £2 1/2 per acre would be abnormal and would not be tilled according to the new conditions of production. The distinction would no longer be between the products of different portions of capital on the same acre, but rather between a satisfactory total capital investment per acre and an unsatisfactory one. From this we can see, firstly, how when a large number of farmers have insufficient capital (it has to be a large number, for a small number would simply be compelled to sell below their production price), this has just the same effect as the differentiation of types of land themselves in a diminishing series. The poorer type of agriculture on worse soil increases the rent on the better; it can even create a rent on better cultivated land of the same poor quality, which this would not otherwise yield. Secondly, we see how differential rent, in so far as it arises from successive investments of capital on the same total area, is actually reduced to an average in which the effects of the different capital investments can no longer be recognized or distinguished. They do not produce rent on the worst lands, but rather, (1) make the average price of the total product, say on an acre of A, into the new governing price, and (2) present themselves as changes in the total amount of capital per acre required under the new conditions for satisfactory cultivation of this land, in which both the individual successive capital investments and their respective effects melt indistinguishably together. The same is true then with the particular differential rents of the better types of land. These are in any case determined by the difference between the average product of the type of land in question and the product of the worst land, in a situation where an increased investment of capital has now become normal.
No land yields any product without a capital investment. This is true even in the case of simple differential rent, differential rent I. When it is said that 1 acre of A, the land that governs the production price, yields such and such a product at this price or that, and that the better types of land, B, C and D, yield so and so much differential product and hence, at the governing price, so and so much ground-rent, this always assumes that a definite capital is applied, i.e. that considered normal under the given conditions of production. Just as in industry a definite minimum of capital is required in each line of business to produce commodities at their price of production.
If this minimum changes as a result of successive investments of capital on the same land, to effect improvements, it happens only gradually. As long as a certain number of acres of A, for example, do not receive this extra working capital, rent on the better cultivated acres of A is generated because the production price has remained constant, while the rent on all the better types of land B, C and D is thereby increased. But as soon as the new type of cultivation has spread sufficiently to become normal, the production price falls; the rent for the better lands falls again, and the portion of land A that does not possess what is now the average working capital must sell below its individual production price, i.e. below the average profit.
With a falling production price, this occurs even when the productivity of the extra capital declines, as soon as increased capital investment brings it about that the total product required is supplied by the better types of land, so that A’s working capital, for instance, is withdrawn and A no longer competes in the production of this particular product, wheat for example. The amount of capital that is then applied on average to the better land B, which now governs price, is now established as the normal amount; and in speaking of the varying fertility of land, we assume that this is the new normal quantity of capital applied per acre.
It is clear on the other hand that this average capital investment, e.g. £8 per acre before 1848 in England and £12 per acre afterwards, is what provides the standard when tenancy contracts are drawn up. For the farmer who spends more than this, the surplus profit is not transformed into rent for the duration of the lease. Whether this happens when the contract expires will depend on the competition of those farmers in a position to make the same extra advance. We are not referring here to permanent improvements to the land, which continue to provide an increased product with the same outlay of capital or even a declining one. Although these are the product of capital, they operate just like the natural differential quality of the soil.
We see therefore how differential rent II involves an element that does not develop as such in the case of differential rent I, since this can persist independently of any change in the normal capital investment per acre. On the one hand the results of different capital investments on the price-governing land A are blurred, their product simply appearing as the normal average product per acre. On the other hand there is a change in the normal minimum or average size of the capital outlay per acre, so that this change appears as a property of the soil. Finally there is a distinction in the way the surplus profit is transformed into the form of rent.
Table VI also shows, when compared with Tables I and II, that the corn rent has risen to more than double as against Table I, and by 1 1/5 qrs as against Table II; while the money rent has doubled as against I, but is unchanged from II. It would have grown significantly either if the extra capital had fallen more on the better types of land, or alternatively if the effect of the extra capital had been less on A, so that the governing average price per qr from A was higher (always taking other preconditions as the same).
If the rise in fertility as a result of extra capital had a differing effect on the different types of land, this would give rise to a change in their differential rents.
What has been proved in any case is that when the production price falls as a result of a rising rate of productivity on the extra capital investment – i.e. as soon as this productivity grows in a higher ratio than the capital advance – the rent per acre for a doubled capital investment, say, may not just double, but can more than double. However, it might also fall, if the production price were to fall much lower as a result of a rapid growth in productivity on land A.
Let us assume that the additional investments of capital, on B and C for example, did not increase productivity in the same proportion as on A, so that the proportionate differences for B and C would decline and the growth in the product would not compensate for the falling price. The rent on D would then rise and that on B and C fall, as compared with the case of Table II.
Table VIa
Type of land |
Acres |
Capital (£) |
Profit (£) |
Output per acre (qrs) |
Selling price (£) |
Proceeds (£) |
Cornrent (qrs) |
Money rent (£) |
A |
1 |
2 1/2 + 2 1/2 = 5 |
1 |
1 + 3 = 4 |
1 1/2 |
6 |
0 |
0 |
B |
1 |
2 1/2 + 2 1/2 = 5 |
1 |
2 + 2 1/2 = 4 1/2 |
1 1/2 |
6 3/4 |
1/2 |
1/2 |
C |
1 |
2 1/2 + 2 1/2 = 5 |
1 |
3 + 5 = 8 |
1 1/2 |
12 |
4 |
6 |
D |
1 |
2 1/2 + 2 1/2 = 5 |
1 |
4 + 12 =16 |
1 1/2 |
24 |
12 |
18 |
Total |
4 |
20 |
|
32 1/2 |
|
|
16 1/2 |
24 3/4 |
The money rent, finally, would rise if, given the same proportionate rise in fertility, more additional capital was applied to the better lands than to A, or if the additional capital investments on the better lands acted with an increased rate of productivity. In both cases the differences would grow.
The money rent falls if the improvement resulting from extra capital investment reduces the differences, either all or some, by having more effect on A than on B and C. Whether the corn rent rises, falls or remains stationary depends on the degree of uneven-ness in this effect.
The money rent rises, and the corn rent with it, either if more capital is added to the rent-bearing than to the non-rent-bearing land, in conditions where the proportionate differences in the additional fertility remain the same, and more capital is added to the lands of higher rent than to those of lower rent, or if, given the same additional capital, the fertility on the better and best lands grows more than on A. Indeed, in the latter case, the rent rises in relation to the degree to which the increase in fertility is greater in the superior categories of land than in the inferior ones.
Under all circumstances, however, the rent experiences a relative rise if the increased productivity is the result of a new addition of capital and not simply of increased fertility for a constant capital investment. This is the absolute point of view, and it shows how, as in all earlier cases, the rent per acre, and now the higher rent per acre (as in the case of differential rent I, the rent over the whole cultivated area – the level of the average rental), is the result of increased capital investment on the land, whether this functions with a constant rate of productivity in a situation of constant or falling prices, with a declining rate of productivity in a situation of constant or falling prices, or with an increasing rate of productivity in a situation of constant or falling prices. For our assumption of a constant price with a constant, falling or rising rate of productivity for the extra capital, and a falling price with a constant, falling or rising rate of productivity, can be reduced to the assumption of a constant rate of productivity for the excess capital in a situation of constant or falling price, a falling rate of productivity in a situation of constant or falling price, a rising rate of productivity with constant and falling price. Even though in all these cases the rent may remain stationary or even fall, it would fall further if the additional application of capital, in otherwise unchanged conditions, were not the condition for higher fertility. The additional capital is then always the cause of the relatively high level of rent, even though this may have fallen in absolute terms.