Front Page Titles (by Subject) CHAPTER XLI.: DIFFERENTIAL RENT II.—FIRST CASE: CONSTANT PRICE OF PRODUCTION. - Capital: A Critique of Political Economy. Volume III: The Process of Capitalist Production as a Whole
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CHAPTER XLI.: DIFFERENTIAL RENT II.—FIRST CASE: CONSTANT PRICE OF PRODUCTION. - Karl Marx, Capital: A Critique of Political Economy. Volume III: The Process of Capitalist Production as a Whole 
Capital: A Critique of Political Economy. Volume III: The Process of Capitalist Production as a Whole, by Karl Marx. Ed. Federick Engels. Trans. from the 1st German edition by Ernest Untermann (Chicago: Charles H. Kerr and Co. Cooperative, 1909).
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DIFFERENTIAL RENT II.—FIRST CASE: CONSTANT PRICE OF PRODUCTION.
THIS assumption implies that the market price is regulated the same as ever by the capital invested in the worst soil A.
1) If the additional capital invested in any one of the rent paying soils B, C, D, produces no more than the same capital upon the soil A, in other words, if it pays only the average profit by means of the regulating price of production, but no surplus profit, then the effect upon the rent is nil. Everything remains as it is. It is the same as though any number of acres of the A quality, of the worst soil, had been added to the cultivated area.
2) The additional capital brings forth upon every one of the different soils additional products proportional to their magnitude; in other words, the volume of production grows according to the specific fertility of every class of soil, in proportion to the magnitude of the additional capital. We started out in chapter XXXIX from the following Table I:
This table is now transformed into Table II.
It is not necessary in this case that the investment of capital should be doubled in all classes of soil, as it does in this Table. The law is the same, so long as additional capital is invested in one, or several, of the rent paying soils, no matter in what proportion. It is only necessary that production should increase upon every kind of soil in the same ratio as the capital. The rent rises here merely in consequence of an increased investment of capital in the soil, and in proportion to this increase. This increase of the product and of the rent in consequence of, and proportionately to, the increased investment of capital is just the same, so far as the quantity of the product and of the rent is concerned, as though the cultivated area of the rent paying lands of the same quality had been increased and taken under cultivation with the same investment of capital as that previously invested in the same classes of land. In the case of Table II, for instance, the result would remain the same, if the additional capital of 2½ pounds sterling per acre were invested in one additional acre each of B, C and D.
This assumption, furthermore, does not imply a more productive investment of capital, but only an investment of more capital upon the area with the same success as before.
All proportional relations remain the same here. True, if we do not consider the proportional differences, but the purely arithmetical ones, then the differential rent may change upon the various classes of soil. Let us assume, for instance, that the additional capital has been invested only in B and D. In that case the difference between D and A is 7 quarters, whereas it was only 3 before; the difference between B and A is 3 quarters, whereas it was one; that between C and B is minus one, whereas it was plus one, etc. But this arithmetical difference, which is decisive in differential rent I, so far as it expresses the difference of productivity with equal investments of capital, is here quite immaterial, because it is a consequence of different additional investments, or of no additional investments, of capital, while the difference for each aliquot part of capital upon the various lands remains unchanged.
3) The additional capitals bring forth surplus products and thus form surplus profits, but at a decreasing rate, not in proportion to their increase. TABLE III
In the case of this third assumption it is again immaterial, whether the additional second investments of capital are uniformly distributed over the various classes of soil or not; whether the decreasing production of surplus profit proceeds in equal or unequal proportions; whether the additional investments of capital fall all of them upon the same rent paying class of soil, or whether they are distributed equally or unequally over soils of different quality paying rent. All these circumstances are immaterial for the law which we are developing here. The only premise is that additional investments of capital must yield a surplus profit upon any one of the rent paying soils, but in a decreasing ratio to the amount of the increase of capital. The limits of this decrease move in the above illustration of Table III between 4 quarters = 12 p.st., the product of the first investment of capital upon the best soil D, and 1 quarter = 3 p.st., the product of the same investment of capital upon the worst soil A. The product of the best soil on the first investment of capital forms the maximum boundary, and the product of the same investment of capital in the worst soil A, which pays no rent and yields no surplus profit, forms the minimum limit of the product, which the successive investments of capital yield upon any of the various classes of soils producing a surplus profit with successive investments of capital and a decreasing productivity. Just as assumption No. II corresponds to a condition, in which new pieces of the same quality are added to the cultivated area among the superior soils, so that the quantity of any one of the cultivated soils is increased, so assumption No. III corresponds to a condition, in which additional pieces of soil are cultivated in such a way that their various degrees of fertility are distributed among soils between D and A, among soils from the best to the worst kind. If the successive investments of capital take place exclusively upon the soil D, they may include the existing differences between D and A, likewise those between D and C and those between D and B. If all the successive investments are made upon soil C, they will comprise only differences between C and A and C and B; if made exclusively upon B, only differences between B and A.
But this is the law: That the rent increases absolutely upon all these classes of soil, although not in proportion to the additional capital invested.
The rate of surplus profit, considering both the additional capital and the total capital invested in the soil, decreases; but the absolute magnitude of the surplus profit increases. In like manner the decreasing rate of profit on capital in general is generally accompanied by an absolutely increasing mass of profit. Thus the average surplus profit of the investment of capital upon B amounts to 90% on the capital, whereas it amounted to 120% on the first investment of capital. But the total surplus profit increases from one quarter to one and a half quarter, or from 3 pounds sterling to 4½ pounds sterling. Considering the total rent by itself—and not comparing it with the doubled magnitude of the advanced capital—it has risen absolutely. The differences of the rents of the various kinds of soil and their relative proportions may vary here; but this variation in the differences is here a consequence, not a cause, of the increase of the rents compared to one another.
4) The case, in which the additional investments of capital upon the superior soils bring forth a greater product than the original ones, requires no further analysis. It is a matter of course that under this assumption the rent per acre will rise, and will do so at a greater rate than the additional capital, no matter upon which kind of soil the investment may have been made. In this case the additional investment of capital is accompanied by improvements. This includes the case, in which an additional investment of less capital produces the same or a greater result than did formerly an investment of more capital. This case is not quite identical with the former one, and this is a distinction, which is important in all investments of capital. For instance, if 100 make a profit of 10, and 200, employed in a certain form, make a profit of 40, then the profit has risen from 10% to 20%, and to that extent it is the same as though 50, employed in a more effective form, make a profit of 10 instead of 5. We assume here that the profit is combined with a proportional increase of the product. But the difference is this, that I must double the capital in the one case, whereas in the other I produce the double effect by the same capital. It is by no means the same whether I bring forth the same product as before with half as much living and materialized labor, or twice the product as before with the same labor, or four times the former product with twice the labor. In the first case, labor in a living or materialised form is released, which may be employed otherwise; the power to dispose of capital and labor increases. The release of capital (and labor) is in itself an augmentation of wealth; it has just the same effect as though this additional capital had been obtained by accumulation, but it saves the labor of accumulation.
Take it that a capital of 100 has produced a product of ten yards. The 100 may include both constant capital, living labor and profit. In that case one yard costs 10. Now if I can produce 20 yards with the same capital of 100, then one yard costs 5. On the other hand, if I can produce 10 yards with a capital of 50, then one yard likewise costs 5, and a capital of 50 is released, assuming the former supply of commodities to be sufficient. Again, if I have to invest 200 of capital in order to produce 40 yards, then one yard also costs 5. The determination of the value, or price, does not indicate such differences as these, neither does the mass of products proportional to the investment of capital. But in the first case, capital is released; in the second case additional capital is saved to the extent that a duplication of production would be required; in the third case the increased product can be obtained only by an augmentation of the invested capital, although not in the same proportion as it would be if the increased product had to be supplied by the old productive power. (This belongs in Part I.)
From the point of view of capitalist production the employment of constant capital is always cheaper than that of variable capital, not where it is a question of increasing the surplus-value, but of reducing the cost price. For a saving of costs even in the element creating the surplus-value, labor, performs this service for the capitalist and makes profit for him, so long as the regulating price of production remains the same. This presupposes in fact the existence of a development of credit and of an abundance of loan capital corresponding to the capitalist mode of production. On the one hand I employ 100 pounds sterling of additional constant capital, if 100 pounds sterling are the product of five laborers during one year; on the other hand, 100 pounds sterling in variable capital. If the rate of surplus-value is 100%, then the value created by those five laborers in 200 pounds sterling; on the other hand, the value of 100 pounds sterling of constant capital is 100 pounds sterling, or perhaps 105 pounds sterling in its capacity as loan capital, if the rate of interest is 5%. The same sums of money express largely different values in product, according to whether they are advanced to production as values of constant or variable capital. Furthermore, as concerns the cost of the commodities from the point of view of the capitalist, there is also this difference that of 100 pounds sterling of constant capital only the wear and tear passes into the value of the product to the extent that this money is invested in fixed capital, whereas 100 pounds sterling invested in wages pas wholly into the values of commodities and must be reproduced in them.
In the case of colonists and of independent small producers in general, who have no command at all over capital or at least command it only at a high rate of interest, that part of the product which stands in place of wages is their revenue, whereas it constitutes an investment of capital for the capitalist. The colonist, therefore, regards this expenditure of labor as the indispensable prerequisite of his product, which is the thing that interests him first of all. As for his surplus-labor, after deducting that necessary labor, it is evidently realised in a surplus-product and as soon as he can sell this, or even use it for himself, he looks upon it as something that cost him nothing, because it cost him no materialised labor. It is only the expenditure of materialised labor which appears to him as an outlay of wealth. Of course, he tries to sell as high as possible; but even a sale below value and below the capitalist price of production still appears to him as a profit, unless this profit is claimed beforehand by debts, mortgages, etc. But for the capitalist the investment of both variable and constant capital represents an outlay of capital. The relatively large outlay of the capitalist reduces the cost-price, and in fact the value of commodities, provided other circumstances remain the same. Hence, although the profit arises only from surplus-labor, consequently only from the employment of variable capital, still it may seem to the individual capitalist that living labor is the most expensive element of his cost of production, which should be reduced to a minimum above all others. This is but a capitalistically distorted form of the correct view that the relatively greater use of past labor, compared to living labor, signifies an increase in the productivity of social labor and a greater social wealth. From the point of view of competition, everything appears thus distorted and invested.
Assuming the prices of production to remain unchanged, additional investments of capital may be made with an unaltered, an increasing, or a decreasing productivity upon the better soils, that is upon all soils from B upward. Upon soil A this would be possible, under the conditions assumed by us, only in the case that productivity should remain the same, in which case this land continues to pay no rent, or in the case that productivity increases in which case a portion of the capital invested in A would produce rent, while the remainder would not. But it would be impossible, if the productivity upon A were to decrease, for in that case the price of production would not remain unchanged, but would rise. But under all these circumstances the surplus-product and the surplus-profit corresponding to it increases per acre, and with them eventually the rent, in grain or in money, regardless of whether the surplus-product yielded by them is proportional to their magnitude, or above or below this proportion, regardless of whether the rate of the surplus-profit of capital remains constant, rises of falls when this capital increases. The growth of the mere mass of surplus-profit, or of the rent calculated per acre, that is, an increasing mass calculated on the same unaltered unit, in the present case on a definite quantity of land, such as an acre or an hectare, expresses itself as an increasing ratio. Hence the magnitude of the rent, calculated per acre, increases under such circumstances simply in consequence of the increase of the capital invested in the soil. This takes place when the price of production remain the same, no matter whether the productivity of the additional capital stays unaltered, or decreases, or increases. These last named circumstances modify the volume, in which the level of the rent per acre rises, but not the fact of this increase itself. This is a phenomenon, which is peculiar to differential rent No. II and distinguishes it from differential rent No. I. If the additional investments of capital, instead of being made successively one after another upon the same soil, were made side by side upon new additional soil of the corresponding quality, the mass of the rental would have increased, and, as previously shown, the average rent of the cultivated total area would like wise have increased, but not the size of the rent per acre. When results remain the same so far as the mass the value of the total production and of the surplus product are concerned, the concentration of capital upon a smaller area of land develops the size of the rent per acre, whereas its distribution over a larger area, under the same circumstances, and other circumstances remaining the same, does not produce this effect. But the more the capitalist mode of production develops, the more develops also the concentration of capital upon the same area of land, and the higher rises the rent calculated per acre. Consequently, if we have two countries, in which the prices of production are identical, the differences of the various kinds of soil the same, and the same amount of capital invested, but in such a way that the investment is made in the form of successive outlays upon a limited area in one country, whereas in the other country it is made more in the shape of co-ordinated outlays upon a wider are, then the rent per acre, and with it the price of land, would be higher in the first and lower in the second country, although the mass of the rent would be the same in both countries. The difference in the size of the rent could not be explained in such a case out of the natural fertility of the various kinds of soil, nor out of the quantity of employed labor, but solely out of the different ways in which the capital is invested.
In speaking of a surplus-product in this case, we mean that aliquot part of the product, in which the surplus-profit presents itself. Ordinarily we mean by surplus-product that portion of the product, in which the total surplus-value is materialised, or in some cases that portion, in which the average profit presents itself. The specific significance, which this term assumes in the case of rent-paying capital, give rise to misunderstanding, as we have shown in another place.