Since the level of the general price of production is one of the limits of the surplus-product, the level of the average rate of profit being one of its factors, it can have no other source but the difference between the general and the individual price of production, and consequently the difference between the general and the individual rate of profit. An excess of this difference would imply the sale of products above the price of production regulated by the market, not at this price.

2) So far as the surplus profit of the manufacturer using natural water power instead of steam for motive power does not differ in any way from any other surplus profit. All normal surplus profit, that is all surplus profit not due through accidental sales or fluctuations of the market price, is determined by the difference between the individual price of production of the commodities of these particular capitals and the general price of production, which regulates in a general way the market prices of the commodities produced by the capitals of this sphere of production, or the market prices of the commodities of the total capital invested in this sphere of production.

But now we come to the difference.

To what circumstance does the industrial capitalist in the present case owe his surplus-profit, the surplus resulting for him personally from the price of production regulated by the average rate of profit?

He owes it in the last resort to a natural power, the motive power of water, which is found ready at hand in nature and which is not itself a product of labor like coal, which transforms water into steam. The water has no value, it need not be paid by an equivalent, it costs nothing. It is a natural agency of production, which is not produced by labor.

But this is not all. The manufacturer who works with a steam engine also employs natural powers, which cost him nothing and yet make his labor more productive and, to the extent that they cheapen the manufacture of the means of subsistence required for the laborers, increase the surplus-value and with it the profit. These natural powers are quite as much monopolised by capital as the natural powers of social labor arising from co-operation, division, etc. The manufacturer pays for the coal, but not for the faculty of the water to alter its aggregate state, of passing over into steam, not for the elasticity of the steam, etc. The monopolisation of natural powers, that is of the increased productivity of labor due to them, is common to all capital working with steam engines. It may increase that portion of the product of labor which represents surplus-value as against that portion which is converted into wages. To the extent that it does this, it raises the general rate of profit, but it does not make any surplus-profit, for this consists of the excess of the individual profit over the average profit. The fact that the application of a natural power, of a waterfall, creates a surplus-profit in this case, cannot therefore be due solely to the circumstance that the increased productivity of labor is here due to a natural force. There must be still other modifying circumstances.

Look at the reverse side. The mere application of natural powers to industry may influence the level of the general rate of profit, because it affects the quantity of labor necessary to produce the means of subsistence. But in itself it does not create any deviations from the general rate of profit, and this is the point in which we are interested here. Furthermore, the surplus-profit, which some individual capital may ordinarily realise in its particular sphere of production—for the deviations of the rates of profits in the various spheres of production are continually balanced by competition into an average rate—are due, aside from accidental deviations, to a reduction of the cost-price, of the cost of production. This reduction arises either from the fact that a capital is used in greater than ordinary quantities, so that the dead expenses of the production are reduced, while the general causes increasing the productivity of labor, such as co-operation, division, etc., can exert themselves with a higher degree of intensity, their field of expression being larger. Or it may arise from the fact that, aside from the greater volume of the invested capital, better methods of labor, new inventions, improved machinery, chemical secrets in manufacture, etc., in short new and improved means of production and methods are used, which are above the average. The reduction of the cost price and the surplus profit arising from it arise here from the manner, in which the self-expanding capital is invested. They arise either from the circumstance that it is concentrated in one hand in extraordinarily large masses (a circumstance which is neutralised when capitals of the same size become the average), or from the circumstance that a capital of a certain size expands itself under exceptionally favorable circumstances (a circumstance which is neutralised as soon as the exceptional method of production becomes general or is superseded by a still more developed one).

The cause of the surplus profit, then, arises here from the capital itself (which includes the labor set in motion by it); it is either due to the greater size of the capital employed, or to its more improved application; and there is no particular reason why all the capital in the same sphere of production should not be invested in the same way. In fact, the competition between the capitals tends to neutralise their differences more and more. The determination of value by the socially necessary labor time asserts itself by the cheapening of commodities and the necessity of making commodities under the same favorable conditions. But it is different with the surplus profit of the industrial capitalist who uses water power. The increased productive power of his labor is not due either to his capital or his labor, nor to the mere application of some natural force separate from capital and labor, but incorporated in the capital. It arises from the greater natural power of production of labor in conjunction with some other natural power, which natural power is not at the command of all capitals in this sphere, whereas such a thing as the elasticity of steam is. The application of this other natural power does not follow as a selfunderstood matter, whenever capital is invested in this sphere. It is a monopolised natural power, which, like a water fall, is only at the command of those who can avail themselves of particular pieces of the globe and its opportunities. It is not within the power of capital to call to life this natural premise for a greater productivity of labor, whereas any capital may transform water into steam. Water power is found only locally in nature, and wherever it does not exist, it cannot be created by any investment of capital. It is not dependent upon products which labor can secure, such as machines, coal, etc. It is dependent upon definite natural conditions of definite portions of the globe. That section of industrial capitalists who own waterfalls excludes the other section who do not own any from the application of this power, because the land, and particularly land supplied with water power, is limited. Of course this does not prevent the quantity of water power available for industrial purposes from being increased, even if the number of natural waterfalls in a certain country is limited. Water power may be artificially diverted, in order to exploit its motive force fully. Under certain conditions a water wheel may be inproved so as to use the highest possible amount of water power; in places where the ordinary wheel is not suitable for supplying water, turbines may be used, etc. The possession of this natural power forms a monopoly in the hand of its owner, it is a premise for the increase of the productivity of the invested capital, which cannot be created by the process of production of the capital itself. 126 This natural power, which can be monopolised in this way, is always attached to the soil. Such a natural power does not belong to the general conditions of that particular sphere of production, and not to those conditions, which may be made general.

Now let us assume that the waterfalls with the land on which they are found are held in the hands of persons, who are considered the owners of these portions of the globe, who are land owners. These owners may exclude others and prevent them from investing capital in the waterfalls or using waterfalls by means of capital. They can permit such a use or forbid it. The capital cannot create a waterfall out of itself. Therefore the surplus profit, which arises from this employment of waterfall, is not due to capital, but to the harnessing of a natural power, which can be monopolised and has been monopolised, by capital. Under these circumstances the surplus-profit is transformed into ground-rent, that is, it falls into the hands of the owner of the waterfall. If the industrial capitalist pays to the owner of the waterfall 10 pounds sterling annually, then his profit is 15 pounds sterling, that is 15% on the 100 which then make up his cost of production; and he is just as well off, or possibly better, as all other capitalists of his sphere of production, who work with steam. It would not matter, if this capitalist should be the owner of the waterfall. He would in that case pocket the surplus profit of 10 pounds in his capacity as a landowner, not in his capacity as an industrial capitalist, just because this surplus is not due to his capital as such, but to a limited natural power separate from his capital, over which he has command, because he has a monopoly of it. And so it is converted into ground-rent.

1) It is evident that this is always a differential rent, for it does not enter as a determining factor into the average price of production of commodities, but rather is based on it. It always arises from the difference between the individual price of production of the individual capital having command over monopoly of natural power and the general price of production of the total capital invested in that particular sphere of production.

2) This ground-rent does not arise from the absolute increase of the productivity of the employed capital, or of the labor appropriated by it, since this can only reduce the value of commodities; it is due to the greater relative fertility of definite individual capitals invested in a certain sphere of production, as compared with investments of capital, which are excluded from these exceptional and natural conditions favoring the productivity. For instance, if the use of steam should offer overwhelming advantages not attached to the use of water power, or tending to neutralise the benefits to be derived from water power, then, water power would not be used and could not produce any surplus profit, or ground-rent, even though coal has a value and water power has not.

3) The natural power is not the source of the surplus profit, but only its natural basis, because this natural basis permits an increase in the productive power of labor. In the same way the use-value is the general bearer of the exchange-value, but not its cause. If the same use-value could be created without labor, it would have no exchange-value, yet it would have the same useful effect as ever. On the other hand, nothing can have an exchange-value unless it has a use-value, unless it has this useful bearer of labor. Were it not for the fact that the different values are neutralised into prices of production, and the different individual prices of production into one average price of production regulating the market, the mere increase in the productivity of labor by the use of a waterfall would merely lower the price of the commodities produced with the waterfall, without adding anything to the share of profit contained in those commodities. On the other hand, this increased productivity of labor would not be converted into surplus-value, were it not for the fact that capital appropriates the natural and social productivity of labor as though it were its own.

4) The private ownership of the waterfall has nothing to do with the creation of that portion of the surplus-value (profit), and of the price of a commodity in general, which is produced by the help of the waterfall. This surplus profit would also exist, if private property did not prevail, for instance, if the land supplied with the waterfall were appropriated by the industrial capitalist as masterless booty. Hence private property in land does not create that portion of value, which is transformed into surplus profit, but it merely enables the landowner, who has possession of the waterfall, to coax this surplus profit out of the pocket of the industrial capitalist into his own. It is the cause, not of the creation of this surplus profit, but of its transformation into ground-rent, of the appropriation of this portion of the profit, or of the price of commodities, by the owner of the land or of the waterfall.

5) It is evident that the price of the waterfall, that is the price which the owner of it would receive if he were to sell it to some other man, perhaps to the industrial capitalist, would not enter directly into the general price of production of the commodities, although it would enter into the individual cost-price of the industrial capitalist. For the rent arises here from the price of production of the commodities produced by steam machinery, and this price is regulated independently of the waterfall. Furthermore, this price of the waterfall is an irrational expression, behind which a real economic relation is concerned. The waterfall, like the earth in general, and like any natural force, has no value, because it does not represent any materialised labor, and therefore it really has no price, which is normally but the expression of value in money. Where there is no value, it is obvious that it cannot be expressed in money. This price is merely capitalised rent. The ownership of land enables the landowner to catch the difference between the individual profit and the average profit. The profit thus acquired, which is renewed every year, may be capitalised, and then it appears as the price of a natural power itself. If the surplus profit realised by the use of the waterfall amounts to 10 pounds sterling per year, and the average interest is 5%, then these 10 pounds sterling annually represent the interest on a capital of 200 pounds sterling; and this capitalisation of the annual 10 pounds sterling, which the waterfall enables its owner to catch, appears then as the capital-value of the waterfall itself. That it is not the waterfall itself, which has a value, but that its price is a mere reflex of the appropriated surplus profit, which the use of the waterfall yields to the industrial capitalist, capitalistically calculated, becomes at once evident in the fact that the price of 200 pounds sterling represents merely the product of a surplus profit of 10 pounds sterling for 20 years, whereas the same waterfall will enable its owner to catch these 10 pounds sterling every year for 30 years, or 100 years, or an indefinite number of years, so long as circumstances remain the same. On the other hand, if some new method of production, which is not suitable for water power, should reduce the cost price of the commodities produced by steam machinery from 100 to 90 pounds sterling, the surplus profit, and with it the rent, and with it the price of the waterfall, would disappear.

Now that we have explained our general conception of differential rent, we will pass on to its consideration in agriculture, strictly so-called. What applies to it will also apply on the whole to mines.

CHAPTER XXXIX.: THE FIRST FORM OF DIFFERENTIAL RENT.
( Differential Rent I. )

RICARDO is quite right when he writes the following sentences:

In other words, surplus profit, if normal and not due to accidental transactions in the process of circulation, is always produced as a difference between the products of two equal quantities of capital and labor. This surplus profit is transformed into ground rent, when two equal quantities of capital and labor are employed on equal quantities of land with unequal results. However, it is by no means absolutely necessary that this surplus profit should arise from unequal results of equal quantities of invested capital. The various investments may also employ unequal quantities of capital. Indeed, this is generally the case. But equal aliquot parts, for instance 100 pounds sterling of each, give unequal results; that is, their rates of profit are different. This is the general prerequisite for the existence of surplus profit in any sphere, where capital is invested. The second prerequisite is the transformation of this surplus profit into ground-rent (and of rent in general as distinguished from profit); it should always be analysed, when, how, under what conditions this transformation takes place.

Ricardo is also right in the following sentence, provided it is limited to differential rent: "Whatever diminishes the inequality in the produce obtained on the same or on new land, tends to lower rent; and whatever increases that inequality, necessarily produces an opposite effect and tends to raise it." (P. 74.)

However, among these causes are not merely the general ones (fertility and location), but also 1) the distribution of taxes, according to whether it works uniformly or not; it always has the latter effect, for instance in England, when it is not centralised and when the tax is levied on the land, not on the rent; 2) the inequalities arising from the different development of agriculture in different parts of the country, since this line of industry, on account of its traditional character, is more difficult to level than manufacture; 3) the inequality in the distribution of capital among the capitalist tenants. Since the capture of agriculture by the capitalist mode of production, the transformation of independently producing farmers into wage workers, is in fact the last conquest of this mode of production, these inequalities are greater here than in any other line of industry.

After these preliminary remarks I will give a brief summary of the peculiarities of my own analysis as distinguished from that of Ricardo, etc.

We consider first the unequal results of equal quantities of capital, applied to different lands of equal area; or on lands with unequal areas, but calculated on the same aliquot parts of it.

The two general causes of these unequal results independent of capital, are 1) Fertility. (With reference to this first point the analysis should state, what is included in the natural fertility of lands, and what elements enter into it.) 2) The location of the lands. This is a deciding factor in colonies, and in general determines the succession in which lands shall be taken under cultivation. Furthermore it is evident that these two different causes of differential rent, fertility and location, may work in opposite directions. A certain soil may be very favorably located and yet be very poor in fertility, and vice versa. This circumstance is important, for it explains how it is that the work of opening the soil of a certain country to cultivation may equally well proceed from the worse to the better soil, instead of vice versa. Finally it is clear that the progress of social production has on the one hand the general effect of leveling the differences arising from location as a cause of ground-rent, by creating local markets and improving locations by means of facilities for communication and transportation; and that, on the other hand, it increases the differences of the individual locations in a certain district by separating agriculture from manufacture and forming great centers of production on the one hand while relatively isolating the agricultural districts on the other hand.

For the present, however, we leave this point, location, out of consideration and confine ourselves to natural fertility. Aside from climatic factors, etc., the difference in natural fertility is one of the chemical compositions of the top soil, that is of its different contents in plant nourishment. However, assuming the chemical composition and natural fertility in this respect to be the same for two areas, the actual fertility will be different according to whether these elements of plant nourishment have a form, in which they may be more or less easily assimilated and immediately utilised for nourishing plants. Hence it will depend partly upon the chemical, partly upon the mechanical development of agriculture, to what extent the same natural fertility may be made available in fields of the same natural fertility. Fertility, although an objective quality of the soil, always implies economic relations, a relation to the existing chemical and mechanical development in agriculture, of course it changes with such a development. By dint of chemical applications (such as the use of certain liquid manures to stiff clay loam, or burning of heavy clay soils) or of mechanical appliances (such as special plows for heavy soils) the obstacles may be removed, which made a soil of the same fertility as some other actually less fertile (drainage also belongs under this head). Or even the succession of soils in cultivation may be changed thereby, as was the case, for instance, with light sandy soil and heavy clay soil in a certain period of development of English agriculture. This shows once more that historically, in the succession of soils under cultivation, one may pass just as well from very fertile soils to less fertile ones as vice versa. The same may come to pass by any artificially created improvement in the composition of the soil, or by a mere change in the methods of agriculture. Finally the same result may be brought about by a change in the succession of the predominant kinds of soil, owing to different conditions of the subsoil, as soon as it is likewise taken into cultivation and turned over into top layers. This is caused either by the employment of new methods of agriculture (such as planting of stock feed), or any mechanical appliances, which either turn the subsoil into top layers, or mix it with the top soil, or cultivate the subsoil without throwing it up.

All these influences upon the differential fertility of different lands amount to the practical result that for the economic fertility the state of the productivity of labor, in this case the faculty of agriculture of making the natural fertility of the soil immediately available, a faculty which varies in different periods of development, is as much an element in the so-called natural fertility of the soil as its chemical composition and its other natural qualities.

We assume, then, the existence of a certain stage of development of agriculture. We assume furthermore, that the predominant succession of soils is calculated with reference to this stage of development, a thing which is, of course, always the case with simultaneous investments of capital on the different soils. Under such circumstances differential rent may form either in an ascending or a descending succession, for although the succession is an established fact for the totality of the actually cultivated lands, a movement of succession leading to this formation always preceded it.

Let us assume the existence of four kinds of soil, A, B, C, D. Let us furthermore assume that the price of one-quarter of wheat is three pounds sterling, or 60 shillings. Since rent is here merely a differential rent, this price of 60 shillings per quarter for the worst soil is equal to the cost of production, that is equal to the capital plus the average profit.

Let A be this worst soil and yield for each 50 shillings of expenditure one-quarter of wheat worth 60 shillings, so that the profit is 10 shillings, or 20%.

Let B yield for the same expenditure 2 quarters of wheat, or 120 shillings. This would be 70 shillings of profit, or a surplus profit of 60 shillings.

Let C yield for the same expenditure 3 quarters, or 180 shillings; total profit 130 shillings, surplus profit 120 shillings.

Let D yield 4 quarters, 240 shillings, 190 shillings of profit, 180 shillings of surplus profit.

Then we shall have the following succession:

The respective rents are: D = 190 sh.—10 sh., or the difference between D and A; C = 130—10 sh., or the difference between C and A; B = 70—10 sh., or the difference between B and A; and the total rent for B, C, D equals 6 quarters, or 360 shillings, equal to the sum of the differences between D and A, C and A, B and A.

This succession representing a certain product in a certain condition may, abstractly considered, descend from D to A, from very fertile to less and less fertile soil, or rise from A to D, from relatively poor to more and more fertile soil, or may fluctuate in a now rising, now descending curve, for instance from D to C, from C to A, from A to B (and we have already mentioned the reasons why this might take place in reality).

The process leading to the descending succession took place in the following manner: The price of one-quarter of wheat rose gradually from, say, 15 shillings to 60 shillings. As soon as the 4 quarters produced by D (assume them to have been so many million quarters) did not suffice any more, the price of wheat rose to a point where the missing supply could be raised by C. That is to say, the price of wheat must have risen to 20 shillings per quarter. When it had risen to 30 shillings per quarter, B could be taken under cultivation, and when it reached 60 shillings per quarter, A could be taken in, and the capital invested in it did not have to be content with a lower rate of profit than 20%. In this way a rent was formed for D, first of 5 shillings per quarter, or 20 shillings for the 4 quarters produced by it; then of 15 shillings per quarter, or 60 shillings, then of 45 shillings per quarter, or a total of 180 shillings for 4 quarters.

If the rate of profit of D originally was likewise 20%, then its total profit on 4 quarters of wheat was also but 10 shillings, but this stood for more grain when the price was 15 shillings than it does when the price is 60 shillings. But since the grain enters into the reproduction of labor-power, and a portion of each quarter has to make good some wages and another some constant capital, the surplus-value under this condition was higher, and to that extent, other things being the same, the rate of profit. (The matter of the rate of profit will have to be analysed separately and in detail.)

On the other hand, if the succession went the opposite way, that is, if the movement started from A, then the price of wheat at first rose above 60 shillings, when new land had to be taken under cultivation. But when the necessary supply was raised by B, a supply of 2 quarters, the price fell once more to 60 shillings. B raised wheat at a cost of 30 shillings per quarter, but sold it at 60 shillings, because its supply sufficed just to cover the demand. In this way a rent was formed, first of 60 shillings for B, and in the same way for C and D; always assuming that the market price remained at 60 shillings, although C and D relatively raised wheat having a value of 20 and 15 shillings respectively, because the supply of the one-quarter raised by A was as much needed as ever to satisfy the total demand. In this case the rising of the demand above the supply first raised by A, then by A and B, would not have made it possible to cultivate successively B, C and D, but would merely have caused a general extension of the sphere of cultivation, by which the more fertile lands came under its control later.

In the first succession, an increase in the price would raise the rent and lower the rate of profit. The lowering of the rate of profit might be entirely or partially checked by opposing circumstances. This point will have to be treated later. It should not be forgotten, that the general rate of profit is not determined uniformly in all spheres of production by the surplus-value. It is not the agricultural profit, which determines the industrial profit, but vice versa. But of this more anon.

In the second succession the rate of profit on the invested capital would remain the same. The mass of profit would present itself in less grain; but the relative price of grain, compared with that of other commodities, would have risen. Only, whatever increase there might be in the profit, would separate itself from the actual profit in the form of rent, instead of flowing into the pockets of the capitalist tenant and appearing as a growing profit. The price of grain, however, would remain unchanged under the conditions assumed here.

The development and growth of differential rent would remain the same, both with unaltered and with increasing prices, and with a continued progress from worse to better land as well as with a continued regression from better to worse land.

So far we have assumed 1) that the price rises in the one succession and remains stationary in the other; 2) that there is a continual progression from better to worse soil, or from worse to better soil.

But now let us assume that the demand for grain rises from its original figure of 10 to 17 quarters; furthermore, that the worst soil A is displaced by another soil A', which raises 1 1/3 quarters at a price of production of 60 shillings (50 sh. cost plus 10 sh. for 20% profit), so that its price of production for one-quarter is 45 shillings; or, perhaps, the old soil A may have become improved through a continued rational cultivation, or may be cultivated more productively at the same cost, for instance, by the introduction of clover, etc., so that its product with the same investment of capital rises to 1 1/3 quarters. Let us also assume that the classes B, C and D of soil supply the same product as ever, but that new classes of soil have been introduced, for instance, A' of a fertility between A and B, furthermore B' and B'' of a fertility between B and C. In that case we should witness the following phenomena:

1) The price of production of one-quarter of wheat, or its regulating market price, would have fallen from 60 shillings to 45 shillings, or by 25%.

2) The cultivation would have proceeded simultaneously from more fertile to less fertile soil, and from less fertile to more fertile soil. The soil A' is more fertile than A, but less fertile than the hitherto cultivated soils B, C and D. And B' and B'' are more fertile than A, A' and B, but less fertile than C and D. The succession would thus have proceeded in crisscross fashion. Cultivation would not have proceeded to soil absolutely less fertile than A, etc., but it would have proceeded to relatively less fertile than the soils C and D; on the other hand, cultivation would not have taken up soil absolutely more fertile, but at least relatively more fertile compared to the hitherto least fertile soils A or A and B.

3) The rent on B would have fallen; likewise the rent on C and D; but the total rental would have risen from 6 quarters to 7 2/3; the mass of the cultivated and rent paying lands would have increased, and the mass of the product would have risen from 10 quarters to 17. The profit, if remaining the same for A, expressed in grain, would have risen; but the rate of profit itself might have risen, because the relative surplus-value did. In this case the wages, and with them the investment of variable capital, and with it the total investment, would have been reduced on account of the cheapening of the means of subsistence. The total rental would have fallen from 360 shillings to 345 shillings.

Let us draw up the new succession.

Finally, if only the classes of soil A, B, C and D were cultivated, but their productivity raised in such a way that A would produce 2 quarters instead of 1, B, 4 quarters instead of 2, C, 7 quarters instead of 3, and D, 10 quarters instead of 4, so that the same causes would have acted differently upon the various classes of soil, the total production would have increased from 10 quarters to 23. Assuming that the demand would absorb these 23 quarters by an increase of the population and the falling of prices, we should get the following table:

The numbers in this and in other tables are arbitrarily chosen, but the assumptions are quite rational.

The first and principal assumption is that the improvement in agriculture acts differently upon different soils, and in this case more so upon the best classes of soil, C and D, than upon the A and B classes. Experience has shown that this is indeed the case, although the opposite may also take place. If the improvement should affect the lesser soils more than the better ones, the rent on these last ones would have fallen instead of rising.

But in our table we have assumed that the absolute growth of the fertility of all classes of soil is simultaneously accompanied by an increase of the higher relative fertility of the better classes of soil, C and D, which implies an increasing difference between the various products with the same investment of capital, and thus an increase of the differential rent.

The second assumption is that the total demand must keep step with the increase of the total product. In the first place, one need not imagine such an improvement to come abruptly, but gradually, until the succession in table III is reached. In the second place, it is a mistake to say that the consumption of necessities of life does not grow with their cheapening. The abolition of the corn laws in England proved the reverse (see Newman), and the contrary view is derived merely from the fact that great and sudden differences in the harvests, caused by the weather, bring about at one time an extraordinary fall, at another an extraordinary rise in the prices of cereals. While in such a case the sudden and short cheapness does not get time to exert its full effect upon the extension of consumption, the opposite takes place when the cheapening process arises out of the lowering of the regulating price of production itself and has permanency. In the third place, a portion of the grain may be consumed in the shape of whiskey or beer. And the rising consumption of these articles is by no means confined within narrow limits. In the fourth place, this matter depends partly upon the increase of the population, and for the other part the country may be a grain exporting one, as England was far beyond the middle of the 18th century, so that the demand is not regulated by the boundaries of a mere national consumption. Finally the increase and cheapening of the wheat production may have the result of making wheat instead of rye or oats the principal article of consumption for the masses, so that the demand for it may grow for this reason alone, just as the opposite may take place when the product decreases and prices rise.—Under these assumptions, and with the figures previously chosen, succession No. III would show a fall in the price per quarter from 60 shillings to 30, that is 50%, that production compared to succession No. I would increase from 10 quarters to 23, in other words, by 130%; that the rent would remain stationary upon the soil B, be doubled upon C, and more than doubled upon D, and that the total rental would increase from 18 pounds sterling to 22, a growth of 22 1/9%.

A comparison of these three tables (taking table I twice, one rising from A to D, and one descending from D to A), which may be considered either as existing gradations under some definite stage of society, for instance, as existing side by side in three different countries, or as succeeding one another in different periods of development in the same country, would show:

1) That the succession, when complete, whatever may have been the course of its formative process, always has the appearance of being in a descending line; for in studying the rent, the point of departure will always be the soil producing the maximum of rent, and the closing point will be the soil yielding no rent.

2) That the price of production of the worst soil, which yields no rent, is always the regulating market price, although this market price in table I, if its succession was formed in an ascending line, could not remain stationary, unless better and better soil were cultivated. In that case the price of the grain produced on the best soil is a regulating one to the extent that it depends upon the quantity produced on such soil in what measure the soil of class A shall remain the regulator. For instance, if B, C, D should produce more that the demand calls for, then A would cease to be the regulator. This is what Storch has in mind, when he adopts the best class of soil as the regulating one. In this manner the American price of cereals regulates the English price.

3) Differential rent arises from the differences in the natural fertility of the soil which depends upon the prevailing degree of development of cultivation (leaving aside for the present the question of location), in other words, from the limited area of the best lands, and from the circumstance that equal capitals must be invested in unequal soils, which yield unequal products with the same capital.

4) The existence of differential rent and of a graduated succession of differential rents may be due quite as much to a descending succession, which leads from the better to the worse soils, as to an ascending one, which takes the opposite direction. Or it may be brought about by alternating forward and backward movements. (Succession No. II may form by a process from D to A, or from A to D; succession No. II comprises both movements.)

5) According to its mode of formation, differential rent may develop with a stationary, rising or falling price of the products of the soil. With a falling price the total production and the total rental may rise, and rent may form on hitherto rentless lands, even though the worst soil A may have been displaced by a better one, or may itself have become improved, and although the rent may decrease on other better, or even the best, lands (table II); this process may also be accompanied by a fall of the total rent (in money). Finally, when prices are falling on account of a general improvement of cultivation, so that the product and the price of the product of the worst soils decrease, the rent may remain the same or may fall on a part of the better soils, but rise on the best soils. It is true that the differential rent of every soil, compared with the worst soil, depends upon the price, say, of the quarter of wheat, when the difference of the quantity of products is given. But when the price is given, differential rent depends upon the magnitude of the differences of the quantity of products, and if, with an increasing absolute fertility of all soils that of the better soil grows relatively more than that of the worse soil, the magnitude of this difference grows to that extent. In this way (see Table I), when the price is 60 shillings, the rent of D is determined by its differential product as compared to A, in other words, by its surplus of 3 quarters. The rent is therefore three times sixty, or 180 shillings. But in Table III, in which the price is 30 shillings, the rent is determined by the quantity of the surplus product of D as compared to A, that is 8 quarters, and therefore it is eight times thirty, or 240 shillings.

This does away with the primitive misconception of differential rent still found among men like West, Malthus, Ricardo, to the effect that it necessarily requires a progress toward worse and worse soil, or an ever decreasing productivity of agriculture. It rather may exist, as we have seen, with a progress to a better and better soil; it may exist when a better soil takes the lowest position formerly occupied by the worst soil; it may be accompanied with a progressive improvement of agriculture. Its premise is merely the inequality of the different kinds of soil. So far as the development of productivity is concerned, it implies that the increase of absolute fertility of the total area does not do away with this inequality, but either increases it, or leaves it unchanged, or merely reduces it somewhat.

From the beginning to the middle of the 18th century England's cereal prices fell continually in spite of the falling prices of gold and silver, while at the same time (viewing this entire period) there was an increase of rent, of the rental, of the area of the cultivated lands, of agricultural production, and of the population. This corresponds to Table I combined with Table II in an ascending line, but in such a way that the worst land A is either improved or eliminated from the grain area; this does not imply that it was not used for other agricultural or industrial purposes.

From the beginning of the 19th century (the date should be given more precisely) until 1815 there is a continual rise in the cereal prices, accompanied by a steady growth of the rent, of the rental, of the volume of the cultivated lands, of agricultural production, and of the population. This corresponds to Table I in a descending line. (Quote here some passages on the cultivation of inferior lands in those times.)

In Petty's and Davenant's time, the farmers and land owners complain about the improvements and the breaking of new ground; the rent on the superior soils falls, the total rental increases through the extension of the soils yielding rent.

(These three points should be illustrated later on by quotations; likewise the difference in the fertility of the different cultivated portions of the soil in a certain country.)

The general rule in differential rent is that the market-value always stands above the total price of production of the mass of products. For instance, take Table I. The ten quarters of the total product are sold at 600 shillings, because the market price is determined by the price of production of A, which amounts to 60 shillings per quarter. But the actual price of production is:

The actual price of production of these 10 quarters is 240 shillings. But they are sold at 600 shillings, 250% too dear. The actual average price for 1 quarter is 24 shillings; the market price is 60 shillings, also 250% too dear.

This is a determination by the market-value, which is enforced on the basis of capitalist production by means of competition; it creates a false social value. This arises from the law of the market-value, to which the products of the soil are subject. The determination of the market-value of the products, including the products of the soil, is a social act, although performed by society unconsciously and unintentionally. It rests necessarily upon the exchange-value of the product, not upon the soil and its differences in fertility.

If we imagine that the capitalistic form of society is abolished and society is organized as a conscious and systematic association, then those 10 quarters represent a quantity of independent labor, which is equal to that contained in 240 shillings. In that case society would not buy this product of the soil at two and a half times the labor time contained in it. The basis of a class of land owners would thus be destroyed. This would have the same effect as a cheapening of the product to the same amount by foreign imports. While it is correct to say that, by retaining the present mode of production but paying the differential rent to the state, the prices of the products of the soil would remain the same, other circumstances remaining unchanged, it is wrong to say that the value of the products would remain the same, if capitalist production were superseded by association. The sameness of the market prices for commodities of the same kind is the way in which the social character of value asserts itself on the basis of capitalist production, as it does of any production resting on the exchange of commodities between individuals. What society in its capacity as a consumer pays too much for the products of the soil, what constitutes a minus for the realisation of its labor time in agricultural production, is now a plus for a portion of society, for the landlords.

A second circumstance, important for the analysis to be given under II in the next chapter, is the following:

It is not merely a question of the rent per acre, or per hectare, nor in general of a difference between the price of production and the market price, nor between the individual and general price of production per acre, but it is also a question of how many acres of each class of soil are under cultivation. The point of importance is here primarily the magnitude of the rental, that is, of the total rent of the entire cultivated area; but it serves us at the same time as a transition to the development of a rise in the rate of the rent, although there is neither a rise in the prices, nor an increase in the differences of the relative fertility of the various kinds of soil when prices are falling.

We had above:

Now let us assume that the number of cultivated acres is doubled in every class. Then we have:

Let us assume two other cases, and let the first be one, in which production expands on the two inferior classes of soil, in the following manner:

Finally let us assume an unequal expansion of production and of the cultivated area on all four classes, in the following manner:

In the first place, the rent per acre remains the same in all these four cases I, I a, I b and I c. For in fact the result of the same investment of capital per acre of the same class of soil has remained unchanged. Nothing more has been assumed than a fact which may be observed in any country at any given moment, namely that the various classes of soil participate in certain definite proportions in the entire cultivated area. And furthermore, a fact which may be observed in any two countries that are compared, or in the same country at different periods of time, namely that the proportion varies in which the cultivated area is distributed among these classes.

If we compare Ia with I, then we see, if the cultivation of the soils of all four classes grows in the same proportion, that a doubling of the cultivated acres doubles the total production, and at the same time doubles the rent in grain and money.

If we compare Ib and Ic successively with I, we see that in both cases a triplication of the area subject to cultivation takes place. It rises in both cases from 4 acres to 12, but in Ib it is the classes A and B which get the greatest share of the increase, although A pays no rent, and B yields the smallest differential rent. But of 8 newly cultivated acres A and B get 3 each, or 6 between the two of them, whereas C and D get only 1 acre each, or together 2 acres. In other words, three-quarters of the increase go to A and B, and only one-quarter to C and D. According to this assumption and comparing Ib with I, the trebled area of cultivation does not result in a trebled product, for the product does not increase from 10 to 30, but only to 26. On the other hand, seeing that a considerable portion of the increase takes place on A, which does not yield any rent, and since the principal portion of the remaining increase takes place on B, the rent in grain rises only from 6 quarters to 14, and the rent in money from 18 pounds sterling to 42.

But if we compare Ic with I, where the soil yielding no rent does not increase in area, and the soil yielding a minimum rent increases but slightly, while the principal portion of the increase takes place on C and D, we find that the trebled area results in an increase of production from 10 quarters to 36, more than three times the quantity. The rent in grain has risen from 6 quarters to 24, or quadrupled; and so has the money rent from 18 pounds sterling to 72.

In all these cases the price of the agricultural product naturally remains stationary. The total rental increases in all cases with the extension of cultivation, unless it takes place exclusively on the worst soil, which does not pay any rent. But the growth is unequal. In proportion as the extension of cultivation takes place upon the superior classes of soil and consequently the quantity of the products grows not merely at the ratio of expansion of the area, but even faster, the rent in grain and money increases. In proportion as the worst soil and the class next above it share principally in the expansion of the area (provided that the worst soil represents a constant class), the total rental does not rise in proportion to the extension of cultivation. If there are two countries, in which the class A, that yields no rent, is of the same nature, the rental stands in the reverse ratio to the aliquot part represented by the worst soil and the lesser classes next above it in the total area of the cultivated soil, and therefore in the reverse ratio to the quantity of the products of equal investments of capital on the same total areas of land. The proportion between the quantity of the worst cultivated soil and that of the better soil, within the total cultivated area of a certain country, thus has the opposite effect upon the total rental than the proportion between the quality of the worst cultivated soil and that of the better soil has upon the rent per acre and, other circumstances remaining the same, upon the total rental. The confounding these two things has given rise to many mistaken objections to differential rent.

The total rental, then, increases by the mere extension of the cultivation, and by the consequent greater investment of capital and labor in the soil.

But the most important point is this: Although it is our assumption that the proportion of the rents upon the various classes of soil remains the same, calculated per acre, and therefore also the rate of rent considered with reference to the capital invested in each acre, yet we must observe the following: If we compare Ia with I, the case in which the number of cultivated acres and the capital invested in them have been proportionately increased, we find that just as the total production has increased proportionately to the expanded agricultural area, that is just as both of them have been doubled, so has the rental. It has risen from 18 pounds sterling to 36, just as the number of acres has risen from 4 to 8.

If we take the total area of 4 acres, we find that the total rental amounted to 18 pounds sterling, or the average rent, including the soil which does not pay any rent, 4½ pounds sterling. This calculation might be made, say, by a landlord owning all 4 acres. And in this way the average rent is statistically calculated upon a whole country. The total rental of 18 pounds sterling is secured by the investment of a capital of 10 pounds sterling. We call the ratio of these two figures the rate of rent; in the present case it is 180%.

The same rate of rent follows in Ia, where 8 instead of 4 acres are cultivated, but all classes of land have shared in the same proportion in the increase. The total rental of 36 pounds sterling gives for 8 acres and an invested capital of 20 pounds sterling an average rent of 4½ pounds sterling per acre and a rate of rent of 180%.

But if we consider Ib, in which the increase has taken place mainly upon the two inferior classes of soil, we find there a rent of 42 pounds sterling upon 12 acres, or an average rent of 3½ pounds sterling per acre. The invested total capital is 30 pounds sterling, and the rate of rent 140%. The average rent per acre has decreased by one pound sterling, and the rate of rent has fallen from 180 to 140%. Here then we have an increase of the total rental from 18 pounds sterling to 42, and yet a fall of the average rent, calculated both per acre and per capital, while production grows also, but not proportionately. This takes place, although the rent upon all classes of soil, both per acre and per capital, remains the same. It does so, because three-quarters of the increase go to the class A, which does not pay any rent, and upon class B, which pays only the minimum rent.

If the total extension in the case Ib had taken place only upon the soil A, then we should have 9 acres upon A, 1 acre upon B, 1 acre upon C and 1 acre upon D. The total rental would be 18 pounds sterling, the same as before, the average rent upon the 12 acres would be 1½ p. st. per acre; and a rent of 18 pounds sterling on an invested capital of 30 pounds sterling would give a rate of rent of 60%. The average rent, both per acre and per invested capital, would have decreased, and the total rental would not have increased.

Finally, let us compare Ic with I and Ib. Compared to I, the area has been trebled, also the invested capital. The total rental is 72 pounds sterling upon 12 acres, or 6 pounds sterling per acre against 4½ pounds sterling in case I. The rate of rent upon the invested capital (72: 30 pounds sterling) is 240% instead of 180%. The total product has risen from 10 quarters to 36.

Compared to Ib, where the total area of the cultivated acres, the invested capital, and the difference between the cultivated classes are the same, but the distribution different, the product is 36 quarters instead of 26, the average rent per acre is 6 pounds sterling instead of 3½, and the rate of rent with reference to the same invested total capital is 240% instead of 140%.

No matter whether we regard the various conditions in Tables Ia, Ib and Ic as existing side by side in different countries, or as existing successively in the same country, we come to the following conclusions: so long as we have the conditions mentioned hereafter, that is, so long as the price of cereals remains unchanged, because the worst rentless soil has the same product; so long as the differences in the productivity of the different cultivated soils remain the same; so long as the respective products of the same invested capitals are the same for aliquot parts (acres) of the areas cultivated in every class of soil; so long as the ratio between the rents per acre of each class of soils and with the same rate of rent upon the capital invested in each portion of the same kind of soil is constant: 1) the rental always increases with the extension of the cultivated area and with the consequent increased investment of capital, with the exception of the case in which the entire increase falls on the rentless soil. 2) Both the average rent per acre (total rental divided by the total number of acres) and the average rate of rent (total rental divided by the invested total capital) may vary very considerably; both of them in the same direction, but in different proportions compared to one another. If we leave out of consideration the case, in which the increase takes place upon the rentless soil, we find that the average rent per acre and the average rate of rent upon the capital invested in agriculture depend upon the proportional shares, which the various classes of soil claim in the cultivated area; or, what amounts to the same, upon the distribution of the employed total capital among the classes of soil of different fertility. Whether much or little land is cultivated, and whether the total rental is therefore larger or smaller (with the exception of the case, in which the increase is confined to A) the average rent per acre, or the average rent per invested capital, remains the same so long as the proportions of the participation of the various classes of soil in the total cultivated area remain unchanged. In spite of the rise, even of a very considerable one, in the total rental with the extension of cultivation and the expansion of the invested capital, the average rent per acre and the average rent per capital fall whenever the extension of the rentless lands, or of the lands of inferior fertility, increases more than that of the superior rent paying ones. On the other hand the average rent per acre and the average rent per capital increase in proportion as the better lands constitute a greater part of the total area and employ a relatively greater share of the invested capital.

Hence, if we consider the average rent per acre, or hectare, of the total cultivated soil, in the way that is generally done in statistical works, by comparing either different countries at different epochs, or different epochs in the same country, we find that the average level of the rent per acre, and consequently the total rental, corresponds in certain proportions (although by no means equal ones, but rather more rapidly moving ones) to the absolute, not to the relative, productivity of agriculture in a certain country, that is, to the mass of products brought forth by it on an average upon the same area. For the larger the share taken by the superior soils in the total cultivated area, the greater is the mass of products brought forth by equal investments of capital upon equally large areas of land. And the higher is the average rent per acre. In the opposite case the reverse takes place. In this way the rent does not seem to be determined by the ratios of differential fertility, but of absolute fertility, and the law of differential rent seems thereby abolished. For this reason certain phenomena are disputed, or perhaps they are explained by non-existing differences in the average prices of cereals and in the differential fertility of the cultivated lands, whereas such phenomena are merely due to the fact that the ratio of the total rental, either to the total area of the cultivated soil, or to the total capital invested in this soil, so long as the fertility of the rentless soil remains the same and with it the price of production, and so long as the differences of the various classes of soil remain unchanged, is determined not merely by the rent per acre or the rate of rent per capital, but quite as much by the proportional number of acres of each class of soil in the total number of cultivated acres; or, what amounts to the same, by the distribution of the invested total capital among the various classes of land. Curiously enough this fact has been completely overlooked so far. At any rate we see (and this is important for the progress of our analysis), that the relative level of the average rent per acre, and the average rate of rent (or the ratio of the total rental to the total capital invested in the soil), may rise or fall, through the mere extensive expansion of cultivation, while prices remain the same, the differential fertilities of the various soils remain unaltered, and the rent per acre is constant, or while the rate of rent for the capital invested per acre in every actual rent paying class of soil, or for every rent paying capital, remains unchanged.

We have to make the following additional remarks with reference to the form I of the differential rent, which also apply partly to form II:

1) We have seen that the average rent per acre, or the average rate of rent per capital, may rise with an extension of cultivation, with stationary prices, and unaltered differential fertilities of the cultivated lands. As soon as all the land in a certain country has been appropriated, while the investment of capital in land, the cultivation of the soil, and the population, have reached a certain level—all of which conditions are matters of fact as soon as the capitalist mode of production becomes the prevailing one and invades also agriculture—the price of the uncultivated soil of various classes (assuming differential rent to exist) is determined by the price of the cultivated lands of the same quality and equivalent location. The price is the same—after deducting the cost of breaking the ground—although this soil does not carry any rent. The price of the land is, indeed, nothing but the capitalised rent. But even in the case of cultivated lands their price pays only future rents, as for instance, when the regulating rate of interest is 5% and the rent for twenty years is paid in advance at one time. When land is sold, it is sold as a rent paying land, and the prospective character of the rent (which is here considered as a fruit of the soil, which it is only seemingly) does not distinguish the uncultivated from the cultivated soil. The price of the uncultivated lands, like their rent, which it represents as though it were its contracted formula, is quite illusory, so long as the land is not actually used. But it is thus determined beforehand and realised as soon as a purchaser is found. Hence, while the actual average rent of a certain land is determined by its real average rental per year and by its proportion to the entire cultivated area, the price of the uncultivated portions of land is determined by that of the cultivated land, and is therefore but a reflex of the capital invested in cultivated land and of the results obtained by such investments. Since all lands with the exception of the worst carry rent (and this rent, as we shall see under the head of differential rent II, rises with the mass of the capital and the corresponding intensity of cultivation), the nominal price of the uncultivated portions of the soil is thus formed, and thus they become commodities, a source of wealth for their owners. This explains at the same time, why the price of land increases in the whole region, even in the uncultivated part (Opdyke). The speculation in land, for instance in the United States, rests merely upon this reflex, which capital and labor throw on the uncultivated land.

2) The advance in the extension of the cultivated soil in general takes place either toward inferior soil, or upon the various existing soils in different proportions according to the way in which they present themselves. The step toward inferior soil naturally is never made voluntarily, but cannot be due to anything but to rising prices (assuming the capitalist mode of production to be a fact), and under any mode of production it will be a result of necessity. However, this is not absolutely so. An inferior soil is preferred to a relatively better soil on account of its location, which decides the point during all extension of cultivation in new countries; furthermore for the reason that, while the formation of the soil in a certain region may belong to the superior ones, the better will nevertheless be relieved here and there by inferior soil, so that the inferior soil must be cultivated along with the superior on account of its location. If inferior soil is surrounded by superior soil, then the better soil gives to the poorer soil the advantage of location as against other and more fertile soil, which is not connected with the already cultivated soil, or with soil about to be cultivated.

In this way the state of Michigan was one of the first to export corn. Yet its soil is on the whole poor. But its vicinity to the state of New York and its water routes by lakes and by the Erie Canal gave to it the advantage before the naturally more fertile states which were farther west. The example of this state, as compared to the state of New York, shows us also the transition from superior to inferior soil. The soil of the state of New York, particularly the western portion of it, is far more fertile, particularly in the raising of wheat. This fertile soil was made sterile by robbing it, and now the soil of Michigan appeared as the more fertile.

"In 1836 wheat flour was shipped from Buffalo to the West, principally from the wheat belt of New York and Canada. At present, only 12 years later, enormous supplies of wheat and flour are brought from the West, by way of Lake Erie, and shipped East upon the Erie Canal, in Buffalo and the neighboring port of Blackrock. The export of wheat and flour was particularly stimulated by the European famine in 1847. The wheat in western New York thus became cheaper, and the raising of wheat less profitable; this caused the New York farmers to throw themselves more upon cattle raising and dairying, fruit growing, etc., lines in which the Northwest, in their opinion, will be unable to compete with them directly." (J. W. Johnston, Notes on North America, London, 1851, I, p. 222.)

3) It is a mistaken assumption that the land in colonies, and in new countries generally, which can export cereals at cheaper prices, must for that reason be necessarily of a greater natural fertility. The cereals are not only sold below their value in such cases, but below their price of production, namely below the price of production determined by the rate of profit in the older countries.

The fact that we, as Johnston says (p. 223) "are accustomed to connect with these new states, which ship annually such large supplies of wheat to Buffalo, the idea of great natural fertility and endless stretches of rich soil," depends primarily upon economic conditions. The entire population of such a country, for instance of Michigan, is at first almost exclusively engaged in agriculture, and particularly in producing agricultural goods in large masses, which they can alone exchange for products of industry and tropical goods. The whole surplus product of this population appears, therefore, in the shape of cereals. This distinguishes from the outset the colonial states founded on the basis of the modern world market from those of former, particularly of antique, times. They receive from the world market finished products, which they would have to make themselves under different circumstances, such as clothing, tools, etc. Only on such a basis were the southern states of the Union enabled to make of cotton their staple product. The division of labor upon the world market permitted this. Hence, if they seem to produce a large surplus product in spite of their youth and small relative population, it is not due to the fertility of their soil, nor to the productivity of their labor, but to the onesided form of their labor, and therefore of the surplus product, in which this labor is incorporated.

Furthermore, a relatively inferior soil, which is newly cultivated and was never touched by civilisation before, has accumulated much easily soluble plant food, at least in its upper layers, provided the climatic conditions are not extremely hard, so that it will yield crops without any manure for a long time, even with very superficial cultivation. The western prairies have the additional advantage of requiring hardly any expenses for clearing, since nature has cleared them herself. 127 In less fertile districts of this kind a surplus is produced, not through the great fertility of the soil or the yield per acre, but through the large number of acres, which may be superficially cultivated, because this soil costs the cultivator little or nothing compared with older countries. For instance, where share farming exists, as it does in certain parts of New York, Michigan, Canada, etc., there this condition is found. A family cultivates superficially, say, 100 acres, and although the product per acre is not large, the product of 100 acres yields a considerable surplus for sale. In addition to this cattle may be kept on natural pastures for almost nothing, without any artificial grass meadows. It is the quantity, not the quality of the soil, which decides the point here. The possibility of this superficial cultivation is naturally more or less rapidly exhausted, in a reverse ratio to the fertility of the new soil, and in a direct ratio to the export of its products. "And yet such a country will yield excellent harvests, even of wheat; whoever skims the first cream off the soil, will be able to ship an abundant surplus of wheat to the market" (L. c., p. 224). In countries of older civilisation the property relations, the determination of the price of the uncultivated soil by that of the cultivated, etc., make such an extensive economy impossible.

That this soil does not have to be very rich, as Ricardo imagines, nor soils of equal fertility have to be cultivated, may be seen from the following: In the state of Michigan 465,900 acres were planted in 1848 with wheat and produced 4,739,300 bushels, or an average of 10 1/5 bushels per acre; deducting the seed grain this leaves less than 9 bushels per acre. Of the 29 counties of this state 2 produced an average of 7 bushels, 3 an average of 8 bushels, 2 one of 9, 7 one of 10, 6 one of 11, 3 one of 12, 4 one of 13 bushels, and only one county produced an average of 16 bushels, and another of 18 bushels per acre (L. c., p. 226).

In practical agriculture a higher fertility of the soil coincides with a greater immediate utilisation of this fertility. This may be greater in a naturally poor soil than in a naturally rich one; but it is the kind of soil which a colonist will take up first, and must take up from lack of capital.

4) The extension of cultivation to greater areas—aside from the case just mentioned, in which recourse must be had to inferior soil than that hitherto cultivated—upon the various classes of soil from A to D, for instance, the cultivation of larger tracts of B and C, does not presuppose by any means a previous rise of the prices of cereals, any more than the annually increasing expansion, for instance of cotton spinning, presupposes a continual rise in the price of yarn. Although a considerable rise or fall of market prices affects the volume of production, nevertheless, aside from this, that relative overproduction which is in itself identical with accumulation always takes place even with average prices, whose stand has neither a paralysing nor an exceptionally stimulating effect upon production. This takes place in agriculture as well as in all other capitalistically managed lines of production. Under different modes of production, this relative overproduction is effected directly by the increase of population, and in colonies by continual immigration. The demand increases constantly, and in anticipation of this new capital is continually invested in new land, although the products of this land will vary according to circumstances. It is the formation of new capitals, which in itself brings this about. But so far as the individual capitalist is concerned, he measures the volume of his production by that of his available capital, to the extent that he himself can still superintend it. What he aims at is to occupy as much room as possible on the market. If there is any overproduction, he does not blame himself, but his competitors. The individual capitalist may expand his production by appropriating a larger aliquot share of the existing market, or by expanding the market itself.

CHAPTER XL.: THE SECOND FORM OF DIFFERENTIAL RENT.
( Differential Rent II. )

So far we have considered differential rent only as the result of the different productivity of different investments of capital upon equal areas of land with different fertilities, so that the differential rent was determined by the difference between the yield of the capital invested in the worst, rentless, soil and that of the capital invested in the superior soils, Here we had the invested capitals side by side upon different areas of land, so that every new investment of capital signified a more extensive cultivation of the soil, an expansion of the cultivated area. But in the last analysis the differential rent was by its nature merely the result of the different productivity of equal capitals invested in land.

But could it make any difference, perhaps, whether masses of capital of different productivities are invested successively on the same piece of land, or side by side on different pieces of land, provided that the results are the same?

In the first place, it cannot be denied that it is immaterial, so far as the formation of surplus profit is concerned, whether 3 pounds sterling of cost of production are invested in one acre of A and yield one-quarter of wheat, so that 3 pounds sterling are the price of production and regulating market price of 1 quarter, while 3 pounds sterling of cost of production applied to one acre of B give 2 quarters, and with them a surplus profit of 3 pounds sterling, while in the same way 3 pounds sterling of cost of production applied to one acre of C give 3 quarters and 6 pounds sterling of surplus profit, and finally 3 pounds sterling of cost of production applied to one acre of D give 4 quarters and 9 pounds sterling of surplus profit; or whether the same result is accomplished by applying these 12 pounds sterling of cost of production, or 10 pounds sterling of capital, with the same results and in the same succession upon one and the same acre. It is in either case a capital of 10 pounds sterling, a part of whose successively invested shares of a value of 2½ pounds sterling each, whether invested in four acres of different fertility side by side, or successively upon one and the same acre, does not yield any surplus profit on account of their different products, whereas the other parts yield a surplus profit in proportion to the difference of their yield from that of the rentless investment.

The surplus profits and the various rates of surplus profit for different parts of the value of capital are formed in the same way in either case. And the rent is nothing but a form of this surplus profit, which constitutes its substance. But at any rate, there are some difficulties in this second method in the way of the transformation of surplus profit into rent, of this change of form, which implies the transfer of the surplus profit from the capitalist tenant to the owner of the land. This accounts for the obstinate resistance of the English tenants to an official statistics of agriculture. It accounts for the struggle between them and the landlords over the ascertainment of the actual results of an investment of capital (Morton). For the rent is fixed when the lease for the land is made out, and after that the surplus profits arising from excessive investments of capital flow into the pockets of the tenant so long as the lease lasts. Therefore the tenants fought for long leases, and on the other hand the landlords enforced by their superior numbers an increase of the tenancies at will, which could be cancelled annually.

It is evident from the outset that even though it is immaterial for the law forming the surplus profit, whether equal capitals are invested with unequal results side by side upon equal areas of land, or whether they are invested successively on the same land, it does make a considerable difference for the conversion of surplus profit into ground-rent. The latter method confines this conversion within boundaries, which are narrower on one side and less definite on the other. For this reason the business of the tax assessor, as Morton shows in his "Resources of Estates," becomes a very important, complicated and difficult profession in countries with an intensive cultivation (and economically we mean by intensive cultivation nothing else but the concentration of capital upon the same piece of land, instead of its distribution over adjoining pieces of land). If the improvements of the soil are of the more permanent kind, the artificially raised differential fertility of the soil coincides with its natural fertility as soon as the lease expires, and this leads to the assessment of the rent by the basis of that which is due to the mere differences of fertility in different soils generally. On the other hand, so far as the formation of surplus profit is determined by the magnitude of the working capital, the amount of the rent paid by a certain amount of capital is added to the average rent of the country and care is taken that the new tenant commands sufficient capital to continue cultivation in the same intensive manner.

In the study of differential rent II, the following points must be noted:

1) Its basis and point of departure, not merely historically, but even as concerns its movements at any given period, is differential rent I, that is the simultaneous cultivation side by side of soils of different fertility and location; in other words the simultaneous application, side by side, of different portions of the total agricultural capital upon soil areas of different quality.

Historically this is a matter of course. In colonies the colonists have but little capital to invest. The principal agents of production are labor and land. Every individual head of a family seeks to acquire for himself and his, an independent field of employment, apart from that of his fellow colonists. This must be generally the case even under precapitalist modes of production in agriculture proper. In the case of sheep pastures, and generally of cattle raising as an independent line of production, the exploitation of the soil is more or less collective, and it is extensive from the outset. The capitalist mode of production starts out from former modes of production, in which the means of production are actually or legally the property of the tiller himself, in which agriculture is carried on by professionals. Naturally this mode of agriculture gives way but gradually to the concentration of means of production and their transformation into capital with a simultaneous change of direct producers into wage workers. So far as the capitalist mode of production asserts itself here in a typical manner, it does so at first mainly in sheep pastures and cattle raising; after that it does not assert itself by a concentration of capital upon a relatively small area of land, but in production on a larger scale, so that the expense of keeping horses and other costs of production may be saved; but in fact not by investing more capital in the same land. It is furthermore in the nature of field tillage that capital, which implies at this stage also the means of production already produced, should become the dominating element of agriculture, when cultivation has reached a certain hight and the soil has become correspondingly exhausted. So long as the tilled land constitutes a small area compared to the untilled, and so long as the strength of the soil has not been exhausted (and this is the case so long as cattle raising prevails with meat as the staple food, before agriculture proper and plant food have become dominant), the beginnings of the new mode of production show their opposition to peasants' economy mainly by large tracts of land which are tilled for the account of some capitalist, in other words, the new mode of production itself starts out with an extensive application of capital to larger areas of land. It should therefore be remembered from the outset, that differential rent No. I is the historical basis from which a start is made. On the other hand, the movement of differential rent No. II puts in its appearance at any given moment only upon a territory, which is itself but the variegated basis of differential rent No. I.

2) In differential rent No. II, the differences in the distribution of capital (and of the ability to get credit) among tenants are added to the differences in fertility. In manufacture proper, each line of business rapidly develops its own minimum volume of business and a corresponding minimum of capital, below which no individual business can be carried on successfully. In the same way each line of business develops, above this minimum, a normal size of capital, which the mass of producers must be able to command and do command. Whatever exceeds this, can form extra profits; whatever is below this, does not get the average profit. The capitalist mode of production invades agriculture but slowly and unevenly, as may be seen in England, the classic land of the capitalist mode of production in agriculture. To the extent that no free importation of cereals exists, or that its effect is but limited, because its volume is small, the producers working upon inferior soil and thus with worse than average conditions of production determine the market price. A large portion of the total mass of capital invested in husbandry and available for it is in their hands.

It is true that the farmer spends much labor on his small plot of land. But it is labor isolated from the objective social and material conditions of productivity, labor robbed and stripped of these conditions.

This circumstance makes it possible for the real capitalist tenants to appropriate a portion of the surplus profit; this would not be so, at least so far as this point is concerned, if the capitalist mode of production were as uniformly developed in agriculture as in manufacture.

Let us first consider the formation of surplus profit in differential rent No. II, without taking notice for the present of the conditions under which the conversion of this surplus profit into ground rent may take place.

It is evident, in that case, that differential rent No. II is but a different expression of differential rent No. I, but that it coincides with it in substance. The different fertility of the various kinds of soil exerts its influence in the case of differential rent No. I only to the extent that it brings about unequal results of the capitals invested in the soil, so that the products of equal capitals, or of equal aliquot parts of unequal capitals, are unequal. Whether this inequality takes place for different capitals invested successively in the same land, or for capitals invested in various tracts of different classes of soil, cannot alter anything in the differences of fertility, or in the differences of their products, nor in the formation of the differential rent for the more productively invested parts of capital. It is still the soil which shows different fertilities with the same investment of capitals, only that in this case the same soil does for a capital successively invested in different portions what different kinds of soil do in the case of differential rent No. I for various equally large portions of social capital invested in them.

If the same capital of 10 pounds sterling, which is shown by Table I to be invested in the shape of separate capitals of 2½ pounds sterling by different tenants in one acre of each of the soils A, B, C and D, were invested successively in one and the same acre D, so that its first investment yielded 4 quarters, the second 3 quarters, the third 2 quarters and the fourth 1 quarter (or vice versa), then the price of the 1 quarter, which is furnished by the least productive capital, namely the price of 3 pounds sterling, would not pay any differential rent, but would determine the price of production, so long as the supply of wheat with a price of production of 3 pounds sterling would be needed. And since our assumption is that the capitalist mode of production prevails, so that the price of 3 pounds sterling includes the average profit made by a capital of 2½ pounds sterling generally, the other three portions of capital of 2½ pounds sterling each will make surplus profits according to the difference of their product, since this product is not sold at their own price of production, but at the price of production of the least productive investment of 2½ pounds sterling, which does not pay any rent and whose price of production is determined by the general law of prices of production. The formation of the surplus profits would be the same as in Table I.

We see here once more that differential rent No. II is conditioned upon differential rent No. I. The minimum product raised by a capital of 2½ pounds sterling upon the worst soil is here assumed to be 1 quarter. Take it then that the tenant using soil of class D invests in this same soil, aside from the 2½ pounds sterling which raise 4 quarters and pay a differential rent of 3 quarters, still another capital of 2½ pounds sterling, which raise only 1 quarter, like the same capital upon the worst soil A. This would be a rentless investment, which would pay him only the average profit. There would be no surplus profit, which could be converted into rent. On the other hand, this decreasing yield of the second investment of capital in D would not have any influence on the rate of profit. It would be the same as though 2½ pounds sterling had been invested in another acre of the soil of class A, a circumstance which would in no way affect the surplus profit, nor for that reason the differential rent of the classes A, B, C, and D. But for the tenant this additional investment of 2½ pounds sterling in D would have been quite as profitable as the investment of the original 2½ pounds sterling had been per acre of D, according to our assumption, although this had raised 4 quarters. Furthermore, if two other investments of 2½ pounds sterling each should yield an additional product of 3 quarters and 2 quarters respectively, another decrease would have taken place compared with the product of the first investment of 2½ pounds sterling in D, which amounted to 4 quarters and paid a surplus profit of 3 quarters, But it would be merely a decrease in the amount of surplus profit, and would not affect either the average profit or the regulating price of production. It would have such an effect only if the additional production yielding this decreasing surplus profit should make the production upon A superfluous and throw class A out of cultivation. In that case the decreasing fertility of the additional investments of capital in class D would be accompanied by a fall of the price of production, for instance from 3 pounds sterling to 1½ pounds sterling, and the class B would become the rentless regulator of the market price.

The product of D would not be 4 + 1 + 3 + 2 = 10 quarters, whereas it was only 4 quarters formerly. But the price per quarter as regulated by B would have fallen to 1½ pounds sterling. The difference between D and B would be 10-2 = 8 quarters, at 1½ pounds sterling per quarter, or 12 pounds sterling, whereas the money rent in D used to be 9 pounds sterling. This should be noted. Calculated per acre, the amount of the rent would have risen by 33 1/3% in spite of the decreasing rate of the surplus profits on the two additional capitals of 2½ pounds sterling each.

We see by this to what highly complicated combinations differential rent in general, and particularly form II coupled with form I, may give rise, whereas Ricardo, for instance, treats it very onesidedly and as a simple matter. One may meet, as in the above case, with a fall of the regulating market price and at the same time with a rise of the rent upon superior soils, so that both the absolute product and the absolute surplus product grow. (In differential rent No. I, in a descending line, the relative surplus product and thus the rent per acre may increase, although the absolute surplus product per acre may remain constant or even decrease.) But at the same time the fertility of the investments of capital made successively in the same soil decreases, although a large portion of them falls upon the superior lands. From a certain point of view—both as concerns the product and the prices of production—the productivity of labor has risen. But from another point of view it has decreased, because the rate of surplus profit and the surplus product per acre decrease for the various investments of capital in the same soil.

Differential rent No. II, with a decreasing fertility of the successive investments of capital, would be necessarily accompanied with a rise of the price of production and an absolute decrease of the productivity only in the case that these investments of capital could be made on none but the worst soil A. If one acre of A, which raised with an investment of a capital of 2½ pounds sterling 1 quarter at a price of production of 3 pounds sterling, should raise only a total of 1½ quarters with an additional investment of 2½ pounds sterling, or a total investment of 5 pounds sterling, then the price of production of this 1½ quarter would be 6 pounds sterling, or that of one quarter 4 pounds sterling. Every decrease of the productivity with a growing investment of capital would imply a relative decrease of the product per acre in such a case, whereas it would signify only a decrease of the surplus product upon superior soils.

The nature of the matter will carry with it the fact that with the development of intensive culture, i.e., with successive investments of capital upon the same soil, mainly the superior soils will show this tendency, or will show it to a greater degree. (We are not speaking now of permanent improvements, by which a hitherto useless soil is converted into useful soil.) The decreasing fertility of the successive investments of capital must, therefore, have principally the effect indicated above. The better soil is chosen, because it offers the best prospects that the capital invested in it will be profitable, since this soil contains the greater quantity of the useful elements of fertility, which need but be utilised.

When after the abolition of the corn laws the cultivation in England was made still more intensive, a great deal of the former wheat land was used for other purposes, particularly for cattle pastures, while the tracts best adapted to wheat and fertile were drained and otherwise improved. The capital for wheat culture was thus concentrated into a more limited area.

In this case—and all possible surplus rates between the highest surplus product of the best soil and the product of the rentless soil A coincide here, not with a relative, but with an absolute increase of the surplus product per acre—the newly formed surplus profit (eventually rent) does not represent a portion of a former average profit converted into rent (not a portion of the product in which the average profit formerly incorporated itself) but an additional surplus profit, which converted itself out of this form into rent.

Only in the case in which the demand for cereals would increase to such an extent, that the market price would rise above the price of production of A, so that for this reason the surplus product of A, B, or any other class of soil could be supplied only at a higher price than 3 pounds sterling, would the decrease of the results of an additional investment of capital in A, B, C and D be accompanied by a rise of the price of production and of the regulating market price. To the extent that this would last for a certain length of time without calling forth the cultivation of additional soil (which should be at least of the quality of A), or without bringing on a cheaper supply through other circumstances, wages would rise in consequence of the dearness of bread, other circumstances remaining the same, and the rate of profit would fall accordingly. In this case it would be immaterial, whether the increased demand would be satisfied by drawing upon inferior soil than A, or by additional investments of capital, no matter upon which of the four classes of soil. Differential rent would then rise in connection with a falling rate of profit.

This one case, in which the decreasing fertility of additional capitals invested in already cultivated soils may lead to an increase of the price of production, a fall in the rate of profit, and a formation of higher differential rents—for this rent would rise under the given circumstances upon all classes of soil just as though inferior soil than A were regulating the market—has been stamped by Ricardo as the only case, the normal case, to which he reduces the entire formation of differential rent No. II.

This would also be the case, if only the class A of soils were cultivated, and if successive investments of capital upon it were not accompanied by a proportional increase of the product.

Here then differential rent No. I is entirely lost sight of when analysing differential rent No. II.

With the exception of this case, in which the supply from the cultivated classes of soil is insufficient, so that the market price stands continually higher than the price of production, until new soil of an inferior character is taken under cultivation in addition to the others, or until the total product of the additional capitals invested in the various classes of soil can be supplied only at a higher price of production than the hitherto customary one, with the exception of this case the proportional decrease in the productivity of the additional capitals leaves the regulating price of production and the rate of profit unchanged. For the rest three cases are possible.

a) If the additional capital upon any one of the classes of soil A, B, C or D yields only the rate of profit determined by the price of production of A, then no surplus profit, and therefore no rent, is formed, any more than there would be, if additional soil of the A class had been cultivated.

b) If the additional capital yields a larger product, then a new surplus profit (potential rent) is, of course, formed, provided the regulating price remains the same. This is not necessarily the case, namely it is not the case when this additional production throws the soil A out of cultivation and thus out of the succession of the competing soils. In this case the regulating price of production falls. The rate of profit would rise, if a fall in wages were connected with this, or if the cheaper product were to enter into the constant capital as one of its elements. If the increased productivity of the additional capital had taken place upon the best soils C and D, it would depend entirely upon the degree of the increased productivity and the mass of the additional capitals to what extent a formation of increased surplus profit (and thus increased rent) would be connected with the fall in prices and the rise of the rate of profit. This rate may also rise without a fall in wages, by a cheapening of the elements of constant capital.

c) If the additional investment of capital takes place with decreasing surplus profits, but in such a way that the product of such additional investment still leaves a surplus above the product of the same capital in A, a new formation of surplus profits takes place under all circumstances, unless the increased supply throws the soil A out of cultivation. This new formation of surplus profit may take place simultaneously upon all four soils, D, C, B and A. But if the worst soil A is crowded out of cultivation, then the regulating price of production falls, and it will depend upon the proportion between the reduced price of 1 quarter and the increased number of quarters yielding a surplus profit, whether the surplus profit expressed in money, and consequently the differential rent, shall rise or fall. But at any rate we meet here with the peculiarity, that in spite of decreasing surplus profits of successive investments of capital the price of production may fall, instead of rising, as it seems it ought to do at first sight.

These additional investments of capital with decreasing surplus products correspond entirely to the case, in which four new and separate capitals would be invested in soils having a fertility ranging between A and B, B and C, C and D, for instance four capitals of 2½ pounds sterling each and yielding 1½, 2 1/3, 2 2/3, and 3 quarters respectively. Surplus profits (potential rents) would form upon all these kinds of soil for all four additional capitals, although the rate of surplus profit, compared with the surplus profit of the same investment of capital, on the corresponding better soil, would have decreased. And it would be immaterial, whether these four capitals were invested in D, etc., or distributed between D and A.

We now come to one essential difference between the two forms of differential rent.

With a constant price of production and constant differences, the rental and the average rent per acre, or the average rent per capital, may rise under differential rent No. I. But the average is a mere abstraction. The actual amount of the rent, calculated per acre or per capital, remains the same here.

On the other hand, under the same conditions, the amount of the rent calculated per acre may rise, although the rate of rent, measured by the invested capital, remains the same.

Let us assume that production is doubled by the investment of 5 pounds sterling in each of the soils A, B, C and D instead of 2½ pounds sterling, a total of 20 pounds sterling instead of 10 pounds sterling, with the relative fertilities unchanged. This would be the same as though 2 acres instead of 1 were being cultivated, with the same cost, on each one of these classes of soil. The rate of profit would remain the same, also its ratio to the surplus profit or the rent. But if A were raising 2 quarters now, and B, 4, C, 6, D, 8, the price of production would nevertheless remain at 3 pounds sterling per quarter because this increment is not due to a doubled fertility of the same capital, but to the same proportional fertility of a doubled capital. The two quarters of A would now cost 6 pounds sterling, just as one quarter used to cost 3 pounds sterling. The profit would have doubled on all four classes of soils, but only because the invested capital did. But in the same proportion the rent would also have become doubled. It would now be two quarters for B instead of one, four for C instead of two, and six for D instead of three. And corresponding to this the money rent for B, C, and D would now be 6 pounds sterling, 12 pounds sterling, and 18 pounds sterling respectively. Like the product per acre, so the rent in money per acre would be doubled, and consequently the price of the land also, in which this rent is capitalised. If calculated in this manner, the amount of the rent in grain and money rises, and thus the price of land, because the standard by which the calculation is made, the acre, is a tract of a constant magnitude. On the other hand, calculating it as the rate of rent on the invested capital, no change has taken place in the proportional amount of the rent. The total rental of 36 is proportioned to the invested capital of 20 as the rental of 18 was proportioned to the invested capital of 10. The same holds good for the ratio of the money rent of all classes of soil to the capital invested in them, for instance, 12 pounds sterling of rent in C are proportioned to 5 pounds sterling of capital, as 6 pounds sterling of rent used to be proportioned to 2½ pounds sterling of capital. No new differences arise here between the invested capitals, but new surplus profits arise, because the additional capital is invested in one of the rent paying soils, or in all of them, with the same proportional product. If this double investment were made only in one of these soils, for instance in C, the differential rent, calculated per capital, would remain the same between C, B, and D. For while its mass is doubled in C, so is the invested capital.

This shows that the amount of rent in products and money, and with it the price of the land, may rise while the price of production, the rate of profit, and the differences of fertility remain unchanged (and with them remain unchanged the rate of surplus profit or the rent, calculated on the capital).

The same may take place with decreasing rates of surplus profits and of rent, that is, with a decreasing productivity of the rent paying additional investments of capital. If the second investments of capital of 2½ pounds sterling had not doubled the product, but B would raise only 3½ quarters, C, 5 quarters, and D, 6 quarters, then the differential rent for the second capital of 2½ pounds sterling in B would be only ½ quarter instead of one quarter, in C, one quarter instead of two, and in D, two quarters instead of three. The proportions between rent and capital for the two successive investments would then be as follows:

In spite of this decreased rate of the relative productivity of capital and thus of surplus profit, calculated per capital, the rent in grain and money would have risen in B from one to one and a half quarter (from 3 to 4½ pounds sterling), in C, from two quarters to three (from 6 pounds sterling to 9 pounds sterling), and in D, from three quarters to five (from 9 pounds sterling to 15 pounds sterling). In this case the differences for the additional capitals, compared with the capital invested in A, would have decreased, the price of production would have remained the same, but the rent per acre, and consequently the price of the land per acre, would have risen.

The combinations of differential rent No. II, which are conditioned upon differential rent No. I as their basis, are analysed in the following chapters.

CHAPTER XLI.: 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.

CHAPTER XLII.: DIFFERENTIAL RENT II.—SECOND CASE: FALLING PRICE OF PRODUCTION.

THE price of production may fall, when the additional investments of capital take place with an unaltered, a falling, or a rising rate of productivity.

CHAPTER XLIII.: DIFFERENTIAL RENT NO. II.—THIRD CASE:  RISING PRICE OF PRODUCTION.

Here likewise the rising of the price of production at the same ratio fully compensates for the decrease in the productivity both in the yield and rent in money.

The third case shows itself in its pure form only when the second investment of capital declines in its productivity, while that of the first remains constant, as assumed everywhere in the first and second cases. Here differential rent No. I is not touched, the change affects only that part which arises from differential rent No. II. We give below two illustrations: In the first we assume that the productivity of the second investment of capital has been reduced by one-half, in the second by one-fourth.

Table IX is the same as Table VIII, only that the decrease in productivity in VIII falls upon the first investment of capital, and in IX upon the second investment of capital.

In this table, likewise, the total yield, the money rental, and the rate of rent remain the same as in Tables II, VII and VIII, because the product and the selling price have once more varied in an inverse proportion, while the invested capital has remained the same.

But how do matters stand in the other case, which is possible with a rising price of production, namely in the case that a soil, which so far was too poor to be cultivated, is taken under cultivation?

Let us suppose that such a soil, which we will designate by a, is entering into competition. Then the hitherto rentless soil A would yield a rent, and the foregoing Tables VII, VIII and X would assume the following forms:

By the interpolation of soil a there arises a new differential rent No. I. Upon this new basis differential rent No. II likewise develops in an altered form. The soil a has a different fertility in every one of the above three Tables. The series of successively increasing productivities begins only with soil A. The series of rising rents corresponds to this. The rent of the least rent producing soil forms a constant magnitude, which is simply added to all higher rents; only after the deduction of this constant magnitude does the series of differences clearly appear among the higher rents, and so does its parallelism with the succession of fertilities of the various kinds of soil. In all Tables, the fertilities from A to D have a proportion of 1: 2: 3 : 4, and the rents are correspondingly in VIIa as 1 : 1+7 : 1+2×7 : 1+3×7, in VIIIa as 1 1/5 : 1 1/5 + 7 1/5 :1 1/5 : 2×7 1/5 :1 1/5 + 3×7 1/5, and in Xa as 2/3 : 2/3 + 6 2/3 : 2/3 + 2×6 2/3 : 2/3 + 3×6 2/3. In brief, if the rent of A = n, and the rent of the soil of next higher fertility = n + m, then the series is as n : n +m : n + 2m : n + 3m, etc.—F. E.]

When a second investment is placed upon the same soil, we have the following eventualities:

First Case: The Price of production remains unaltered.

Variant No. 2: The productivity of the second investment of capital declines; soil A receives no second investment.
a) If soil B ceases to yield a rent.

b) If soil B does not lose all the rent.

Variant No. 3: The productivity of the second investment of capital increases; no second investment upon soil A.

Second case: The price of production declines.

Variant No. 2: The productivity of the second investment of capital declines; soil A is thrown out of competition, soil B loses its rent.

Variant No. 3: The productivity of the second investment of capital increases; soil A remains in the competition. Soil B produces rent.

Third Case: The price of production rises.

Variant No. 2: The productivity of the second investment of a capital decreases; this does not exclude a constant productivity of the first investment.

Variant No. 3: The productivity of the second investment of capital rises, which implies, under the assumed conditions, a declining productivity of the first investment.

Variant No. 2: The productivity of the second investment of capital declines.

Variant No. 3: The productivity of the second investment increases.

These tables lead to the following conclusions:

In the first place they show that the series of rents maintains the same proportions as the series of degrees of fertility, taking the rentless regulating soil as the zero point. Not the absolute yields, but only the differences in yield are the determining elements of rent. Whether the different kinds of soil produce 1, 2, 3, 4, 5 bushels, or whether they produce 11, 12, 13, 14, 15, bushels of yield per acre, the rents are in both cases seriatim 0, 1, 2, 3, 4, bushels, or money to that amount.

But the result of our analysis is far more important with respect to the total yields of rent with a repeated investment of capital upon the same soil.

In five cases out of the analysed thirteen the total amount of the rents is doubled with the duplication of the investment of capital; instead of 10 times 12 shillings it becomes 10 times 24 shillings, or 240 shillings. These cases are:

In four cases the rent increases by more than double, namely:

In one case the rent rises, but not to double the amount of the rent produced by the first investment of capital:

Finally, it is only in three cases that the total rent, with a second investment upon all kinds of soil, remains at the same level as with the first investment (Table XI); these are the cases, in which the soil A is thrown out of competition and soil B becomes the regulator and pays no rent. In this case the rent B is not only lost, but is also deducted from every succeeding link of the rent series. This is the basis of the above result. We mean the following cases:

This is to say: In the great majority of all possible cases the rent rises, both per acre of the rent paying soils and for the total amount, as a result of an increased investment of capital upon the land. Only in three cases out of the thirteen analysed cases the total amount of the rent remains unaltered. These are the cases, in which the lowest quality of soil, which hitherto paid no rent, drops out of competition and the next higher one takes its place and loses its rent. But even in these cases do the rents upon the superior soils rise in comparison to the rents due to the first investment. When the rent of C falls from 24 to 20, then that of D and E rises from 36 to 48 respectively to 40 and 60 shillings.

A fall of the total rents below the level of the first investment of capital (Table XI) would be possible only in the case that soil B as well as soil A would drop out of competition and soil C become regulating and rentless.

The more capital is applied to a certain soil, and the higher the development of agriculture and of civilization in general is in a certain country, the more do the rents rise per acre and per total amount of rental, and the more immense becomes the tribute paid by society to the great land owners in the form of surplus profits—so long as the different soils taken under cultivation remain capable of competition.

This law explains the wonderful vitality of the class of great landlords. No social class lives so sumptuously, no other claims like it a right to a traditional luxury in keeping with its "estate," regardless of where the money for that purpose may come from, no other class piles debt upon debt as lightheartedly as it. And yet it always lands on its feet—thanks to the capital invested by other people in the soil, whereby the landlord collects a rent, which stand in no proportion to the profits to be drawn out of the soil by the capitalist.

However, the same law also explains, why the vitality of the great landlord is gradually exhausted.

When the English corn taxes were abolished in 1846, the English manufacturers believed that they had transformed the landowning aristocracy into paupers. Instead of that they became richer than ever. How did that happen? Very simple. In the first place, the renting capitalists were now compelled by contract to invest 12 pounds sterling annually instead of 8 pounds, as heretofore. And in the second place, the landlords, being strongly represented also in the Lower House, granted to themselves a heavy subsidy for the drainage and other permanent improvements of their lands. Since no total displacement of the worst soil took place, but at the worst a temporary employment of such soil for other purposes, the rents rose in proportion to the increased investment of capital, and the landed aristocracy were better off than ever before.

But everything is perishable. The transoceanic steamboats and the railroads of North and South America and India enabled very peculiar masses of land to enter into competition upon the European grain markets. There were on the one hand the North American prairies, the Argentine pampas, steppes, made fertile for the plow by nature itself, virgin soil, which offered rich harvest for years to come even with a primitive cultivation and without any fertilization. Then there were the lands of the Russian and Indian communes, that had to sell a portion of their product, and an increasing one at that, for the purpose of obtaining money for the taxes wrung from them by the pitiless despotism of the state, very often by means of torture. These products were sold without regard to their cost of production, sold at the price offered by the dealer, because the peasant had to have money under all circumstances when tax paying day came around. And against the competition of the virgin prairie soils and of the Russian and Indian peasants ground down by taxation, the European capitalist farmer and peasant could not stand up at the old rents. A portion of the soil of Europe fell definitely out of the competition for the raising of grain, the rents fell everywhere. Our second case Variant II (falling prices and falling productivity of the additional investment of capital) became the rule for Europe. This accounts for the woes of the landlords from Scotland to Italy, and from Southern France to Eastern Prussia. Fortunately all prairie lands have not been taken under cultivation. There are enough of them left to ruin all the great landlords of Europe and the small ones into the bargain.—F. E.]

The heads, under which rent is to be analyzed, are the following:

• A. Differential rent.

• 1) Meaning of differential rent. Illustration by water power. Transition to real agricultural rent.
• 2) Differential rent No. I, arising from different fertilities of different pieces of land.
• 3) Differential rent No. II, arising from successive investments of capital upon the same soil. Differential rent No. II is to be analysed

• a) with a stationary price of production.
• b) with a falling price of production.
• c) with a rising price of production.

And furthermore

• d) the transformation of surplus profit into rent.
• 4) Influence of this rent upon the rate of profit.

• B. Absolute rent.
• C. The price of land.
• D. Final Remarks concerning ground rent.

As the general result of our analysis of differential rent we come to the following conclusions:

1) The formation of surplus profits may take place in different ways. On the one hand it may come about by the help of differential rent No. I, that is, by an investment of the entire agricultural capital upon one soil area consisting of soils of different fertilities. Or, it may come about by means of differential rent No. II, that is by means of the varying differential productivity of successive investments of capital upon the same soil, which signifies here a greater productivity, say in wheat measured by quarters, than is secured with the same investment of capital upon the worst rentless soil, which regulates the price of production. But no matter how these surplus profits may arise, their transformation into rents, their transfer from the capitalist farmer to the landlord, always presupposes that the various individual prices of production represented by the partial products of the individual capitals invested in succession (independently of the general price of production by which the market is regulated) have previously been reduced to an individual average price of production. The excess of the general regulating price of production of the product of one acre over its individual average price, forms and measures the rent per acre. In differential rent No. I the differential results may be distinguished by themselves, because they take place upon differentiated portions of land lying side by side, with an investment of capital and a degree of cultivation considered normal per acre. In differential rent No. II they must first be made distinguishable; they must in fact be reconverted into differential rent No. I, and this cannot take place in any other but the indicated way. Take for instance Table III, Chapter XLI, 3.

Soil B gives for the first investment of capital 2½ pounds sterling 2 quarters per acre, and for the second equally large one 1½ quarters; together 3½ quarters upon the same acre. These 3½ quarters do not show what part of them is a product of the investment of capital No. I and what part a product of capital No. II, for they are all grown upon the same soil. They are in fact the product of the total capital of 5 pounds sterling; and the actual condition of the matter is that a capital of 2½ pounds sterling produced 2 quarters, and a capital of 5 pounds sterling produced only 3½ quarters, not 4 quarters. The case would be just the same, if these 5 pounds sterling were producing 4 quarters, so that the proceeds of both investments of capital would be the same, or even 5 quarters, so that the second investment of capital would yield a surplus of 1 quarter. The price of production of the first 2 quarters is 1½ pounds sterling per quarter, and that of the second 1½ quarters is 2 pounds sterling per quarter. Consequently the 3½ quarters together cost 6 pounds sterling. This is the individual price of production of the total product, and it makes an average of 1 pound and 14 2/7 shillings per quarter, in round figures 1¾ pounds sterling. With the average price of production regulated by soil A, namely 3 pounds sterling, this makes a surplus profit of 1¼ pounds sterling per quarter, and for the total 3½ quarters profit of 4 3/8 pounds sterling. With the average price of production of B this is represented by about 1½ quarters. In other words, the surplus profit of B is represented by an aliquot portion of the product of B, by these 1½ quarters, which express the rent in terms of grain, and which under the prevailing price of production sell at 4½ pounds sterling. But on the other hand, the surplus product of one acre of B compared to that of A is not without ceremony a formation of surplus profit, is not offhand a surplus product. According to our assumption one acre of B produces 3½ quarters, whereas one acre of A produces only 1 quarter. The surplus of the product of B is, therefore, 2½ quarters, but the surplus product is only 1½ quarters; for the capital invested in B is twice that of A, and for this reason its cost of production is doubled. If soil A should also receive an investment of 5 pounds sterling, and the rate of productivity should remain the same, then the product would amount to 2 quarters instead of 1 quarter, and it would then be seen that the actual surplus product is found, not by a comparison of 3½ with 1, but of 3½ with 2, so that it would be only 1½ quarter, not 2½ quarters. Furthermore, if B should invest a third capital of 2½ pounds sterling, which would produce only 1 quarter, so that this quarter would cost 3 pounds sterling, the same as that of A, then its selling price would cover only the cost of production, would yield only the average profit, but not a surplus profit, and would not offer anything that could be converted into rent. The product per acre of any kind of soil, compared with the product per acre of soil A, shows neither whether it is a product of the same or of a larger investment of capital, nor whether the additional product covers merely the price of production, nor whether it is due to a greater productivity of the additional capital.

2) With a decreasing rate of productivity of the additional investments of capital, whose limits, so far as the new formation of surplus profit is concerned, is that investment of capital which just covers the cost of production, in other words, which produces one quarter at the same expense as the same investment of capital in one acre of soil A, amounting to 3 pounds sterling according to our assumption, we come to the following conclusions on the basis of what has gone before: That the limit, where the total investment of capital in one acre of B would not yield any more rent, is reached when the individual average price of production of the product per acre of B would rise to the price of production per acre of A.

If B invests only such additional capital as pays just the price of production, but forms no surplus profit, no rent, then this raises only the individual average price of production per quarter, but does not affect the surplus profit, or eventually the rent, formed by previous investments of capital? For the average price of production always remains under that of A, and when the excess over the price per quarter decreases, then the number of quarters increases in the same ratio, so that the total excess over the price remains unaltered.

In the case assumed, the first two investments of capital of 5 pounds sterling produce 3½ quarters upon B, which amounts to 1½ quarters of rent, at 4½ pounds sterling, according to our assumption. Now, if a third investment of capital of 2½ pounds sterling is added, which produces only one additional quarter, then the total price of production (including a profit of 20%) of the 4½ quarters is 9 pounds sterling, so that the average price per quarter is 2 pounds sterling. The average price of production per quarter upon B has then risen from 1 5/7 pounds sterling to 2 pounds sterling, so that the surplus profit per quarter, compared with the regulating price of A, has fallen from 1 2/7 pounds sterling to 1 pound sterling. But 1 × 4½ = 4½ pounds sterling, just as formerly 1 2/7 × 3½ = 4½ pounds sterling.

upon B, and that these investments produce one quarter only at its average price of production, then the total product per acre would by 6½ quarters, and their cost of production 15 pounds sterling. The average price of production per quarter of B would have risen once more, from 1 pound sterling to 2 4/13 pound sterling, and the surplus profit per quarter, compared with the regulating price of production of A, would have dropped once more, from 1 pound sterling to 9/13 pound sterling. But these 9/13 would now have to be calculated upon 6½ quarters instead of 4½ quarters. And 9/13 × 6½ = 1 × 4½ = 4½ pounds sterling.

The inference from this is, in the first place, that no raising of the regulating price of production is necessary under these circumstances, in order to make possible additional investments of capital even to the point where the additional capital ceases wholly to produce any surplus profit and yields only the average profit. It follows furthermore that the sum of the surplus profit per acre remains the same here, no matter how much the surplus profit per quarter may decrease; this decrease is always balanced by a corresponding increase of the quarters produced per acre. In order that the average price of production may rise to the general price of production (in this case to 3 pounds sterling for soil B) it is necessary that additions should be made to the capital, which must have a product of a higher price of production than the regulating one of 3 pounds sterling. But we shall see that this does not suffice without further ado in order to raise the average price of production per quarter of B to the general price of production of 3 pounds sterling.

Let us assume that soil B produced.

1) 3½ quarters as before at a price of production of 6 pounds sterling; this with two investments of capital of 2½ pounds sterling each, which both form surplus profits, but of a decreasing amount.

2) 1 quarter at 3 pounds sterling; an investment of capital, in which the individual price of production shall be equal to the regulating price of production.

3) 1 quarter at 4 pounds sterling; an investment of capital, in which the individual price of production shall be higher by 25% than the regulating price.

We should then have 5½ quarters per acre, at 13 pounds sterling, with an investment of a capital of 10 pounds sterling; this would be four times the original investment of capital, but not quite three times the product of the first investment of capital.

5½ quarters per acre at 13 pounds sterling make an average price of production of 2 4/11 pounds sterling, which would give a surplus of 7/11 pound per quarter at the regulating price of production of 3 pounds sterling . This surplus may be converted into rent. 5½ quarters sold at the regulating price of production of 3 pounds sterling make 16½ pounds sterling. After deducting the cost of production of 13 pounds sterling a surplus, or rent of 3½ pounds sterling remains, which, calculated at the present average price of production per quarter of B, that is, at 2 4/11 pounds per quarter, represent 1 5/72 quarters. The money rent would have fallen by 1 pound sterling, the grain rent by about ½ quarter, but in spite of the fact that the fourth additional investment upon B does not produce a surplus profit, but even less than the average profit, a surplus profit and a rent still continue to exist. Let us assume that not only the investment of capital as illustrated in No. 3), but also that in No. 2), produce at a cost exceeding the regulating price of production, then the total production is 3½ quarters at 6 pounds sterling plus 2 quarters at 8 pounds sterling, total 5½ quarters at 14 pounds sterling cost of production. The average price of production per quarter would be 2 6/11 pounds sterling, and it would leave a surplus of 5/11 pound sterling. The 5½ quarters, sold at 3 pounds sterling, make 16½ pounds sterling; subtract the 14 pounds sterling of cost of production, and 2½ pounds sterling remain for rent. At the present average price of production upon B this would be equivalent to 55/56 quarters. In other words, a rent would still remain, although less than before.

This shows at any rate, that upon the better soils with additional investments of capital, whose product costs more than the regulating price of production, the rent does not disappear, at least not within the bounds of admissible practice, although it must decrease, and will do so in proportion, on the one hand, to the aliquot part formed by this unproductive capital in the total investment of capital, on the other hand in proportion to the decrease of its fertility. The average price of its fertility would still stand below the regulating price and would still leave a surplus profit that could be converted into rent.

Let us now assume that the average price per quarter of B coincides with the general price of production, in consequence of four successive investments of capital (2½, 2½, 5 and 5 pounds sterling) with a decreasing productivity.

The capitalist renter in this case sells every quarter at its individual price of production, and consequently the total number of quarters at their average price of production per quarter, which coincides with the regulating price of 3 pounds sterling. Hence he still makes a profit of 20%, or 3 pounds sterling, upon his capital of 15 pounds sterling. But the rent is gone. What has become of the surplus in this compensation of individual prices of production per quarter with the general price of production?

The surplus profit on the first 2½ pounds sterling was 3 pounds sterling; on the second 2½ pounds sterling it was1½ pounds sterling; total surplus profit on one-third of the invested capital, that is, on 5 pounds sterling, 4½ pounds sterling, or 90%.

In the case of investment No. 3) the 5 pounds sterling do not only yield no surplus profit, but its product of 1½ quarters, if sold at the general price of production, gives a minus of 1½ pounds sterling. Finally, in the case of investment No. 4), which amounts likewise to 5 pounds sterling, its product of 1 quarter, if sold at the general price of production, gives a minus of 3 pounds sterling. Both investments of capital together give a minus of 4½ pounds sterling, equal to the surplus profit of 4½ pounds sterling, which was realized on investments Nos. 1) and 2).

The surplus profits and deficits balance one another. Therefore the rent disappears. In fact this is possible only because the elements of surplus-value, which form a surplus profit, or rent, now pass into the formation of the average profit. The capitalist renter makes this average profit of 3 pounds sterling on 15 pounds sterling, or of 20%, at the expense of the rent.

The compensation of the individual average price of production of B to the general price of production A, which regulates the market, presupposes that the difference, by which the individual price of the product of the first investment of capital stands below the regulating price, is more and more compensated and finally balanced by the difference, by which the product of the subsequent investments of capital stands above the regulating price. What appears as a surplus profit, so long as the product of the first investment of capitals sold by itself, becomes by degrees a part of their average price of production, and thereby enters into the formation of the average profit, until it is finally absorbed in this way.

If only 5 pounds sterling are invested in B, instead of 15 pounds sterling, and if the additional 2½ quarters of the last Table are produced by taking 2½ new acres of A under cultivation with an investment of 2½ pounds sterling per acre, then the invested additional capital would amount only to 6¼ pounds sterling, so that the total investment on A and B for the production of these 6 quarters would be only 11¼ pounds sterling instead of 15 pounds sterling, and the total cost of production of these including the profit of 13½ pounds sterling. The 6 quarters would still be sold at 18 pounds sterling, but the investment of capital would have decreased by 3¾ pounds sterling, and the rent upon B would be 4½ pounds sterling per acre, as before. It would be different, if the production of additional 2½ quarters would require that inferior soil than A, for instance A—1, A—2, should be taken under cultivation; so that the price of production per quarter, for 1½ quarters on soil A—1 would be 4 pounds sterling, and for the last quarter on soil A—2 would be 6 pounds sterling. In this case these 6 pounds sterling would be the regulating price of production per quarter. The 3½ quarters of B would then be sold at 21 pounds sterling instead of 10½ pounds sterling, and this would leave a rent of 15 pounds sterling instead of 4½ pounds sterling, or in grain a rent of 2½ quarters instead of 1½ quarter. In the same way the one quarter on A would now leave a rent of 3 pounds sterling, or of ½ quarter.

Before we discuss this point any further, we will pause to make the following observation.

The average price of one quarter of B is compensated and coincides with the general price of production of 3 pounds sterling per quarter, regulated by A, as soon as that portion of the total capital, which produces the excess of 1½ quarter, is balanced by that portion of the total capital, which produces a deficit of 1½ quarter. How soon this compensation is effected, or how much capital with less than average productivity must be invested in B for that purpose, will depend, assuming the surplus productivity of the first investments of capital to be given, upon the relative underproductivity of the later invested capitals, compared with an investment of the same amount upon the worst regulating soil A, or upon the individual price of production of their product, compared with the regulating price.

We now come to the following conclusions from the foregoing:

1) So long as the additional capitals are invested in the same soil with a surplus productivity, even a decreasing one, the absolute rent in grain and money increases per acre, although it decreases relatively, in proportion to the advanced capital (in other words, the rate of surplus profit, or rent). The limit is here formed by that additional capital, which yields only the average profit, or the price of production of whose product coincides with the general price of production. The price of production remains the same under these circumstances, unless the production upon the lesser soils becomes superfluous through an increased supply. Even with a falling price may these additional capitals still produce a surplus profit, though a smaller one, within certain limits.

2) The investment of additional capital, which produces only the average profit, whose surplus productivity is therefore zero, does not alter anything in the level of the existing surplus profit, and consequently of the rent. The individual average price per quarter increases thereby upon the superior soils; the surplus per quarter decreases, but the number of quarters, which carry this decreased surplus, increases, so that the product remains the same.

3) Additional investments of capital, whose product has an individual price of production exceeding the regulating price, whose surplus productivity is therefore not merely zero, but less than zero, that is, a minus lower than the productivity of the same investment of capital upon the regulating soil A, bring the individual average price of production of the total product of the superior soil closer to the general price of production, reduce more and more the difference between both, which forms the surplus profit, or rent. More and more of that which forms a surplus profit, or rent, passes over into the formation of the average profit. But nevertheless the total capital invested in one acre of B continues to yield a surplus profit, although a decreasing one in proportion as the capital with undernormal productivity and the degree of its underproductivity increase. The rent, with an increasing capital and increasing production, decreases in this case absolutely per acre, not merely relatively as compared to the increasing size of the invested capital, as in the second case.