Land rent difference and absolute lease of land is the concept used by Karl Marx in the third volume of Capital to explain how capitalist production will operate in agricultural production, under conditions where most of the agricultural land is owned by the social class of landowners who earn rental income from those who cultivate the land. Agricultural work can be done by landowners themselves, tenants from landowners, or by hired agricultural workers. Rents as an economic category are considered by Marx as one form of surplus value such as net interest income, net production tax and industrial profits.
Video Differential and absolute ground rent
The purpose of theory
In a good part, Marx's theory is a critique of David Ricardo's lease law, and he examines with detailed numerical examples of how the relative profitability of capital investments in agriculture is affected by the productivity, fertility, and location of agricultural land, and by spending capital for land improvement. Ricardo drew up the concept of rent income essentially as "unacceptable" earnings beyond the actual cost of production, and he analyzed how some farm owners could gain additional benefits because of more favorable agricultural conditions than elsewhere.
Marx aims to show that capitalism transforms agriculture into a business like any other, operating with purely commercial motives; and that leased land rented by landowners is a burden to the industrial bourgeoisie either because they imply additional production costs and because they raise the price of agricultural produce. More specifically, Marx intends to show how the law of value governs capitalist agriculture, just as it regulates the capitalist industry.
The peculiarity of capitalism in agriculture is that trade must adapt to physical factors such as climate, altitude and soil quality, inelasticity of relative agricultural supply, and the impact of bad harvests on international prices for agricultural products. Finally, however, the production of agricultural products is completely rearranged in accordance with the exchange rate of agricultural produce - foodstuffs are then produced especially in accordance with the expected trade value in the market (this is not always entirely true, for example because it may be feasible to plant only limited plant varieties , or run a limited variety of livestock on a particular land, or because there is no perfect knowledge of what the future market will do, if there is a large price volatility, climate uncertainty, etc.).
Maps Differential and absolute ground rent
Value law
According to Marx, the operation of the law of value and the formation of production prices has been modified in capitalist agriculture, as prices for agricultural produce are determined by land yields and land tenure rights separately from work productivity. For example, poor harvests in major agricultural areas due to adverse weather conditions, or monopoly of agricultural land supply, can have a major effect on world market prices for agricultural products. Marx expanded his theory of agricultural rent to build lease and mine leases, and consider the effect of rental income on land prices.
Theoretical significance
This theory is the most unknown part of Marx's economic writings, and among the more difficult, because income from agricultural work can be influenced by many variables, even at a very abstract level of analysis. But the theory becomes very important for neo-Marxists like Ernest Mandel and Cyrus Bina who interpret late capitalism as an increasingly parasitic form of capitalism in which surplus profits are acquired by capitalists from monopolizing access to resources, assets and technology in imperfect competition conditions. Marxist writers such as Cyrus Bina have expanded the concept of rent to an oil lease.
Source
Marx's main texts on lease theory can be found in the second volume (edited) of Survival Value Theory and in Section 6 of Capital, Volume 3 . Gibson & amp; Esfahani (1983) commented that:
"Marx postponed his discussion of the lease to the third volume of Capital, but the quantity of his writing on the topic (more than 600 pages in its entirety) indicates that he did not underestimate the problem. (...) Marx's own work is long, odd and above all, tentatively, not one of the few hundred pages written in Capital
on a topic that was once approved for publication by the author. "
Lease in macro-economy
Another possible explanation for the relative obscurity of this theory is that in modern macro-economic statistics and national accounts no separate and comprehensive data are provided on the amount of leased land and underground rents that are charged and earned, since they are not officially considered as part of added value, and consequently not included in the calculation of GDP (except for the value of a productive lease contract). Tax data on land transactions is unreliable because of inconsistencies in valuations.
The underlying conceptual argument in the national account is, simply, that the lease does not reflect the income generated by production and is not related to production, and consequently that income does not make a net addition to the value of the new output. Implicitly, therefore, many land leases are treated as if they are a revenue diversion. Usually only the annual value of expenditures for land improvement and the rental value of productive equipment is recorded as "productive" income, value added.
In Marx's theory, however, ground rent not only reflects the property income derived from asset ownership, but is a real element of the value and consequence of the value product, so far because the rental price is the income stream to be paid from the new value created by the current production of primary products on land. Such a rent, according to Marx, is part of the total capitalist cost of production structure, and the component of the value of agricultural output.
Different ground rent forms
Suppose for example that the world market price of ruling for quality wheat is about US $ 350 per metric ton f.o.b. Even if two investors have the same amount of capital to invest in wheat production, the economy produces wheat at that price will differ greatly, depending on the actual yield (productivity) of the land they use. The same amount of money invested in wheat production in area A yields larger wheat harvest and more profit than in area B, if A is more productive, fertile, better, etc. than B.
But not only that - it gives per hectare harvest and the price of wheat per tonne known, it may be economical or uneconomical to produce wheat on certain soils. There is a "land-type hierarchy," and if market and price demand rise, more or less productive (or marginal) land can be cultivated; if demand and prices fall, less marginal land can be cultivated.
Differential rent I
That situation is the basis of what Marx calls " Differential rent I ". This means that investors who produce wheat on more productive land reap additional benefits or rent on the ground. This rent, of course, varies according to the total supply and demand of wheat and the price of the ruling wheat market.
However, income from wheat production will also depend not only on soil quality but on the number of hectares of each type of cultivated land. Thus the supply of wheat and the price of wheat, and consequently the rental price derived from their fluctuations, will also be affected by for example. whether the expansion of wheat production in response to increased demand occurs on better or worse soils.
Differential Rent II
In addition, the profitability and productivity of wheat production can also be affected by the 'actual amount of capital invested per acre' '. Marx calls this The difference in rent II and he examines what will be the effects of a more capital-intensive agriculture when production prices remain stable, and when it falls, while additional yields from additional capital investments vary.
Summary
The Differential Rent I theory shows how extra profits are transformed into rent with the same amount of capital invested in different lands from unequal productivity, while the theory of Differential Rent II refers to the difference in profitability resulting from an unequal amount of capital invested successively and intensively on different plots of the same kind. The difference in rent II implies the appropriation of surplus profits created by temporary differences in yields, caused by the improper application of capital to the same type of land.
Absolute ground rent
Absolute land rentals are sometimes described as leases that landowners can take because they are monopolizing access to or supply of land, and sometimes as leases arising because of the difference between product-value and output production prices in agriculture, due to more organic composition low of capital in agriculture compared to industry.
According to Marx's own concept, absolute rent can not exist when the organic composition of capital in agriculture becomes higher than the social average. Marx envisioned that labor productivity would be higher in the manufacturing sector than in agriculture, over the long term, reflecting the fact that the organic composition of the capital (C/V ratio) is higher in the manufacturing sector than in agriculture. This implies, that in agriculture, the value of a constantly generated value is higher than the production price of that output.
Physiocratic School
Another definition for the lease of land or ground rent is absolute from the school of 18th century French political economy called the Physiocrats. They seek to bring logical analysis to bear government questions. They came to the conclusion that "land rent" should be the source of most or all taxes. They define the land rent as part of all rents that can be attributed only to the size and location of the package. For example, say you have a piece of land. If everything you develop or build on the ground burns... then you can still rent it for land rent (its locational value). The Physiocrats notes that the owner is not responsible for raising the "locational" value of his parcel. Certain locations are only made more valuable because more people come to live around them. Because the community as a whole who gives the land rent its value... they reasoned that the public should regain some of that value in tax revenues.
See also
- Economic rent
- Rental Law
- Superprofit
- Excess value
- Value product
- The hidden country
- Rente capitalism
References
External links
- rent of capitalist land
Source of the article : Wikipedia
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