From: rakeshb@STANFORD.EDU
Date: Fri Apr 18 2003 - 04:00:49 EDT
As I think over Cyrus's very ingenious and theoretically surprising argument of differential rents in themselves becoming chump change, I would like to note Richard Jones' critique of Ricardian rent theory (which seems to be ignored in most histories of economic thought and which I may thus get wrong in the following). Jones argued that while differential rent may well rise absolutely, it would nonetheless probably decrease as a percentage of gross revenue and thus have less economic significance. This was of course part of Jones' vision of class harmony: the rising absolute rent collected by landlords need not pose an economic threat to or come at the expense of other classes as Ricardo's theory lead one to believe. As a result of his focus on auxilliary capital, Jones did not believe in the dismal inevitability of declining marginal returns which would in turn lead to a "cost push" threat to profitability. He argued that as land became more capitalized and both land and agricultural labor more productive, the gross revenue created on even the marginal land would increase and allow for an absolute increase in the differential rent yielded on better lands on which there had also been capital investment (or in his words investment in auxilliary capital). But the differential rent would make up an ever smaller percentage of rising gross produce as the farmers' capitalization of agriculture would increase the share of depreciation and profit in gross output. Yet it is conceivable that while the capitalists' or (in Jones' words) farmers' profit may be increasing absolutely with the rise in gross output, the profit rate may be falling as well and this decline, coupled with an insatiable appetite for surplus value which can be capitalized, may well motivate rising capitalist hostility to the landlord even as rent is falling as a share of gross produce and there are no rising costs for agro-minerals as a result of declining marginal returns. That is, Malthus' successor Jones may have been wrong to suggest the possibility of class harmonics even among the elite-- farmers and landlords, capitalists and land-owners. ***Capitalists may well have a sharpening need to eliminate ground rent (whether differential or absolute) even as rent decreases as a percentage of gross produce.*** But Jones does seem to have been correct to have challenged Ricardo's dismal prognostication of declining marginal returns. Yours, Rakesh
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