Rent, it is fair to say, troubled Marx deeply.
Rent, in the final analysis, is simply a payment made to landlords for the right to use land & the resources embedded within it.
Improvements embodied in the land are the result of human labour.
Hence a component of rent can be treated as a special case of interest on fixed capital.
Ground rent is the component of raw land independent of improvements.
The Ricardians depicted landlords as parasites, as useless & superfluous holdovers from the feudal era.
Malthus gave them a more positive role as a source of effective demand.
The Use Value of Land
The land, together with the labourer, constitute the original sources of all wealth.
Private persons can, under the laws of private property, acquire monopoly powers over definite portions of the globe, as exclusive spheres of their private will to the exclusion of all others.
Since the land is monopolisable & alienable, it can be rented or sold as a commodity.
Land itself is a non-reproducible asset.
By contrast, some use values embodied in it are not only reproducible but can be created through commodity production (factories, houses, shops, etc.)
The use values land contains can be extracted, e.g. minerals, mobilised in production as ‘forces of nature’ e.g. wind power, or used as the basis for reproduction, e.g. agriculture.
Agriculture is special: the production process is partially embodied within the soil itself.
Hence the illusion that ‘rents grow out of the soil’ & that the land has value even though it is not a product of human labour.
The use values in & on the land are free gifts of nature, & vary greatly as to their quantity & quality.
‘Excess profits’ can accrue to capitalists with access to use values of superior quality.
This relative surplus value is a permanent fixture compared to that associated with a technological advantage.
Marx gives the example of one capitalist uses a waterfall (not a product of human labour), while another uses coal ( a product of human labour) to power machinery. Any capitalist can go & purchase coal & machinery, but the waterfall in a monopolisable force of nature.
The level of excess profit, & so rent, is fixed by the difference between the individual productivity & the average productivity & price of production prevailing within the industry.
These excess profits would exist even without their conversion into ground rent.
The circulation of capital, rather than landed property, is the active factor in this process.
Money can be put to improving transportation & so opening up more fertile lands for exploitation, or to improving the inferior lands already in cultivation.
The price of production of agricultural commodities is usually fixed by the cost of production on the worst soil plus the average rate of profit.
This is different to industry where price is determined by the average.
Landed Property
The hallmark of landed property under capitalism is the total separation of the land as an instrument of production from landed property & the landowner.
The landlord assumes a passive role.
There is an increasing tendency to treat land as a pure financial asset.
It becomes a form of fictitious capital, & functions simply as a branch of the circulation of interest-bearing capital.
Like all such forms of fictitious capital, what is traded is a claim upon future revenues, a claim on future labour time.
According to Harvey, Marx was fascinated by the possibility that the Russian village commune might provide the basis for a direct passage to the highest communist form of landed property.
The Forms of Rent
Marx considered four forms: monopoly, absolute, & two types of differential rent.
Monopoly rent is based upon the monopoly power of private owners of certain portions of the globe.
Common in wine, grain & housing.
It is a deduction out of the surplus value produced in society as a whole, a redistribution through exchange.
There is a strong likelihood that the value composition of capital in agriculture will be lower than the social average (proved?).
If a complete equalisation of the rate of profit across all sectors is assumed, then the prices of production in agriculture will be below their values.
In otherwords, a capital of a certain size in agriculture produces greater surplus value than it receives in the way of profit, because sectors contribute to the total social surplus value according to the labour power they employ but receive surplus value according to the total capital they advance.
This assumes no barriers exist to the equalisation of the rate of profit.
Absolute rent can arise when landed property erects a barrier to this free flow of capital.
It follows that agricultural products can trade above their prices of production, & so yield absolute rent, while selling below, or even up to their values.
If the value composition becomes equal or higher than the social average, absolute rent disappears.
The market value of products in which land is used as a basic means or production is fixed by the price of production on the worst land.
The first type of differential rent (DR-1) is fixed by the difference between individual prices of production & the market value determined by the conditions of the worst land.
If all land was of equal fertility there would be no DR-1.
The same concept Ricardo advanced.
A second version of differential rent (DR-2) expresses the effects differential applications of capital to lands of equal fertility.
If some producers invest more than the ‘normal’ capital, & gain returns to scale on the capital they invest, then their individual price of production will be lower than the market value.
All or some of this difference may be appropriated as DR-2.
The Contradictory Role of Ground Rent & Landed Property Within Capitalism
“Landed property has nothing to do with the actual process of production. Its role is confined to transferring a portion of the produced surplus value from the pockets of capital to its own. However, the landlord plays a role in the capitalist process of production not merely through the pressure he exerts upon capital, nor merely because large landed property is a prerequisite & condition of capitalist production, since it is a prerequisite & condition of the expropriation of the labourer from the means of production, but particularly because he appears as the personification of one of the most essential conditions of production” (Capital, Vol. 3, p.821)
In making the reproduction of wage labour possible, the appropriation of rent also becomes possible.