[OPE-L:7686] Re: Absolute rents in Sraffaland and Marxland

From: Fred B. Moseley (fmoseley@mtholyoke.edu)
Date: Thu Sep 19 2002 - 14:03:56 EDT

On Tue, 17 Sep 2002, Gil Skillman wrote:

> Hi, Fred.  In response to this exchange,
> > > >I think the usual Sraffian treatment (e.g. Sraffa, Kurz) is your second
> > > >option - to assume that rent is a payment to the additional input of land.
> > >
> > >
> > > That's right, but is it consistent with what *you* mean by absolute 
> > rent in
> > > the present context?  If not, then isn't the other option I mention the
> > > only possibility?
> you write
> >I answered in terms of the Sraffian treatment of rent, because my argument
> >on this point is in terms of Sraffian theory.  I am arguing that, in terms
> >of Sraffian theory (with a modified equation for the gold industry,
> >replacing the price of gold with 1, since gold has no price), the
> >technical conditions and the wage rate do not uniquely determine the rate
> >of profit.  Because the inclusion of absolute rent as a cost in the gold
> >industry adds another variable without adding another equation.
> But I dispute this characterization:  in the Sraffian framework, to the 
> contrary, the inclusion of absolute rent is accommodated *precisely* by 
> "adding another equation."  

And what equation would you add to this Sraffian framework?  

> So the question is whether a similar addition 
> must happen given the Marxian interpretation of absolute rent, which is the 
> point you discuss next:
> >Marxs treatment of absolute rent is entirely different.  Absolute rent is
> >not considered as a "cost of production", whose magnitude is determined
> >simultaneously with prices and the rate of profit.  Rather, absolute rent
> >is determined in Marxs theory as a residual, as the difference between the
> >surplus-value produced in the gold industry (in this case) and the average
> >profit.  The average profit is equal to the general rate of profit
> >(already determined prior to prices of production and rent) times the
> >total capital invested in the gold industry.
> As I stated in my previous post, so far as I can see absolute rent can only 
> arise in one of two possible ways in the accounting equation for 
> gold:  either rent is a payment for scarce land, or it arises from the 
> exercise of monopsony power on the part of gold-producing capitalists, 
> resulting in the artificial depression of constant and variable capital 
> magnitudes below what would otherwise obtain.  I do not see that you have 
> introduced a third possibility, so is it legitimate to conclude, in light 
> of the above, that you're electing the latter alternative?  If not, how 
> exactly does the absolute rent arise, and why doesn't competition equate 
> the rate of return in the gold industry with the rate of return in other 
> sectors, in this case?

According to Marxs theory, the source of absolute rent in the gold
industry is surplus labor, just like all forms of surplus-value.  As I
have already explained in several recent posts, under Marxs assumption of
a lower than average composition of capital in the least productive gold
mines, and the additional assumption of equal rates of surplus-value
(i.e. no monopsony power in the labor market), the surplus-value produced
in the gold industry is greater than the average profit, and the
difference between the two is absolute rent.  The average profit is equal
to the general rate of profit (already determined prior to prices of
production and rent) times the total capital invested in the gold
industry.   In terms of equations:  

	surplus-value = new value ( = mL) - variable capital (taken as

	absolute rent = surplus-value - average profit ( = r Kg)

No additional equation is needed to determine absolute rent in the gold
industry.  Certainly no additional equation derived from an alternative
physical "technique" to produce gold, as you suggest above.  Such physical
techniques play no role in Marxs theory of surplus-value and absolute

> >   The rate of profit in Marxs theory is not determined by these physical
> >quantities and the wage rate, but is instead determined by the total
> >surplus labor (which determines the total surplus-value, the numerator in
> >the rate of profit) in relation to the total capital invested in the
> >economy as a whole.
> This statement presumes that the translation from "surplus labor" into 
> "surplus-value" can coherently be made without any reference, under any 
> conditions, to physical input requirements and the wage rate.  That remains 
> to be seen. For now, I'll just ask-- isn't it true that the quantity of 
> surplus labor is only *one* determinant of total surplus value, not the 
> sole determinant?

Right, the other determinant is the money-value-added per hour (m); i.e.

	S = m Ls

> > > In light of the foregoing, the following two conditions must be satisfied
> > > simultaneously for the agricultural production sector:
> > >
> > > (0)  Pk = (1+r)[(Sum over i:)PiEio] + wLio + aTo
> > >
> > > (I)  Pk = (1+r)[(Sum over i:)PiEi1] +wLi1 + aT1,
> > >
> > > where r is the rate of profit, Pi denotes the price of the ith constant
> > > capital good, Eij is the unit input requirement of constant capital 
> > input i
> > > in technique j, w is the wage rate (also equalized across sectors), Lij is
> > > the unit labor requirement in technique j, a is the rental rate on land,
> > > and Tj is the unit land input for technique j.
> >
> >These equations are for the unlikely case of "intensive rent", which
> >assumes that all lands (or gold mines) are the same quality.  What about
> >the more general case of "extensive rent", with the more realistic
> >assumption of lands (or mines) of different qualities?  How does
> >Mainwaring determine absolute rent in this case?
> By your own representation in 7636, Fred, this scenario is not at issue, 
> because it necessarily involves an instance of *differential* rent, and 
> what we're talking about here is *absolute* rent.  In Mainwaring's lingo, 
> "intensive rent" and "extensive rent" are respectively synonyms for 
> "absolute" and "differential rent.  I reproduce your own comment on this 
> distinction 7636:
>  >I think you are misunderstanding what I mean by scarce, and are also
> confusing differential rent and absolute rent. By scarce, I do not mean
> diminishing marginal returns, which has to do with differential rent, not
> absolute rent. Differential rent is historically contingent in the sense
> that only one kind of land or mine could be cultivated, or all the lands
> or mines could be of equal fertility. In these cases, differential rent
> would disappear.<
> I'd say that in the present case, *you're* the one confusing absolute and 
> differential rent, since you're now introducing the "historically 
> contingent" possibility of mines of different qualities.  But we don't need 
> to introduce this to discuss absolute rent, so I'd prefer to stick to the 
> case of mines of equal quality.  To put the same point another way, if we 
> introduce mines of unequal quality,  we'd *necessarily* have to introduce 
> differential rents, which is what you said in 7636 that we *weren't* 
> discussing.  

My point is that with lands of unequal quality, which is the general case,
there is BOTH differential rent on the more productive gold mines AND
absolute rent on the least productive gold mines.  And I would like to
know how Mainwaring and you determine absolute rent in this more general

> But for what it's worth, in the Sraffian framework an 
> additional equation would have to be added for each additional level of 
> differential rent, so my original inconsistency conclusion continues to hold.

Yes, and an additional equation is also added to explain absolute rent is
this case.  This equation is that absolute rent = 0, which is no
explanation at all.  At least that is what Sraffa and Kurz do.  What
equation does Mainwaring add in this case?  And what equation do you add?


This archive was generated by hypermail 2.1.5 : Fri Sep 20 2002 - 00:00:00 EDT