(OPE) Cyrus Bina On Differential Oil Rents

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

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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