Letter to Friedrich Engels, January 7, 1851

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To Engels in Manchester

London, 7 January 1851

Dear Engels,

I am writing to you today, to lay before you a questiuncula theoretica [a small question of theory] naturally naturae politico-economicae [of a political economic nature].

You know, to begin ab ovo [at the beginning], that according to Ricardo’s theory, rent is nothing else but the difference between the production costs and the price of agricultural produce, or, as he also expressed it, the difference in the price at which the produce of the poorest land must be sold in order to cover costs (the tenant-farmer’s profit and interest being always included in the costs), and that at which the produce of the best land can be sold.

The increase in rent proves, according to his own exposition of his theory, that:

1. Recourse is had to ever poorer types of soil, or that the same amount of capital, successively employed on the same land, does not give the same yield. In a word: the soil deteriorates in like proportion to the increasing demands the population must make upon it. It becomes relatively less fertile. Wherein Malthus discovered the real basis for his theory of population, and wherein his disciples now seek their last sheet-anchor.

2. Rent can only rise when the price of corn rises (at least according to economic laws); it must fall when the latter falls.

3. When a country’s overall rental rises, this can only be explained by the fact that a very large mass of relatively poorer land has been brought under cultivation.

Now these 3 propositions are everywhere refuted by history.

1. There is no doubt that, with the advance of civilisation, ever poorer types of soil are brought under cultivation. But equally, there is no doubt that, as a result of the progress of science and industry, these poorer types of soil are relatively good as against those previously regarded as good.

2. Since 1815 the price of corn has fallen, irregularly but steadily, from 90 to 50 shillings and, before the repeal of the Corn Laws even lower. Rent has steadily risen. Thus in England. Mutatis mutandis everywhere on the Continent.

3. In all countries, as Petty has already observed, we find that, when the price of corn fell, the country’s overall rental rose.

The main point of all this is to adjust the law of rent to progress in fertility in agriculture generally, this being the only way, firstly, to explain the historical facts and, secondly, to eliminate the Malthusian theory of the deterioration, not only of the ‘hands’, but also of the soil.

I believe that the matter can be explained simply, as follows:

Let us assume that, at a given state of agriculture, the price of wheat is 7 shillings a bushel and one acre of the best quality land, subject to a rent of 10 shillings, produces 20 bushels. The return per acre thus = 20x7 or = 140 shillings. In this case the production costs amount to 130 shillings. Hence 130 shillings is the price of the product of the poorest land under cultivation.

Let us assume that there is a general improvement in agriculture. If this be presupposed, we at the same time assume that science, industry and population are in a state of growth. A general increase in the fertility of the land resulting from improvements presupposes these conditions, as against the fertility fortuitously induced by a favourable season.

Say the price of wheat falls from 7 to 5 shillings a quarter. The best land, No. 1, which formerly yielded 20 bushels now yields 30 bushels. This now returns, instead of 20x7, or 140 shillings, 30x5, or 150 shillings, i.e. a rent of 20 shillings instead of 10 as formerly. The poorest land, which bears no rent, must produce 26 bushels, for, in accordance with our foregoing assumption, the requisite price of these is 130 shillings and 26x5=130. If the improvement, i. e. the general progress of science, which goes hand in hand with the overall progress of society, growth of population, etc., is not so general as to enable the poorest land that must be brought under cultivation to produce 26 bushels, the price of corn cannot fall to 5 shillings a bushel.

As before, the 20 shillings rent is an expression of the difference between production costs and the price of corn on the best land, or between the production costs on the poorest and those on the best land. Relatively speaking, one piece of land is no less infertile by comparison with the other than before. But fertility in general has improved.

All that is presupposed is that, if the price of corn falls from 7 to 5 shillings, consumption or demand increases correspondingly, or that productivity does not exceed the demand that may be expected when the price is 5 shillings. False though this hypothesis might be if the price had fallen from 7 to 5 as the result of an exceptionally abundant harvest, it is a necessary one where fertility has increased gradually and as a result of measures taken by the producers themselves. In any case, all we are concerned with here is the economic feasibility of this hypothesis.

From this it follows that:

1. Rent may rise although the price of agricultural produce falls, and yet Ricardo’s law still holds good.

2. The law of rent, as laid down by Ricardo in its simplest form and leaving aside its exposition, does not presuppose the diminishing fertility of the land, but only — and this despite the general increase in fertility that accompanies the development of society — the varying fertility of fields or the varying results obtained by the capital successively employed on the same land.

3. The more general the improvement in the land, the greater the variety of the fields it will embrace, and the country’s overall rental may rise, although there is a general fall in the price of corn. E. g., given the above example, it is simply a question of the number of fields producing over 26 bushels at 5 shillings without actually having to go as high as 30, i.e. of the extent to which the quality of the land varies as between the best and the poorest. This has nothing to do with the ratio of rent of the best land. In fact it has nothing to do directly with the ratio of rent at all.

As you know, the real joke where rent is concerned is that it is generated by evening out the price for the resultants of varying production costs, but that this law of market price is nothing other than the law of bourgeois competition. Even after the elimination of bourgeois production, however, there remains the snag that the soil would become relatively more infertile, that, with the same amount of labour, successively less would be achieved, although the best land would no longer, as under bourgeois rule, yield as dear a product as the poorest. The foregoing would do away with this objection.

I should like to have your views on the matter.

Having bored you with this muck, I am sending you by way of comic relief the enclosed bundle of letters from Dr Magnus Gross (doubly great Great! Greatest of the Great!) of Cincinnati. You will see that if Monsieur Gross is not grand, he is nevertheless gros. Tellering II in nuce. [in miniature] These Coblenzers are all alike! Send the things back to me with, if you have the time and the inclination, a line or two for Dronke.

Your
K. M.