A remark on intensive differential rent and the labour theory of value in Ricardo

Fratini, Saverio M. (2010): A remark on intensive differential rent and the labour theory of value in Ricardo.

Abstract

One of the foundations of the labour theory of value used by Ricardo in the Principles is that rent does not enter into commodity prices. In response to objections raised by Malthus and Say, Ricardo defended this idea by arguing that even where all cultivated land pays rent, the last dose of capital employed on the land does not and no rent is therefore involved in the price of the product of this capital. We will show that this claim, which has convinced several generations of economists, is based on a misleading argument. In particular, we will show that the intensive differential rent paid on land of the worst quality under cultivation enters into the agricultural product price and so, even in the most favourable case, commodities are no longer exchanged at a ratio corresponding to the relative quantities of labour they embody.

• Item Type: MPRA Paper
• Language: English
• Keywords: differential rent; labour theory of value; methods of production; Ricardo; Sraffa; Smith
• Subjects: D - Microeconomics > D4 - Market Structure, Pricing, and Design > D46 - Value Theory; B - History of Economic Thought, Methodology, and Heterodox Approaches > B5 - Current Heterodox Approaches > B51 - Socialist ; Marxian ; Sraffian; B - History of Economic Thought, Methodology, and Heterodox Approaches > B1 - History of Economic Thought through 1925 > B12 - Classical (includes Adam Smith)

References

D’Agata, A. (1983) ‘The Existence and Uniqueness of Cost-Minimizing Systems in Intensive Rent Theory’, Metroeconomica, 35: 147-158.

Flaschel, P. (1983) ‘ Actual Labour Values in a General Model of Production’, Econometrica, 51: 435-454.

Fratini, S.M. (2008) ‘Alcune Osservazioni sulla Teoria Classica della Rendita’, QA – Rivista dell’Associazione Rossi-Doria, 131-158.

Fratini, S.M. and Levrero, E.S. (2011) ‘Sraffian Indeterminacy: a Critical Discussion’, Cambridge Journal of Economics, forthcoming.

Guichard, J.P. (1982) ‘La Rente Differentielle Intensive, Expression d’un Processus d’Intensification des Cultures’, in R. Arena et al. (eds), Études d’economie classique et neoricardienne, Paris: Presses Universitaires de France.

Hollander, S. (1979) The Economics of David Ricardo, Heinemann Educational Books, London.

Kurz, H (1978) ‘Rent Theory in a Multisectoral Model’, Oxford Economic Papers, 30: 16-37.

Kurz, H. and Salvadori, N. (1995) Theory of Production. A Long-Period Analysis, Cambridge: Cambridge University Press.

Marshall, A. (1893) ‘On Rent’, The Economic Journal, 3: 74-90.

Marx, K. (1909) Capital vol. III, Chicago: Charles H. Kerr & Co.

Montani, G. (1975) ‘Scarce Natural Resources and Income Distribution’, Metroeconomica, 27: 68-101.

Morishima, M. (1973) ‘Marx in the Light of Modern Economic Theory’, Econometrica, 42: 611-632.

Ricardo, D. (1951-1973) Works and Correspondence of David Ricardo, P. Sraffa (ed.), 11 vols, Cambridge: Cambridge University Press.

Samuelson, P.A. (1959) ‘A Modern Treatment of the Ricardian Economy: I. The Pricing of Goods and of Labor and Land Services’, The Quarterly Journal of Economics, 73: 1-35.

Smith, A. (1976) The Glasgow Edition of the Works and Correspondence of Adam Smith, 7 vols., Oxford: Clarendon Press.

Sraffa, P. (1960) Production of Commodities by Means of Commodities, Cambridge: Cambridge University Press.

Steedman, I. (1976) ‘Positive profits with negative surplus value’, The Economic Journal, 85: 114-123.

Steedman, I. (1977) Marx after Sraffa, London: New Left Books.

Stigler, G.J. (1952) ‘The Ricardian Theory of Value and Distribution’, The Journal of Political Economy, 60: 187-207.

Toker, M.A. (1984) ‘A Note on ‘Negative’ Quantities of Embodied Labour’, The Economic Journal, 94: 149-154.