This chapter has been brutal. When Smith separated profit as a special part of value I could understand him, even if I didn’t agree; but separating rent out confused me; I had to read this chapter several times. I think I may have finally gotten somewhere; we’ll see if the conclusions I’ve drawn make any sense.
NOTE: I lost my copy of the book and had to get a new one. From now on, page numbers refer to the Prometheus trade paperback edition, published in 1991, ISBN 978-0-87975-705-2.
Page 153: Rent is the highest the tennant can afford. “The smallest share with which the tenant can tonent himself without being a loser…Whatever part of the produce, or, what is the same thing, whatever part of its price, is over and above this share, [the landlord] naturally endeavors to reserve to himself.”
He speaks of the ignorance of the landlord sometimes being a factor in setting the price–the ignorance of the landlord is something he returns to very strongly at the end of the chapter.
He defines this amount as the “natural rent of land” in much the same way that he considers there to be a certain “natural profit.”
Page 154: “The rent of land…is not at all proportioned to what the landlord may have laid out upon improvement of the land, or to what he can afford to take; but to what the farmer can afford to give.” And yet it is obvious that the farmer can afford to give more for improved land–Smith makes this observation later in the chapter.
Page 155: “High or low wages and profit, are the causes of high or low price; high or low rent is the effect of it.” This is interesting indeed. Does it hold up? If we use Smith’s approach and consider the exchange value of a commodity to result from the labor necessary to produce it–and if we go further and accept his argument that rent is a special portion of that value, then it does make sense if a commodity is selling for a high price, the landlord will demand a high price for the land on which it is produced. But that second “if” seems especially large to me.
Land, he says on page 156 (and I’m pretty sure he is limiting himself to agricultural land) “can always purchase such a quantity of labor as it can maintain” if not more. In other words (I think) if you can grow enough corn on a given piece of land to support ten laborors, you can always exchange that corn for the wages to pay (at least) ten laborers. If that is what he means, than I think it makes sense. He says that it can usually produce more–providing something for profit, and something for rent.
His point here is that agricultural land can always bring in rent.
Further down he argues effectively that where agricultural land is placed (ie, how close to nearby markets) has a major effect on how much rent it can bring in. This is obviously also a function of technology and infrastructure: “Good roads, canals, and navigable rivers, by diminishing the expense of carriage, put the remote parts of the country more nearly on a level with those in the neighborhood of the town. They are upon that account the greatest of all improvements.” He does not specifically mention this as being a function of technology, but it is obvious that improvement in engineering techniques play a major role in infrastructure.
A significant breakthrough in my own understanding came on page 162: “In a hop garden, a fruit garden, a kitchen garden, both the rent of the landlord, and profit of the farmer are generally greater than in a corn or grass field. But to bring the ground into this condition requires more expense. Hence a greater rent becomes due the landlord.” This indicates strongly to me that in fact rent, like profit, has its source in surplus value, which in the end has its source in labor.
On page 165 he speaks of cases where the the quantity that can be produced is smaller than the demand, and that this will drive up the price; and then he adds, “the greater part of this excess naturally goes to the rent of the landlord.” Here I’m confused: why? It would seem that negotiation among farmer, landlord, and any labors, would determine where the excess goes. What am I missing?
On page 166 he speaks of vinyards. “For though such vinyards [that produce exceptionally valued wines] are in general more carefully cultivated than most others, the high price of the wine seems to be, not so much the effect, as the cause of this careful cultivation.” To me, this seems over-simplified. I would think it was both the cause and the effect–the one dialectically transforming into the other–as high price leads to better cultivation which leads to better wine which leads to higher price.
Continued in next post
0 thoughts on “TWoN Chapter 11 Part 1”
Page 153: Rent is the highest the tenant can afford. “The smallest share with which the tenant can tonent himself without being a loser…Whatever part of the produce, or, what is the same thing, whatever part of its price, is over and above this share, [the landlord] naturally endeavors to reserve to himself.”
On page 165 he speaks of cases where the quantity that can be produced is smaller than the demand, and that this will drive up the price; and then he adds, “the greater part of this excess naturally goes to the rent of the landlord.” Here I’m confused: why? It would seem that negotiation among farmer, landlord, and any labors, would determine where the excess goes. What am I missing?
I think that he’s saying that the landlord is inherently in a stronger bargaining position. This makes sense if you assume that there is a limited amount of usable land relative to the number of available farmers and laborers as the landlord can always rent to someone else. I don’t think that this holds up when labor is in short supply.
Michael: Okay, that makes sense. Thanks.
re separating rent & profit as aspects of value:
Different mind-set. Don’t think “value,” think “income.” Income generated by production is called profit; income generated by land or other natural resources is rent. I don’t know who started the trend, but by the 19th century, this thinking was built into virtually all discussions of capital.
Smith’s p. 155 re rent as a “special portion” of value:
Again, different mind-set. Read Smith’s next 2 sentences after the one you’ve quoted. Wages and profit *must* be covered; what’s left after that is what can go toward rent. Turned around, rent goes toward cost, not toward value. See also 2 paragraphs higher up, beginning with “Such parts only of the produce…”
Smith’s p. 156 re land purchasing labor:
Interesting. My downloaded text (from the Library of Economics andLiberty) reads “It can always purchase,” with the preceding sentence referring specifically to food, not land. My text goes on to say that the quantity of labor is *not* always equal to what could be maintained under the most efficient management.
Smith’s p. 165 re excess “naturally” going to landlord
Smith is referring to the natural economic process, which he admits is sometimes out of synch with actual practice. Reread his very first paragraph of Chapter 11.