Rent theory
Bortkiewicz published two papers devoted to the treatment of land in the theory of value and distribution. In both papers the attention focuses on the theories of rent of the German economist Karl Rodbertus, on the one hand, and Marx, on the other, and on whether these theories involved any progress with respect to Ricardo’s theory (Bortkiewicz 1910-11, 1919).
In volume III of Capital Marx had criticized Ricardo for having missed the concept of “absolute rent”, that is, rent obtained by the proprietor of “marginal” land. Absolute rent emerges, because the competitive process is said to be imperfect and thus fails to channel surplus value produced in agriculture, which is taken to exhibit a lower organic composition of capital than manufacturing, away from it in an amount necessary to bring about a uniform rate of profit. Some of the non-redistributed surplus value is said to allow the proprietors of marginal land to pocket a rent. Marx located the deeper reason for Ricardo’s inability to see this in his failure to distinguish between constant and variable capital. Ricardo is therefore also accused of having missed an important element at work in the transformation (or lack thereof) of (labour) values in prices of production.While there is a correct element in Marx’s criticism in so far as Ricardo had indeed tended to neglect the existence of non-wage capital when determining the rates of profit and rent (see Gehrke 2012), two observations are apposite. First, as Bortkiewicz stressed, Ricardo did not advocate a “law of value” in the sense of Marx (see also Kurz and Salvadori 2013). Secondly, without free competition across all sectors of the economy the results would differ from those obtained. There is nothing surprising here, as the classical theory of differential profit and wages rates, originating with Smith and further developed by Ricardo, shows (see 1951-73, I, ch.
I, s. II). As Bortkiewicz demonstrated, Ricardo’s theory of rent emerges largely unscathed (see also Gehrke 2012). Its substance stands up to criticism, but certain formulations Ricardo used turn out to be misleading or untenable and more general formulations of the theory are possible.The question was close at hand: did Marx’s theory involve only regress compared with Ricardo’s? Bortkiewicz was not of this opinion, but credited Marx essentially with a single important achievement only: his explanation of the “source of profits”. In the third instalment of his 1906-07 essay, Marx is said to have had the illuminating idea of building a scheme in which, while commodities exchange according to labour values, there is surplus value and thus profits. In this way Marx was able to refute both the vulgar idea that profits are the result of raising prices above their values and the proposition that profits are a payment for the “productive services” of capital. Marx was able to show conclusively that profits reflect “unpaid labour”, and thus exploitation, and imply a “deduction” from the produce of labour, as Adam Smith had already argued.