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A Reformulated Version of Marx’s Theory of Ground Rent Shows That There Cannot Be Any Absolute Rent

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  • Deepankar Basu

Abstract

This article develops a simple theoretical model to analyze Marx’s theory of ground rent. Using the model, I demonstrate two important results. First, if we take capital outlay as exogenously given, then total ground rent can be decomposed into the three components: differential rent of the first variety (DRI), differential rent of the second variety (DRII), and absolute rent (AR). Second, if we let the amount of capital outlay on each plot of land be determined by the profit-maximizing behavior of capitalist farmers, then absolute rent becomes zero. Neither the low organic composition of capital nor the monopoly power of the class of landlords can generate any absolute rent. I conclude that under reasonable behavioral assumptions about landlords and capitalist farmers, there will be no absolute rent in a capitalist economy. JEL Classification: B51

Suggested Citation

  • Deepankar Basu, 2022. "A Reformulated Version of Marx’s Theory of Ground Rent Shows That There Cannot Be Any Absolute Rent," Review of Radical Political Economics, Union for Radical Political Economics, vol. 54(4), pages 542-567, December.
    • Handle: RePEc:sae:reorpe:v:54:y:2022:i:4:p:542-567
    DOI: 10.1177/04866134221115905
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    Keywords

    ground rent; differential rent; absolute rent;
    All these keywords.

    JEL classification:

    • B51 - Schools of Economic Thought and Methodology - - Current Heterodox Approaches - - - Socialist; Marxian; Sraffian

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