Basic pension theory

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The basic pension theory is a theory of classical economics that explains why and in what form a basic pension is due in the economic cycle. The ground rent (also ground rent , differential rent or simply just rent ) is that part of the income that a tenant has to pay regularly to the owner of the land he uses as arable land, building land, forestry, mining or whatever.

In a specific sense, land rent refers to the difference in income between two soils of the same size with the same input of labor and capital . This difference is based on factors such as different soil fertility , favorable climatic factors , traffic situation, type of use (agricultural or forestry, structural and legal suitability for living or working, possibility of exploiting the land for coal, oil or natural gas extraction) as well as the prevailing land law with its special provisions (see e.g. agricultural law (Germany) ).


Karl Marx , Theories of Added Value , 1956

The theoretical analysis of the basic rent presupposes the theory of labor values. This elementary theorem of classical economics , which describes the exchange ratio of commodities under market conditions , says that every commodity has an objective value that can be measured by the quantity of labor (expressed in time units) that had to be expended on average for the production of this commodity . The market price is calculated on the basis of this value, but can be subject to fluctuations due to supply and demand . If supply and demand (viewed over the long term) are in equilibrium , the price corresponds exactly to the value expressed in terms of the size of another commodity (e.g. gold).

In the case of agricultural products (as opposed to industrial products), however, the yield is not solely dependent on the work (time) due to the above-mentioned external influences. Thus, given the demand and the difference in income regardless of the workload, an income can be achieved. The basic pension can therefore be added to the income forms wage and profit.

The discovery of the rent theory

Ricardo saw Sir Edward West (1782-1828) and Malthus as the discoverers of the rent theory. Marx, on the other hand, refers to James Anderson (1739–1808) and his largely unnoticed work An inquiry into the nature of the corn laws, with a view to the new corn bill proposed for Scotland (Edinburgh 1777), where this incidentally describes the nature of rent explained as well as on his essays. Relating to Agriculture and rural Affairs (3 volumes, Edinburgh 1775–1796), as well as in the Recreations in Agriculture published from 1799 to 1802 . Natural History, Arts etc. (London). Marx acknowledges Anderson's priority in discovering rent theory while also accusing Malthus of plagiarism .

Adam Smith

Adam Smith (1723-1790)

Adam Smith defined the land rent in his main work " Wealth of Nations " ("The prosperity of the nations") as "the price for the use of land" which the tenant (or capitalist) has to pay to the landowner. Smith continues:

"The landowner endeavors to adjust the terms of the lease in such a way that the lessee does not have more of the income than is sufficient to maintain his capital, with the help of which he procures seeds, pays workers and buys and replaces cattle and agricultural implements, and in order to achieve the usual profit of an agricultural investment in the neighborhood. "

Thus, according to Smith, rent is the difference between the return on the product and the cost (of labor and means of production) plus the lessee's profit. If both sizes (expressed in money) are the same, the landowner can accordingly not accrue a pension.

The latter, according to Smith, is an important characteristic of the basic rent: unlike wages and profit, it is not a factor in price formation:

"High and low wages and profits are the cause of a high or low price, while a high or low pension is the result of it."

Subdivision of land products according to the amount of land rent

Adam Smith divided the various soil products into two groups: 1. soil products that always yield a rent and 2. soil products that sometimes yield a rent, but sometimes not. He counts foodstuffs (mainly grain) in the first group. Smith backs this claim with the empirical evidence that even the most inhospitable areas of Norway and Scotland yield a pension for their landowners because food is needed anywhere, anytime. A growing population increases this tendency in the form of increased demand. Likewise, even with high wages, a few workers would be enough to generate enough income for a pension. The pension is also influenced by two natural factors: the fertility of the soil (especially important for agricultural products) and the location of the soil. If the ground is far away from cities (population concentration → main sales area), transport costs reduce the pension.

In the second group, Smith counts mining products and those products that satisfy secondary human needs (such as clothing and housing ). Here, according to Smith, it sometimes happens that too little demand depresses the price, so that there is no pension for the landowner. As an example, he names the operators (tenants) of numerous silver mines who are giving up their mines because the silver price keeps falling due to the inflow from the new world and the demand that is not keeping pace with it.

David Ricardo

David Ricardo (1772-1823)

David Ricardo says in the introduction that the rent is "that part of the product of the earth that is paid to the landlord for the use of the original and indestructible forces of the soil".

Ricardo basically agrees with Adam Smith's remarks, but still gives some concrete form. Taking up Smith's realization that the rent cannot be a component of the price of farm produce, he deduces from this that there must always be some farmed property that does not yield any rent. Since the price of a commodity (e.g. grain) is derived from its value, which in turn results from the work involved, it can theoretically be possible that there are grains of different values. If two tenants work with the same effort (same number of workers, same number of tools, etc.) on two soils with different fertility, the income of the tenant who cultivates the more fertile soil is higher than that of the less fertile one; but both have the same (labor) value.

So if a (closed) economy cultivates soil of given fertility, but now (due to population growth) demand exceeds supply (price increase), the corresponding nation cannot avoid cultivating soil of poorer fertility. If demand and supply (at the increased level) are in equilibrium again, the price (of the grain) is based exactly on the value of the grain that is grown on the soil with the lowest fertility. The price is just enough to replace the capital employed (plus profit) for this tenant (plus profit), with which he cannot pay a basic rent.

As a result of the price rise in this way, the landowners with better land are now in a position to demand a pension from their tenants, precisely enough that the remaining part represents their invested capital plus profit.

In the course of Ricardo's explanations of the basic pension, he emphasizes the inconsistent application of the labor theory of some of his predecessors (Adam Smith, Jean-Baptiste Say ) to the complex of the topic. He points out that only the quantity of labor influences the price of a commodity and neither profit nor rent.

According to Joseph Schumpeter , Ricardo's rent theory did not explain the phenomenon, but was only a means of excluding the land factor from value theory and price theory . The assertion of a direct connection between the wage level and the subsistence level only served Ricardo to get along without a special wage theory. Without this thesis, however, his distribution theory would collapse. The modern view does not reject Ricardo's assertion as empirically false, but even cope with empirical contexts that are incompatible with Ricardo's thesis.

With the term "Ricardian Vice" (German roughly: "Ricardo's peculiar mistake") Schumpeter wants to identify a fundamental mistake in Ricardo's method of explanation. Heinz D. Kurz , however, rejects Schumpeter's criticism as unjustified because he misinterprets Ricardo's method. Schumpeter, who in his criticism of Ricardo believes that he can argue from the standpoint of marginal utility theory that he prefers because it is supposedly more general, does not do justice to the different explanations of classical economics .

Henry George

Most influential in the 19th century had the teachings of Henry George that private property is the result of human labor and creation, but that all natural resources - especially land - belong to all of humanity. Owners of land and natural resources should pay a fee to the general public. This tax is levied in the form of a land value tax only on the natural, unchanged property, without the improvements made by the owner. The teachings are summarized as Georgism . Today you are represented by Mason Gaffney or Dirk Löhr , for example .

Karl Marx

Karl Marx (1818-1883)

Karl Marx takes Ricardo's remarks as a basis for his work on the basic pension. Marx expressly praises these, but also those of Smith, which is mainly due to the fact that he too agrees with the statements of the two. His theory of differential rent is only of particular importance because Marx had to include it on the one hand in his analysis of the form of value (and the resulting distribution of value in wages, profit, and basic rent) and on the other hand with much more precise explanations regarding rent and influence various factors (capital employed, size of the cultivated area, etc.) on those made.


The basis of every commodity exchange relationship is also with Marx the theory of labor values. The exchange value of a commodity results from the average working time required for those commodities as a whole. The aim of the capitalist mode of production is then a so-called valorization process: the production of an (absolute / relative) surplus value. More precisely, this means that the capitalist, in order to produce surplus value (or profit), is forced to let the worker do additional work for himself (by extending or intensifying the work (time)), i.e. to let the worker work longer than would actually be necessary for this to reproduce. Or to put it another way: The work performed by the worker, and the (new) value arising from it, is divided into two parts: One part goes to the worker (in the form of wages), the other part to the capitalist (in the form of surplus value) . According to Marx, the propertyless working class is exploited: profit (or surplus value) is generated by the worker leaving part of his work unpaid. According to Marx, wages are based on the sum of consumer goods (the sum of prices) that the worker needs in order to survive, ergo: "to reproduce". What goes beyond this amount falls to the capitalist. The capitalist mode of production thus presupposes that the direct producers (workers) are separated from the means of production ( expropriation ), that a certain technological level of development of civilization has been reached and that the workers rely on a contractual relationship with the capitalists, i.e. on the exchange of their labor power for a fee. In order for the tenant to be able to pay the landlord a rent at all, it is necessary that the capitalist mode of production also exists in agriculture. This means that the agricultural workers (the producers) are also separated from their means of production and that there is free competition and transferability of capital.

See also the theory of labor values ​​(Karl Marx) , surplus value , capital

Differential rent

With the advent of the capitalist mode of production, according to Marx, the generation of a basic rent is the ultimate goal of agricultural production, as is the process of valorization and the associated exploitation of the working class for the entire capitalist class.

The land rent, or differential rent, is part of the surplus value, unpaid labor, that the tenant pays the landlord. Marx explains:

“Surplus profit [as the basic rent is one] ... is always produced as the difference [hence differential rent ] between the product of two equal amounts of capital and labor, and this surplus profit turns into rent when two equal areas of land are occupied with unequal results become."

Thus Marx also points out that the rent is a consequence of this difference and is therefore not to be understood as a component of the price. Like Ricardo, he emphasizes that even high (or low) profit and wages are not to be understood as building blocks (i.e. the cause) of a high (or low) price. The pricing is based on the production price ( cost price plus average profit ) and this in turn depends on the quantity of work that has been used on a commodity. This value is then broken down into the parts of profit, wages and basic rent. Marx here accuses Smith and even Ricardo of inconsistency in the application of the labor theory.

The causes of the difference in the results are:

  • the location (e.g .: distance from the main sales areas)
  • fertility
  • Differences in tax burden
  • Differences in technological development
  • Inequalities in capital distribution among tenants

Differential Rent I

To present his theory, Marx uses an abstract example: In the first part of his investigation of the influences that cause the level of the basic rent to vary, he focuses on the capital-independent, natural influences. It defines 4 soil classes with different fertility (and location). A, B, C and D are these 4 types, whereby soil type A is the (relatively) most sterile and most inaccessible and D is accordingly the most fertile and best located type. A should (e.g. in a harvest season) shed 1 quarter of wheat and the following soil types in sequence each one more quarter.

As an example, it is also assumed that the price of the grain is 3 pounds sterling (= 60 shillings). Since A is the worst type of soil and rent is a differential rent, this price corresponds exactly to the production price (cost price plus average profit) of the grain of soil A. The production price is therefore set to 60 schillings, so that one can now assume that the capital employed (cost price ) is 50 shillings and the average profit is 10 shillings.

The following overview is obtained:

Soil type Product (in quarters) Product (in Schillingen) Advance capital Profit (in quarters) Profit (in Schillingen) Pension (in quarters) Pension (in Schillingen)
A. 1 60 50 1/6 10 - -
B. 2 120 50 1 1/6 70 1 60
C. 3 180 50 2 1/6 130 2 120
D. 4th 240 50 3 1/6 190 3 180
Total: 10 600 6th 360

While the capital advance (i.e. the constant and variable capital ) remains constant, the product of B, C and D is twice as large as that of the previous soil type. The tenants of this land are able to pay a pension: just enough to cover the remaining part of the capital advance and average profit (the tenant of the worst type of land, which determines the price). (see table: remaining profit = profit - pension )

"Genesis of the capitalist basic rent"

Karl Marx subjects the basic rent to a historical perspective and states that the basic rent in itself is not an expression of the capitalist mode of production. In the course of development it has only changed its appearance or, as Marx puts it, it has veiled its original form. At the same time, he accuses several vulgar economists of confusing pension with profit and not distinguishing between them. He also criticizes Smith and Ricardo for not having made any effort to classify the pension from a historical point of view. He only attributes the achievement to the physiocrats of having recognized the following differences.

Labor pension

What Marx retrospectively calls labor pension is the product of so-called compulsory labor . In the Middle Ages, serfs or unfree peasants were obliged to do serf work if their liege lords demanded it. According to Marx, this is the pure form of the basic rent. There is no “middleman” between the landowner and the worker, and exploitation takes place, visible to the observer, directly by doing additional work. The unfree or serf cultivates the land left to him for himself in order to work another part (a week) for the landowner. The extra work is still evident here.

Product rent

With the advancement of cultural development in Europe, the pension changes its appearance, but not its essence. As Marx says, the pension is now demanded “by law instead of the whip”. Due to the legal freedom of the producers (farmers) that has been gained, the pension is now increasingly taking on the form of a commodity. The rent is therefore not expressed in forced additional work, but more subtly in part of the products produced.

Money pension

The money rent is close to the product rent, with the important difference that a rent in the form of money requires not only money circulation but also active trade, a market and, as a result, the existence of a market price . With the detachment from the demand for direct extra work towards the purely contractual money ratio in which the rent is represented, the capitalist mode of production finds its way. With the transformation of rent into money rent, the capitalist class now appears as the third party between landowners and workers. This development is largely influenced by silver inflation from the New World . Rising prices and rigid rents increase the profits of individual farmers and tenants, which leads to a centralization of agriculture and a rapid implementation of the capitalist mode of production.

See also


Primary literature:

  • Adam Smith: The prosperity of the nations: An investigation of its nature and its causes (1776), Munich: Deutscher Taschenbuchverlag, ISBN 342330149X (11th edition June 2005), after the 5th edition of 1789 (original title: An Inquiry into the Nature and Causes of the Wealth of Nations )
  • David Ricardo: On the principles of political economy and taxation (1817), Marburg: Metropolis-Verlag, ISBN 389518540X (2nd edition 2006) (Original title: On the Principles of Political Economy and Taxation )
  • Karl Marx and Friedrich Engels: MEW 25: Das Kapital Volume III The Complete Process of Capitalist Production (1895), Berlin: Dietz Verlag, ISBN 3320002643 (July 2008)

Individual evidence

see literature

  1. "The problem only exists for Ricardo because the value is determined by the working time." Karl Marx: Theories about surplus value . MEW 26, .2, p. 125.
  2. Karl Marx: Theories about the surplus value . MEW 26.2, p. 107 f.
  3. Adam Smith, Wealth of Nations, p. 125.
  4. Adam Smith, Wealth of Nations, p. 125.
  5. Adam Smith, Wealth of Nations, pp. 126 ff.
  6. David Ricardo, On the Principles of Political Economy and Taxation, p. 57
  7. David Ricardo, On the principles of political economy and taxation, p. 58 ff.
  8. ^ David Ricardo, On the principles of political economy and taxation, pp. 66/67
  9. Joseph A. Schumpeter: Dogmenhistorische and biographical essays . JCB Mohr (Paul Siebeck) Tübingen 1954. p. 261, note 1.
  10. ^ Heinz D. Kurz: Ricardian Vice. ( Memento of March 4, 2016 in the Internet Archive ) International Encyclopedia of the Social Sciences, 2nd ed.
  11. Dirk Löhr, Fred Harrison (Ed.): The End of the Rent Economy - How we can create global welfare and build a sustainable future . Metropolis , 2017, ISBN 978-3-7316-1226-1 .
  12. Karl Marx, MEW Volume 25 p. 628
  13. Karl Marx, MEW Volume 25 p. 627 ff.
  14. Karl Marx, MEW Volume 25 p. 662