12/2 Land, rent…

12 February: comments specified to this week/topic
Land Markets, Rent and Finance Capital
Reading: David Harvey, “Class-Monopoly Rent, Finance Capital and the Urban Revolution,” Regional Studies, 1974, vol.8, pp238-251; Harvey, The Limits to Capital (Verso, 1999 ed.), “The Land Market and Fictitious Capital,” pp367-372; and Harvey, A Companion to Marx’s Capital Volume 2 (Verso, 2013), “Introduction,” pp1-35

We have added some downloads on the Programme page. I fear we’ll all have to find the other stuff ourselves. Michael.  NB if anyone is looking for an alternative to Amazon, I do recommend Housman’s bookshop at King’s Cross (bottom of Caledonian Road, almost on Pentonville). They have an online order service for things they don’t have in stock and you can select whether the item is delivered to you or to the shop where you can pick it up – and that’s a great pleasure to visit.

Slide showing the path of Harvey’s argument in Limits to Capital which Andy showed during his talk: AM arguments of Limits

Comment added by Michael Edwards 12 Feb after the seminar. (Anyone please tell me if you want rights to post on this site – anyone in the seminar can join.  Otherwise use the comments box below.)

1. I consider “class monopoly rent” to be a bad concept  which we should not use. Briefly (I’m tired) for the following reason.  The phrase captures and emphasises that, as a class of people, landowners own the land. But to operate monopolistically they would have to conspire / collude.  Perhaps in specific conjunctures they do or did but they may equally compete with each other – and there is plenty of evidence from over-production booms that they often fail abysmally.  I would keep the word ‘monopoly’ for the specific and special cases where a plot of land has unique properties enabling a unique product or service to be produced.  [ My very inspiring PhD student Joon Park – whom some will remember – introduced a valuable idea that it can be common for a land owner or developer to create something unique enabling the capture of an abnormally high (monopoly) rent but this will typically be a temporary scoop, soon eroded by imitators who undermine the monopoly so that the rent surface absorbs and normalises the innovation.  It’s a bit like the idea of ‘founder rent’ which floats around somewhere in the literature. ]

2. There is always the danger of confusion when the word ‘value’ is used interchangeably between its 2 meanings: (i) a conventional bourgeois usage where it means much the same as market price / exchange value. Clearly (common sense) my house has a value in that I cold sell it for £600,000.  (ii) Marx’s usage as the core term in a quest for understanding about where value comes from, how human labour can create more value than is required for its reproduction – thus generating surplus value.  In class societies this SV tends to be appropriated by proprietors through profits or rents.

Getting to the bottom of these issues is the main quest in Capital and one outcome of the analysis is to show how the 2 kinds of value are connected.  But it’s not simple which is why it doesn’t lend itself to a 2-minute interjection in a seminar and I flunked it last night.

Briefly, the analysis is the problem of the transformation of values into prices (the ‘transformation problem’) through a whole series of social processes when tend to equalise the rate of profit on different capitals.  Without these adjustments, investors would pull out of sectors where the rate of SV is low and all pile in to the sectors where it is high.

Land can play a role in this, and that is where the idea of absolute rent comes from. It can arise where capital which would tend to bring down prices accross the whole market (e.g. by building 500,000 houses a year in England) is prevented from entering the market by difficulties in gaining access to land. This is good news for those who own the land and buildings which are already developed as they can thus appropriate (demand and get) absolute rents in addition to whatever differential rents their properties command. [ The barrier to investment required to maintain these conditions can come from various sources – topography, landowners’ reluctant release of land (aristocratic owners, corporate land-banking, green belts, conservation areas etc).   Interesting.  ] This is another thing which Joon Park tried to crack in his PhD.

All of the above would be more authoritatively written by a proper scholar of Marx. We have some in our seminar and I hope they will comment, or add links to where (in Harvey or elsewhere) it is best explained.

That’s all for now.  M.E. 13/02/14 0950h

Comment from David Harvey 13/02/14 (copied from the general comments page because it really belongs here).

I would defend the category of class monopoly rent. All spatial competition is, as Chamberlain long ago pointed out (cf Losch) monopolistic competition and all locations are unique though, as with branding, some are more unique than others (see my Art of Rent paper). You cannot say landlords do not collude and then suppose later on there is some mysterious “barrier” that allows the extraction of absolute rent. Land and property owners have a reserve price before they release the asset they control. many stores in my neighborhood were forced to close by a rapid rise in rent extractions 2007-12 but many have stayed empty ever since. landlords don’t compete in the same way as in other markets (cf the payments for access to scientific articles in the case of intellectual property rights). The concept of absolute rent does not work. leaving aside the question of transformation etc., the extraction of absolute rent would depend on very low productivity in landed activities and we know that in Marx time agriculture was not industrialized (though Marx hoped it would be one day) and with a low value composition landlords could extract some of the transfer that Marx saw as necessary to equalize rate of profit but much of agriculture is now very high composition (capital intensive) and in urban situations the whole idea does not work which is why marx held that in the urban case monopoly rent would be the appropriate category.david harvey
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3 thoughts on “12/2 Land, rent…

  1. Thanks Michael,

    At some point over the next few days I’ll cut and past some of the discussion from the spatial fix discussion between you, Joon, myself and others about ‘rent’ and socio-spatial property relations. Might help steer us through the choppy waters of rent theory.

    For my money the invaluable contribution in this amazing paper is that it opens up Harvey’s political critique of microeconomics. The value of which is that it throws light on the actually existing social relations which determine how the social product of society is unevenly distributed in space.

    As Harvey says when we begin to investigate the way the social relations of rent are spatially constructed we begin to ask interesting questions like … “The appropriation of rent, in short, entalls the exploitation of who, by whom?” (Limits p. 333) Shedding light on the role of finance and commercial capital in the ownership and management of urban space, goes some way to revealing the bewildering extent of urban modes of financial expropriation.

    London seems to me to be the point where all these contradictions are writ large. But not necessarily in the form of the Shard, but more in the vast honeycomb of empty spaces-cum-financial assets. Empty space which exist in order to maintain and prop up the scarcity of centrally located urban space.

    Lots more to say. But in the meantime I’ll throw in this clipping from Martin Wolf a few years ago. It’s interesting that mainstream economists recognise the beef Ricardo has with rentiers, what Ann Kruger later called rent-seeking, but their institutional analysis sees this solely as one of over-regulation/over-planning by the state. And their conceptual apparatus is unwilling to ask how socio-spatial property relations – of the state, developers/builders/designers/FM (productive & commercial capital), and financiers (interest-bearing capital) – work in a dynamic way to frame the rules of economic growth and filch the rewards of the spatial game of location, location, location…

    http://www.ft.com/cms/s/0/8f06df9e-8ac1-11df-8e17-00144feab49a.html

    “In a world in which people have borrowed heavily to own a location, they are desperate to enjoy land price rises and, still more, to prevent price falls. Thus we see a bizarre spectacle: newspapers hail upward moves in the price of a place to live – the most basic of all amenities. The beneficiaries are more than land speculators. They are also enthusiastic supporters of efforts to rig the market. Particularly in the UK, they welcome the creation of artificial scarcity of land, via a ludicrously restrictive regime of planning controls. This is the most important way in which wealth is transferred from the unpropertied young to the propertied old.”

    Louis Moreno. 13/02/2014

  2. The “value” question won’t go away, even if we’d conceptually like it to go away. Marx’s own problematic was: How is it that land has a “value” when it isn’t a product of labor? Obviously, the first part of his response was because it is monopolizable and because, presumably, somebody wanted that land to do something on it. And were prepared to pay. Value for Marx was rooted in labor exploitation, in finding commodities that could produce more value than they themselves received to create that value, or extra, surplus-value. Above all else, value was – is — a social relation, a power relation, a social process that has innumerable components and manifests itself in strange, entangled ways – like Michael’s house price. Didn’t Marx call it “fetishism,” the very “real” appearance of something which actually masked a deeper, imperceptible reality? Smart people try to puncture this veil of ignorance. Michael’s Finsbury Park house is worth pretty much the same “value” (or perhaps a bit less!) as David’s 2-bedroom Upper East Side apartment. How to explain? As Michael says, it is something to do with the relationship between “price” and “value”; but you don’t have to be a rocket scientist nor a Marxist to know that those “prices” are related to something more deeply that’s going on in the urban, national and international political-economy. Neither do you need to know anything about the “transformation problem” to know that. Real estate and property interests of various stripes and persuasions will try all they can, relentlessly, to test out the water, to stretch that relationship between price and value. They cajole, advertise, lobby, evict, dispossess, threaten, kill – do all they can to achieve their ends, to get their “pound of flesh,” as David Harvey puts it in Social Justice and City. They do everything they can get away with. Sometimes they get their pound of flesh and a lot more; other times they don’t, they over-estimate the market, what it can absorb, how far it can diverge, be stretched, from its value basis, from its value center of gravity. On the ground, landlords monopolize land. In that sense, both Michael and David are right in their respective rejection and defense of “class-monopoly rent”: as Matthew Edel argued long ago (in Kapitalstate, 1976), doesn’t ALL rent under capitalism involve class-monopoly? Thus, for Edel, the concept has no resolution, no nuance, to explain why rents and land values may vary; every rent involves a group of people with vested rights to do what they want with their property. On the one hand, to deny class-monopoly rent is deny what happens to land under capitalism. On the other, to affirm it leaves you with little ground to explain actual rent differentials and land value differences. Edel, like François Lamarche (see his essay in Pickvance’s edited Urban Sociology: Critical Essays, 1976), still uphold absolute rent as a valid analytical category—accepting the technical definitions that Marx voiced in defining it with respect to agriculture, and those David Harvey uses to diss the concept in the urban realm today. Absolute rent arises when investment barriers are created, speculative barriers that are more than land monopolization, given that monopoly power is the normal functioning of capitalist land markets anyway. Absolute rent can be separated out from differential rent II, which seems the “normal” incentive for capital flows into the urban realm, via the Lefebvrian secondary circuit. Maybe one way to clear away the ground would simply to see rent as tantamount to interest, to an interest-bearing asset, to another form of fictitious capital (as David Harvey puts it in those brilliant pages of Limits to Capital, pp367-372). Like a stock, investment chases a future gain. Here are Jameson’s well-chosen words from his “Brick and Balloon” article (New Left Review, #228, 1998), in praise of the “magisterial” Limits to Capital: “Harvey suggests that for Marx the value of land is something like a structurally necessary fiction. And indeed he calls it capital not backed up by any commodity transaction. This is possible only because fictitious capital is oriented towards the expectation of future value; and thus at one stroke the value of land is revealed to be intimately related to the credit system, with the stock market and finance capital generally. ‘Under such conditions [Jameson cites Harvey], the land is treated as a pure financial asset which is bought and sold according to the rent it yields. Like all such forms of fictitious capital, what is traded is a claim upon future revenues, which means a claim upon future profits from the use of the land or, more directly, a claim upon future labor’.”

    • Just to follow on from Andy’s last point linking David’s work to Fredric Jameson’s on the question of value.

      In the cultural logic of late capitalism FJ tentatively began to link the cultural and spatial turn of capital accumulation the 1980s with the rise of human capital ideology of Becker et al. The latter being a defence of the extension of the market mechanism in the provision of public goods and in particular the ability of people to realise their ‘human capital’. (And was a feature of Foucault’s inquiry into neoliberal reason). Jameson never completed the circuit by linking the spatial and human capital to the problem of rent, but it’s implicit.

      So I think what’s also fascinating about the urban process today, is not only the way land can be treated as a pure financial asset, but that this spatial moment of financial accumulation and privatization manifests itself increasingly in (a) life-support processes like education and healthcare and (b) adaptations to microeconomic theory which justify the extension of markets into new spheres of life.

      So again, I think what’s so fascinating about the urban question of ‘rent’ is it opens up the manifold ways in which the fundamental properties of urban space are mobilized to extract/monopolise/parasitise the value creating capacities of human beings (What Marx called species-being). Here, the whole intellectual property bubble that’s blown up around operationalizing creativity: the creative economy, smart cities, and the ‘global race’ to agglomerate human capital represents a new ‘human-rent question’ that’s disorienting in its implications.

      And what’s even more disorienting, I’ve just discovered David talking about rent, human capital, google and parasitic cities – perhaps via recent conversations between Andy and David ? – with Ed Glaeser himself last December.

      What are the economics of the creative economy ? – Harvey vs. Glaeser…

      Perhaps in the next seminar we can discuss this exchange ?

      There’s a hilarious bit where Glaeser says to Harvey how dare you call Google ‘rentiers’ and parasites, we should pay fealty too them for their intellectual generosity !

      Anyway I think it helps move the rent question and value question onto some fascinating terrain about the ‘creative’ ideology of urban policy today.

      LM

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