Comparing economic rent
and common sense rent
Colloquial subversion in the neoclassical age
Excludability:
Economic inference in language
• Tacit in language yet its intent overtly exercised
through economics, how “rent” is understood
and applied is a narrative that illustrates not only
“schooling” in comparison to “education” but
offers some degree of insight into one’s socioeconomic situation
• We offer you some perspectives on the
phenomenon of “rent”…
“The Invisible Hand” is not a fist
• “Rent”: The income accruing to the owner for the services of a durable good
such as a piece of land, property or a computer. (1)
“Rent-seeking behavior”: Firms or individuals influencing government policy
to increase their own welfare. (1)
♫ “Rent”: aka differential rent or in the case or NR, scarcity rent, is equivalent to
producer surplus and is defined as payment over and above the minimum
necessary supply price. (2)
“Necessary” in terms of a common, normative value is an ethic, or at the very
least a moral judgment, to which “market demand”, “whatever the market can
bear” and all market equations would adhere to. Ecology becomes the new
“gold standard” of accountability as apposed to fiat financing.
What is economic rent?
…the difference between what enables
economic activity to occur, which is known as
factors of production (usually an individual or
single corporation), is paid and how much it
would cost (or need to be paid) to keep that
factor in use.
Examples…
Ricardian Rent
and Differential Rent
SAME THING as Economic Rent!
“…payment of any such a 'surplus' to a factor
of production over and above what was
necessary to maintain that factor in its present
use or form of production, above its
opportunity cost.”
- Marc Blaug
Francois Quesnay (1694-1774):
Physiocratic Rent
• Physiocrats (Les Economistes) – First organized group
of economists
• “Rule of Nature”, Ideas developed (1756 – 1763)
• Surgeon and Physician
• Class assumptions developed from his observations of
agriculture
• Rise of a new class (Agricultural Entrepreneur).
Crucial distinction between share-cropper and this
group…access to capital (3)
Francois Quesnay:
“Avances” as Rent ?
• Quesnay's system of political economy was summed up
in Tableau économique (1758), which diagrammed the
relationship between the different economic classes and
sectors of society and the flow of payments between
them. In his Tableau Quesnay developed the notion of
economic equilibrium, a concept frequently used as a
point of departure for subsequent economic analysis.
Of explicit importance was his identification of capital
as avances—that is, as a stock of wealth that had to be
accumulated in advance of production. His
classification of these avances distinguished between
fixed and circulating capital. (4)
David Ricardo (1772-1823)
“owners of high quality land would be able to
extract the differential gain, or rent, from using
higher instead of lower quality land by simply
sitting back and letting the farmers bid amongst
each other for the higher quality land.
Competition would make every farmer's profits
identical; the productivity differential, however,
would remain and accrue to the holders of
higher than marginal quality lands.”
-Humberto Barreto
A contemporary example…
Thomas Paine (1773- 1809):
“Quit-rent”
• Should affairs be patched up with Britain, and she to remain the governing
and sovereign power of America, (which as matters are now circumstanced, is
giving up the point entirely) we shall deprive ourselves of the very means of
sinking the debt we have or may contract. The value of the back lands which
some of the provinces are clandestinely deprived of, by the unjust extension
of the limits of Canada, valued only at five pounds sterling per hundred acres,
amount to upwards of twenty-five millions, Pennsylvania currency; and the
quit-rents at one penny sterling per acre, to two millions yearly.
• It is by the sale of those lands that the debt may be sunk, without burden to
any, and the quit-rent reserved thereon, will always lessen, and in time, will
wholly support the yearly expense of government. It matters not how long
the debt is in paying, so that the lands when sold be applied to the discharge
of it, and for the execution of which, the Congress for the time being, will be
the continental trustees. (5)
Enclosure’s Paine-in-the-Ass
• There are two kinds of property: Natural,
Artificial [invention of man]
• The former is a birthright, the latter impossible
to be equal
• Since birthrights were diminished by enclosure
there ought to be “indemnification for that loss”
• Proposed a “national fund” for the “loss of his
or her inheritance” (6)
John Stuart Mill (1806 -1873):
Keeping Ricardo Alive & Beyond…
• Principles of Political Economy (1848 1st ed.) – To
retain Ricardian framework (in an attempt to update
A Wealth of Nations) yet take into account the
many points made by critics
• Distinction between laws of production Based
in physical world) and laws of distribution
(human institutions)
• Production of wealth depended on factors
beyond human control (7)
Henry George (1839 – 1897):
Rent
• “The man who cultivates the soil for himself
receives his wages in its produce, just as if he
uses his own capital and owns his own land, he
may receive interest and rent; the hunter’s wages are
the game he kills; the fisherman’s wages are the fish he
takes.” (8)
Bibliography
• Intermediate Microeconomics and its applications, 8th ed. Walter
Nicholson
• Ecological Economics Principles and Applications, 1st. ed.
Herman Daly, Joshua Farley
• Ordinary Business of Life: History of Economics, Roger
Backhouse
• Encyclopedia Britannica On-Line
• Capitalism 3.0 A guide to Reclaiming the Commons, Peter
Barnes
• Common Sense, Appendix, Thomas Paine
• Ordinary Business of Life: History of Economics, Roger
Backhouse
• Progress and Poverty, Book 1, Chapter 2 The meaning of terms,
Henry George