Jump to navigation Jump to search This article is about economic brookings bitcoin mining in political economy and socioeconomics. In economics, economic rent is any payment to an owner or factor of production in excess of the costs needed to bring that factor into production.
In the moral economy of the economics tradition broadly, economic rent is opposed to producer surplus, or normal profit, both of which are theorized to involve productive human action. When economic rent is privatized, the recipient of economic rent is referred to as a rentier. By contrast, in production theory, if there is no exclusivity and there is perfect competition, there are no economic rents, as competition drives prices down to their floor. Economic rent is different from other unearned and passive income, including contract rent.
This distinction has important implications for public revenue and tax policy. Historically, theories of rent have typically applied to rent received by different factor owners within a single economy. Hossein Mahdavy was the first to introduce the concept of “external rent”, whereby one economy received rent from other economies. More specifically, a rent is “a return in excess of the resource owner’s opportunity cost”. The law professors Lucian Bebchuk and Jesse Fried define the term as “extra returns that firms or individuals obtain due to their positional advantages. In simple terms, economic rent is an excess where there is no enterprise or costs of production. As soon as the land of any country has all become private property, the landlords, like all other men, love to reap where they never sowed, and demand a rent even for its natural produce.
The wood of the forest, the grass of the field, and all the natural fruits of the earth, which, when land was in common, cost the labourer only the trouble of gathering them, come, even to him, to have an additional price fixed upon them. Johann Heinrich von Thünen was influential in developing the spatial analysis of rents, which highlighted the importance of centrality and transport. Simply put, it was density of population, increasing the profitability of commerce and providing for the division and specialization of labor, that commanded higher municipal rents. Neoclassical economics extends the concept of rent to include factors other than natural resource rents. The excess earnings over the amount necessary to keep the factor in its current occupation.
The difference between what a factor of production is paid and how much it would need to be paid to remain in its current use. A return over and above opportunity costs, or the normal return necessary to keep a resource in its current use. The labeling of this version of rent as “Paretian” may be a misnomer in that Vilfredo Pareto, the economist for whom this kind of rent was named, may or may not have proffered any conceptual formulation of rent. Some returns are associated with legally enforced monopolies like patents or copyrights. In addition, companies like Microsoft and Intel have important de facto monopolies that can be quite valuable.
Some businesses, like public utilities, are by their nature monopolies. This section does not cite any sources. The generalization of the concept of rent to include opportunity cost has served to highlight the role of political barriers in creating and privatizing rents. For example, a person seeking to become a member of a medieval guild makes a huge investment in training and education, which has limited potential application outside of that guild. However, a political restriction on the number of people entering into the competitive market for services of the guild has the effect of raising the return on investments in the guild’s training, especially for those already practicing, by creating an artificial scarcity of guild members. The same model explains the high wages in some modern professions that have been able to both obtain legal protection from competition and limit their membership, notably medical doctors, actuaries, and lawyers.