Definitions of economic rent by Adam Smith, Ricardo and others

Adam Smith (1776), The Wealth of Nations, chapter 6: “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 laborer only the trouble of gathering them, come, even to him, to have an additional price fixed upon them. He must then pay for the license to gather them, and must give up to the landlord a portion of what his labor either collects or produces. This portion, or, what comes to the same thing, the price of this portion, constitutes the rent of land.”

David Ricardo (1817), chapter 2: “Rent is that portion of the produce of the earth which is paid to the landlord for the use of the original and indestructible powers of the soil.”

Alfred Marshall (1890): “… his producer’s surplus or rent is the excess of the gross income from the improved land over what is required to remunerate him for the fresh doses of capital and labour he annually applies” (chapter IX, Rent of land, p. 524).

Tollison (1982): “Economic rents are excess returns above the normal levels that are generated in competitive markets. More specifically, a rent is a return in excess of the resource owner’s opportunity costs.”

Khan & Jomo (2000): “The term rent is used to describe (not always very precisely) incomes which are above normal in some sense. But what is a ‘normal’ return? Often the benchmark used is the income which an individual or a firm would have received in a competitive market. But since the competitive market of theory does not usually exist, a more useful definition is an income which is higher than the minimum which an individual or firm would have accepted given alternative opportunities.”

Ryan-Collins (2017): Economic rent is any return deriving from the possession of a scarce or exclusive factor of production, in excess of the cost of bringing it into production.” “Confusingly, rent has two different meanings for economists. The first is the commonplace definition: the income from hiring out land or other durable goods. The second, also known as economic rent, is a measure of market power: 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 soccer star may be paid $50,000 a week to play for his team when he would be willing to turn out for only $10,000, so his economic rent is $40,000 a week. In perfect competition, there are no economic rents, as new firms enter a market and compete until prices fall and all rent is eliminated. Reducing rent does not change production decisions, so economic rent can be taxed without any adverse impact on the real economy, assuming that it really is rent.”

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