Talk:Economic rent/Archive 1

Archive 1

risk free interest rate

How is modern portfolio theory's use of the risk free interest rate related to the calculation of economic rent? Jim Bowery 17:11, 12 September 2005 (UTC)

you can be somewhat correct, but....

Whereas the creation costs of land are zero (most unlike the creation costs of real capital) then any amount paid for tenant rights to land must be used in the public interest thus avoiding an economic rent for all such privatised rent is economic rent. You can also take the position that economc rent is not conditioned upon who receives the rent (though I would disagree).

Your term for privatised rent seems to be income over and above what what was paid for this factor of production. That is simply incorrect unless you acknowledge that money paid to a previous, so called "owner" of land is total economic rent. The tenant pays for the right to exclude others from the land and such right cannot be granted in perpetuity. The right to collect (privatize) land rent is arrived at in a somewhat feee market for land rights. But there is no actual "cost" for land in that it is naturally occurring.

In the case of a sports star there is no rent that inures to the benefit of the star. He/she is not protected from competition by any form of political contrivance and any funds paid to the star are willingly paid, e.g. we must have a place to be, and we must have medical care, and we may need lots of stuff, but entertainment is simply not on the list. The rent component in organized sports is the difference between what the star would earn in free agency and what the star will earn under current rules in the sports "business". That rent inures to the OWNER of the franchise and NOT to the star.

Economic rent is, in every case, a political contrivance to privatise that which should belong to all or to those who actually earn it.

--208.54.14.65 16:39, 5 December 2005 (UTC)

surplus value

this sounds like Marx's theory of surplus value

As the current page seems to be an attempt to hide the true nature of rent as that term is used in political economy or in classical economics or in any other reasonably honest presentation of the subject, it will be necessary to view a proper definition and explanation of the term at "economic rent (economics)".

Any "store of value" must be secured from theft by some force. Fiat money serves this purpose quite well in that it can be accounted in a government recognized bank where it will be almost impossible for anyone other than the owner to gain access to it. Imagine an outlaw going into a modern bank and demanding all of the account balances. Ergo, the cost of this safe depository is quite low and so too the payment for such service. Now imagine that one fears inflation and so converts the account balance into gold coins and stores these in a safe in the bank. In either case the "store of value" is protected by the bank which is, in turn, protected by government. The only return to the owner of this "store of value" that is earned is the original deposit minus the cost of safekeeping. We will refer to this as the real "risk free interest rate" (and it is always negative). Government bonds are the same scam. The return should be negative and any return above this amount is "economic rent". Inflation can be controlled by the central bank and probably is so controlled so as to return a negative rate of real interest to bank deposits. But the fact remains that "savings" (and T-bills and government bonds are savings as opposed to investments) should see a small negative return. Why do you expect the citizenry to pay for the government and banking services necessary to protect your financial wealth????

Hint! "Time value" is currently a crock. People save so they can spend later when they are (or may be) in need. Being dead certain that I will have an income in retirement is worth a lot to me NOW. I will pay a premium.

--The Trucker 01:27, 19 December 2005 (UTC)

Merge Classical/Political Economy Version With This Version

I have attempted to merge these two versions of economic rent into this one article. We will see how much screeching and screaming results from my insistence that neoclassical economics is not the only or even the correct school of economic thought. Comments and criticisms are welcomed and will be treated with respect. I can always be reached on usenet news or google groups in alt.politics.economics or sci.econ for less laborious discussions on the subject of neoclassical vs classical vs political economy. I post as The Trucker.

The Trucker 15:55, 10 July 2006 (UTC)

wikify

I know this article may be merged soon, but I thought I'd wikify it before anyway. --Draicone ^(talk) 04:07, 10 July 2006 (UTC)

Certainly doesn't meet deletion criteria, and there isn't any copyright violation I can see. --Draicone ^(talk)

The only other article that matches this is being merged in. --Draicone ^(talk)

There really is no need for any work here in terms of markup. The article has been constructed fairly well so far. Considering a re-write however, which would take time and might not be worth it if there is a merge. Please share your views. I am happy to spend time rewriting, however do not want my work to go to waste. --Draicone ^(talk) 07:49, 12 July 2006 (UTC)

Latest edit

A LOT has been added to this article's intro, that is not at all sourced, and smells of original researh. I will give it some time before deleting the new material, to give a chance to source it. Dullfig 20:08, 27 August 2006 (UTC)

"Economic Rent" is a specialized term, it does NOT mean "Economic definition of rent"

This article seems to confuse defining rent in general with the definion of "economic rents" which are a specialized, distinct concept.

There needs to be one clear section discussing rent (returns to a factor), and one clear section defining economic rents (returns to a factor above the value to keep them in use). —The preceding unsigned comment was added by 66.92.52.166 (talk) 20:53, 20 February 2007 (UTC).

So what is it??

I came on here trying to find a basic idea of what economic rent is, but the quality of this article is so terrible I don't even know what section of this crap I should read first. Define economic rent categorically, then show different ways the one true definition can be interpreted, then go into an explanation please. This is a mess. 193.1.172.104 22:37, 23 April 2007 (UTC)

I agree. This is one of the worst written articles I have read in a while. The opening sentence of the second paragraph is just one example. "Economic rent is distinct from economic profit, which is the difference between a firm's revenues and the opportunity cost of its inputs." What does that mean? Is the difference between a firm's revenue and opportunity cost its economic profit or economic rent? I'm in economics right now and I'll try a rewrite once I have a firm grasp of economic rent. As I understand it, economic rent is the difference between the price an input factor would ordinarily command and the price the input factor does command, based on the opportunity cost of allocating that input factor to another production process. For example, when Michael Jordan played basketball he was paid economic rents because his opportunity cost of playing basketball was fairly low. He briefly switched over to playing baseball, but was paid much less, thus less economic rent, and subsequently switched back to basketball. This is how I have interpreted economic rent but I don't really know if that is accurate. If I am correct or incorrect, someone please let me know. I can begin rewriting the article that much sooner. Thank you. --Andrew Elgert 00:42, 2 May 2007 (UTC)

I am done with this until further complaints.

I await the wiki police and their POV banners all over the place. I'll see what I can do about support of official "wanks". It's there but I have to find it. I think the article is at least a little more to the point than it was and the history DOES provide quite a bit of "wank" support. --The Trucker 04:36, 27 May 2007 (UTC)

I stand corrected regarding "interest" being the return to "capital" in classical economics. In searching "Wealth of Nations" (Smith) and "On the Principles of Political Economy and Taxation" (Ricardo) the term "profit" is employed extensively to lable the distribution/return to the ownership of tools and machinery. The word "interest" does indeed lable the "rent" (common usage) paid for the use of money. --The Trucker 04:39, 1 June 2007 (UTC)

Benefit from celebrities

The celebrity .. performance of the work has added to the public welfare.

I laughed when I saw this... Zargulon 11:52, 15 June 2007 (UTC)

Brief Historical Summary

...section is not a brief historical summary. It's a brief summary of historical contrarity. So shall I re-label it "Brief Summary of Historical Counter-Spin"? I think that's what I'll do. I'd do more, but I don't know enoughb to re-write it into an actual brief historical summary, and if I remove it altogether (seems plain useless to me) it will probably get reverted by someone who thinks I'm a vandal or by someone who won't make the point of looking at it and seeing how worthless it is in its current state. In fact - it's so worthless, its worth is negative. At least with a new title, it may draw the attention of someone who can improve it, while simultaneously saving readers from laughing themselves into the hernia ward at the incongruity. It's too late for me, but at least my fingers still work. 76.200.158.235 18:19, 7 October 2007 (UTC)

In classic Economies

It was observed that higher wages or higher interest rates might be expected to draw additional labor or capital to market, but higher rents did not induce God to make any more land; the owners of land rented or made useful all the land they had, regardless of the going rent.

Sorry, but that is bullshit. This model confuses "the market" (a) / "not in the market" (b) and "all there is" (c). When mentioning labor the model expects it to move from (b) to (a). When mentioning capital the model expects it to move from (b) to (a). BUT when mentioning land the model tells us that (c) cannot get any larger.

The point is land can indeed move from being "not in the market" into "the market". No fancy talk needed for that idea. And that God cannot be induced to make any more laborers or capital, is also easily said. WHO thought of that ?

Might be some prank played by some conservative freak. Thanks for the warning. But I do suggest you make an edit yourself =p __earth 18:18, 19 October 2005 (UTC)

The point actually is thst land = location and it does not move. The port of Seattle is not going to move to Denver and the amount of land in range of the water (usable as a port) is fixed. So too is the total amount of land. Remember that land is not just the hard dry stuff under the feet. --The Trucker 01:35, 4 December 2005 (UTC)

Current definition of economic rent is :

"The difference between the opportunity cost and the income earned in its present use is a rent."

But that is insufficient. The rent of any plot of land is the difference in the cost/income from that plot of land and the least desirable plot of land in the sovereignty (I would suggest that we remain in a given sovereignty). In our modern (non agricultural) economy almost all of the value of a plot of land is due to the location of the plot and the surrounding infrastructure. The "rent" of a plot of land is _not_ the difference between what the sports stadium people will pay and the amount which the hospital people will pay. It is the difference between the amount paid for a plot in the city and the amount paid for a plot in Death Valley. Every last dime paid for the use of a location is _rent_ and why people will pay it is irrelevant. And it matters not who gets the rent, i.e. it matters not who supposedly "owns" the land.

This POV (the "ownership is a sham and obviously belongs in quotation marks" POV) pervades this article. Especially "Detailed Historical Terminology" section. I tried to clean it up... but I didn't have any success. I don't know enough about the subject to rewrite the section, and the POV is so pervasive that I can't readily edit it out. 70.187.186.43 (talk) 02:43, 16 March 2008 (UTC)

       Correction -- it matters as to privatization.

So:

Economic rent is the "income" extracted by virtue of monopoly privilege. Pretty simple until you try to make up excuses to allow the idle aristocrats to fleece the common people. The current definition of "economic rent" seems to be an exercise in "neoconomics".

--The Trucker 02:03, 6 November 2005 (UTC)

I have created a new definition as "economic rent (economics)" that properly defines economic rent. Please comment on this offering.

--The Trucker 01:35, 4 December 2005 (UTC)

"Ownership" POV

I've tagged the Detailed Historical Terminology section as POV. The POV I'm referring to (as I mentioned above on this talk page -- the POV pervades here as well -- is the "ownership is a total sham invented by the powerful and deserves to be put in quotes and talked about as if we all know it's BS" POV.

The whole article suffers a bit from POV, but this section is horrendous. I tried my hand at fixing it myself, but ended up deleting all my changes. I'm not expert enough on the subject to rewrite the section completely, and the whole section is written so thoroughly from the POV that I couldn't edit it out without just deleting the whole section.

I understand that Karl Marx believes that ownership (property rights) is just a means for the powerful to oppress the working man, but to assume that this is the only legitimate viewpoint (or even the most-legitimate viewpoint) is downright absurd. You might believe it too -- but you must realize that this is at best a controversial viewpoint.

70.187.186.43 (talk) 02:59, 16 March 2008 (UTC)

Introduction needs rewriting

The article's introduction needs rewriting to conform with WP:LEAD. Specifically, the introduction should provide an overview of the article that is accessible to people who aren't economists and should avoid specialist terminology where possible and define the terminology that is used. Dricherby (talk) 14:20, 4 February 2009 (UTC)

It should also be noted that the introduction should not be WRONG. Here's a good summary of what economic rent actually is[1]; it has nothing to do with the second best use of land. —Preceding unsigned comment added by ItsDrewMiller (talk • contribs) 23:40, 5 July 2009 (UTC)

How are strong implications to be handled?

In the example in this page, some friends and I found that the article was strongly implying that governments have engaged in restricting the number of medical school seats, and as the concept of economic rent doesn't really make sense if the medical school seats were subsidized in the first place, the implication is that governments have engaged in restricting the number of unsubsidized medical school seats.

While the example is completely correct in its hypothetical, I believe that a simple reading of the example would would leave the reader with the impression that governments have actually done that (multiple people were left with this impression after reading). This might be true, but I have found no such sources to support it.

To fix this, I added at the end of the example the following sentence: "(There are virtually no sources that show that governments have ever engaged in restricting the number of unsubsidized medical school seats, and so the above example, although correct in its hypothetical, is highly unrealistic.)". This phrase was removed recently.

How would you handle this situation? Dikteren (talk) 13:50, 26 October 2010 (UTC)—Preceding unsigned comment added by Gabiteodoru (talk • contribs) 04:17, 23 October 2010 (UTC)

Who said anything about "unsubsidized medical school seats"? The article is about rent and this example refers to rent-seeking consequences that occur in the marketplace when artificial scarcity is imposed on a market by cartels. The medical licensing system is a cartel that excludes medically licensed and trained physicians from practicing medicine in a geographic area without obtaining a local and redundant license to practice medicine. Its putative intent is to protect consumers, but the real beneficiaries are in fact the established players who benefit from the state-imposed cartel to derive monopoly pricing.Dikteren (talk) 13:50, 26 October 2010 (UTC)

RfC: How are strong implications to be handled?

An example in this page strongly implies that X does A (multiple people who have read it were left with the impression that X does A), although there are no sources indicating that X does A or that X does not do A. How should I handle this so that the page makes it clear that the example is just a hypothetical, and that we have no knowledge of whether that happens or not? 15:29, 23 October 2010 (UTC)

Placed by request. VernoWhitney (talk) 15:29, 23 October 2010 (UTC)

That section is also problematic as it has no cited source. Mrfebruary (talk) 08:45, 27 October 2010 (UTC)

That's also a good point, although I have to say the example helped me a lot in understanding the concept, and I think it's good content. Is there an official Wikipedia policy on examples? Gabiteodoru (talk) 08:56, 27 October 2010 (UTC)

I am not sure which policy would apply. However, I have renamed the paragraph from "Example" to "Hypothetical example". That should hopefully clarify that the paragraph is not saying "Situation A occurs". Mrfebruary (talk) 09:37, 28 October 2010 (UTC)

I think having an example like this helps. It would be good to make the example less specific so that it doesn't target MDs specifically and imply that their high salaries are mostly from economic rent. A better example might be medieval guilds.--Bkwillwm (talk) 22:51, 7 November 2010 (UTC)

fractions in the example

There seems to be some disagreement as to how economic rent should be calculated in the example I added. My understanding is that since the reduction in work is by 1/4 then that is how much time is "rented." The other line of thought is that the fastest worker can complete 1 extra job in 3 hours, so the rent is 1/3. If it is the latter several other secondary changes need to be made to the example (specifically the rent value is higher than $2.50 and that calculation needs to be specified). Either way, someone should add why the other is not correct, even if it's commented out so casual readers don't see it. Darker Dreams (talk) 04:54, 15 April 2011 (UTC)

Proper distinctions between "interest", "profit", and "rent"

In classical economics rent is the return to ownership of NON PRODUCED factors such as land and other natural resources. In latter day economic parlance rent also arises due to barriers to entry and politically contrived scarcity (taxi medallions, labor unions, monopolies, and such). But a return to capital is referred to as "interest" or "profit" depending upon the circumstances of ownership or use respectively. The following is an example of "interest" because the return is to ownership as opposed to proprietorship:

"For example; three workers can all perform the same job requiring a specific set of tools. They share a workshop with three sets of tools of differing quality. Any of these workers using the best set of tools can perform a job in 45 minutes while either of the other sets of tools increases the time required to 1 hour. Assuming that workers will complete one job an hour, since most will, they are paid $10 per hour. As one of the workers will produce one third more per hour than this price indicates, this creates an economic rent of $2.50 each hour."

This is not an example of rent. It is an example of the return to CAPITAL (tools) and is properly classified as "interest" or "profit".

Example: The man who provides a ditch digging service using a backhoe may actually own the backhoe (or be making payments on it to become the full owner) or he may "rent" the backhoe from a rental concern so as to dig a ditch. The difference between the "rent" paid for the backhoe and the labor that would have been necessary absent the rental is called _PROFIT_ in accounting and in economics. It is a return to the _Proprietor_ of capital. If the proprietor does not "own" the backhoe but instead "rents" it, then he sees the payment as "rent". But the owner (the tool rental company) sees the distribution as "interest" because it is a return to CAPITAL. Capital is not, like land and minerals, naturally occurring. Its ownership REQUIRES investment and labor. This is the true distinction between "rent" and the other terms. There is nothing that prevents others from producing tools and profiting thereby or producing tools for others and thus collecting "interest". And if the holders of money finance the proprietor then they will collect "interest" on that supposed form of "capital". — Preceding unsigned comment added by Mikcob (talk • contribs) 19:25, 17 April 2011 (UTC)

If it can be cited, that sounds like the sort of plain language differentiation that should be in this article. God knows, I've got an undergraduate degree in econ and some of this seems unnecessarily obfuscatory to me. Darker Dreams (talk) 07:56, 18 April 2011 (UTC)

Thank you, Mikcob. I must say, I have learned far more from this Talk page than from the article to which it is attached.

After reading this discussion, I think it may be impossible to maintain a neutral point of view in an article which discusses a term which belongs to an arguably biased body of theory and literature, unless the entire article is qualified by a preface which states the context in which the term originates. LineChaser (talk) 03:40, 28 March 2012 (UTC)

One of the worst written articles on Wikipedia

I intend to fix this.

The opening paragraph needs to be simplified. The ideas there seem to be fragmentary and random, added by multiple users, edited and re-edited until it makes very little sense, even to someone familiar with the field.

Let's deal with the first sentence:

"In economics, Economic rent typically describes the difference between the amount paid for the 'inputs' to a production process and the amount that would be paid for those inputs assuming a unitary (or greater) elasticity of supply.[1]"

This idea is too complex to explain in a single sentence. We need an entire section on inputs and supply. What are inputs? How do they relate to economic rent? What is elasticity of Supply? How does it relate to economic rent? These things cannot be expressed in a sentence, so they have to go. We must eliminate jargon from the intro section.

Furthermore, the random addition of italics seems to imply POV. A wikipedia article shouldn't give un-due emphasis to any words.

So does anyone else have any ideas on how to remove all of the jargon from the intro section, moving it to its own section? I'd like to begin the process myself, but I don't want to tread on anyone's toes. — Preceding unsigned comment added by Ollie Garkey (talk • contribs) 16:03, 26 February 2013 (UTC)

Please have at it! Couldn't agree more -- needs the love of an expert in the field, both to make this make sense, and to remove jargon. Good luck!Jytdog (talk) 16:47, 26 February 2013 (UTC)

I agree that the way it is written now is terrible. I think it might make a lot of sense to simply revert two or three years. The article was much better written, then than now. I'd like to discuss when, exactly, it might be optimal to revert to, and whether anything added since should be salvaged. BruceW07 (talk) 02:17, 7 March 2013 (UTC)

I removed a line stating that the American Medical Association had limited the number of doctors in the US. While I can't verify if the was or wasn't collusion happening at some point to limit doctors, or if the AMA is/was support efforts to do so, the AMA wouldn't have the authority to actually do so themselves. MD-granting schools in the US are under the AAMC and LCME. The AMA is a sponsor of the latter, but doesn't run it. Also, DO-granting schools are under completely different organizations - the COCA and AOA. The citation given link to a single page which doesn't make the reference stated. Also, it was from 1975, so is likely to be outdated anyway.

Application

Was tagged for neutrality, moved to talk for discussion and possible rewrite for neutrality and clarity

Private property enables land owners to collect rent. While the physiocrats were inclined to recognize the implications of this privatization in regard to taxation and production, classical economists were concerned with studying how the economy actually works; not how laws could make trade more fair for the poor. Smith mentions economic rent in only in passing, as does Ricardo. In the 1800s Henry George published on the economic implications of land-based taxation and urged its adoption to alleviate poverty. Neoclassicical economists generally dismiss the writings of Henry George, claiming that George does not present a coherent economic theory, is advocating for tax policy changes to benefit one class over another, and that his tax policy would exacerbate the poverty George intended to alleviate. Nevertheless, Henry George has enjoyed a dedicated following.

"Private property enables land owners to collect rent" This statement is incorrect. Vilhelmo (talk) 17:55, 8 April 2013 (UTC)

Distinguishing Economic Rent from Producer Surplus

Economic rent bears a close resemblance to producer surplus. But producer surplus is determined by the efficiency or capability of an actual producer. There is controversy over the definition of "Parethian Rent" as that term applies to celebrities.

The only ref. to "Parethian Rent" in Google is to your mention of it here, and I cannot find it in any dictionary, so I am wondering as to the extent of this controversy. Myles325a (talk) 04:43, 2 April 2016 (UTC)

Whereas, the celebrity must actually perform the production in order to collect the income, a rentier does not need to perform any production in order to receive that part of income which is economic rent. While it may be that the celebrity would have to derive income from waiting tables if the celebrity did not perform the highly paid acts from which extreme compensation is derived, the fact remains that the celebrity must perform those acts in order to receive the income. That _SHOULD_ be what distinguishes "producer surplus" from "economic rent". There is no "Rent" in the high wages paid to celebrities. It is just "high wages" because it is EARNED.--The Trucker (talk) 00:55, 2 January 2013 (UTC)

"the celebrity must actually perform the production in order to collect the income, a rentier does not need to perform any production in order to receive that part of income which is economic rent."

This is not true, a rentier may or may not be involved in production. Vilhelmo (talk) 18:39, 14 February 2013 (UTC)

Saying that "a rentier does not need to perform any production" is the same thing as saying that "a rentier may or may not be involved in production", so I'm not sure where your disagreement lies.-- Derek Ross | Talk 21:59, 9 May 2014 (UTC)

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Removal of inaccurate information

I have "undone" a modification to the opening definition of economic rent because it references https://www.tutor2u.net/economics/reference/transfer-earnings-and-economic-rent-1 Which is wrong. What that information describes is properly termed "producer surplus" and not "economic rent". https://www.google.com/imgres?imgurl=https://s3-eu-west-1.amazonaws.com/tutor2u-media/subjects/economics/consumer_producer_surplus.png?mtime%3D20150313144627&imgrefurl=https://www.tutor2u.net/economics/reference/producer-surplus&h=535&w=718&tbnid=FLGTcRmSVBTLRM:&tbnh=157&tbnw=211&usg=__pCE3NYgFQjxHBdcptjR-59mWe-g%3D&vet=10ahUKEwijx6f5_LzYAhUR5GMKHUSGBf8Q9QEILTAA..i&docid=W2CexkeKoPQj2M&sa=X&ved=0ahUKEwijx6f5_LzYAhUR5GMKHUSGBf8Q9QEILTAA defines producer surplus. The amount paid by an employer to a particular individual is not economic rent in that some other employee may be substituted. To the person receiving the payment the amount is producer surplus because that particular producer (the person) stays in his/her current economic position considering other alternatives (other opportunities) and the amount is not contrived by a guild or union. Celebrities do not receive economic rent. They must actually produce in order to get paid. Land owners sit by the pool awaiting the rent or royalty check.The Trucker (talk) 23:58, 3 January 2018 (UTC)

What is not Economic Rent

No payment made to | labor of any kind can be economic rent but for that part conditioned upon a political contrivance such as a union or a guild that would prevent the substitution of other providers. No payment made to capital of any kind can be economic rent but for that part conditioned upon patent, or trademark, or copyright.

People of great talent will seek high payments for their own labor and promoters of various guises will pay these fees in order to profit from events they promote. People of great skill such as surgeons will seek high payments for their own labor based upon their innate talent, notoriety, and years of study and practice. Sports figures have invested years of training and practice to command the fees they receive.

Unlike the owner of a legal claim such as a patent, a copyright, or a geophysical location, a frequency band, or naturally occurring flora or fauna, or political contrivance, the owner of labor must labor or that owner will not be compensated. The cost of any labor can be and is driven down by competition. While there is only one Michael Jackson, there are other celebrities that can draw a great many concert goers. Famous surgeons and accountants and CEO's are in the same boat. One distinguishing characteristic of economic rent is that it cannot be competed away because it arises due to ownership of something which is not produced by the recipient of the economic rent. Economic rent is a payment received because of legal ownership alone and not because of any performance or any production of a commodity on the part of the recipient. Economists and schools of economics that attempt to fold, spindle, and mutilate the term "economic rent" by applying it to labor or to capital would seem to be shills of the oligarchy

The Trucker (talk) 04:09, 11 January 2018 (UTC)

References