Economic Rent
An Economic Rent is an economic income (to a rentier) to a factor of production in excess of its opportunity cost.
- Example(s):
- income from Patents and Copyrights.
- Brand Loyalty.
- income from Real Estate.
- …
- Counter-Example(s):
- an Income for a Custom Product.
- See: Producer Surplus, Normal Profit, Scarcity, Rentier Capitalism, Perfect Competition, Unearned Income, Passive Income.
References
2014
- (Wikipedia, 2014) ⇒ http://en.wikipedia.org/wiki/economic_rent Retrieved:2014-4-12.
- In economics, economic rent is any payment to a factor of production in excess of its opportunity cost. Economic rent should not be confounded or confused with opportunity cost, producer surplus, or normal profit in that all of these other terms involve productive human action. Economic rent is the cost of non-produced inputs or advantages; the result of natural or contrived exclusivity.
In regard to labor, economic rent could be created by the existence of guilds or labor unions (e.g., higher pay for workers, where political action creates a scarcity of such workers); for a produced commodity, economic rent may also be due to the legal ownership of a patent (a politically enforced right to the use of a process or ingredient); for operating licenses, it is the cost of permits and licenses that are politically controlled as to their number regardless of competence and willingness of those who wish to compete in the area being licensed; for most other production including agriculture, and extractions, economic rent is due to scarcity of natural resources (e.g., land or minerals). 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. [1] Economic rent is different from other unearned and passive income, including contract rent. This distinction has important implications for public revenue and tax policy.[2]
As long as there is sufficient accounting profit, governments can collect a portion of economic rent for the purpose of public finance. For example, economic rent can be collected by a government as royalties or extraction fees in the case of resources such as minerals and oil and gas. Historically, theories of rent have always 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. [3]
- In economics, economic rent is any payment to a factor of production in excess of its opportunity cost. Economic rent should not be confounded or confused with opportunity cost, producer surplus, or normal profit in that all of these other terms involve productive human action. Economic rent is the cost of non-produced inputs or advantages; the result of natural or contrived exclusivity.
- ↑ What is Economic Rent?
- ↑ Kittrell, Edward R.
(1957
). "Ricardo and the Taxation of Economic Rents
". The American Journal of Economics and Sociology
16
(4
): 379–390
- ↑ Hossein Mahdavy, "The Pattern and Problems of Economic Development in Rentier States: The Case of Iran", in Studies in the Economic History of the Middle East, ed. M.A. Cook (Oxford University Press, Oxford, 1970)
- (Wikipedia, 2014) ⇒ http://en.wikipedia.org/wiki/rentier Retrieved:2014-4-12.
- A rentier ( /ˈrɒnti.eɪ/ or ) is a person or entity that receives income derived from economic rents, which can include income from patents, copyrights, brand loyalty, real estate (land), interest or profits; this is a transfer of the French term rentier with a change of meaning from "one who derives income from rentes", i.e. in a French context, state bonds ("Rentes: A French word, originally meaning the fee of the tenant to his landlord, now [circa 1905, from internal evidence in other entries] signifying the interest on the consolidated debt. Rentes are exempt from all taxation, except those taxes on succession and donation. The French public debt is about £1,000,000,000. The number of rentiers or fundholders is estimated at about 1,000,000."). Associated terms include:
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