Economics Dictionary of ArgumentsHome
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| Rent: In economics, rent refers to the payment made for the use of land or other natural resources that are in fixed supply. It also can describe economic rent, the extra payment made to a factor of production (like land or labor) beyond what is necessary to keep it in its current use. Rent reflects scarcity and value. See also Economic rent._____________Annotation: The above characterizations of concepts are neither definitions nor exhausting presentations of problems related to them. Instead, they are intended to give a short introduction to the contributions below. – Lexicon of Arguments. | |||
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Murray N. Rothbard on Rent - Dictionary of Arguments
Rothbard III 488 Rent/Rothbard: The subject of “rent” is one of the most confused in the entire economic literature. We are using “rent” to mean the unit price of the services of any good. It is important to banish any preconceptions that apply the concept of rent to land only. >Land/Rothbard, >Renting/Rothbard. Perhaps the best guide is to keep in mind the well-known practice of “renting out.” Rent, then, is the same as hire: it is the sale and purchase of the unit services of any good.(1) It therefore applies as well to prices of labor services (called “wages”) as it does to land or to any other factor. The rent concept applies to all goods, whether durable or nondurable. >Durable goods/Rothbard, >Consumer goods/Rothbard, >Goods/Rothbard. In the case of a completely nondurable good, which vanishes fully when first used, its “unit” of service is simply identical in size with the “whole” good itself. >Service/Rothbard. In regard to a durable good, of course, the rent concept is more interesting, since the price of the unit service is distinguishable from the price of the “good as a whole.” (…) we have been assuming that no durable producers’ goods are ever bought outright, that only their unit services are exchanged on the market. Therefore, our entire discussion of pricing has dealt with rental pricing. >Price/Rothbard. Rothbard III 489 It is obvious that the rents are the fundamental prices. The marginal utility analysis has taught us that men value goods in units and not as wholes; the unit price (or “rent”) is, then, the fundamental price on the market. >Marginal utility/Rothbard, >Renting/Rothbard. Capital good: The price of the “whole good,” also known as the capital value of the good, is equal to the sum of the expected future rents discounted by what we then vaguely called a time-preference factor and which we now know is the rate of interest. >Time preference/Rothbard, >Interest rate/Rothbard. Price: The capital value, or price of the good as a whole, then, is completely dependent on the rental prices of the good, its physical durability, and the rate of interest.(1) Obviously, the concept of “capital value” of a good has meaning only when that good is durable and does not vanish instantly upon use. If it did vanish, then there would only be pure rent, without separate valuations for the good as a whole. When we use the term “good as a whole,” we are not referring to the aggregate supply of the whole good in the economy. We are referring, e.g., not to the total supply of housing of a certain type, but to one house, which can be rented out over a period of time. We are dealing with units of “whole goods,” and these units, being durable, are necessarily larger than their constituent unit services, which can be rented out over a period of time. >Capitalization/Rothbard. Rothbard III 494 Land: [Found] land (…) is really as much capitalized as land that has been bought on the market. We must therefore conclude that no one receives pure rent except laborers in the form of wages, that the only incomes in the productive ERE economy are wages (the term for the prices and incomes of labor factors) and interest. Rothbard III 495 But there is still a crucial distinction between land and capital goods. For we see that a fundamental, irreducible element is the capital value of land. The capital value of capital goods still reduces to wages and the capital value of land. In a changing economy, there is another source of income: increases in the capital value of ground land. Typical was the man who found unused land and then sold its services. Originally, the capital value of the land was zero; it was worthless. Now the land has become valuable because it earns rents. >Land/Rothbard, >Capital value/Rothbard. 1. This concept of rent is based on the original contribution of Frank A. Fetter. Cf. Fetter, Economic Principles, pp. 143–70. Fetter’s conception has, unfortunately, had little influence on economic thought. It is not only in accord with common usage; it provides a unifying principle, enabling a coherent explanation of the price determination of unit services and of the whole goods that embody them. Without the rental-price concept, it is difficult to distinguish between the pricing of unit services and of whole goods._____________Explanation of symbols: Roman numerals indicate the source, arabic numerals indicate the page number. The corresponding books are indicated on the right hand side. ((s)…): Comment by the sender of the contribution. Translations: Dictionary of Arguments The note [Concept/Author], [Author1]Vs[Author2] or [Author]Vs[term] resp. "problem:"/"solution:", "old:"/"new:" and "thesis:" is an addition from the Dictionary of Arguments. If a German edition is specified, the page numbers refer to this edition. |
Rothbard II Murray N. Rothbard Classical Economics. An Austrian Perspective on the History of Economic Thought. Cheltenham, UK: Edward Elgar Publishing. Cheltenham 1995 Rothbard III Murray N. Rothbard Man, Economy and State with Power and Market. Study Edition Auburn, Alabama 1962, 1970, 2009 Rothbard IV Murray N. Rothbard The Essential von Mises Auburn, Alabama 1988 Rothbard V Murray N. Rothbard Power and Market: Government and the Economy Kansas City 1977 |
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