What is Meant by the Phrase Economic Rents There seem to be some questions or confusion about economic rents in FB discussions. Basically such rents are unearned income 1) not derived from enterprising economic activity that provides goods and services to others at fair value and 2) that do not require significant costs to the recipients to acquire. The principal forms of economic rent are -- 1) returns on land and the resources in land, which the Georgists and others want to remedy by a land tax. The idea at base is the commons was stolen from the people when it was partitioned and fenced off by those who wrongfully acquired title to it. 2) capital gains on assets other than land. These are gains usually from asymmetrical market information and opportunistic positioning in markets, often for resold financial assets. 3) interest and fees on new created money in the form of loans by our banking system. Bankers get these rents because the state gave them the franchise to create new money for loans and did not charge them for that right. The gains dwarf welfare assistance to the poor. 4) monopoly rents in the economy. These are the revenues on incrementally higher prices that some sellers can charge due to niche advertising, some intellectual property rights or other advantages which other sellers who compete do not have. 5) part of the gains from enterprising activity which imposes part of its costs on others who are not a part of the enterprise. Pollution which imposes health and cleaning costs on some of the public is the usual example here. There are other, more minor forms of economic rent. These are the largest by estimated revenue volume, possibly in order of odiousness. For those who accumulate wealth, legitimate enterprise earnings are often then used to successfully seek out rents in the economy so that their wealth, a stock variable, is then a mixed accumulation of both enterprise earnings and rents, both in the form of income, a flow variable. In recent years, gains to wealth for the rich have been predominately in the form of economic rents.
Posted on: Sat, 10 Jan 2015 21:13:54 +0000
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