current price of leasesand
disposable revenue.Adam Smith attempted to formulate a
natural rateof rent based on the laws of supply and demand. This rate would be an amount high enough to induce the landowner to keep his land in cultivation and low enough to allow the tenant to subsist. David Ricardo held that demand determined the amount of marginal land under cultivation, and that rent was determined by this margin, which had the highest costs of production. Ricardo attacked Smith for putting rent on the same footing with wages and profits as one of the costs of production. Ricardo thought that high or low wages and profits were the cause of high or low prices, while high or low rents were the effect of these prices. Critics of Ricardian theory, such as Henry George, argued that monopolistic control of rent was the cause of poverty, which could only be cured by converting private rights into public by the medium of a single tax on land. Economic rent is the difference between the compensation for a factor of production and the amount necessary to keep it in its current occupation. In economic theory, under perfect competition, there would be no economic rent. Ground rent is paid to a landowner for the lease of property, often under long-term leases (such as a 99-year lease).
See C. Rowley and R. D. Tollison, ed., The Political Economy of Rent Seeking (1988).
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