economic rent Flashcards
(24 cards)
What is economic rent?
Payment to a factor of production that exceeds the minimum required to keep it in its current use.
“Economic rent is the surplus payment to a factor of production—particularly land—arising from its scarcity and fixed supply, beyond what is necessary to retain it in its current use (Ryan-Collins et al., 2017; Haila, 2015).”
Why do landowners benefit from economic rent as populations grow?
Due to increasing land values and urban development, landowners can extract unearned income.
Who developed the theory of rent in the early 19th century?
David Ricardo.
What does Ricardo’s theory of rent explain?
Differences in land fertility and location lead to differential rent.
What is the significance of Henry George’s ideas on land value?
He argued that land value increases are socially generated and advocated for a land value tax.
What is the Alonso-Muth model related to?
It explains land use patterns in cities based on accessibility and rent.
What are agglomeration economies?
Benefits from proximity to other firms and workers that increase land values.
What does Neil Smith’s ‘rent gap’ theory explain?
Gentrification occurs when potential ground rent exceeds current capitalized rent.
How does David Harvey view economic rent?
As a mechanism for extracting surplus value, reinforcing class divisions.
What is a critique of the commodification of land as per Beth Stratford?
It undermines democratic control and equitable development.
What is rent-seeking behavior?
Using political and regulatory influence to secure favorable outcomes and capture rising land values.
What are the implications of deregulation on landlords?
It enables landlords to extract increasing rents without improving housing quality.
Fill in the blank: Economic rent arises due to the _______ and location-specific advantages.
scarcity
What do classical economists like Ricardo and George contribute to the understanding of economic rent?
They laid the foundation for understanding rent as a surplus arising from land’s unique characteristics.
What is the relationship between urban growth and land values according to neoclassical economics?
Urban growth increases demand for land, raising prices and generating economic rent.
What does the term ‘structural inequalities’ refer to in the context of economic rent?
Inequalities embedded in land markets that allow landowners to benefit disproportionately.
Fill in the blank: Economic rent is a powerful concept for understanding urban _______.
inequality
What is one consequence of rent-seeking behavior on economic productivity?
It distorts markets and reduces economic productivity.
What is the ‘rent gap’?
The rent gap is the difference between the potential ground rent and capitalised ground rent. The rent gap explains how gentrification and reinvestment occur when the potential ground rent (what could be earned under a more profitable use) exceeds the capitalised ground rent (what is currently being earned).
You could clarify that the rent gap is a spatial and temporal phenomenon—it emerges in disinvested urban areas and is closed through reinvestment and displacement.
what is potential ground rent?
what could be earned under a more profitable use
what is capitalised ground rent?
what is currently being earned (from the land)
What is Bourassa’s (1993) critique of the rent gap?
Bourassa (1993) argued that the distinction between ‘actual’ and ‘potential’ rent in Smith’s theory is economically meaningless and theoretically incoherent
how does Ricardo define differential rent?
differential rent is a classical concept that explains why landowners of superior land earn more, even though they do not contribute more labour or capital. . It’s essentially a surplus generated by land that is more productive than the average.
what are the main araguments usued by Ward and Aalbers (2016) surrounding land rent theory ?
Their central argument is that land rent theory has been neglected in contemporary urban studies despite its critical importance in understanding urban capitalism, housing markets, and spatial inequality.
They clarify and defend Marx’s categories:
Differential rent: Arises from differences in land productivity or location (e.g. proximity to CBD).
Monopoly rent: Arises from unique, non-substitutable features (e.g. waterfront views).
Absolute rent: Arises from property rights and class monopoly—landowners can extract rent simply by owning land and restricting access.
