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View Diary: Time to resurrect an old idea: Economic Rent (107 comments)

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  •  The distinction fails (1+ / 0-)
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    Simian

    The argument depends on land having constant value, and not becoming depleted. This is a false rationalization, just as false as the notion that markets themselves are perfectly rational, if not more so.

    Look up farmland and topsoil loss. We basically mine our farmland. Our large wheat-growing areas, for instance, have lost half their topsoil over the last century.

    Look up industrial sites and brownfields. If you build a factory on my land, and pay me rent, there's a great likelihood when the factory closes my land won't merely be worth less, but will be a significant liability — have a negative value.

    So the contributor of land to either farming or industry is contributing capital, which is quite at risk in the enterprise. Adam Smith, we can be sure, knew little-to-nothing about topsoil loss or factory-site contamination. Comprehending the depletion of land-as-capital is vital to constructing an ecologically-sane and sustainable society.

    This isn't to say the distinction of "rentier" isn't useful in the abstract. But the theft by Wall Street isn't best understood as high rent (although there's plenty of high rent in NYC), it's best understood as having been done by thieves. Thieves who should be facing prosecution. Sure, capital gains should be taxed level with other income. That's a problem too. But the main problem is theft by various forms of fraud. Renting property is not in itself a fraud. Selling bogus financial instruments with flagrant lies is.

    •  Wrong. (0+ / 0-)

      "The argument depends on land having constant value, and not becoming depleted."

      No such assumption is made, or needed.

      "If you build a factory on my land, and pay me rent, there's a great likelihood when the factory closes my land won't merely be worth less, but will be a significant liability — have a negative value."

      That is extremely unlikely unless there is a problem of chemical contamination, etc., which should be handled by land use and nuisance laws.

      "So the contributor of land to either farming or industry is contributing capital, which is quite at risk in the enterprise."

      The landowner is not contributing the land, which was already there, ready to use, with no help from him or anyone else.  He is not contributing capital, as capital is a product of labor devoted to production rather than consumption.  His risk taking -- risking "capital" in the accounting rather than the economic sense -- is simply a normal part of his rent-seeking behavior.  Even criminals take risks.

      "This isn't to say the distinction of "rentier" isn't useful in the abstract."

      It's crucial in practice as well as theory, which is why it has deliberately been erased from the discipline of economics (one cannot call it a "science").

      "But the theft by Wall Street isn't best understood as high rent (although there's plenty of high rent in NYC), it's best understood as having been done by thieves."

      Rent seeking is effectively legalized theft.

      "Renting property is not in itself a fraud."

      Why else would the producer pay the landowner for what nature provided for free?

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