Landed Property and the Distinction between Royalty and Rent

Abstract

The purpose of this paper is to examine a debate that took place among economists at the turn of the century on whether or not a mineral royalty constituted a rent. Before examining the debate itself, we investigate why it should have taken place at all. This investigation is in two parts. The first part, treated in section I, attempts to discover why there should have been any interest in royalties. We suggest that towards the end of the nineteenth century, the system of landed property in Britain began to impede the organization of the coal industry so that the system of private royalty ownership came under question but was not yet found seriously wanting. Accordingly, having stimulated an interest in royalties, which was found to be unnecessary for practical purposes, a debate over the royalty/rent distinction could be used for other theoretical purposes. This forms the second part of our investigation in section II, where we argue that at the turn of the century there was disagreement over the merits of partial and general equilibrium analysis. The royalties controversy was a weapon in this second debate, although the debate itself was confined to those who subscribed to partial equilibrium. In section III we review the debate itself and show how positions taken correspond to broader theoretical positions in relation to partial and general equilibrium analysis. Finally, in section IV, we draw some concluding remarks concerning the relevance of the debate for modem economics.