Rent Theory Research Articles

7 Moffat's “Unorthodox” Critique

Although he wrote number of articles and two important books on political economy, contributions of Robert Scott Moffat, British author/essayist (1834-1895), are less well known than those of many of his contemporaries. He was lucid, forceful writer whose works were often at odds with premises of received economic doctrine. In focusing on shortcomings of orthodox economics his efforts fell outside classical mainstream, and perhaps this may have been factor in his receiving less attention than did other writers of his day. His first book, titled The Economy of Consumption, appeared in 1878, and in it Moffat, in tradition of earlier critics of similar persuasion (Lauderdale, Chalmers, Sismondi), questions efficacy of competitive industrial organization in general, and inherent ability of system to avoid recurrent episodes of general overproduction in particular. Probably because of its length and fact that it was rather difficult book to read, it did not enjoy very wide audience. Even so, book's impact was of sufficient importance to provoke T. W. Hutchison into recognizing Moffat as one among very few nonsocialist writers since Thomas Malthus to question orthodox formula about impossibility of general over-production. (1) The second book, Mr. Henry George Orthodox, published in 1885, is lengthy effort (296 pages) at an critique of Progress and Poverty (2)--an unorthodox critique because Moffat attempts to integrate his appraisal of economics of Henry George into his objections to orthodox economics of David Ricardo and J. S. Mill. He chooses this approach because it enables him to expound further on his own reservations concerning orthodox economics, and at same time provides him with convenient reference for analysis of George's work. The book, therefore, is designed to serve more than one purpose: as vehicle to continue his attack on certain tenets of orthodoxy on one hand, and, on other, as critical review of Progress and Poverty. Because much of Moffat's criticism of Henry George stems, in fact, from his preoccupation and disenchantment with orthodox economics, not surprisingly, he proceeds to reject methodically those parts of Progress and Poverty that he perceives as outgrowths of Ricardo-Mill principles, providing detailed commentary and explanations and, in process, often citing his own The Economy of Consumption for support. Those portions that he admits have certain uniqueness, on other hand, he more often than not is inclined to dismiss as being rhetorical and scientifically or economically unsound. This distinctive method of critique does not lack thoroughness. Systematically, and in some detail, Moffat discusses each subject in turn: Population, Wages and Capital, Laws of Distribution, Dynamics, book by book, chapter by chapter through book 4. He gives shorter treatment to chapters on Remedy and Laws of Human Progress found in books 5 through 10, evidently feeling that nature of topics warranted only summary evaluation. In separate section there are an appraisal of George as an economist, commentary on theory of rent, and reference to two rival theories of labor and At only one point does Moffat depart from order of topics as they are arranged in Progress and Poverty. He chooses to discuss theory of population before discussing topic of wages, maintaining that a clear view of problem of population is indispensable to any useful discussion of problem of wages. More than neatness is implied by this change. In reversing order of first and second books Moffat hopes to reveal an error in George's thinking concerning sequential relationship between level of wages and growth in population, source of labor supply. Noting that George is the boldest of opponents to Malthus, he proceeds initially to examine in great length George's objections to Malthusian theory and its related doctrine, wages-fund theory. …

13 Harris and His Anachronistic Attack

William Torrey Harris (1835-1909) is best known as an American educator, editor, and philosopher. He served as a teacher in, and superintendent of, St. Louis, Missouri, school system, and later as U.S. Commissioner of Education. He edited Appleton's International Education Series, Webster's New International Dictionary, and philosophy section of Johnson's Encyclopedia; he wrote numerous reports, papers and articles, and books. He was (with Emerson and Alcott) a founder of influential School of Philosophy in Concord, Massachusetts, founder and editor of Journal of Speculative Philosophy, and a promoter of Hegelian idealism. Yet, on several occasions, Harris took time from these activities to offer his critique of George's Progress and Poverty. (None of George's other works were discussed.) Harris believed that his basic arguments against George's ideas were never refuted. (1) Attack on Deductive Method It is not surprising that Harris emerged as a critic of George since, on matters of economic theory, Harris was a disciple of Henry C. Carey. (2) Carey was a critic of deductive method of analysis and Ricardian rent theory in particular. Further, his theory of income distribution was quite different from theories of classicists and George. (3) Carey's ideas provided foundation for Harris's critique. Harris's attack began in September 1886 in an address to Saratoga meeting of American Social Science Association. (4) The speech was important for several reasons. First, it pattern for all of his other attacks. Since Harris believed that his arguments were devastating and that they had not been refuted, he did little to revise them. Second, as Barker noted in his definitive biography of George, with this speech Harris became the most famous person to speak against [George] in this period. (5) After some preliminary remarks, Harris, following Carey, attacked all of classical economists, including George, for their use of deductive method of reasoning. Carey claimed that axioms of classicists (wealth-maximizing behavior, drives to reproduce, etc.) simply did not adequately represent actual human behavior. He also claimed that when classicists applied deductive logic to these inadequate axioms they inevitably got inadequate results. Further, he charged that classicists never detected flaws because their test of their theories' validity was logical consistency, not ability to explain and predict real world behavior. He maintained that if classicists ever tested their theories against actual data, they would have had to reject most of their theories. (6) Harris, in similar fashion, said that classicists failed because they set up principles for absolute ones which serve only for a nation of mere shopkeepers. (7) He too believed that empirical tests would lead to rejection of most of classical political economy. Carey felt that one of worst errors produced by classicists was Ricardian rent theory, a theory that postulated that most fertile land would be settled first and that margin of cultivation would then extend downward and outward as more land was needed. Carey said that historical evidence of England, home of most of classicists, revealed that reverse was true, namely, that first settlements were in hill country and that settlement extended to, not from, richer soil of river bottoms. (8) That pattern, insisted Carey, was quite general. Harris, in turn, argued that Ricardian view was obviously incorrect because, if best land had been settled first, lush Amazon basin would have been settled before most other parts of world. (9) In reiterating Carey's arguments, Harris apparently never realized that leading economists had refuted them twenty years before. John Stuart Mill reasoned that in areas of new settlement, in which labor and capital were scarce relative to land, people might not settle on land that would eventually prove to be most fertile if initial cultivation of that land required more capital and labor than cultivation of another plot that would eventually prove less fertile. …

Retail concentration: a comparison of spatial convenience in shopping strips and shopping centres

The emergence of the Internet and a more discerning consumer has created the need for traditional retail centres to provide a more convenient shopping environment. A retail centre offers convenience when it minimises the spatial, temporal and effort costs of shopping. Existing strategies for spatial convenience include limiting the size of a retail centre by controlling the entry of non-retail firms, creating a compact physical design, and creating compatible clusters of shops. The authors’ propose an alternative method; the degree of retail concentration. The purpose of this study is to determine the extent to which shopping centres (also referred to as shopping malls) and shopping strips (also referred to as the high street, downtown or city centre) provide retail concentration. From the measures taken, this study provides insight into the degree of retail concentration offered by a sample of nine shopping centres (also referred to as a shopping mall) and nine shopping strips (also referred to as the high street, downtown or city centre). The findings yielded three important insights. Firstly, across the three measures of retail concentration, the shopping centre was found to offer consumers’ greater spatial convenience. Secondly, the findings add support to the notion that the demise of the shopping strip could be linked to its inability to satisfy the needs of a convenience-oriented society. And thirdly, while the shopping strip may be at a competitive disadvantage in terms of spatial convenience, market mechanisms such as Bid Rent Theory provided a better-than-expected spatial juxta-positioning of its businesses.

Urban land rent theory: a regulationist perspective

Whilst real estate capital became a driving force in analyses of urban development, urban land rent theory has made only very limited progress during the past decade. There are a number of reasons for this – such as a weak conceptualization of the role of political agency, for example. Hence, a way out of this relative stagnation, by attempting to systematically develop an integrated view on structure and agency in the context of urban land rent, is offered in this article. Advances in critical theory, thinking about space and dialectic reasoning contribute to the development of a new perspective on land rent. Land rent is conceptualized as a middle‐range theory. In order to bring together concrete urban phenomena with the general process of political‐economic development, a systematic link between land rent theory and the theoretical apparatus of the French Regulation School is developed. The reformulation of land rent theory from a regulationist perspective underlines the importance of the institutional context (and its changes) for an understanding of rent and its role in the urban context. In so doing, land rent theory proves to be a very useful tool for providing an integrated political‐economic perspective for analyses of urban phenomena. This is illustrated briefly in the cases of Vienna and Montevideo.Si le capital immobilier est devenu un point central des analyses du développement urbain, la théorie n'a guère progressé au cours de la dernière décennie. Plusieurs facteurs sont en cause, telle la faible conceptualisation du rôle politique d'agence. Cet article propose donc une porte de sortie à cette relative stagnation, en tentant de construire systématiquement une vision intégrée de la structure et l'agence dans le cadre de la rente urbaine. Les progrès en matière de théorie critique, réflexion en termes d'espace et raisonnement dialectique facilitent l'élaboration d'une nouvelle perspective sur la location foncière, laquelle est conceptualisée en tant que théorie intermédiaire. Afin de regrouper phénomènes urbains concrets et processus général d'aménagement politico‐économique, une relation systématique est établie entre la théorie sur la rente foncière et l'appareil théorique de l'École Française de Régulation. Reformuler la théorie sur la rente foncière d'un point de vue régulationiste souligne combien le contexte institutionnel (et ses changements) est important pour comprendre la rente et son rôle dans le cadre urbain. Ce faisant, la théorie sur la rente foncière se révèle un outil très utile pour créer une perspective politico‐économique intégrée permettant d'analyser les phénomènes urbains. Cet aspect est brièvement illustré dans les cas de Vienne et Montevideo.

Equilibria with local governments and commuting: income sorting vs income mixing

Tiebout's model [Journal of Political Economy 94 (1956) 416–424] of fiscal competition suggests income sorting between jurisdictions while the Alonso [Location and Land Use: Toward a General Theory of Land Rent, 1964], Mills [Papers and Proceedings of the American Economic Association 57 (1967) 197–210], and Muth [Cities and Housing, 1969] model of the monocentric city suggests income sorting over space. However, strict income sorting is not empirically observed. We add fiscal competition to the spatial model by considering a circular inner city surrounded by a suburb. The fiscal difference between the jurisdictions and the commuting advantage of locations closer to the city center are capitalized into house prices. In addition to the traditional equilibrium with income sorting, there are equilibria with income mixing—both across jurisdictions and across space.

The price of space: the convergence of value in use and value in exchange

This paper discusses concepts of value from the point of view of the user of the space and the counter view of the provider of the same. Land and property are factors of production. The value of the land flows from the use to which it is put, and that in turn, is dependent upon the demand (and supply) for the product or service that is produced/provided from that space. If there is a high demand for the product (at a fixed level of supply), the price will increase and the economic rent for the land/property will increase accordingly. This is the underlying paradigm of Ricardian rent theory where the supply of land is fixed and a single good is produced. In such a case the rent of land is wholly an economic rent. Economic theory generally distinguishes between two kinds of price, price of production or “value in use” (as determined by the labour theory of value), and market price or “value in exchange” (as determined by supply and demand). It is based on a coherent and consistent theory of value and price. Effectively the distinction is between what space is “worth” to an individual and that space’s price of exchange in the market place. In a perfect market where any individual has access to the same information as all others in the market, price and worth should coincide. However in a market where access to information is not uniform, and where different uses compete for the same space, it is more likely that the two figures will diverge. This paper argues that the traditional reliance of valuers to use methods of comparison to determine “price” has led to an artificial divergence of “value in use” and “value in exchange”, but now such comparisons are becoming more difficult due to the diversity of lettings in the market place, there will be a requirement to return to fundamentals and pay heed to the thought process of the user in assessing the worth of the space to be let.

La théorie des ceintures limitrophes (fringe belts) : discontinuités d'occupation de l'espace sur les franges des villes

The outward growth of cities over time is uneven. As a result, fringe belts, which are composed of a characteistic mixture of land use units initially seeking peripherical, cheaper location, appear. JWR. Wnitehand brought together the fringe belt theory and a land rent theory. This allows to explain the city spreading mechanisms and the land occupation discontinuities on urban fringes. Moreover, the still unknown theory in France revives the study of urban morphology thanks to its theoritical, deductive and dynamic dimensions.

Development Process and Alternative of the Forest Land Rent Theory after the 2nd World War

Development Process and Alternative of the Forest Land Rent Theory after the 2nd World War

Tooke's approach to explaining prices

This paper examines the method of analysis and theoretical approach Thomas Tooke (1774–1858) employed in his empirical study of English prices. It is shown that Tooke adopted the “long period method” formulated by Adam Smith to analyse a capitalist society. It is shown that like most nineteenth-century classical economists, Tooke adopted a modified version of Adam Smith's “adding-up” approach to normal prices and distribution which incoporated Ricardo's theory of rent. The paper shows that based on this approach, Tooke explained short-run fluctuations in prices be reference to factors that disrupted the adjustment of supply to the “effectual” demand for commodities.

AN ECONOMIC ANALYSIS OF ASPECTS OF PETROLEUM AND MILITARY SECURITY IN THE PERSIAN GULF

Geologic estimates of remaining global petroleum resources place about 50% in the Persian Gulf. Production costs are estimated at $5 per barrel there and $15 per barrel in the North Sea and Alaska. According to mathematical results derived from depletion theory, the present value of economic rent from oil is on the order of $20 trillion. This article uses game theory to explain the $15–$20 per barrel price band that existed from 1986 to 1999. New economic forces have displaced this previously stable pattern; a new price range of $23–$30 is emerging. International trade in petroleum and conventional weapons are analyzed with econometric methods; the occurrence of nuclear weapons capability in the Persian Gulf region is explored.

Increasing rotation periods during a time of decreasing profitability of forestry — a paradox?

The profitability of forestry in Germany decreased during recent decades because of more or less constant prices for forest products, increasing input prices and limited success in rationalisation. However, the volume of growing stock increased significantly during this period since forest enterprises have chosen longer rotation periods. This is especially true for state owned and community owned forests but also at least partly for private forests. It is normally not an alternative for the owners of forest enterprises in Germany to sell the forests completely, but on a first glance increasing investments in standing timber during a time of decreasing profitability of forestry seems to be inconsistent with economic theory. On the one hand this observation could be explained as the result of non-timber values. However, this paper is focused on another approach, which is an expanded Faustmann model in line with soil rent theory and focused on timber production. Profitable rotations in the future have the effect of shortening the optimal rotation period because an investment in standing timber causes opportunity costs by delaying the establishment of the next generation of the forest. Unprofitable future rotations have the opposite effect, if the landowner is forced to reforest. In case investments in reforestations are not profitable decision-makers have good reasons not to cut the mature stands, in spite of the fact that the internal rates of return of investments in standing timber are low in comparison with investments on the financial market. Empirical data for the period 1954–1998 mostly from guidelines for forest valuation are used together with inflation corrected interest rates to show that optimal rotation length increased over time. Nevertheless we have to recognise that the observed rotation periods are distinctly longer than the calculated optimal rotation lengths. Other factors which may also explain the investments in forestry are discussed later.

The German struggle between the ‘Bodenreinertragslehre’ (land rent theory) and ‘Waldreinertragslehre’ (theory of the highest revenue) belongs to the past — but what is left?

The beginning of the land rent theory is closely related to the German forest economists Friedrich Wilhelm Leopold Pfeil and Johann Christian Hundeshagen (1828). It was further developed by Gottlob König (1864), Johann Heinrich v. Thünen, Max Robert Preßler, Gustav Heyer, Max Endres and in particular by Martin Faustmann (1849). His 1849 published and well known formula may be seen as the center of the land rent theory. However, the application of this concept demanded a considerable change of forest management practice due to the reduction of usual rotations and stocking density. Eventually, the land rent theory conflicted with the principle of sustained yield which had become the central idea of forestry in Germany in the 19th century. Since forestry under German conditions did not start as an investment on bare forest land, but had to manage existing forests under the principle of sustainability, the theory of the highest revenue seemed to be a more appropriate guideline for forestry. However, the maximization of the highest revenue assumed a marginal interest rate of 0% because the time span between input and output was not considered. Besides that, this principle also conflicted with the reality of forestry, because the scarcity of financial funds was not regarded. So far, both theories have not delivered solutions useful to real forest economic decision problems in Germany. Using an example from Lower Saxony, it is demonstrated that considering the objective of sustainability leads to results which are in accordance with the reality and the economic theory.

Qualité et développement territorial: une grille d'analyse théorique à partir de la rente

Quality and territorial developments theoretical grid of analysis from the rent - In this paper, we try to build a grid of analysis of the territorial development starting from the theory of rent. A series of criteria must be observed in reality and collected together in a synthetic matrix so that are generated various forms of rents: territorial rent due to the valorization of specific resources on certain spaces ; quality rent related to the emergence of quality products or services; rent of territorial quality, when all these elements interact. After a clarification of the contextual reasons for returning to the concept of rent and a justica- tion of its relevance when it is applied to quality and territory, two theoretical filiations of the rent theory - the ricardian one, then the marshallian - are approached in order to show that they are complementary from the point of view of relationship between quality and territorial development and can be combined as a grid of theoretical analysis of territorial development

A meeting between quality and territorialism: the rent theory reviewed in the context of territorial development, with reference to French examples

The objective of this paper is to show that revisiting the theory of can be a useful tool for analysing new perspectives of territorial development. For more than a century, economic theory has been forgetting about the concept or making it commonplace through generalising its use to all production factors in situations of scarcity, monopoly or quasi-monopoly. We feel that coming back to the real origin of (i.e. the natural agents of production, the non-renewable or non-substitutable resources), as well as applying it to the whole range of environmental amenities intrinsic to a territory, can make this concept useful once again. It can then be used as a tool that enables the analysis of various forms of internalisation of externalities - of environmental origin or not - by different actors using it in the context of a strategy of sustainable territorial development. The rent of territorial quality, which this paper seeks to analyse, is obtained through the combined valorisation of intrinsic characteristics of a given geographical space and the quality of products and services rooted in. It can constitute the central axis of a new strategy of sustainable territorial development. First, the paper clarifies the contextual reasons for a return to the concept of and justifies its relevance when applied to quality and territory. Second, it proposes a framework of theoretical reinterpretation along the two major lines of the theory - the Ricardian one, then the Marshallian - and shows that, from the point of view of the relationship between quality and territorial development, they are complementary. Third, it constructs a typology of different types of observed rent, and scans their limits and differences as compared with the conceptual model presented here. It shows that institutional coordinations are absolutely necessary in order to develop and give permanence to the rents of territorial quality in a development perspective.

Property Rights in Pheasants: Landlords, Farmers and the Game Laws, 1860–80

The deference shown by English tenant farmers to their landlords was the despair of English radicals in the nineteenth century. This was especially the case for Cobden and Bright, the leaders of the Anti-Corn Law League. As firm believers in Ricardo's theory of rent, according to which only landowners gained from the Corn Laws, they felt that tenant-farmers should have been the natural allies of the League. Unfortunately, they proved unable to convince farmers of this logic. Their attempts to drive a wedge between landlord and tenant remained unavailing – until 1845, when John Bright raised the question of the game laws in the Commons. The select committee that followed tapped a rich vein of farmer resentment and hostility, one that led nowhere at the time but remained to be exploited for the next forty years.

Differential rent in the 1760s: two neglected French contributions

Possibly the earliest contribution to the theory of differential rent is contained in C.-F.-J. d'Auxiron's Principes de tout gouvernement (1766). Two years later, in 1768, another discussion of the phenomenon of extensive differential rent appeared in the physiocratic periodical Ephémérides du citoyen, probably written by J.-N.-M. de Saint-Peravy. This article, while remaining a short and isolated contribution, indicates how differential payments for the use of land can be incorporated within a value theory in which normal prices reflect necessary costs of production and how differential rent can be reconciled with the explanation of rent as a return on capital.

A Review of the Georgist Tax Remedy for Australia

Rent theory has been associated historically with the suggestion that land rent is a most suitable basis for public funding, giving rise to the single tax movement of Henry George. The political fortunes of the latter have been singularly unfavourable, and have tended to draw attention away from systematic study of rent theory.The recent trend in many texts has been to enumerate a set of shortcomings with rent theory that often owes more to a provincial rejection of the single tax proposal than to an informed and balanced critique of the apparent target. This paper reviews the fundamental political economy of land tax with special reference to Australia to demonstrate a separate set of shortcomings, not associated with rent theory. In this way the political impracticality is explained without challenging the validity of rent theory.

The Political Economy of Water Abstraction Charges

An important economic instrument in the management of a river catchment's water resources is the charges made by government for the abstraction of water from ground and surface sources. ion charges are a form of rent. However, the classical theory of differential rent has limited application to abstraction prices because that theory's assumption of competition in the supply of the natural resource does not hold in this case. Here, the property rights of individual households and of institutions to draw water are assigned by a state monopoly. In order to understand the specific and contingent practices of government in different countries, a taxonomy of charge-setting principles is proposed. This paper sets out six principal fields of action for sustainable water resource planning and, in that context, recommends full incentive charging as the basis of catchment policy.

Re-establishing the Rent Gap: An Alternative View of Capitalised Land Rent

The debate between the proponents of the rent gap hypothesis and Steven Bourassa concerning its internal consistency centres on the role of land use in capitalised land rent. Bourassa argues that capitalised land rent is nonsensical because it is determined in part by land use which is in conflict with land rent theory. The paper explores the determinants of capitalised land rent by reviewing the rent gap hypothesis and related research, and argues that the issue of scale is implicit in the rent gap. Land rent can be determined at a minimum of two scales resulting in at least two different land rents. This argument rectifies Bourassa's contentions, and is consistent with the theoretical foundations of the rent gap.

Note and comment. A note on Hollander's 'Notes on a possible Bentham manuscript: a mystery unresolved'

Samuel Hollander recently found a manuscript, in Mill's hand, on the effects on profits of cultivating successive qualities of land. In this journal, he discussed the authorship of the document, suggesting either Bentham or Mill. The first hypothesis means that it was written long before 1815, so that Bentham should be acknowledged as a forerunner of the Malthus-West-Ricardo theory of differential rent. The present note aims at establishing that Bentham cannot be the author of the manuscript, since the land-scarcity issue is only circumstantial in his analysis and the argument of diminishing returns in agriculture is hard to find in his writings. We then present some arguments supporting the other assumption, that the manuscript was authored by James Mill.