3 ms·

It’s “the same” in the sense that it’s an example of rent-seeking. Here's another definition [1]: > David Ricardo introduced the term “rent” in economics. It m

It’s “the same” in the sense that it’s an example of rent-seeking. Here's another definition [1]: > David Ricardo introduced the term “rent” in economics. It means the payment to a factor of production in excess of what is required to keep that factor in its present use. So, for example, if I am paid $150,000 in my current job but I would stay in that job for any salary over $130,000, I am making $20,000 in rent. Similarly, a landlord charges rent in excess of what it costs to maintain the land and building. Unless I’m misunderstanding Ricardo’s definition, that fits neatly inside of it. [1] https://www.econlib.org/library/Enc/RentSeeking.html https://www.econlib.org/library/Enc/RentSeeking.html

kasey_junk 6y ago
By that interpretation any profit making is rent seeking. A landlord is not “rent seeking” just by charging rent. For instance they are providing value in the form of risk arbitrage in most cases. The only case a landlord is purely rent seeking in the economic sense is if they only captured the difference in value of their properties due to external factors.
- tptacek 6y ago
  Right, as I understand it, the "economic rent" (ER) of an apartment lease would be the extent to which the cost of the lease was inflated by artificial scarcity (as opposed to just supply and demand). There are, then, rent-seeking things you could do as a landlord/developer, but in a well-functioning market where you're competing with lots of other landlords, the price of a lease reflects the market value of occupancy and does not include ER. Similarly, one of the classic examples of ER is wage premiums paid to closed-shop union members: the clearing price for the labor involved is, say, $20, but your union bumps that up to $25; the extra $5 is ER. There is directly substitutable labor that could be acquired at a discount to union labor, but closed-shop rules lock in the extra rents.

kasey_junk 6y ago

By that interpretation any profit making is rent seeking. A landlord is not “rent seeking” just by charging rent. For instance they are providing value in the form of risk arbitrage in most cases. The only case a landlord is purely rent seeking in the economic sense is if they only captured the difference in value of their properties due to external factors.

tptacek 6y ago
Right, as I understand it, the "economic rent" (ER) of an apartment lease would be the extent to which the cost of the lease was inflated by artificial scarcity (as opposed to just supply and demand). There are, then, rent-seeking things you could do as a landlord/developer, but in a well-functioning market where you're competing with lots of other landlords, the price of a lease reflects the market value of occupancy and does not include ER. Similarly, one of the classic examples of ER is wage premiums paid to closed-shop union members: the clearing price for the labor involved is, say, $20, but your union bumps that up to $25; the extra $5 is ER. There is directly substitutable labor that could be acquired at a discount to union labor, but closed-shop rules lock in the extra rents.