![]() In regard to labor, economic rent can be created by the existence of mass education, labor laws, state social reproduction supports, democracy, guilds, and labor unions (e.g., higher pay for some workers, where collective action creates a scarcity of such workers, as opposed to an ideal condition where labor competes with other factors of production on price alone). For education and occupational licensing, it is the knowledge, performance, and ethical standards, as well as the cost of permits and licenses that are collectively controlled as to their number, regardless of the competence and willingness of those who wish to compete on price alone in the area being licensed. Still, the total income is made up of economic profit (earned) plus economic rent (unearned).įor a produced commodity, economic rent may be due to the legal ownership of a patent (a politically enforced right to the use of a process or ingredient). Unlike economic profit, economic rent cannot be theoretically eliminated by competition because any actions the recipient of the income may take such as improving the object to be rented will then change the total income to contract rent. Economic rent is viewed as unearned revenue while economic profit is a narrower term describing surplus income earned by choosing between risk-adjusted alternatives. Economic rent is also independent of opportunity cost, unlike economic profit, where opportunity cost is an essential component. In the moral economy of the economics tradition broadly, economic rent is opposed to producer surplus, or normal profit, both of which are theorized to involve productive human action. In the moral economy of neoclassical economics, economic rent includes income gained by labor or state beneficiaries of other "contrived" (assuming the market is natural, and does not come about by state and social contrivance) exclusivity, such as labor guilds and unofficial corruption. In classical economics, economic rent is any payment made (including imputed value) or benefit received for non-produced inputs such as location ( land) and for assets formed by creating official privilege over natural opportunities (e.g., patents). In neoclassical economics, economic rent is any payment (in the context of a market transaction) to the owner of a factor of production in excess of the cost needed to bring that factor into production.
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