Economic rent

[ksen]

http://www.investopedia.com/terms/e/economicrent.asp

DEFINITION of 'Economic Rent'

An excess payment made to or for a factor of production over and above the amount expected by its owner. Economic rent is the positive difference between the actual payment made for a factor of production (such as land, labor or capital) to its owner and the payment level expected by the owner, due to its exclusivity or scarcity. Economic rent arises due to market imperfections; it would not exist if markets were perfect, since competitive pressures would drive down prices. Economic rent should not be confused with the more commonly used “rent,” which simply refers to a payment made for temporary use of an asset or property.

Is economic rent good for society?

If it isn't, how should it be controlled? Should it be controlled? Is it just something we, living in a capitalist nation, have to deal with and government has no business trying to mitigate its impact?

 

[Bronzeage]

How do we define or determine "expected"? There seems to be a contradiction in the premise. If economic rent is high due to a scarcity or exclusiveness, how can a perfect market reduce this amount?

If I secured the exclusive rights to sell tickets to Mick Jagger's 80th Birthday Farewell Tour, I can set ticket prices for the highest amount that still guarantees every seat is filled(monopoly pricing model). A more perfect market only insures I can set the highest possible price, since this creates more competition for tickets.

 

[ksen]

By the provided definition economic rent cannot exist in a perfect market so I'm not sure what you're asking.

 

[coloradoatheist]

By the provided definition economic rent cannot exist in a perfect market so I'm not sure what you're asking.

The argument isn't that it won't happen at certain times, but they will correct themselves. How long does price gouging continue happening after a natural event?

 

[ksen]

By the provided definition economic rent cannot exist in a perfect market so I'm not sure what you're asking.

The argument isn't that it won't happen at certain times, but they will correct themselves. How long does price gouging continue happening after a natural event?

So you're in the "it's not a problem but if it is the market will fix it" category?

 

[laughing dog]

http://www.investopedia.com/terms/e/economicrent.asp

DEFINITION of 'Economic Rent'

An excess payment made to or for a factor of production over and above the amount expected by its owner. Economic rent is the positive difference between the actual payment made for a factor of production (such as land, labor or capital) to its owner and the payment level expected by the owner, due to its exclusivity or scarcity. Economic rent arises due to market imperfections; it would not exist if markets were perfect, since competitive pressures would drive down prices. Economic rent should not be confused with the more commonly used “rent,” which simply refers to a payment made for temporary use of an asset or property.

Is economic rent good for society?

If it isn't, how should it be controlled? Should it be controlled? Is it just something we, living in a capitalist nation, have to deal with and government has no business trying to mitigate its impact?

If economic rent spurs entrance or competition, it is usually viewed as good for society. However, whether or not that occurs is a different matter. But as a capitalist nation, we do have laws specifically designed to allow for economic rent: patents are a good example. How long should a patent or a copyright las (i.e. how long should the economic rent be sustained)?

 

[coloradoatheist]

The argument isn't that it won't happen at certain times, but they will correct themselves. How long does price gouging continue happening after a natural event?

So you're in the "it's not a problem but if it is the market will fix it" category?

Yep. You are going to have short term small blips.

 

[ksen]

So you're in the "it's not a problem but if it is the market will fix it" category?

Yep. You are going to have short term small blips.

Fair enough. :fistbump:

 

[dismal]

By the provided definition economic rent cannot exist in a perfect market so I'm not sure what you're asking.

Of course it can.

Let's say there is land that can produce 5000 bushels of corn per year and the marginal land in corn production yields 2000 bushels per year. The owner of the land that produces the 5000 bushels per year can earn an economic rent.

 

[ksen]

I have no idea what you're trying to say.

 

[Horatio Parker]

The rent's too damn high.

 

[dismal]

I have no idea what you're trying to say.

Well, among other things, you seem to have linked a non-standard definition of "economic rent". The bushels of corn thing is a classic economic rent example.

https://en.wikipedia.org/wiki/Economic_rent