What is a rentier economy?

 rentier economy mean

Rents economy

Rent economy is a term that specifies the amount of money gained that exceeds what was economically or socially necessary, which is the minimum amount of money that the owner of the land, labor, or capital receives by allowing another person to use that land, labor, or capital, and the term rent is used to express constant periodic income Resulting from selling or renting a property, but at the state level, it occurs when a state relies mainly on revenues from selling oil or minerals without conducting any manufacturing process, and among the forms of the rentier economy are taxes and customs duties imposed by countries on goods, any revenue that the state collects without any effort launched Rent it.

How the rentier economy works

Economic rents or the rentier economy are profits that exceed what the market may allow because everyone has a price and every production worker has a price as well, for example, the owner of a plot of land willing to invest it through leasing or selling at a price at least equal to what that owner costs and the company can get On the rentier economy in several cases, including monopoly or if it is part of a cartel, also the rentier economy is the amount of money that the owner of the economic production factor gets - your work and skills - and this productive factor has an effect on the debt or the bills to be paid and other obligations, the value may differ accordingly. The percentage of demand for work skills and the rent economy is equivalent to the salary or compensation that will be obtained for doing a specific job. 

Modern economy and the rentier economy

According to the modern economy, the rentier economy is represented by the difference between the return and the factor of production, whether it is land, labor, or capital. The price of supply, the necessary minimum acceptable in exchange for obtaining its services, and the modern extension of this view is that returning to any other element in production may also contain elements Of rent, which consists of the difference between the income of a productive worker and the real bid price or price. Since the supply of land is fixed, the supply price for the land is effectively zero, and the rent is fully restored. On the other hand, supplies of labor and capital respond to the prices offered to them, and the portion of its return is a higher cost for those who have many alternative uses. The rental portion of productive factor return also decreases as the analysis shifts to the long run because there are more open alternative uses of economic resources in the long run. Also see benefit and value.

Rent economy and economic schools

Economic schools differed in the concept of the rentier economy. The classical school had a concept and the modern one, on the other hand. The different schools enriched the concept of a rentier economy, and the diversity of sources led to several transactions, whether accounting or economic, and the difference between them was as follows: 

the classic school

Henry George, a distinguished economist from the classical school, was interested in rents and the rentier economy. He described the rent economy as the exclusion of payments for the use of any product of human effort; also payments for the use of houses, farms, etc., the part that pays for the use of buildings or others is the appropriate interest, Since it constitutes the consideration of the use of capital, the concept of economic rent as unearned income should not be applied to material lands, as the classical school focused on land in the material sense due to the structure of the economy, as the economy continues to operate on the basis of property and rights. 

Modern school

Hibdon - a modern economist - defined the rent or rent economy as the difference between the actual payment to the worker and the supply price. The modern economy has tended to point out that the rent economy is a push to the factor of production and introduce the supply price more broadly into the general concept of a rentier economy.

Ricardian theory

The economic rent according to classical economists is the price of the land where it is paid to the landlords by the tenant for the use of the land. The land is more fertile, so it has a higher rent value. Rent is that part of the land production that is paid to the landlord to use the original and indestructible power of the soil. Ricardian talked about differential rent and the rent economy in an expanded manner and how additional rent can be generated. 

Types of rent

There are several types that fall under the concept of a rentier economy, such as economic rent, total rent, scarcity of rent, differential rent, and lease contracts. Each of them has what is distinguished from other types and forms its own concept within the rentier economy. 

  • Economic rent:  It is the amount paid for using the land alone, also called economic surplus as it comes without effort on the part of the owner and has been described by Professor Boulding as an economic surplus.
  • Total rent:  It is the rent paid for the services of the land in addition to the capital invested in it, and it consists of:
  1. Economic rent, which is a payment for the use of the land.
  2.  Interest on capital invested for land improvement. 
  3. The reward for the risk taken by the owner in investing his capital
  • Scarcity of rent:  Scarcity rent occurs when the supply is limited in relation to the demand and homogeneous lands are used. If all the lands are homogeneous, but the demand for them exceeds the supply, then the economic rent is due to scarcity.
  • Differential rent: The differential rent is that which is made due to the difference in the fertility of the land. Some lands are more fertile and some are less, and when the farmer is forced to less fertile lands, he gets less production, so the surplus arising due to the difference in the fertility of the land is called differential rent.
  • Contract lease:  It is the rent agreed upon between the owner of the land and the user.

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