This explanation does not give full credit to Ricardo's depth of analysis, an analysis that is built on the writing of Richard Cantillon, Adam Smith and Anne Robert Jacques Turgot (leading theorist of the Physiocratic school). Rent is a return to land as a factor of production. Ownership of land is immaterial to the growth of rent. The owner of land does not produce rent because landownership is a passive activity. Rent arises because of locational advantage, increasing as free land at the margin of production is less and less available as population increases the demand for land. The case is made, therefore, that the rent of land rightfully belongs to the community and not to the individual owner of land. For further reading, I recommend "The Power in the Land," by British economist Fred Harrison (1983). Capital goods are congealed labor, but the extent to which is important is attempting to calculate the distribution of wealth between labor and capital goods. The real importance of the theory of rent is its relation not to a "labor theory of value" but to a "labor and capital goods theory of private property." In the real world, what we see is the operation of "the demand theory of value." What will one give in exchange for a good or service?
Bloody European Aristocrats, you can't Win!. Never mind corn! What about carbon footprints when you're growing beans? I don't think Locke, Ricardo or Marx ever considered how asymmetrical the equation is when you try and flip these ideas around.
@@RUclipsPremiumDude Asset helps you to generate value not just in the form of current money but in other terms like positive projection of future gains
Can you explain again how it is that Ricardo's rent theory is an opportunity cost and/or utility theory? You said its a theory that asks how much "value" (defined in terms of utility) we lose if we move a factor of production from one area of the economy to another. Is that the question Ricardo was asking with respect to fertile land? Was he asking how much we'd "lose" if we moved that land from one area of the economy to another? I'm having trouble picturing what that means. Thank you
9:30 wages down to subsistence levels. Yes, but only if a country stays underdeveloped. In underdeveloped 'status' countries property income can account for up to 50% of all income. Whereas developed countries sell services and technology and property income is well beow 20%.
There are several problems with this theory, for instance, the landlord would like to have labourers with experience, and he would probably like to have labourers who are known to him, because he can trust them more. There's the odd chance that a succesful operation would want to pay workers more becuase they can, raising living standars, and production with it, and there's also the possibility that wage earners would detest working for people who only care about profits, which creates political stability. What's worst about this theory is that Ricardo was talking about a world in which most people could simply up and out and have as good a standard of living in America, especially, or anywhere else for that matter, as you did living, basically, as serfs under a lord. This theory was put to paper during the Napoleonic Wars.
There's different ways to model it, it boils down to segmenting the market a little bit. Maybe increasing the productivity where skill is higher, that's why skilled workers can command a higher wage, that adds complications, but the underlying theory and it's conclusion are sound. Perhaps the worst assumption is that labor is that it excludes technological changes, labor saving inventions and other goods that can be produced in the economy.
What about capital? Land is a productive asset & therefore can be considered capital in an agricultural model of late 18th & early 19th century. Mechanised farming did not exist. It's not surprising that Ricardo subscribes to the labour theory of value as his model is a reasonably accurate abstraction of reality offering useful insights into nature of exploitation & social injustice. Rent is the surplus value the land Lord extracts from his workforce. Land is cultivated by the workforce. It's productivity increases over time due to improved soil fertility. Utility theory of value is deliberately vague with assumptions more tenuous than that of Ricardo's model.
Land is not capital. Capital is the product of labor. Land is uncreated by humans. Mechanized farming actually did exist on some level during Ricardo's time there were such things as threshing machines. But yes, land rents are the capture of wealth that is not created by the titleholder. I agree with you on that.
Very nice visual illustration of Ricardo to complement the text!
Excellent explanation of this concept--salud
Such a helpful video, thank you so much!
This explanation does not give full credit to Ricardo's depth of analysis, an analysis that is built on the writing of Richard Cantillon, Adam Smith and Anne Robert Jacques Turgot (leading theorist of the Physiocratic school).
Rent is a return to land as a factor of production. Ownership of land is immaterial to the growth of rent. The owner of land does not produce rent because landownership is a passive activity. Rent arises because of locational advantage, increasing as free land at the margin of production is less and less available as population increases the demand for land. The case is made, therefore, that the rent of land rightfully belongs to the community and not to the individual owner of land. For further reading, I recommend "The Power in the Land," by British economist Fred Harrison (1983).
Capital goods are congealed labor, but the extent to which is important is attempting to calculate the distribution of wealth between labor and capital goods. The real importance of the theory of rent is its relation not to a "labor theory of value" but to a "labor and capital goods theory of private property." In the real world, what we see is the operation of "the demand theory of value." What will one give in exchange for a good or service?
+10:00 "Corn is not high because a rent is paid, but rent is paid because corn is high."
Bloody European Aristocrats, you can't Win!. Never mind corn! What about carbon footprints when you're growing beans? I don't think Locke, Ricardo or Marx ever considered how asymmetrical the equation is when you try and flip these ideas around.
This video makes it seem to be like rent, on Ricardo's account, is a lot like surplus value, on Marx's account.
"capital" is a balancing term representing assessed value of ownership (assets) less liabilities-- what you own minus what you owe.
@GenghisVern "what you own minus what you owe" is the definition of profit, not capital. Capital, simply put, is self-expanding value.
@@RUclipsPremiumDude Asset helps you to generate value not just in the form of current money but in other terms like positive projection of future gains
Can you explain again how it is that Ricardo's rent theory is an opportunity cost and/or utility theory? You said its a theory that asks how much "value" (defined in terms of utility) we lose if we move a factor of production from one area of the economy to another. Is that the question Ricardo was asking with respect to fertile land? Was he asking how much we'd "lose" if we moved that land from one area of the economy to another? I'm having trouble picturing what that means. Thank you
super helpful. thanks
9:30 wages down to subsistence levels. Yes, but only if a country stays underdeveloped. In underdeveloped 'status' countries property income can account for up to 50% of all income. Whereas developed countries sell services and technology and property income is well beow 20%.
Yes but what is "price" in this country?
thank you!!!!
*Ricardo*
Brilliant!
There are several problems with this theory, for instance, the landlord would like to have labourers with experience, and he would probably like to have labourers who are known to him, because he can trust them more. There's the odd chance that a succesful operation would want to pay workers more becuase they can, raising living standars, and production with it, and there's also the possibility that wage earners would detest working for people who only care about profits, which creates political stability.
What's worst about this theory is that Ricardo was talking about a world in which most people could simply up and out and have as good a standard of living in America, especially, or anywhere else for that matter, as you did living, basically, as serfs under a lord.
This theory was put to paper during the Napoleonic Wars.
There's different ways to model it, it boils down to segmenting the market a little bit. Maybe increasing the productivity where skill is higher, that's why skilled workers can command a higher wage, that adds complications, but the underlying theory and it's conclusion are sound.
Perhaps the worst assumption is that labor is that it excludes technological changes, labor saving inventions and other goods that can be produced in the economy.
@@josephmoore4764 American.. You need to not waste my time.
hit me back
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What about capital? Land is a productive asset & therefore can be considered capital in an agricultural model of late 18th & early 19th century. Mechanised farming did not exist.
It's not surprising that Ricardo subscribes to the labour theory of value as his model is a reasonably accurate abstraction of reality offering useful insights into nature of exploitation & social injustice.
Rent is the surplus value the land Lord extracts from his workforce.
Land is cultivated by the workforce. It's productivity increases over time due to improved soil fertility.
Utility theory of value is deliberately vague with assumptions more tenuous than that of Ricardo's model.
Land is not capital. Capital is the product of labor. Land is uncreated by humans. Mechanized farming actually did exist on some level during Ricardo's time there were such things as threshing machines. But yes, land rents are the capture of wealth that is not created by the titleholder. I agree with you on that.