I am also confused by the way economic theorists use the word “rent. “ Am I correct in thinking it refers not simply to literal tenant landlord payments but rather to any net value gained from the mere fact of ownership.
In: Economics
It’s easy to be confused by this because there are three different uses of words going on here.
The first is the familiar usage of “rent”.
The second is “economic rents”, explained very well by /u/Twin_Spoons.
However this is not quite the same as “rentier capital” which is generally used to mean exactly what you think, value gained merely from owning assets. I think this is by definition an “economic rent” but it’s a more narrow term and is generally used in a pejorative sense – it’s typically associated with Marxist or other left-wing criticisms of an economy or group.
You’re correct that “rent” means something different in an economic context, but it’s not just a generalization of housing payments. Rents are earnings in excess of what you would get in a perfectly competitive market.
Suppose you work as a barber. Let’s say that in a competitive market you would earn a wage of $25/hour. If you demanded more than that from your employer, they could refuse and go hire someone else who was willing to work for $25/hour. You earn no rents in this situation.
Now suppose the market wasn’t competitive. In particular, the government has said that people need training to be barbers, and that training should be overseen by people who are already barbers (btw, this is a [true story](https://ij.org/report/license-work-2/ltw-occupation-profiles/ltw2-barber/)). Now you get to say who can and can’t be a barber, including the hypothetical competitor who kept your wage down at $25/hour. Suppose this lets you charge $30/hour. That $5 difference is economic rents.
It’s also worth noting that a landlord in a competitive market will collect rent, but he won’t collect *economic rents*. I acknowledge that this is stupid and confusing.
Thanks, u/twin_spoons and u/tiredstars. This helps a lot.
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