The Source of Rent

George Charles

[Reprinted from Progress, November 1995]

To the uninitiated, economics presents a mysterious, formidable and daunting task because economists have shrouded their subject in unintelligible jargon. There is no need for this as the subject is the simplest of all our sciences and it can be explained in language that all can understand. The word rent is a commonly used one which conveys a clear message to most people when it is paid or collected.

It must, however, be understood when a site of land is leased or rented, that the improvements such as a house, shed, fencing or farm buildings are not included in the transaction. Just as a science restricts its terms to one definite meaning, Economics restricts the word rent to the process of leasing or renting a site without taking into consideration the improvements upon it.

In the activities of people, it can be plainly seen what are wages because the wealth of labour's efforts are the material goods produced and the services rendered. Likewise, when tools and buildings are used to produce goods in easier and better ways, the extra production can be seen and measured.

When paying rent, evidence is not so easily seen, because there does not seem to be an expenditure of labour effort; no one makes a land site. People collecting rent may be absent or asleep, yet rent accumulates 24 hours a day and there is no exchange of goods. Despite this, rent payment is made in material goods and services which have resulted from people's efforts.

Until now, we have dealt only with labour and individual wages. In society, however, there is an added factor which gives to society as a whole again. This extra production is derived from the specialisation and division of labour, and is separate and distinct from a person working alone, such as a Robinson Crusoe. The gain only comes from people working together and it is a phenomenon that occurs in the nature of people and things. If there were no gain, the process would not occur. Examples can be seen all around us where some people are better than others in making the things we need for our sustenance and welfare. Importantly, it includes the occupations of everyone, none are exempt in modern life. It includes the makers of material things and the services provided by others, including artists and musicians.

This gain of production is measured by the amount of material goods and services which are offered by producers to occupy a location or land site which gives their own efforts, as well as the nation, the greatest return for their efforts. This gain is called the economic rent of a site and it does not include the hire of any improvements on the land.

Far from being a mysterious entity, the manifestation of land rent is a normal outcome in the evolution of the human race and its organisation. Rent of land is generally looked upon as being a weekly, monthly or yearly payment. In everyday affairs, land titles are bought and sold for lump sums, hence the term land values. It is quite obvious that the rent or value of a site is created by the cooperation within society as a whole and in the nature of people and things it belongs to those whose collective labour takes part. No one person can make a claim upon rent; it belongs to the nation and equity demands that every cent of it is the inalienable property of the people. Rent of land is the sole and sufficient source of public revenue for any government, whether hi a large nation or a small one.