The Distinction Between
"Rents" and "Rental Values"

Kenneth N. Grigg

[Reprinted from the International Union Newsletter, August, 1969]

John T. Tetley uses the term "rent" in two different senses, as different is chalk aid cheese. ("A Clarification," International Union Newsletter, No. 6.) He uses it to mean that part of the product which is in excess of what is produced on marginal land (chalk). He also uses it to mean the payment that is made to the title holder of land (cheese).

Land has a differential capacity to subserve the attainment of human satisfactions, of which physical goods are but one variety; a view, a pleasant climate, residential convenience -- all of these are, equally validly, satisfactions which can be enjoyed only differentially in relation to the location of land. So it may be seen, that RENT is differential incme governed by site, and that such income is not necessarily in money terms; so "satisfactions" is the best all-embracive term to use.

For it is the quest for satisfactions that men enter into exchanges in the market, and so it comes about that satisfactions of all kinds may acquire a monetary value when men will make a monetary payment for them in the market. The surplus crop in the more fertile field is RENT in the physical sense, long before it hits the market. But when it does reach the market in a monetary exchange and evaluation, then the sum it fetches transmutes such RENT into ECONOMIC RENT -- and the sane goes for any other "satisfaction income-stream." (By the same token, goods produced and services rendered are physical or natural WAGES which are transmuted into monetary wages when the process of market exchange gives to such goods and services their monetary value.)

So much for RENT as a function of abundance, the chalk in the situation. Now for the cheese. The differential desirability of locations gives them a market value in the process of men competing to make monetary payment - in order to obtain the exclusive undisturbed possession that will enable the stream of satisfactions designated RENT to be enjoyed. To repeat, a sum of money must be paid. It is a sum paid for the privilege of exclusive possession.

I hark back to Latin. The gerundive form RENTAL is exactly the right word to describe Tetley's second concept. It has the entire connotation of "that which must be paid." It is the monetary analogue of RENT. We cannot ever say what actually constitutes RENT in particulate form within the whole stream-flow of satisfactions. But we can monetarily evaluate it - which, after all, is all that we both need and want in order to apply the "equalizer" in a situation wherein special privilege has to be paid for. How do we evaluate RENT? In the ANNUAL RENTAL VALUE OF LAND.

I stated that the concept of RENT is a concept of abundance. But the concept of RENTAL is the very opposite; for in nature it is a PRICE expressed, albeit periodically. It is the monetary measure of the difficulty in obtaining exclusive possession of some particular moiety of the satisfaction stream. It is therefore in nature a VALUE, for VALUE is bound up with difficulty in supply. RENTAL is a function of scarcity in supply of desired locations.

What Georgists need to be talking about at the practical level is RENTAL, not RENT. We have got to see to it that, for community purposes, government collects that which must be paid, the land RENTALS due to be paid for the exclusive opportunity to partake of the abundance of RENT. RENT, the theoretical concept, can only be actualized in RENTAL, the practical and measurable reality that is daily determined in the market. Other readers may have a better name for it. I don't mind, so long as they get the concepts clear and as separate as chalk and cheese.