Does Rent Enter Into Price?

Samuel M. Levin

[Reprinted from the Henry George Fellowship News, March, 1936]

Single-Taxers themselves, those usually invulnerable logicians of economics, are split into two raging factions on the question of whether rent enters into price.

Offhand, the topic seems academic. Who cares a hoot whether it does or not?

Well, everyone should care.

Look at it this way. You walk into a chain grocery; you lay a quarter on the counter, and ask for a can of Peacherino Pineapple; the manager curtly informs you the price is 30 cents.

But, you expostulate, your store two blocks west charges only 25 cents! "They pay a much smaller rent than we," he remarks smiling.

Would you pay the price? In a pig's eye. You'd seize your quarter, blisteringly denounce the poor simp, and manfully trudge those two long blocks!

You'd show him that rent does not enter into price! That the only price you'll pay for a given article is the lowest price you can obtain it for. That "price is determined at the margin," as the economist likes to say.

Our question, you triumphantly assert, is easily answerable.

But -- suppose there is no margin? Suppose only one place on earth sells that brand of pineapple?

We can see the problem more clearly in the case of an absolute necessity, the supply of which is extremely limited.

Suppose, for instance, a physician should discover that a certain drug, PHENOMINE, is an absolute cure for cancer. Suppose, further, that the entire world's supply of PHENOMINE grew in Winnetka, and Winnetka only!

Two results would immediately follow these discoveries. First, Winnetka land values would skyrocket to dizzy figures; second, the price of PHENOMINE would skyrocket to equally dizzy figures. ...

Now. ... does rent enter into price?

Yes and no.

Price is determined at the margin. This is always true. ...

Where the margin is ONE SPOT ONLY -- where MONOPOLY exists -- rent does enter price; it is the largest element in price (No TRUE monopoly exists in the world).

Where a QUASI-MONOPOLY exists (witness diamonds, platinum, tin) price -- always determined at the margin -- will be relatively high. Rent again enters price -- and causes it to remain consistently high.

Where a highly competitive condition exists, as in the case of wheat, sugar -- price, still determined at the margin, will be relatively low. Rent enters into price practically not at all in such (and most) commodities; because at the margin practically no rent is paid.

In other words, not RENT but MONOPOLY or QUASI-MONOPOLY enters into price. ...