Ecology and Economic Rent
John T. Tetley
[Reprinted from The Gargoyle, November, 1970]
Air and water pollution and conservation of natural resources are
topics of much discussion these days. Who is to pay the bill, of
course, inevitably cones to the fore. Those who do the polluting --
those who use up the natural resources should pay contends one group.
Government should pay, says another group.
Might we ask where will government or industry obtain the funds? Will
not industry increase the price of the product and thus pass the cost
on to the consumer? Will the consumer pay increased prices? There can
be no question as to the source of government funds -- either taxes or
monetary inflation. So in any case, the cost comes from the income of
Those who favor the collection of the annual rental value of land and
the severance value of natural resources for the support of government
must keep in mind the distinction between these sources of public
"Economic Rent," a term used in discussions at the Henry
George School of New Jersey, is a part of the product. If there is no
production, there can be no economic rent. The term rent is
used as defined by Ricardo -- "the excess productivity over the
least productive land in use." Economic Rent therefore is fixed
by natural law. A product then, is distributed as rent, wages and
interest. The portion rent cannot be arbitrarily increased
should government require increased funds for its operation, be it for
education or air pollution. It is fallacious to say we can increase
the economic rent to cover the cost of eliminating pollution, or to
conserve natural resources.
It may be argued that severance value of natural resources such as
timber, minerals or oil, is a "form of economic rent."
However, I prefer to make a clear distinction, reserving use of term
economic rent to apply only to a part of the product claimed by the
owner of location in production. Accordingly that which is paid for
use of land for residential purpose would not be economic rent, but
rather payment for use of a natural resource -- land surface.
When the time comes -- whatever agency may be set up to administer
the collection of severance value of natural resources, I vision, at
this time, such being handled on a nation wide basis. For instance, in
the United States, we have areas containing vast amounts of timber,
others where no timber is grown. We have mineral and oil deposits in
areas (including "off-shore") in some locations but no known
deposits in other areas.
So long as it is necessary to have a Federal Government, I vision an
administrative body, which may be established independently of
government. Such a body would of necessity be hiqhly specialized and
could determine the method of arriving at severance value of these
natural resources (equivalent it may be assumed to what we presently
_ I further believe leases to be granted for exploitation of these
resources might provide for curtailment of pollution and conservation
of resources, which in effect, would be included in the "royalty"
figure -- the payment for severance of such resources -- payment to
the administrative body, as representative of all citizens of the
The mechanics of allocating the funds collected might be on a basis
of population to each State. The State in turn, after using such
portion of the fund as needed for necessary state services, and
deducting the cost of administration, could distribute the balance to
This might meet cost of elimination of pollution and conservation of
natural resources, be met from the "rent fund" -- "economic
rent" -- "location rent for residential land", and "severance
value" of natural resources.