critique of rent theory for the purpose of shoring up the conceptual coherence of the emerging scholarship on rentier capitalism. A simple but important question informs the chapter: what is rent? After dealing with some basic elements of rent theory and the social phenomena it seeks to explain, chapter 2 situates rent theory in historical perspective, sketching out the context within which specific contributions to the historiography of rent were made and, most importantly, reflecting on how they helped change the societies under investigation. Key mainstream views and alternatives from political economy are then surveyed, identifying merits and limitations of each, using real-world examples in chapters 3 and 4. Chapter 5 considers the significance of rent theory today by looking closely at how rents are implicated in the social processes generating economic inequality, stalling economic dynamism in global capitalism and the climate crisis. Specific episodes are examined with a view to spotlighting the role of rents in generating circumstances for what have come to be known as globalization, neo-liberalism and financialization. The discussion in this final chapter is concerned mainly with why and how the study of rent is important going forward.
That takes care of the ‘why’ and the ‘what’ questions. How will the critique of rent theory proceed? While penning the introduction to the third volume of Capital after painstakingly assembling the manuscript from his dead friend’s mountains of chicken-scrawled notes, Frederick Engels made the comment that ‘where things and their mutual relations are conceived not as fixed but rather as changing, their mental images, too, i.e. concepts, are also subject to change and reformulation.’ Such phenomena, Engels argues, are ‘not to be encapsulated in rigid definitions, but rather developed in their process of historical or logical formation’.32
A little under a century later, Ben Fine dispensed the following scholarly rebuke of a pivotal contribution to mainstream rent theory by Joseph Buchanan. Fine contends that the ‘doctrines of the past should not be seen as an evolutionary approach to those of the present,’ but rather, ‘different theories utilise different concepts and theoretical frameworks as well as posing different questions, ones that may not be posed let alone answerable within another theory’.33 This is, Fine notes, ‘a popular but misguided method of approach to the history of economic thought, or indeed to the history of any discipline’.34
The crux of both statements might seem like common sense, but it never ceases to amaze how some economic writing seems to lose sight of what most reasonable people would consider uncontroversial – things change, so our ideas for understanding them should too, and the different ways we make sense of our complex reality in motion cannot all be understood from a single perspective. It is on the basis of this sound advice that the inquiry into the character, causes and consequences of rent proceeds.
The contested meaning of rent: land or monopoly?
Rent is one revenue among a few in economic theory that designates flows of value through society. Wages, interest and profit are others. The task of rent theory is not only to track the direction and magnitude of rental flows, but also to understand how they came about, the consequences of where they go and also why it is they exist at all in any given society. As will be shown below, there are lots of different ways people have emphasized aspects of these questions and called them ‘rents’. One challenge when making sense of these different perspectives is to decide on what basis to make separations, or comparisons, between them. One way is to split the contending views on rent along the axis of what rent theory is really all about – land or monopoly?
There are two broad orientations when it comes to theories of rent. One suggests that rent is essentially about monopoly. To put it another way, a concept of rent is helpful insofar as it tells us something about how markets function, or perhaps how a dysfunctional market might operate. This view accepts that all things are scarce when considered relative to their demand. It is therefore how this scarcity is mediated by the different claims people have over property that determines the flows and levels of rents. As with the example of housing above, rent explained from this perspective could be understood as the income received by the owners of scarce goods. The one in three people in the OECD, for example, who rent housing do so, it could be argued, because housing stock is too expensive for them to buy. The price of this housing stock could be explained by demand exceeding supply and therefore the scarcity of housing stock is what pushes prices of houses up and compels people to rent.
The second orientation in rent theory suggests that rent should be conceived only as the revenue that owners of land receive for permitting its use. There are contending views within this approach as to what exactly the rents are paid for, how the levels of rent are determined and why they exist, but there is an insistence overall that rent theory is principally about understanding the role of land in the economy. The housing example explained from this perspective might argue that it is because land itself is scarce, in absolute terms, that the price of housing is driven up to the point that a third of the OECD population is forced to rent. This line of argument is still concerned with scarcity but only as it is a characteristic unique to land. Another tack, still within the land-based orientation, might claim that it is not just the finite nature of land that drives rents, but rent is also about the ways in which land is owned, rather than the fact that land can be owned. In countries where land ownership and control is split among various stakeholders, for example, the different groups who hold titles to different plots of land may well affect the pricing of housing stock. Explanations for why Germany and Switzerland are outliers when it comes to the numbers of renters compared to homeowners might look towards the historical development of land ownership in these countries or the ways in which their governments have historically acted to affect housing supply in relation to demand.
Figure 1.1 sketches a very basic map of how these views connect. The land/monopoly dichotomy is not exactly neat. Some who claim that rent is primarily about monopoly also believe that it should be considered a revenue specific to owners of land. Indeed, those who have taken the view that rent is about monopoly have produced important work on the subject, examining the various ways in which rents have materialized in modern political economies and the role they play in either facilitating or mitigating economic development. This map of sorts is not meant to be detailed but rather it indicates a key distinction in rent theory debates, to be layered upon other differences explored in the next few chapters. The starting point could just have easily been different schools of thought or indeed the key theorists associated with developments in thinking about rent. The current framing was chosen to emphasize the important role that considerations of land have played in the historical debates on rent theory.
This chapter has offered preliminaries on the meaning of rent, its ongoing significance in social science and how we might make sense of the term today. Its key points relate to the contested meaning of rent in recent history and what this ambiguity might mean for current studies of capitalism with its rentier inflection. The most familiar form of rent, that paid for housing, was examined briefly to demonstrate that what appears to be a fairly simple matter of payment for the temporary use of a basic need is much more interesting and complicated. The next chapter deals with the history of economic thought as it relates to rent theory.
Notes
1 1 Klein (1966): 1327.
2 2 Sedgwick (2009): 58.
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