Supply and demand …. equilibrium …. scarcity ….. er, guys – try abundance.
That abundance, of course, is represented by the surplus over and above profits plus costs of production that is the economic rent of our land and natural resources.
Despite what these guys say—forgive them, they’re only neo-classical economists—it’s about 40% of the economy, and the 0.1% are permitted to steal the greater part of it:
“The percentage [of property rent in the economy] has dropped to well under one percent today”, New Ideas from Dead Economists: an introduction to modern economic thought, Todd G Buchholz, Plume, 2007, p.86.
“But by 2000 urban land rents represented only four percent of national income”, A Farewell to Alms, Gregory Clark, Princeton University Press, 2007, p.198.
“Rent is one percent of the US income in 2004”, Economics, Paul Krugman and Robin Wells, Worth Publishers, 2006, p.283.
“Rental income was 4.7 billion, or 0.079% of GDP in 1992”, Economics, Third Edition, Karl Case and Ray Fair, Prentice Hall, 1994, p.559.
“Rental income is $7.9 billion of a total GNP of $5,234 billion, or 1.5 percent” Economics: Principles and Policy, Fifth Edition, William J Baumol and Alan S Blinder, Harcourt Brace, 1991, p.137.
“… land rent forms such a small percentage of national income: that 2% is nothing compared to the present tax percentages which is around 30”, Income Distribution, Jan Pen, Pelican, 1974, p.210.
Age of Enlightenment? …… Pah!
[Sigh!]
The difficulty is that those values are not currently treated as rents.
They aren’t even charged in most cases. To account for them you would have to add both a rent and a benefit of equal size for all freehold land.
Interestingly, given that it isn’t accounted for, what you are talking about is actually on top of GDP, not part of it.
Definition matters. You define land rents one way – and I’m not disagreeing with your definition – and others define it differently, in order to get the results they do.
I suspect there is a failure to include the current cost of (land value) capital as the main culprit.
BTW, what statement of James?
Yes, but that statement of yours is not correct either, James. I’m all for simplifying how we put it provided it is accurate. LAND and natural resource rents are conservatively 40% of our GDP, and we do collect significantly more than 1% of these – but not nearly enough. The quoted economists don’t come anywhere near to 30% for land rent alone, and at least another 10% for other natural resource rents (such as mining, spectrum, fishing, forestry licences, etc.), and they even contradict each other!
Perhaps what we should be saying is that only 1% is collected as property rent, but available property rent in real terms is 40%.
Definition and understanding of the definigtion is everything.
Simplicity is the key to understanding and resolving this discussion..
No – it’s a matter of fact, boyo!
All a matter of definition, isn’t it.