Where does rent collide?

The payment to a factor of production over and above the minimum needed to keep it in its present use, that is, its return in excess of its opportunity cost. Ricardo's 1817 On the Principles of Political Economy and Taxation developed the classic case of land rent: because fertile land is fixed in supply, its owners earn a surplus set by the margin of cultivation rather than by any cost of production. The referent is a surplus return that accrues to a scarce or fixed factor, counted in money per period, and it is neither a tenant's contractual payment for premises, nor the wasteful contest to capture a transfer, nor a physical tear in tissue.[1]

Unit

A factor's return above its opportunity cost, in money per period

Recovery means

Competed away only if the factor's scarcity ends, as by new entry or a close substitute

Measured by

Estimated as the gap between a factor's earnings and its next best alternative, or as the surplus above the marginal unit

The expenditure of scarce resources to capture an existing transfer or to secure a privilege that yields a rent, rather than to create new wealth. Tullock's 1967 The welfare costs of tariffs, monopolies, and theft argued that the true social cost of a monopoly or a tariff includes the resources spent competing for it, and Krueger's 1974 The political economy of the rent-seeking society named the behaviour and modelled its scale where import licences and other state-created rents are large. The referent is a socially wasteful activity, the pursuit of a transfer, counted by the resources dissipated in the contest, and not the surplus itself, a lease payment, or a tear in tissue.[2][3]

Unit

Resources dissipated in pursuit of a transfer, as a share of the prize

Recovery means

Not applicable

Measured by

Approximated by lobbying, litigation, and licence-seeking outlays, or by the value of the contested rent