COMPARISON BETWEEN RICARDIAN THEORY OF RENT AND MODERN THEORY OF RENT

• DIFFERENCE BETWEEN RICARDIAN THEORY OF RENT AND MODERN THEORY OF RENT
  MICRO ECONOMICS/BUSINESS ECONOMICS
• RICARDIAN THEORY OF RENT

1. DAVID RICARDO FIRST OF ALL GAVE A SYSTEMATIC THEORY OF RENT IN HIS BOOK,” PRINCIPLES OF POLITICAL ECONOMY AND TAXATION
2. PRIOR TO RICARDO,PHYSIOCRATES AND ADAM SMITH REGARDED RENT AS THE RESULT OF BOUNTY OF NATURE
3. BUT ACCORDING TO RICARDO RENT IS RESULT OF NIGGARDLINESS OF NATURE
4. PRIOR TO RICARDO CLASSICAL ECONOMIST ANDERSON HELD THE OPINION THAT RENT ARISES BECAUSE OF DIFFERENCE IN FERTILITY OF LAND
5. ACCORDING TO RICARDO,” RENT IS THAT PORTION OF THE PRODUCE WHICH IS PAID TO THE LANDLORD FOR THE USE OF ORIGINAL AND INDESTRUCTIBLE POWER OF THE SOIL.

• MODERN THEORY OF RENT

1. MODERN THEORY OF RENT IS AN AMPLIFIED AND MODIFIED VERSION OF RICARDIAN THEORY OF RENT.DISCUSSED BY J.S MILL AND LATER ON DEVELOPED BY JEVONS,PARETO,MARSHALL AND JOAN ROBINSON
2. ACCORDING TO MODERN THEORY ECONOMIC RENT IS SURPLUS WHICH IS NOT PECULIAR TO LAND ALONE. IT CAN BE A PART OF THE INCOME OF THE LABOUR .CAPITAL AND ENTREPRENEUR
3. ECONOMIC RENT MAY BE DEFINED AS ANY PAYMENT TP FACTOR OF PRODUCTION WHICH IS IN EXCESS OF ITS TOTAL SUPPLY PRICE
4. SUPPLY PRICE REFERS TO THE MINIMUM EARNING REQUIRED TO KEEP THE FACTOR IN ITS PRESENT OCCUPATION
5. RENT=ACTUAL EARNING-TRANSFER EARNING

• DIFFERENCE BETWEEN RICARDIAN THEORY OF RENT AND MODERN THEORY OF RENT
• RICARDIAN THEORY OF RENT

1. RENT IS AVAILABLE ONLY TO THE LAND
2. RENT IS THE REWARD FOR ORIGINAL AND INDESTRUCTIBLE POWER OF THE SOIL
3. RENT DOES NOT ENTER INTO THE PRICE RATHER IT IS DETERMINED BY THE PRICE
4. MAIN CAUSE IS DIFFERENCE IN FERTILITY OF LAND

• MODERN THEORY OF RENT

1. DIFFERENCE BETWEEN ACTUAL EARNING MINUS TRANSFER EARNING
2. RELATION FROM THE ECONOMY POINT OF VIEW,RENT DOES NOT ENTER INTO PRICE BUT FROM THE POINT OF VIEW OF ECONOMY IT DOES ENTER INTO PRICE
3. MODERN THEORY HOLD THAT RENT  ARISES WHEN EITHER  A FACTOR BECOMES SPECIFIC OR ITS SUPPLY LESS THAN PERFECTLY ELASTIC

• MODERN THEORY MODIFIED AND AMPLIFIED VERSION OF RICARDIAN THEORY
• AMPLIFICATION OF RICARDIAN THEORY OF RENT:-ACCORDING TO RICARDO RENT IS AVAILABLE TO ONLY LAND. NOT AVAILABLE TO OTHER FACTORS OF PRODUCTION. BUT ACCORDING TO MODERN THEORY RENT IS ALSO EARNED BY OTHER FACTORS SUCH AS LABOUR,CAPITAL AND ENTREPRENEUR ETC. RENT ARISES WHEN A FACTOR BECOMES EITHER SPECIFIC OR ITS SUPPLY BECOMES LESS THAN PERFECTLY ELASTIC. THE ONLY DIFFERENCE IS THAT ALL THE INCOME OF THE LAND IS CALLED RENT ONLY A PART OF THE INCOME OF OTHER FACTORS IS CALLED RENT
• MODIFICATION OF RENT:-
• ACCORDING TO RICARDIAN THEORY RENT IS MEASURED THE DIFFERENCE BETWEEN THE PRODUCE OF MARGINAL LAND AND THAT OF INTRA MARGINAL LAND. RENT IN RICARDIAN THEORY CAN NOT BE MEASURED. MODERN THEORY RENT IS MEASURED THE DIFFERENCE BETWEEN ACTUAL RENT MINUS TRANSFER EARNING
• CAUSE OF THE EMERGENCE OF RENT:-THE REASON GIVEN BY MODERN THEORY IS MORE LOGICAL AND REALISTIC

1. ACCORDING TO RICARDO SCARCITY OF LAND GIVE RISE TO RENT. BECAUSE OF SCARCITY OF LAND,PEOPLE HAVE EITHER TO MAKE USE OF THE INFERIOR LAND OR PUT MORE UNITS OF LABOUR AND CAPITAL ON THE SAME PIECE OF LAND. DUE TO THIS DIFFERENCE SUPERIOR LAND EARNS RENT OVER INFERIOR LAND.
2. MODERN THEORY HAS GIVEN A MORE SCIENTIFIC REASON FOR THE EMERGENCE OF RENT. RENT ARISES BECAUSE OF  THE SPECIFIC NATURE OF A FACTOR. MORE SPECIFIC FACTOR MORE IS RENT. LAND IS COMPLETELY SPECIFIC SO ALL ITS EARNING IS CALLED RENT BUT OTHER FACTORS ARE SPECIFIC TO CERTAIN EXTENT

• MODERN THEORY MODIFIED AND AMPLIFIED VERSION OF RICARDIAN THEORY
• RENT AND PRICE:

1. RICARDIAN RENT DOES NOT ENTER IN THE PRICE
2. MODERN ECONOMIST FROM THE ECONOMY POINT OF VIEW RENT DOES NOT ENTER INTO PRICE BUT FROM THE POINT OF VIEW OF FIRM IT ENTER INTO THE PRICE