Abstract
Classics—Locke, Smith, Ricardo, and Marx—struggled with the role labor, capital, and rent play in the determination of prices and incomes. The received wisdom was the labor theory of value: if incomes earned by wage laborers—essentially adult, male breadwinners—are proportional to the value of their labor, the system is fair. If they get less, the laborers are exploited. Few economists would accept this reasoning today, and the authors reject it as well. This chapter brings the views of Max Weber and Aage Sorensen into the discussion of rents in order to build the present book’s underlying theory on a solid historical and analytical footing.
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- 1.
Locke (1698, pp. 287–288).
- 2.
Locke, ibid., p. 288.
- 3.
Locke , ibid., p. 289.
- 4.
Locke , ibid., p. 296.
- 5.
Locke , ibid., pp. 301–302.
- 6.
Adam Smith (1776, Book I, p. 136).
- 7.
Smith, ibid., pp. 53–54.
- 8.
Smith, ibid., p. 54.
- 9.
Smith, ibid., p. 56.
- 10.
Smith, ibid., p. 59, our emphasis.
- 11.
Smith, ibid., p. 55, our emphasis.
- 12.
Smith , ibid., p. 56, our emphasis.
- 13.
Ricardo (1817, p. 34), our emphasis.
- 14.
Ibid., pp. 33–34, our emphasis.
- 15.
Jones (2015, p. 7).
- 16.
Under the FAO’s definition, agricultural land covers only 33% of the world’s land area.
- 17.
Ricardo , ibid., p. 38.
- 18.
Ricardo , p. 40, our emphasis.
- 19.
Joseph Stiglitz’s theory about the relationship between public spending and increase in land rent—called, the Henry George theorem—is a contemporary application of the original idea. See Stiglitz (1977).
- 20.
Marx. Capital ([1867] 1954, p. 208).
- 21.
This was still the typical question of the twentieth-century social democrats and trade unionist, who fought for higher wages and lower profits and rents.
- 22.
The term “satanic mills” was coined by William Blake (1757–1827), a radical Christian poet. In a poem, he wrote around 1810 he used the term, as a criticism of orthodox churches. At one later point in time, Gramscian Marxists who emphasized the tendency of capitalism to reproduce itself adopted this metaphor as a description of capitalist reproduction unless revolutionary consciousness overcomes the over-determination of the capitalist mode of production, see Burawoy (1984).
- 23.
This slogan (In French: La propriété, c’est le vol!) was coined by the French anarchist Pierre-Joseph Proudhon (1809–1865) in his 1840 book What is Property? Or, an Inquiry into the Principle of Right and of Government.
- 24.
Marx, ibid., p. 161, our emphasis.
- 25.
Marx, ibid., p. 161.
- 26.
Marx, ibid., p. 190.
- 27.
The term idealized in the previous sentence is important. As we know, the major shortcoming of neo-classical economics is that there are no perfect markets in any “actually existing” capitalist economies.
- 28.
See, especially Marx, pp. 773–774, 782–783.
- 29.
Ibid., p. 885.
- 30.
Marx wrote this about the German Ideology in A Contribution to the Critique of Political Economy (1857), but it is reasonable to assume that he found Volume II and III equally incomplete, not ready to be printed. It is especially telling the Volume III, Chapter 52, which was supposed to be the grand conclusion is broken off on the second page.
- 31.
Keynes ([1920] 1971, p. 20).
- 32.
Although Marx himself didn’t consider such an option, higher profits could also finance higher wages for workers in order to generate sufficient demand for capitalist production.
- 33.
This is a very interesting qualification. Weber tries to avoid the Marxian trap, namely that workers since they do not have capital by definition cannot enter competition . Both capitalist and workers compete: workers with workers, capitalists with capitalists.
- 34.
Weber (1978, p. 43).
- 35.
For instance kinship, caste, or estate can be characterized by close relations, while classes or occupational groups are open.
- 36.
Max Weber (1978, Volume I, p. 99).
- 37.
Stiglitz (2015b) makes similar comments on Piketty’s book (p. 428, 444).
- 38.
This system was only recently abolished after massive anti-government rallies. See The Economist, April 21, 2018.
- 39.
- 40.
According to the last estimates made by the Council of Europe, the share of Roma in the above-mentioned six countries ranges from 6.8 to 10.3%. The exact share of this minority in the population (and the very definition who are Roma) is hotly debated.
- 41.
Although the hukou system has origins in China dating back to ancient times, the system in its current form came into being with the 1958 People’s Republic of China Hukou Registration Regulation. In present times, a similar household registration system exists within the public administration structures of Japan (koseki), Vietnam (hộ khẩu), and North Korea (hoju). In South Korea, the hoju system was abolished on 1 January 2008.
- 42.
The Economist, 23 December 2017, pp. 26–28.
- 43.
- 44.
https://stats.oecd.org/Index.aspx?DataSetCode=MIN2AVE, accessed on 9 August 2018.
- 45.
Op. cit., p. 99.
- 46.
- 47.
Op. cit., p. 204.
- 48.
Solow (2014) calls this rent of supermanagers a “sort of adjunct to capital”.
- 49.
Kornai (1992, pp. 216–227).
- 50.
In Roemer (1982) book, written at a time, when socialism was an existing and strong political system, this reward for political loyalty in the socialist countries was named “status exploitation” by him. We hope that our readers will agree with us, that it makes much more sense to call this kind of income “rent”, rather than getting into the logical trouble to explain who is exploiting whom. Op. cit., pp. 243–247.
- 51.
Stiglitz (2012, pp. 15–39).
- 52.
Op. cit., p. 40.
- 53.
For a comprehensive overview of Sorensen’s work see Trond Petersen (2004).
- 54.
Stiglitz (2015b, p. 425).
- 55.
Sorensen (2000, p. 1536).
- 56.
p. 1542.
- 57.
p. 1542.
- 58.
pp. 1545–1546.
- 59.
Stiglitz offers a similar analysis with his concept of “exploitation rent”. He attributes rent to either monopolies or political influence (p. 432). Both Sorensen and Stiglitz , however, operate with the assumption, that free competition is a solution to rent-seeking. But some theorists, most recently Akerlof and Shiller (2015) reminds us that even under “perfect” market competition rent can be generated, by deception of consumers (phishing for phools).
- 60.
Ibid.
- 61.
p. 1547.
- 62.
Stiglitz also emphasizes, that inequality not stemming from the logic of capitalism, is a political problem (2015b, p. 444).
- 63.
Or saying the same in a more modest way: in an economy thoroughly permeated with rents, there is no mechanism which guarantees the most efficient use of assets.
- 64.
“In the aftermath of the financial crisis , no one today would argue that the banker’s pursuit of their self-interest has led to the well- being of all. At most, it led to the banker’s well-being… It was a negative--sum game , where the gains for winners are less than the losses to the losers. What the rest of society lost was far greater than the banker’s payoff…. When the market works well – in the way Adam Smith hypothesized - it is because private returns and social benefits are aligned…” p. 41.
- 65.
Weber (1978, p. 205).
- 66.
Weber (1978, p. 205).
- 67.
See Footnote 44, Weber (1978, p. 211).
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Mihályi, P., Szelényi, I. (2019). Rent in Classical Economic, Social, and Political Theory. In: Rent-Seekers, Profits, Wages and Inequality. Palgrave Pivot, Cham. https://doi.org/10.1007/978-3-030-03846-5_2
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