ancient cities

Re n t th e o R y
Land rent refers to the payment of a tribute to a
landowner. As an institution or social relation, it
regulates the use of land. Because the total sum of
capitalized future rent payments constitutes the
land price, land rent has an impact on the distribution
of income between different classes or
groups in society. In classical political economy, it
was a crucial concept for understanding the relative
income of landlords, capitalists, and workers.
In current debates, land rent is used to explain the
location of productive activities as well as the spatial
segregation of different social groups within
the urban and regional context. In general, land
rent is crucial to the explanation of spatial development
and its articulation with economic and
social processes.
Classical Political Economy
The main concern of the classical economists was
to understand the overall dynamics of economic
accumulation and growth and to explain the distribution
of income among different social classes.
Adam Smith, David Ricardo, and Karl Marx lived
in a social environment that was heavily dominated
by the weight of agricultural production in the
economy and, hence, by the relatively important
social power of landlords. One of the main questions
was how landlords were affected by economic
growth and whether their existence was a barrier
to a dynamic accumulation of capital. Smith
represents, by and large, a rather harmonistic perspective
regarding the interests of landlords and
capitalists. Both are supposed to benefit from economic
growth, capitalists in the form of increasing
profits and landlords in the form of higher rents.
Taking a different tack, Ricardo focused primarily
on differential rent. This brought him to
a rather pessimistic perspective on the role of
land rent and to an antagonistic view with regard
to the relationship between landlords and industrial
capitalists. The concept of differential rent is based
on the idea that the source of rent is different qualities
of land, such as the type of soil and the distance
to market. Better-quality land should yield a higher
rent. The price of goods produced is determined by
the conditions of production on the worst land, that
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is, land that yields no differential rent. Ricardo
argued that a further expansion of capitalism would
lead to the inclusion of land of inferior quality,
thereby increasing differential rent and reducing the
profits of the capitalist, who has to pay higher
wages to workers to allow for their reproduction.
He assumed that wages are determined by a subsistence
level, which in a simplified case consists of a
certain amount of wheat. If additional land of inferior
quality is used for production, productivity
falls. This lower productivity means that the costs of
production of the amount of wheat necessary for a
worker’s subsistence increases, and therefore, capitalists
have to pay higher wages. At the same time,
differential rent for all other landowners is increasing.
Decreasing profits ultimately reduce investment
and cause economic stagnation and crisis.
Using differential rent, Karl Marx and Friedrich
Engels further developed the concepts of monopoly
rent and absolute rent, which were also included in
a rudimentary way in the work of Smith. Their
concepts were based on the idea that rent is nothing
natural but a historically developed institution
or social relation. They also defined land as a fictitious
commodity that is not produced within the
capitalist system of production. Rather, private
property rights are assigned to nature in order to
make land a commodity.
Heinrich von Thünen
and New Urban Economics
Heinrich von Thünen, a forerunner of neoclassical
reasoning, developed his model of the isolated
state in 1826. It was based on differential rent,
which was further developed into a model of marginal
productivity. The model explains rents in
terms of transport costs to a city center and the
specific production conditions for goods. In fact,
the rent mechanism determines the type of agricultural
goods produced at different distances from
the center. In von Thünen’s theoretical perspective,
land rent is based not on social institutions but on
the conditions of production and transport costs.
Neoclassical theory may be understood as the
application of differential rent in the form of marginal
thinking and, hence, the application of scarcity
to all types of economic resources.
Nevertheless, in the 1960s, the Cambridge
Controversy in Capital put neoclassical theory and