The Modern Development of Classical Rent Theory.

Modern rent theory evolved considerably from rent's classical definition as an unearned increment and rests today on the classical footing that part of rent enters price. Rent on marginal land arising from opportunity cost becomes a cost and affects pike. However, no synthesis could be made with the classical view of rentless margins with rent no part of price. Alfred Marshall developed Adam Smith's monopoly theory to where short run quasi-rent arises from fixed land supply, intro- ducing rent as a cost which may be price-determined. The diminishing returns theory followed Maithus' concept that when successive lands are cultivated, they are more and more inferior. The productivity theory of John Bates Clark integrated rent theory by defining rent as the dis- counted value of the marginal product of land. Land of equal quality and unlimited supply would have a zero marginal product and be rentless. Measurement of Clarkian rent has been developed through the Cobb- Douglas production function. Under perfect competition, rent will determine the efficient allocation of various lands ranked by their respective marginal products. Variance of tents around the marginal product of land stemming from the institutional frictions of imperfectly competitive conditions are measurable and represent extensions of the Clarkian theory into a modern theory of rent resting on classical footings. [ABSTRACT FROM AUTHOR]