№ II
The twelve plates
There are two ways to grow rich: to make something the world will pay for, or to own something it needs and cannot do without. The first volume took up the wage, which is the price of making; this one takes up rent, the return to having. It anatomizes the most disputed of all incomes — the payment that flows not to effort or invention but to the ownership of what is scarce: the landlord's due, the monopolist's premium, the rent of a gift or a place. What part of it, if any, is earned, is a question economics has never laid to rest.
where does the earned return end, and the unearned rent begin?
There are two ways to grow rich, and they are not the same. One may make something the world will pay for — grow the corn, weave the cloth, write the song — and be paid for the making; or one may own something the world needs and cannot do without, and be paid simply for letting others use it. The first volume of this table took up the wage, which is the price of doing. This one takes up rent, which is the return to having. The distinction is ancient and uneasy, for the income of the owner has always worn a different moral color from the income of the worker: the wage is plainly earned, bought with effort and time, while rent — the landlord's payment for ground he never tilled, the owner's return on a scarcity he merely holds — has the look of something got for nothing, a charge levied by those who happen to control what the rest of us require. Whether that look is just is the question the volume cannot avoid.
The classical economists worried at the puzzle for a hundred years. Adam Smith had eyed the landlord with plain suspicion, calling rent a kind of monopoly price and remarking that landlords, like other men, love to reap where they never sowed; but it was Ricardo who cut to the center of it. Rent, he saw, is a child of difference. Imagine a country with land of every quality, and few enough people that only the best of it need be farmed: then land is not scarce, the poorer ground lies idle, and no one pays a penny to use what he might have for the taking. But let the population grow, and poorer and poorer soils must be brought under the plough to feed it — and now the best land yields more, for the same labor, than the marginal land just barely worth working. That surplus, the difference between the good acre and the worst acre in use, is bid for by every farmer who would rather have the good land than the bad; and the bidding hands it to the owner, as rent. From which Ricardo drew the inversion that startled his contemporaries and founded the modern theory: rent does not make corn dear; the dearness of corn, by forcing poor land into use, makes the rent. The landlord is not the cause of the high price but its beneficiary — a passenger grown rich on a journey he does not row.
What Ricardo found in the cornfield, later economists found everywhere, for land proved only the plainest instance of a far more general thing. The essence of rent is not soil but scarcity: the return to anything whose supply cannot grow to meet the demand for it. A mineral seam, a stretch of spectrum, a site at the city's heart, a rare and wanted skill, a name the public loves — each is fixed, or nearly so, in supply, and each therefore earns its holder a surplus that competition cannot erode, because the thing itself cannot be multiplied. Marshall gave the temporary version of this its name, the quasi-rent earned by a factor that is scarce for a while before supply can adjust. And the modern definition, more austere than Ricardo's, draws the idea to its limit: rent is whatever a factor is paid above the least that would keep it where it is — the surplus over its next-best use, the part of the income that buys nothing, because the factor would have stayed for less. By that measure rent hides in almost every payment, wherever something needed is something scarce.
If rent is a surplus the owner did nothing to produce, the moral question is not far behind, and in 1879 it arrived with the force of a revival. Henry George, an American printer turned prophet, published Progress and Poverty, and a treatise of political economy became, for a season, a phenomenon outsold only by the Scriptures. His question was the one the classics had raised and flinched from: why does progress, for all the wealth it heaps up, leave poverty so stubbornly beside it? His answer was rent. The value of a piece of land, George insisted, is made not by its owner but by the whole community that grows up around it — the roads, the neighbors, the commerce, the sheer press of people — so that the landlord who pockets the rising value is collecting a toll on the labor of everyone else, an unearned increment skimmed from the common advance. His remedy was as bold as his diagnosis: tax away the rent of land through a single tax that would fund the whole of government, and abolish every other levy on industry and wage. The single tax never came; but George had named, more sharply than anyone before him, the oldest suspicion in the subject — that some are paid not for what they do, but for what they are permitted to withhold.
The twentieth century gave that suspicion a harder and more general edge. Rent, the modern economists observed, does not merely wait to be collected; it is competed for, and the competition is itself a waste. Wherever a rent can be won — a monopoly licensed by the state, a tariff that shuts out a rival, a regulation bent to favor the incumbent, a place at the head of some privileged queue — men will spend real resources to capture it: hiring lobbyists, mounting lawsuits, courting the officials who hold the gate. Tullock and Krueger called this rent-seeking, and saw what was insidious in it. The rent itself is only a transfer, a shifting of wealth from one pocket to another; but the scramble to win it consumes effort and talent and ingenuity that produce nothing at all, burning real wealth in pursuit of a prize that merely changes hands. An economy thick with rents, on this view, sets its cleverest people not to enlarging the pie but to fighting over the slices — and the fight, not just the rent, is the cost. The modern economy offers a thousand such doors — the licensed profession that limits its own numbers, the patent stretched to fence off a field, the subsidy written for a single firm — each a scarcity made by rule rather than nature, and each worth the lobbying it costs to win. Here the volume touches its neighbor on power, for a monopoly's profit is precisely a rent, and much of what power buys is the right to collect one.
Beneath all of it lies the question the volume turns on, and it is this table's master thought in its starkest form. A rent is the part of an income that flows from controlling something scarce rather than from contributing anything — and it presents itself, always, as the natural and earned return to a factor: the landlord's due, the owner's just reward, the going rate for a thing in short supply. But it is nothing so innocent. It is a verdict on a contest — over who owns the scarce thing, who was permitted to enclose it, who got there first — dressed in the mild language of a market price. A price is a verdict on a hidden contest, mistaken for a fact of nature; the wage, the first volume argued, is that verdict on the contest between employer and worker, mistaken for the natural worth of the work — and the rent is the same discovery pressed to its limit, for the rent owes nothing even to effort, and is the purest case the subject affords of a price that is wholly a claim and scarcely a contribution at all. And yet — for the volume must be honest — the line between the earned and the unearned is the hardest in all of economics to draw, and nearly every real income straddles it: the gifted man labored to hone his gift, the owner bore a risk, the site was improved as well as held. The twelve plates that follow trace the rent from Ricardo's difference and George's unearned increment through the general return to scarcity, the surplus above transfer, the waste of rent-seeking, the rents of monopoly and land and talent and position, the increment the public makes, the tax the economists urge, and the rentier in whose image an economy may slowly be remade. Where the wage asked what labor earns, this volume asks what ownership is owed. The argument remains open.