The general law of the last plate ran along an axis of fixity — and at the one end of it stood what is fixed forever, the land, earning a rent that never fades; at the other, what may be freely reproduced, earning no rent at all. But the long middle of that axis, where the greater part of the economy actually lives, is occupied by things fixed only for now: the machine, the building, the scarce skill, none of which can be multiplied today, though all of them can be in time. The return to such things is Alfred Marshall's great refinement, the quasi-rent — a rent in the short run, while supply stands fixed, that dissolves in the long run, as supply at last catches up. This plate follows the quasi-rent, perhaps the most useful single idea Marshall gave the science, and finds in it both the dimension of time that the classical theory wanted, and the seam — sharper here than anywhere in the volume — between the rent that is earned and the rent that is merely seized.
Marshall's insight begins with a machine already built. In the short run no more machines can be made, for the building of them takes time; so the supply of this machine's services is fixed, exactly as the supply of land is fixed. And a fixed supply, we have seen, earns a rent: the machine's return is settled not by what it cost — that is already spent, sunk, gone beyond recall — but by demand pressing upon the fixed supply, a residual, price-determined, in the very manner of the rent of land. This return Marshall named a quasi-rent — quasi, because it is rent-like, behaving for a time just as rent behaves, and yet only for a time. For the machine differs from the land in the one decisive respect: its supply, fixed today, is not fixed forever. Let the return to machines rise above what it costs to build them, and more will be built; the supply will swell; and the return will be competed back down to the cost of its production. What is rent in the short run becomes, in the long run, a plain cost.
And here is the idea's deepest yield, which remade the theory of distribution entire. Whether a payment is a rent or a cost — the sharpest distinction the classical economists drew — turns out to depend wholly upon the length of the time one chooses to consider. In the short run the machine's return is a rent: price-determined, the output's price settling the machine's earnings, and entering not at all into the cost that governs that price, since the machine is there regardless. In the long run the very same return is a cost: price-determining, the cost of building machines entering into the long-run cost of the output, since unless the return covers that cost no machine will ever be built. The identical payment is a rent or a cost according only to whether supply has had the time to adjust. By this stroke Marshall dissolved the classical wall between rent and profit into a single graded continuum: land, fixed forever, earns rent always; capital, fixed for a season, earns a quasi-rent that hardens into a cost as the seasons pass; labour adjusts faster still. The three great shares of the old scheme stood revealed as points along one axis — the axis of how quickly supply answers to price.
Whether a payment is a rent or a cost depends wholly upon the length of the time one chooses to consider.
The quasi-rent carries within it another idea the modern science could not afterward do without: the sunk cost. Once the machine is built, its cost is spent and gone — a bygone — and bygones, as the maxim the idea bred has it, are bygones. The firm, weighing whether to keep the machine running, looks not at what the machine cost but at what it now earns, set against what it costs to operate; and so long as the revenue covers that operating cost, the machine runs, and the excess of revenue over operating cost is the quasi-rent — ample, in good seasons, a pittance in bad. The original outlay enters this reckoning not at all: it is sunk, unrecoverable, irrelevant to the choice now at hand. From this seed grew the whole modern apparatus of fixed cost and variable, and the shut-down rule — that a firm should go on producing so long as the price covers its variable cost, even when it cannot cover its fixed; for the fixed cost, being sunk, is a quasi-rent forgone and not a cost still to be weighed. The quasi-rent is what a durable thing earns once the question of whether to have built it can no longer be reopened.
Nor is the quasi-rent confined to the machine; it reaches across into the wage of the volume before. For a worker's skill, too, may be fixed in the short run and free to vary in the long. Let some skill grow suddenly precious — the programmer's, say, in a year of feverish demand — and those who happen already to hold it earn, for a season, a surplus over what the skill cost them to acquire: a quasi-rent upon their human capital, conjured by a demand that has outrun the supply of the skilled. In time, others train to it, the supply swells, and the surplus erodes back toward the cost of acquiring the skill — the quasi-rent dissolving precisely as the machine's dissolves. Much of what the volume before set down as the return to skill, or numbered among the differences in pay, was a quasi-rent of just this kind: the passing reward of holding a scarce capacity a little before the rest of the market contrives to match it. Marshall's quasi-rent is thus the very bridge between the rent of this volume and the wage of the last — the device that shows the skilled worker's premium, the machine's surplus, and the landlord's rent to be three forms of a single thing, set apart only by how long their several scarcities can last.
And now to the seam this plate lays barer than any other. The quasi-rent is, seen the one way, a pure windfall: the owner of the scarce machine, or the holder of the suddenly precious skill, reaps a surplus from a surge in demand that he did nothing whatever to create — rent, in the volume's suspicious sense, the gain of merely fortunate possession. But seen the other way, the quasi-rent is the very thing that called the machine into being, and the skill into being, in the first place. For why does anyone build the machine, or endure the long years of training? Because of the quasi-rent he expects to earn — the surplus that will reward him for having borne the cost and the risk of creating, ahead of the demand, the capacity the demand will need. The prospect of the quasi-rent is the carrot; without it, no machine is built, no skill acquired, no durable thing made against an uncertain morning. So the same payment is, after the event, a windfall the owner did not earn, and, before it, the indispensable reward that drew him to build at all — unearned in the moment, and yet the very means by which an economy gets its productive capacity made. The quasi-rent straddles the volume's question in the most telling posture of any rent: it is the rent most plausibly earned, for it rewards an investment — and rent-like even so, for it is a residual windfall of scarcity.
The same payment is, after the event, a windfall the owner did not earn — and, before it, the reward that drew him to build at all.
One thing more, which carries the volume forward. The quasi-rent is benign in exact proportion as it is temporary — as the long run is genuinely suffered to arrive, the new supply genuinely permitted to enter and compete the surplus away. That erosion is the market working as it ought: the surplus cries "build more of this," investment turns toward it, supply rises, the surplus melts, and the buyers of the thing inherit the gain. It is the very dynamic by which scarce capacities are multiplied and their rents dissolved — the engine, some would say, of growth itself, the temporary reward that calls forth the innovation and is then competed away. But let the long run be prevented from arriving — let entry be barred, by a patent, a licence, a statute, a network that no rival can hope to match — and the quasi-rent does not dissolve; it hardens, into a permanent rent that the later plates of this volume will know by harder names: the monopoly rent, the rent of the spectrum, the toll of the gate. The whole line between a quasi-rent and a monopoly rent is nothing but whether supply is suffered to adjust. The quasi-rent earned while the world catches up is the benign face of scarcity's reward; the same surplus, walled against the world's ever catching up, is its malignant one.
Return, then, to the question of the volume, which the quasi-rent answers more revealingly than it resolves. The quasi-rent is the rent of what is fixed only for now — the machine, the building, the scarce skill — a surplus settled like rent in the short run and dissolved like a cost in the long. It taught economics that rent and cost are not two kinds of payment but one payment seen across two horizons; it gave the science its sunk costs and its short run; and it revealed the landlord's rent, the capitalist's profit, and the skilled worker's premium to be three forms of one thing, graded only by the speed at which their scarcities yield. But its deepest lesson is reserved for the volume's question. Of every rent these plates will examine, the quasi-rent is the one most plausibly earned — for it is the reward that induces the building of the very capacity an economy needs, and its erosion by fresh supply is the market doing exactly its proper work. And yet it is rent still: a windfall of scarcity, owed in the moment to fortune and not to merit. Which it finally is — earned reward or seized windfall — depends upon whether the clock is allowed to run: upon whether the long run, in which the surplus ought to dissolve, is suffered to arrive. Where it is, the quasi-rent is scarcity's benign and passing wage; where it is barred, the rent hardens, and the harder questions of the plates to come begin. The rent with a clock upon it keeps the volume's question open in the most exact way of all — for the answer turns on time, and on who holds the power to stop it. As the table says of every price within it, the argument remains open.