Re: Example economic rent calculation

On 23 Oct 2005 01:37:45 -0700, jim_bowery@xxxxxxxxxxx wrote:

>>>From the Wikipedia article on "economic rent":
>
>"the income earned in its next best use, is the opportunity cost of the
>factor. The difference between the opportunity cost and the income
>earned in its present use is a rent."
>
>http://en.wikipedia.org/wiki/Economic_rent
>
>OK, so here's a simple example to calculate economic rent:
>
>Microsoft owns the copyright to the Windows operating system. Let's
>say they earn $X/month on it and in its "next best use" it would earn
>$Y/month.
>
>$X is easily defined as, say, the sales of Windows.
>
>Is $Y easily defined? If so what is it?

Nobody knows, and it makes no difference anyway. The idea is that the
efficiency of free markets eliminates rents by reducing differences in
returns. The definition of rent as a return in excess of opportunity
cost is thus designed not to illuminate the concept of rent, but to
eliminate it, in order to prevent anyone from even thinking about it.
Defining rent by the size of the return obtained rather than its
source is clearly nothing but epistemological sabotage.

-- Roy L
.

Relevant Pages

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