DEFINITION Boulding: Economic rent may be defined as payment made to a factor of production in excess of the minimum amount necessary to keep the factor in its present occupation. Transfer earnings are the part of the earnings of a resource that are equal to the earnings that this resource could derive in the next best use to which it can be put. Prominent among the theories of rent are: (a) Ricardian Theory of Rent (b) Modern Theory of Rent 8. David Ricardo in his book. The theory of economic rent was first propounded by the English Classical Economist David Ricardo (1773 -1823). In economics, economic rent is any payment to an owner or factor of production in excess of the costs needed to bring that factor into production. Explain about Quantity theory of money? Modern theory of rent does not confine itself to the determination of the reward of only land as a factor of production. The Modern Theory of Rent! The modern theory of rent is that it is the difference between the actual earning of a factor until over its transfer earnings. Related Discussions:- rent. What motivates humans to behave in certain ways has been an area of study for scholars for many centuries. Ricardo's theory explains why one land commands higher rent than another. Economic rent: – according to classical economists: “economic rent is a price of land.It is paid to the landlords by the tenant for the use of land. The classical theory of rent is associated with the name of David Ricardo. MODERN THEORY OF DISTRIBUTION The marginal productivity theory, which we have discussed above only tells us how many workers will an employer engage at a given wage-level in order to maximize his profit.It does not tell us how that wage-level is determined. By this definition, rent is exerted to other factors such as labor and capital. Modern Management Theory: The new thought of management theory was introduce in 1950s. In the context of modern theory of rent, we use the term economic rent instead of economic earnings. The transfer earnings of a factor of production are the minimum payment required for preventing that factor for transferring it to some other use. Enjoy the videos and music you love, upload original content, and share it all with friends, family, and the world on YouTube. The following are some of the criticisms: (1) No original and indestructible power of the soil: Ricardo states that rent is paid to the landlord for the ‘original and indestructible’ power of … The Ricardian theory of rent follows from the views of classical writers about the operation of law of diminishing returns in agriculture. Given the cost functi ons, we discuss the traditional and modern theor ies of . Rent according to the modern sense can arise in respect of any factor of production. But it fails to answer who rent arises. RICARDIAN THEORY OF RENT There are many theories of Rent propagated by Classical Economists and the most popular one is Ricardian Theory of Rent. discuss modern theory of determination of rent? Organizations want to adopt new techniques and methods that improve their working efficiency and also give more attention to employees and customers. One of the main elements of the classical model is quantity theory of money. But modern writers have extended the rent theory to all kinds of factor incomes. In his theory, rent is nothing but the producer’s surplus or differential gain, and it is found in land only. The minimum amount that a factor may earn in its present use to prevent it from moving away to some other use is called its reservation price or transfer earnings. It means that rent is not peculiar to land only, it may arise in the incomes of other factors as well, i.e., in wages, interest and profits. 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