chapter  7
Rent as a Measure of Welfare Change
Pages 6

The definitions of economic rent i n current use fall easily into two categories: ( I ) a payment in excess of that necessary to maintain a resource in its current occupa­

1tion. Thus, Frederick Benham tells us that rents are 'the sums paid to the factors which need not be paid in order to retain the factors in the industry' . While to Kenneth Boulding2 it is the payment to a factor 'in excess of the minimum amount necessary to keep that factor in its present occupation' . The second category (2) is the difference between the current earnings of a resource and its transfer earnings3 - the latter term signifying its earnings in the next best alternative use. 4 For instance, Paul Samuelson5 says, 'we should term the excess of his income above the alternative wage he could earn elsewhere as a pure rent' . Similarly, for George Stigler6 the rent of a factor is 'the excess of its return in the best use over its possible return in other uses' . 7

While the first type of definition is , as we shall see, unavoidably ambiguous, the second type is yet more inadequate. Among other things it would require that, in the choice of occupation, men were motivated solely by pecuniary considerations.