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RE: [LandCafe] Advice pls - Definition of Economic Rent?

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  • Paul Metz
    In my opinion the question has 2 components: the qualitative definition and the quantitative value. It does not seem practical to define rent as the diference
    Message 1 of 14 , Sep 20, 2004
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      In my opinion the question has 2 components:
      the qualitative definition and the quantitative value.

      It does not seem practical to define rent as the diference
      between 2 rents, but for theoretical purposes it can be useful.

      In practice only the quantitative value will be of interest.
      Here the question is not different from "what is the correct
      percentage of any tax ?". As taxation practice shows, such
      values cannot be calculated and have many centuries been set
      by a trial-and-error process.
      E.g. tobacco, gasoline, profit and income taxes vary widely
      between countries and times.

      Conclusion: LVT can best start at a low level and gradually
      grow, while monitoring its benefits and damages to citizens.
      The revenue can partly be used to compensate proven damages.

      _____________________________________________

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      Dr Paul E. Metz Managing Consultant
      Phone +31 26 362 04 50

      Mobile +31 653 76 58 85
      Email Metz@...
      URL http://www.integerconsult.org

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      _____________________________________________


      -----Original Message-----
      From: Wetzel Dave [mailto:davewetzel@...]
      Sent: maandag 20 september 2004 8:35
      To: 'RANA ROY'; 'Land Café ( lc1)'
      Subject: RE: [LandCafe] Advice pls - Definition of Economic Rent?



      -----Original Message-----
      From: RANA ROY [mailto:rana.roy@...]
      Sent: 19 September 2004 14:50
      To: 'Land Café ( lc1) '; Wetzel Dave
      Subject: Re: [LandCafe] Advice pls - Definition of Economic Rent?



      Dave,

      Briefly: the correct (Ricardian) answer is b. The rent on a marginal site
      in the Ricardian sense is by definition zero. Think of a patch of land on
      the Saharan edge with the labourer gaining bare subsistence with no more
      than hand tools. By contrast, Canary Wharf will yield a higher return to
      labour and a return to capital - and a positive rent. ALL supra-marginal
      sites will yield a positive return after deducting for returns to the other
      factors.

      But the main point I want to make is:
      Beware of the false answer, a! This has the potential of making a nonsense
      of the concept of rent. So, if its next best use is an alternative bidder
      offering £1 less, the rent on Canary Wharf becomes: £X squillion - [£X
      squillion - £1] = £1.

      By the way, the logic of the Barker recommendations runs precisely in this
      direction. Admittedly, there is a big difference between developing
      residential land and its next best use in farming or whatever. But as a
      general rule this way of thinking is seriously misguided and seriously
      misleading.

      Rana

      -----

      Dr. Rana Roy
      5 Bryanston Square
      London W1H 2DH
      UK
      Phone: + 44 (0)207 402 6687
      Fax: + 44 (0)207 724 8925
      E-mail: rana.roy@...

      ----- Original Message -----
      From: "Wetzel Dave" <davewetzel@...>

      Is the definition of rent for a site:

      a) The excess between what is the potential and permitted best use and its
      next best use.

      or

      b) The difference between the rent for the optimum permitted use of the
      site and the rent of a marginal site.

      or

      c) something else.

      Dave

      Dave Wetzel


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