The results of land management depend on the fertility of the land and on the location of the plots. Therefore, there are types of differential rent:

Differential rent I by natural fertility- this is the difference between the income from production in the worst conditions and income from the production of products on the best and average plots of land.

The market price of agricultural products is determined by the costs of production on the worst lands. Entrepreneur running a business on the more fertile plot, will receive more income, other things being equal.

The surplus profit turns into differential rent and is appropriated by the owners of the average and best plots of land.

Differential rent I by location- the difference between income from the production of similar products on lands of the same fertility, but located closer to the markets. As a result, manufacturers bear different costs for the delivery of products to the consumer.

The number of plots located close to the sales market is limited. The production of these lands alone is not enough to meet the entire demand for food. Therefore, remote areas are involved in the economic turnover, which will be processed only when the price of the product covers all costs (including transport costs) and ensures the average industry profit. The price of agricultural products is regulated by the costs of production in remote areas.

This rent is also appropriated by the landowner.

Question 5. Differential rent II

The application of fertilizers, the use of the latest technology for cultivating agricultural crops, and the implementation of a complex of agrotechnical measures creates the economic fertility of soils - its ability to provide increased productivity. The natural fertility of the soil is created by nature, based on the use of the beneficial properties of the upper layer of the earth - the soil. Economic fertility depends on the conditions of farming, the level of development of science and technology and is created by people.

Before the expiration of the lease agreement, D II is appropriated by the tenant, after this period the owner of the land includes it in a new lease agreement. Therefore, land owners always strive to shorten the lease period, and entrepreneurs - to lengthen it.

D II is the result of investments in land resources that bring additional income.

Question 6. Land price

The price of land depends on the influence of several factors.

1. Rent. Land acquires a price only because it generates rent.

2. Interest rate. Both ground rent and loan interest are factor incomes. The buyer of land always makes a choice: what is better: to buy land and receive rent, or to invest money in a bank and have a loan interest.

The price of land is equal to such a sum of money, which, being loaned, will annually yield an income equal to the rent from this land.

C \u003d Received rent / rate of loan interest.

For example, if a landowner receives rent in the amount of $10,000, and the loan interest rate is 5%, then the price of land (Pz) will be equal to:

The landowner will sell his land for a price not less than $200, because the bank, at a rate of 5% per annum, will allow him to receive an income equal to $10,000.

Interest rates are relatively stable, and the demand for land and the price of land are increasing, so the owners of money prefer to invest in land.

The higher the rent, the higher the price of land. The higher the interest rate, the lower the price of land.

Rent is the amount of rent and other payments for the use of buildings, plantations, roads, etc. located on this site.

1.1.2 Differential rent 2

In addition to the natural fertility of the land, there is the concept of economic fertility. The economic fertility of the land is associated with successive additional investments in it of capital and reflects the intensive path of development of agricultural production. The degree of intensity of production in the farms is different. Successive additional investments of funds are realized with different efficiency. Farms that make efficient use of capital investments and conduct intensive production receive additional income - differential rent II.

The principal mechanism for the formation of differential rent II does not differ from the mechanism for the emergence of differential rent I. It can be illustrated by the same fig. 1. for the best site. Only the reasons for the reduced level of costs differ. If for differential rent I they are associated exclusively with natural factors, then for differential rent II they are associated with a combination of natural factors and capital investments. The entrepreneur invests in improving the properties of the land, and it responds to these efforts with more or less responsiveness.

Like differential rent I, differential rent II can exist not only in agriculture. Thus, the injection of special solutions can increase the return of oil-bearing formations and reduce costs even in difficult fields.

The differential rent I goes almost entirely to the landowner, since he sets the rent at a level that takes into account the quality of the plots. Differential rent II is the result of the productive efforts of the tenant and is fully assigned to them minus income tax. In any case, this is the case until the end of the lease. After its completion, differential rent II begins to be fully or partially appropriated by the landowner. The fact is that improvements to the land achieved through the efforts of the tenant usually become inseparable from it. Thus, the tenant cannot take the roads laid inside the farm or reclamation facilities when leaving the site. This circumstance sharply strengthens the position of the landowner when renegotiating the lease agreement for a new term. He may well put the tenant before a choice: pay more or leave. Moreover, in the latter case, the landowner does not risk anything. For improved land, the new tenant will easily agree to pay more.

The described mechanics of appropriation of differential rent II affects the efficiency of agricultural production. In particular, there is a relationship between the terms of the lease and the attitude of tenants to the land. With short lease terms, tenants are not interested in improving the quality of the land: after the end of the lease, they will only suffer losses from their own efforts. The better the land becomes, the steeper the rent will rise. In the case of long terms, on the contrary, it makes sense to improve the land - all the time while the lease is in effect, the tenant will receive differential rent II. Thus, only long lease periods contribute to a prudent attitude to the land.

And what about the land users of the worst plots? D. Riccardo's theory states that this category of land does not provide differential income, and therefore no rent, because it only reimburses the costs of their cultivation. From what, then, do the land users of these plots make rent to the owners of the land? D. Riccardo's theory does not contain an answer to this question. This problem was developed by K. Marx in the theory of absolute rent.

In a market economy, there is no "no one's" land. At the same time, not one - even the worst - piece of land will be given by its owner for rent for free. At the same time, even on the worst lands, tenant farms should be able to cover their costs and receive income sufficient to pay rent, make tax payments to the budget, expand production and receive normal (or in other terms, zero economic) profits. This problem is solved with the help of net rent received from all lands without exception, including the worst ones. Pure rent (in the literature of the classical school, in particular, and the Marxist one, absolute rent) is a consequence of the absolutely inelastic supply of land under the conditions of the existence of private property on it.

On the one hand, private ownership of land excludes the free migration of capital to the agricultural sector of the economy (land cannot be used without the permission of the owner). On the other hand, the amount of land suitable for agricultural use is strictly limited; there is nowhere to take additional plots to circumvent the interests of the landowner.

Under these conditions, landowners have the opportunity to request rent for any land plots. For marginal (worse) land, pure rent is the only type of rent, for the rest it is an addition to differential rent. , while tenants have the opportunity to set inflated (compared to the practice of forming costs and profits in other sectors of the economy) prices for agricultural products in order to be able to pay them.

In other words, pure rent is a kind of tax which landowners, through the agency of tenants, levy on the whole of society, taking advantage of the fact that land, as a factor of production, is extremely immobile. If there were no net rent, the cost level of each agricultural firm would be lower. If we return again to Fig. 1, then without net rent, the tenant cost curves (ATC.) and the industry-wide supply curve S would be lower. This means that the same volume of supply of agricultural products would exist at a lower level of prices for it.

Despite what has been said, it would be wrong to regard net rent as an unambiguously negative phenomenon. Since it is a cost for the tenant, he tends to minimize this type of expense, i.e. make the most of every piece of land.

On the contrary, the lack of rent encourages mismanagement. For example, it was very often observed in the collective farms and state farms of the Soviet era. And even now huge areas of free land in the farms have been turned into wastelands. Of course, a strong economy is itself interested in using the land to increase the volume of production. But a weak or mismanaged producer, of which, unfortunately, there are still many in the countryside, loses nothing by abandoning a large piece of land, to which he "does not reach his hands." In other words, net rent is an economic mechanism that provides prudent treatment of a limited natural resource - land.

The distribution of land rent among the subjects of agricultural production depends on the type of rent.

Net Rent Assigned by the Landowner In practice, a part of the net rent may remain with the tenant, since he is the intermediary between the consumers of agricultural products, who pay this rent when buying goods, and the landowner, who ultimately receives it. Such an operation, like any intermediary service, can bring income to the intermediary. In this case, part of the net rent will be the economic profit of the tenant. in the form of rent. For him, it acts as a reward for possessing an absolutely limited resource.

And so the net (absolute) rent is that part of the income of the entrepreneur-land user, which he gives in the form of rent to the owner of the land. Consequently, even the worst lands should bring a certain income to those who exploit them. Where does it come from?

C (constant capital)

V (variable capital)

In agriculture, K. Marx believed, because of its relative backwardness from industry, the organic composition of capital is lower than in industry. And this means that the share of variable capital (invested in labor) in it is higher. But since, according to the concept of K. Marx, only the labor of hired workers is involved in the creation of profit, the profit created in agriculture is higher than the average profit. This surplus is the source of absolute rent. Therefore, the entrepreneur-land user gets the average profit, the owner of the land - absolute rent, and the hired worker - wages.

Obviously, the theory of absolute rent by K. Marx, in the form in which he justified it, is based on the ideological dogma that profit is a product of labor, and not entrepreneurial efforts. Therefore, this theory, as a rule, is not considered in modern textbooks on economics due to its obvious scientific inconsistency.

The neoclassical interpretation of land rent is based on the method of supply and demand analysis. The uniqueness of land as a factor of production is in its limitedness, immovability, immovability. From this, the neoclassicists concluded that the mechanism of interaction between the demand for land and the supply of land. The supply of land is absolutely price inelastic, i.e. even in the face of significant growth, land supply prices will remain fixed. Graphically, this means that the land supply curve S L is a line parallel to the y-axis (Fig. 2.).

The fixed nature of land supply means that land prices are determined by the demand for it. How is the demand for land formed?

The land is used both for agricultural and non-agricultural purposes, which leads to the existence of two types of demand for land: D cx, - agricultural demand. D nsh -- non-agricultural demand. The total demand for land D L will be the sum of the two specified types of demand:

D L = D cx + D HCX .

The curves of agricultural and non-agricultural demand for land have a negative slope due to the law of diminishing land productivity, but different elasticity (Fig. 3): the agricultural demand curve will be more elastic, since even a slight decrease in price will cause a noticeable increase in the volume of demand for land (for residential construction, offices, etc.).

Agricultural demand for land is a derivative of the demand for food. It takes into account the level of soil fertility, as well as the position of agricultural plots - the degree of remoteness from the centers of consumption of food and raw materials.

An important factor influencing the agricultural demand for land is the gradual reduction in food spending in the consumer's budget. As incomes rise, people spend more of their income on non-food items (housing, cars, travel, etc.). This means that the share of agriculture in national income is declining. Therefore, as R. M. Nureyev emphasizes, “if the number of the population employed in the agricultural sector does not decrease at the same pace as the costs of agricultural products, then the incomes of this part of the population will steadily rise. Naturally, this is ultimately reflected and on the agricultural demand for land and its supply" Nureev R. Capital Market and Land Market // Questions of Economics. 2006. No. 5. P. 136.

As for non-agricultural demand for land, it has a steady upward trend. There are several types of non-agricultural demand for land: housing, infrastructure, industrial demand, and even inflationary demand. With high inflation rates, the fight against the depreciation of money determines the demand for real estate, including land.

Now you can build a model of the interaction of demand and supply of land. The intersection of the demand curve D L with the supply curve S L determines the equilibrium in the land market, i.e. the land rent R, quoted by the owner of the land (Fig. 4).

With demand for land D L 1, the rent will be the area of ​​the rectangle 0R 1 BC, with demand D L 1 - the area 0R 2 AC, with D l 0 - the rent is equal to zero.

The proposed model can be used primarily to illustrate the level of differential rent. The rent for the best land R 2 will be higher than for the average R 1 , and for the average land higher than for the worst.

The worst land, as noted, will give its owner only absolute rent, while the average and best land, along with absolute rent, will provide the landowner with differential rent.

The mechanism of absolute rent can be represented by the following graph (Fig. 5).

If the demand for land increases (due to an increase in the demand for food or an increase in the demand for housing) from the level D L 1 to the level D L 2: absolute rent will increase from R 1 to R 2.

Consequently, both the differential rent model and the absolute rent model clearly show the active role of demand. Under conditions of inelastic land supply, rent is entirely determined by the dynamics and level of demand. And this has a direct impact on the price of land.

ground rent

The reason for the formation of differential rent is a natural monopoly on the object of the economy, in other words, it is impossible to create equal conditions for managing because of natural differences in fertility, in transportation costs ...

Farms operating on the best and average land are in an advantageous position compared to farms located on the worst plots, since their costs are lower. This gives them the opportunity to earn additional income ...

Land as a factor of production

In addition to the natural fertility of the land, there is the concept of economic fertility ...

Features of the land market

Features of the land market

The market of land resources and land rent

Absolute land rent is generated by the monopoly of private ownership of land. By virtue of this, the tenant pays a fee (rent) to the owner of the land for the right to use it ...

Possessing a monopoly of land management, the land user receives additional profit in the form of differential rent, the source of which is the difference between the social and individual value of the land product ...

In the process of managing the land, in the case of monopolization of the production (marketing) of a unique product, the formation of monopoly rent is possible ...

Status, problems and prospects for further development of the land market in Russia

Net economic rent is the difference between the income received from the use of factors of production (rent) and the minimum profit that induces the owner of this resource to sell (lease) it ...

In reality, the earth differs ("differentiates") both in fertility and in position. The question of differential rent was first developed in detail in the writings of D. Ricardo.

Consider the problem on the example of the natural fertility of the earth. Suppose there are three kinds of land: the best, the average, and the worst. With equal investments of capital and labor, different results can be obtained on the same size plots due to the different fertility of the land.

Higher productivity and, accordingly, productivity in this case are entirely the result of differences in natural fertility.

Therefore, the rent for the best land will be higher than for the average, and for the average higher than for the worst. The worst land will give its owner only an absolute rent, while the average and best land, along with the absolute rent, will also give a differential one.

The differential rent from the worst land will be zero.

The fertility of the earth is not given once and for all. It can be improved or worsened as a result of managing the land. Artificial fertility can be added to natural fertility. Modern land is the result of a long process of investment of capital and labor.

Differential rent of the first kind- rent collected from plots of land with the best natural fertility or with the best location of the land (for example, land in the center of the city will always be more expensive, other things being equal, if only because it is in the center).

Differential rent II kind- rent collected from agricultural land with the best artificial fertility or non-agricultural - with developed infrastructure. If the owner of the land made some improvements, then he must both reimburse the cost of these structures and receive interest on the capital expended (after all, he could put the capital in the bank and live in peace, receiving interest).

The construction of buildings and structures on land, the costs associated with improving fertility, and the development of infrastructure lead to the fact that depreciation and interest on capital investments account for an increasing share in the structure of rent - "rent swells."

The additional return on capital investment can increase labor productivity, lower it, or leave it at the same level. In the event that additional capital investments lead to an increase in production efficiency, they speak of an increasing additional return. Then, when the lease is renewed, the rent will also increase.

Land price.

The price of land is determined by capitalizing the rent.

The price of the land should represent the amount of money that, by putting it in the bank, the former owner of the land would receive a similar interest on the invested capital. Therefore, the price of land is the discounted value of the future land rent:

P L = --------- * 100%

where R is the annual rent;

i - market rate of the court interest.

Rent.

In reality, rent is only a part of the amount that the tenant pays to the landowner. In addition to rent, the rent also includes depreciation on buildings and structures (which are located on the ground), as well as interest on invested capital.

This happens because the landowner seeks to take these investments into account by raising the rent. The shorter the contract, the faster the rent can be raised, motivated by improved land quality or developed farm infrastructure. Therefore, tenants strive to make such investments that will fully pay off for the lease period.

Hence the well-known opposition of interests. Owners of the land seek to reduce the terms of the lease, and tenants seek to increase it. It is no coincidence that in Western Europe there is a tradition of renting land for construction for a period of 99 years. During this period, the cost could be completely written off, and the building itself fell into complete disrepair.

150 years ago, at least 50% of the national income was created in the agrarian sector of the advanced countries of Western Europe and North America, about half of which was appropriated by landowners.

Currently, the share of national income generated in the agrarian sector is estimated at a few percent, and private land owners receive even less - in the United States, for example, less than 1% (although official statistics underestimate this figure).

The problem of the price of land and rent has recently become not so much a "village" problem as an urban problem, and land rent has turned into economic rent.

Farms operating on the best and average land are in an advantageous position compared to farms located on the worst plots, since their costs are lower. This gives them the opportunity to receive additional income, called differential rent I. The most typical reasons for the formation of differential rent I are the advantages that the land has in terms of fertility or location.

The mechanism of formation of differential rent I is shown in more detail in fig. one.

Suppose that there is a demand for some type of agricultural product, characterized by the curve D, and an industry-wide supply, expressed by the curve S. As always, the market equilibrium will be established at the intersection of the curves O. For agricultural producers, which are small firms, this will set the price level at which buy their products. So, in the first approximation, events will develop, as in the market of perfect competition. The intersection of marginal cost curves with marginal revenue curves (MC=MR=D) will set the optimal production size Qi for each of the firms.

Here, however, the resemblance to perfect competition in non-agricultural industries breaks off. Lands are the best and the worst in quality. And if economic profits are obtained on the best section No. 1, then on the worst section No. 2 only break-even production is ensured.

By the way, the worst section No. 2 is usually called the marginal one, since it is the last type of sites on which production is still possible with a given ratio of supply and demand. All lands that are worse than it in quality will definitely be taken out of production in the long term, since the selling price of products on them will not cover the costs.

Economic profits in the first section will be long-term. In other industries, as you know, with perfect competition, this does not happen. The presence of economic profit (if it is formed for a while) attracts new producers to the industry. Supply rises, the S curve shifts to the left, prices fall, and profits disappear.

All this does not happen in agriculture. After all, economic profits on the best plots are due to a natural reason - the higher quality of the land. It is impossible to transfer all production only to the best sites: unlike industrial enterprises, they do not "multiply", there are exactly as many of them as nature has created. The economic profit obtained on all plots that exceed the marginal quality of land is called differential rent.

Differential rent I is formed not only in agriculture, but everywhere where the natural properties of the land and other natural resources, which differ in their qualitative characteristics, are used in the production process. For example, this happens in mining and construction, energy and fisheries. Thus, unlike manufacturing firms, individual mines, shafts, etc. have consistently lower costs compared to other companies in their industry. This advantage (and the resulting economic profits) is due to natural causes: the conditions of occurrence of minerals and the wealth of deposits.

Of no small importance is the location of mines, wells and mines. Location has a particularly large influence on rent in construction. For example, apartments in the city center are more expensive, and accordingly, differential rent is formed on the land allocated here for development.

Differential rent is formed not only in agriculture, but also in mining and construction. In the extractive industry, as in land ownership, it is generated by differences in the level of labor productivity and the magnitude of the value of the product. These differences are due to the unequal wealth of mineral deposits, the inequality of other natural conditions in mines, mines, oil wells, etc. differential income, which is appropriated by the owner of the land in the form of differential rent. Land owners also receive differential rent for plots of land on which buildings and structures are built. Its value largely depends on the location of the facility under construction.

When considering differential rent, it turned out that it does not form on the worst lands. However, the landowner also leases these lands, for he receives for this absolute rent.

Absolute P. (absolute rent) - a kind of rent associated with a monopoly of ownership of a given type of resource.

The reason for its formation is the second type of monopoly in agriculture - monopoly private property to the ground. It hinders the free application of capital to land, its transfusion in the course of intersectoral competition, which establishes an average profit. Historically, agriculture has often had a higher share of labor compared to the share of capital goods than industry. Therefore, in agriculture, more surplus value is created per unit of capital, and the value of agricultural products is greater than the social price of their production. The difference between the value of agricultural produce and the social price of its production on inferior lands forms the surplus profit which the landowner appropriates in the form of absolute rent. It raises the market prices of agricultural commodities and enables landowners to impose a kind of tribute on society in the form of absolute rent.

So, cause the absolute rent received from the worst lands is the monopoly of private ownership of land, the condition for its formation- lower organic composition of capital - O (O - C: V, where C is the cost of the means of production; V- the cost of labor) and agriculture, a source- surplus value created by the labor of agricultural workers.

Under exceptionally rare conditions, monopoly rent.

monopoly rent- based on the monopoly price of products of rare quality (durum wheat for obtaining flour with special baking qualities; special grape varieties for making world famous wines).

The fact is that for certain agricultural products (special varieties of grapes and tea, citrus fruits, etc.), produced in exceptional natural and climatic conditions, monopoly prices are formed that exceed the cost of their production. The demand for these goods is greater than their supply. Under these conditions, the upper price limit is determined only by the level of effective demand, i.e., market conditions. The difference between the monopoly market price and the value of the product forms the monopoly land rent, which is appropriated by the owner of rare earths. Consequently, the source of monopoly rent is outside agriculture. It is obtained in other sectors of the economy, and then redistributed through the mechanism of market prices in the interests of the owner of rare earths.

Under the conditions of the transitional economy in Russia, there are corresponding changes in rent relations: in the reason and conditions for the formation of rent, in the sources of its formation, in distribution and appropriation. So, in agricultural enterprises (cooperative, joint-stock and other enterprises) differential rent I and II is formed. However, its source in the reorganized state and collective farms and other farms is not only the surplus labor of hired workers, but also the labor of the members of the farm. Since the differential rent I, connected with the natural fertility of the land, is not the result of the best work of the given economy, it must be withdrawn from the economy in the main and used in the interests of society. In contrast, differential rent II is formed in connection with the additional costs of the economy, which gives it the right to appropriate appropriation of part of the rent. Another part of the rent may be appropriated by the state if it has taken part in improving the fertility of the soil.

Differential rent is also formed in peasant (individual) farms, in which there are differences in the fertility and location of land plots, in the productivity of additional investments in land. The sale of agricultural products from the best plots of land allows the peasants to receive a surplus of value, which forms the differential rent.