Economic rent
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This article is about Economic rent as it pertains to political economy and socioeconomic theory. For other uses, see Rent.
Economic rent is the difference between what a factor of production is paid and how much it would need to be paid to remain in its current use. There are multiple mechanisms that can create economic rent: political contrivance, network effect, monopoly power, star power, etc.
In neoclassical parlance, an economic rent is the difference between the income from a factor of production in a particular use, and either the cost of bringing the factor into economic use (Classical factor rent), or the opportunity cost of using the factor, where opportunity cost is defined as the current income minus the income available in the next best use (Paretian factor rent). In other words, economic rent is generally defined as the difference between the income in the current use of the factor and the absolute minimum required to draw a factor into a particular use (from no use at all, or from the next best use). But this neoclassical treatment does not tell us whether the income is earned by virtue of a contribution to the society, or simply created by natural happenstance or government sanction and taken by virtue of unearned privilege. And it is that distinction which is essential to any proper understanding of the term.
