Paretian Rent Theory Versus Pareto's Rent Theory: A Clarification and Correction

Paretian Rent Theory Versus Pareto's Rent Theory: A Clarification and Correction 910 History of Political Economy 24:4 (1992) which have been ascribed to Pareto and what Pareto actually wrote on the subject; in conclusion, we present an assessment of the significance and implications of Pareto’s contributions to the theory of rent. “Paretian” Rent The term “Paretian” rent first appears in economic literature in a review article by D. A. Worcester (1946). Worcester delineated three branches of development for rent theory. These branches were labeled (a) classical, (6) neoclassical, and (c) “Paretian” (258). Worcester defined classical rent theory (258) in terms of the basic Ricardian model as interpreted by Marshall. He defined neoclassical rent theory as the position taken by those economists who “agree with the definitions and most of the conclusions of Marshall but who believed that the marginal productivity approach is superior to the residual approach” (258). Worcester defined “Paretian” rent as “the return to any agent of production greater than that required to keep it in its present employment” (261). He explained that the return required to keep a factor unit in its present employment was the factor’s opportunity cost. Opportunity cost was equated with the idea of transfer price: if the factor reward in the current http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png History of Political Economy Duke University Press

Paretian Rent Theory Versus Pareto's Rent Theory: A Clarification and Correction

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Publisher
Duke University Press
Copyright
Copyright 1992 by Duke University Press
ISSN
0018-2702
eISSN
1527-1919
DOI
10.1215/00182702-24-4-909
Publisher site
See Article on Publisher Site

Abstract

910 History of Political Economy 24:4 (1992) which have been ascribed to Pareto and what Pareto actually wrote on the subject; in conclusion, we present an assessment of the significance and implications of Pareto’s contributions to the theory of rent. “Paretian” Rent The term “Paretian” rent first appears in economic literature in a review article by D. A. Worcester (1946). Worcester delineated three branches of development for rent theory. These branches were labeled (a) classical, (6) neoclassical, and (c) “Paretian” (258). Worcester defined classical rent theory (258) in terms of the basic Ricardian model as interpreted by Marshall. He defined neoclassical rent theory as the position taken by those economists who “agree with the definitions and most of the conclusions of Marshall but who believed that the marginal productivity approach is superior to the residual approach” (258). Worcester defined “Paretian” rent as “the return to any agent of production greater than that required to keep it in its present employment” (261). He explained that the return required to keep a factor unit in its present employment was the factor’s opportunity cost. Opportunity cost was equated with the idea of transfer price: if the factor reward in the current

Journal

History of Political EconomyDuke University Press

Published: Dec 1, 1992

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