Revenue

REVENUE. - In common language it is equivalent to income (v.), with the addition of a marked character of gratuitousness, of certainty, or of constancy in amount, which income generally does not present. Among scholars, however, the meaning the term had in the classical economics of the early period (physiocratic and Smithian) still survives, and it bears the mark of the word's English origin: rent, the leasing of land. In this sense rent is specific to land (land rent), and is not to be confused with, but rather added to, any income from labor or capital spent on the improvement or cultivation of land. Rent was made to depend on the natural fertility of the soil, and A. Smith wrote that "in agriculture nature labors together with man; her contribution often represents a third, and never less than a fourth, of the total product."

This Ricardo, author of the theory that makes value (v.) depend essentially on labor and on the cost of production, could not accept; from the fact that in England in his day even uncultivated lands found tenants (Carey's experience in America was entirely different and led to opposite conclusions), he devised his famous theory of land rent, which was discussed for over half a century among economists. According to this theory rent is a differential gain that the more fortunate landowners (by fertility of the soil, natural irrigation, proximity to consumer markets, density of agricultural population, or otherwise) enjoy in comparison with the less fortunate, because of the higher costs of production the latter encounter relative to the former, while the market prices of the products are modeled on the higher costs.

The concept was then extended from the agricultural field to all primary productions, and some wished to apply it to every kind of production: but the extension worked to the detriment of accuracy and effectiveness. It is, in fact, inevitable that the most favorable situations are generally the first to be exploited, and then gradually the less favorable ones: and that this, by progressively raising the costs of production for new installations (e.g., hydroelectric ones), and consequently the sale prices for all, constitutes a special gain for the situations most favored by nature or by personal qualities (inventors). This condition consolidates into a kind of static state owing to the fact that it is not easy to disinvest capital and transfer labor from the industry of lesser profit in order to compete with those that in the same period allow a greater profit: hence the concepts of positive, or privileged, rent and of negative, or unfavorable, rent.

In manufacturing industry, however, rent is a rarer phenomenon and of a temporary character, inasmuch as prices are generally modeled on the lowest costs of production rather than on the highest. It should also be noted that land rent increases with population (H. George) and with protectionist measures, while it is checked both by the colonization of new lands and by the improvement of transport and by the scientific and technical progress of agriculture.

The school of general economic equilibrium of Walras and Pareto (every economic phenomenon influences each of the others and is influenced by them) considers the Ricardian concept outdated: rent is formed for any employment of labor or capital, especially in the extractive industries, and land rent was merely the one that first offered itself to observation, and with characteristics of greater evidence. It does not, moreover, constitute an element of price, but is a consequence of it.

To the above-mentioned phenomena of objective rent, whose cause is to be sought in real situations, there is opposed an objective rent that takes its origin from persons: thus there are a rent of the consumer and of the saver, a differential gain that it is possible to reap by buying products, services or incomes at prices lower than those one was prepared to pay; and a monopoly rent (v.), which derives not so much from being able to sell at higher prices as from producing, owing to particular situations, at a lower price than the generality.

The constitution of a rent or life annuity concerns contracts in which the irrevocable transfer of goods obliges the transferee to pay to the transferor, for a fixed period, or for the whole of his natural life, or in perpetuity to his heirs, an annual payment of money, produce, maintenance or services.

Much has been discussed and is still discussed regarding the legitimacy of rent, because it does not depend on labor and is a cause of surplus value. On this are based the schools opposed to the right of property, in order to deny that land can belong to private owners, since it pre-exists labor: which makes necessary the recognition of the right of the first occupant or of a usurper and the admission of a monopoly, which is moreover difficult to justify in point of law. Hence the tendency toward the socialization of land, with ancient and extensive experiments concerning: a) the abolition of the perpetual character of landed property (Walras) and the adoption of temporary concession contracts (v. ENFITRUS); b) a tax progressive with time, intended to absorb the surplus value (Stuart-Mill, H. George); c) the democratization of landed property through the splitting up of the larger properties, facilitating access to small property for the greatest possible number of proletarians.

Mario Baronci