RENDITA.—In common usage, reddito (v.), with the additional pronounced character of gratuitousness, certainty, or constancy in amount, which reddito generally does not possess. Among scholars, however, the meaning that the term had in the classical economics of the early period (physiocratic and Smithian) still survives, and reflects the English origin of the word: rent, the leasing of land. In this sense, r. is specific to land (r. fondiaria), and must not be confused with, but rather added to, any income from labor or capital expended in improving or cultivating land. R. was made to depend on the natural fertility of the soil, and A. Smith wrote that “in agriculture nature works together with man; her contribution often represents a third, and never less than a fourth, of the total product.”
Ricardo, the author of the theory that makes value (v.) essentially dependent on labor and the cost of production, could not accept this; observing that in England in his day even uncultivated land found tenants (Carey’s experience in America was entirely different and led to opposite deductions), he devised his famous theory of land r., which was debated among economists for more than half a century. According to this theory, r. is a differential gain enjoyed by the more fortunate landowners (because of soil fertility, natural irrigation, proximity to consumer markets, density of the agricultural population, or other factors) in comparison with the less fortunate, owing to the greater production costs encountered by the latter, while market prices for the products are determined by the higher costs.
The concept was subsequently extended from agriculture to all original forms of production, and some wished to apply it to every kind of production; but this extension came at the expense of precision and effectiveness. It is inevitable, in fact, that the most favorable situations are generally the first to be exploited, followed gradually by the less favorable ones; and that this process, by progressively raising production costs for new installations (e.g., hydroelectric ones), and consequently selling prices for all, constitutes a special gain for situations favored by nature or by personal qualities (inventors). This condition becomes consolidated into a kind of static situation because it is not easy to withdraw capital and transfer labor from the less profitable industry in order to compete with those which, at the same time, permit a greater profit: hence the concepts of positive, or privileged, r., and negative, or disadvantageous, r.
In manufacturing industry, however, r. is a rarer and more temporary phenomenon, since prices are generally determined by the lowest production costs rather than by the highest. It should also be noted that land r. increases with population (H. George) and with protectionist measures, while it is restrained both by the colonization of new lands, by improvements in transport, and by scientific and technical progress in agriculture.
The school of general economic equilibrium of Walras and Pareto (every economic phenomenon influences each of the others and is influenced by them) regards the Ricardian concept as outdated: r. arises from any employment of labor or capital, especially in extractive industries, and land r. was merely the first to present itself for observation, and with more evident characteristics. It does not, moreover, constitute an element of price, but is a consequence of II.
The objective phenomena of r. mentioned above, whose cause is to be sought in real situations, are contrasted with an objective r. originating in persons: thus there are a consumer’s r. and a saver’s r., a differential gain that can be obtained by purchasing products, services, or incomes at prices lower than those one was prepared to pay; and a monopoly r. (v.), which derives not so much from the ability to sell at higher prices as from producing, owing to particular circumstances, at a lower price than the general level.
The establishment of r., or life r., concerns contracts in which the irrevocable transfer of property obliges the transferee to pay the transferee, for a specified period, or for the duration of a natural life, or in perpetuity to the heirs, an annual provision of money, produce, subsistence, or services.
Much has been and continues to be debated concerning the legitimacy of r., because it does not derive from labor and is the cause of surplus value. The schools opposed to the right of property base their denial that land can belong to private owners on this fact, since it existed prior to labor: this makes necessary recognition of the right of the first occupant or of a usurper, and the admission of a monopoly, which is, moreover, difficult to justify as a matter of law. Hence the tendency toward the socialization of land, with ancient and extensive experiments concerning: a) the abolition of the perpetual character of land ownership (Walras) and the adoption of temporary concession contracts (v. ENFITRUS); b) a tax progressive over time, intended to absorb surplus value (Stuart-Mill, H. George); c) the democratization of land ownership through the subdivision of larger properties, facilitating access to small property for the greatest possible number of proletarians.