The Ricardian Theory of Rent

David Ricardo, a noted classical economist enunciated a systematic theory of rent. His theory is also known as the classical theory of rent. In his hook ‘Principles of Political Economy and Taxation’ (1817), Ricardo defines rent as that portion of the produce of the earth which is paid to the landlord for the use of the original and indestructible powers of the soil.”

In Ricardian sense, rent is typically land rent which is different from contractual rent as discussed above.

Assumptions

The Ricardian theory of rent is based on the following assumptions:

• The supply of land is fixed. It is a free gift of nature.
• Land is used for the growth of corn alone.
• Land differs in quality.
• Perfect competition prevails in the market.
• Land is subject to the law of diminishing returns.
• The fertility of land is original and indestructible.
• Land is cultivated in descending order of fertility.