The characteristics of land set out above also apply to certain forms of capital. Some economists for this reason have doubted the usefulness of the distinction between land an capital.
Some forms of capital are fixed in supply in the short run, and their reward is therefore in the nature of a rent. If there is a sudden increase in the demand for steel, the existing blast furnaces and rolling mills will become more valuable because in the short run such plant cannot be increased in supply. In the long run of course the capacity of the steel industry can be increased; the resemblance to land applies only in the short run.
In the short run many forms of capital equipment have no effective cost of being used. They originally cost something to buy but having once been bought they cost no more to use than to leave idle, and in this sense they resemble land. Again, however, the resemblance is confined to the short run. In the long run machinery wears out and has to be replaced, and will not be replaced unless its earning promise to cover its cost of production.
Marshall referred to the earnings of such equipment as ‘quasi rent’ because, although resembling a rent in the short run, they were not a true rent as they did not resemble the earnings of land in the long run. The principle can be applied very widely; there are rent elements for example in the wages of workers whose supply is fixed in the short run because of a long period of training required for the job. If the supply of a particular type of worker is fixed because of some rare natural gift required, the excess wages he earns because of the scarcity are a true rent, because they persist in the long run as well as in the short run.
It will be seen that it is quite possible to do without the concept of rent in economic analysis, assimilating land to other forms of capital. Its only claim to separate consideration is that its supply curve is unusually inelastic. Even this is only true of land as a whole. The supply of land for a particular use is obviously elastic as more land can be brought in from other uses. The supply of land for a particular purpose therefore has an opportunity cost, for if it is used for one purpose it cannot be used for another. However, the term rent has now become part of terminology of economics for describing the return to any factor of production the supply of which is highly inelastic. It is a useful short way of writing this phrase.
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