---
title: three things called rent
canonical_url: https://ensurance.app/guide/three-things-called-rent
markdown_url: https://ensurance.app/guide/three-things-called-rent.md
subtitle: "contract rent is a price, economic rent is a surplus, rent-seeking is a race. what entrust ends is the perpetuity on the land."
category: natural-capital
---

# three things called rent

*contract rent is a price, economic rent is a surplus, rent-seeking is a race. what entrust ends is the perpetuity on the land.*

**Economic rent** is what a thing earns beyond what it takes to bring it into use and keep it there. For land, it is what a parcel yields because of what it is and where it is: deep soil, reliable water, a good location. Most people mean something else by rent: the check a tenant writes. "Rent-seeking" is a third thing. Mix them up and a farmer's fair lease gets called extraction, while real extraction hides behind the farmer.

The soil, the water it holds and the habitat on a parcel yield whether or not anyone collects rent on them. [*Ensurance*](https://ensurance.app/?from=guide) is a way to pay a parcel out of the rent roll and hold it for itself. It is not the land, and it is not a better landlord.

:::johnson
**contract rent is a price. economic rent is a surplus. rent-seeking is a race.** Entrust, the designed end state where a parcel is paid off and held for itself, leaves the price of use alone, stops the surplus being capitalized into a price for the land, and takes one parcel at a time out of the race.

[why land is priced like an income that never ends →](/guide/rent-is-a-perpetuity?from=guide)
:::

## contract rent: the price of using land

**Contract rent** is what a tenant pays an owner for possession and use under a lease. A farm tenant paying cash rent per acre, a community group renting a hall. Both sides chose it.

A cash rent on bare land is largely a price on the soil and water ([what cash rent is already pricing](/guide/what-cash-rent-is-already-pricing?from=guide)). So a lease is one way the land's surplus reaches an owner. That does not make it extraction: it is a chosen price for real use, and legitimate income. It is not rent-seeking.

## economic rent: the surplus the land yields

David Ricardo drew the line in 1817. Rent, he wrote, "is 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." He warned that popular usage applies the word to "whatever is annually paid by a farmer to his landlord", barns and drains included.

Take two fields worked the same way. The river-bottom field holds water into August; the upland field dries out in July. The tenant will bid more for the bottom field. That difference, from the soil and water rather than anyone's work, is **economic rent** in Ricardo's sense.

A soil scientist would object that topsoil erodes and aquifers drop. On farmland, economic rent is the yield of a living system, and it can be run down.

A living parcel yields more than any crop or lease shows: the water it stores for the town below, the habitat on its edges, the flood peaks it flattens. Most of that has no buyer, so it sits in nobody's rent or price: an unpaid benefit, not yet rent. As more of it finds a payer, more of it becomes economic rent. The question is **who capitalizes it**.

## the step from rent to price

A buyer prices a parcel as the rent it can command, divided by a rate. Illustrative only: a field that rents for $250 an acre, at a 4% capitalization rate with no growth and no end date, prices near $6,250 an acre. The price is the economic rent, capitalized into a claim that never ends: a **perpetuity**.

Whoever can pay the most capitalized rent decides the use. [Every unprotected acre has a buyer](/guide/every-unprotected-acre-has-a-buyer?from=guide) shows the crowd at that table. Bidding for land in an open market is not rent-seeking; it is the ordinary contest capitalized rent sets up.

## rent seeking: spending to win a transfer

**Rent-seeking** is spending money and effort to capture income from control of something scarce rather than from making anything. The unease is older than the term. Adam Smith wrote in 1776 that as soon as the land of any country has all become private property, "the landlords, like all other men, love to reap where they never sowed, and demand a rent even for its natural produce."

Smith was describing economic rent, not rent-seeking, and condemning no lease. The modern term is about what people spend to win a transfer. Gordon Tullock argued in 1967 that the cost of a monopoly or tariff includes everything spent trying to get one, by losers and winner alike: "The cost of a football pool is not measured by the cost of the winner's ticket, but by the cost of all tickets." Anne Krueger named it in 1974, estimating that rents from government restrictions in India in 1964 were about 7.3% of national income. People compete for such rents, she wrote, and "Sometimes, such competition is perfectly legal."

A land example: a county will approve one new subdivision at the edge of town, and five farm owners and the developers holding options on them spend on lawyers, studies and campaigns to be chosen. The uplift is made by that decision, not by work on the soil. What all five spend is Tullock's pool of tickets, and four get nothing for it.

Rent-seeking runs through licences, patents, platforms and zoning. Ensurance does not end it.

## henry george's answer, compared

Henry George saw the same surplus in 1879: "It is not necessary to confiscate land; it is only necessary to confiscate rent." His remedy was "to appropriate rent by taxation", the policy now called a land value tax.

| | George's land value tax | entrust |
|---|---|---|
| reach | every parcel, by law | one parcel at a time, by agreement |
| the owner | keeps title; the public takes the rent yearly | is paid the value of the perpetuity, once or over a dated path |
| the land | stays saleable, at a price that falls as the tax takes the rent | leaves the market |
| what it needs | a legislature | a willing seller and a payer |

The sharpest difference is compensation. George argued landowners had no claim to it; entrust pays the owner, so someone has to fund that price. This post takes no side on a land value tax.

## which rent entrust changes

At **entrust**, the land is held by a foundation, a land trust, a group of stewards, or the land itself through a holder or wrapper with the place as beneficiary, under real-property law with a care plan ([permanent protection has to survive us](/guide/permanent-protection-has-to-survive-us?from=guide)). No parcel is at entrust yet, and legal permanence at scale is still to be proven.

| kind of rent | who pays | who collects | does entrust change it |
|---|---|---|---|
| Contract rent on a working farm today | The tenant | The owner | No. Legitimate income; after entrust, paid use goes to the place (last row) |
| Economic rent (the soil, water and habitat surplus) | The tenant or the buyer, for the part that is priced; nobody for the rest | Whoever holds title, through rent and price | Yes, in one way: it can no longer be capitalized into a price for the land. The flows go on |
| The perpetuity (rent capitalized into the price) | The next buyer | The seller | Yes, on entrusted parcels: paid out once or over a dated path |
| Rent-seeking (spending to capture a transfer) | The public and the losing bidders | The winner | Not in general; one parcel leaves the table |
| Paid use after entrust | The grazier, the hall group, the user | The place, as its governance sets | Stays, and is contract rent |

During a dated path, title or security may sit with whoever carries the cost ([the annuity that ends the perpetuity](/guide/the-annuity-that-ends-the-perpetuity?from=guide)). After entrust, a certificate or coin is not a use right unless one is built in; use runs through ordinary use agreements and leases ([one token can't be your home, your vote and your visit](/guide/one-token-cant-be-your-home-your-vote-and-your-visit?from=guide)).

Entrust does not end rent. It ends the perpetuity on the land: the land is free of the owner's perpetuity, of debt and of private claims, so nobody can buy, sell, borrow against or foreclose it. Certificate distributions continue where a place's governance provides them, as a share of what the place and protocol earn, with no claim on the land; [the hub answers that objection](/guide/rent-is-a-perpetuity?from=guide).

## frequently asked questions

### what is economic rent?

Economic rent is income beyond what it takes to bring something into use and keep it there. For land, it is the extra a fertile, well-watered or well-placed parcel yields over a poorer one worked the same way (Ricardo, 1817). Contract rent is the payment a tenant makes under a lease.

### what is rent seeking?

Rent seeking is spending resources to capture income from control of something scarce, such as a licence, a monopoly or a rezoning decision, rather than from producing anything (Tullock 1967, Krueger 1974). A landowner collecting a fair cash rent is not rent seeking.

### does ensurance end rent?

No. Contract rent for use can continue, paid to the place after entrust. Rent-seeking goes on. What entrust ends, on parcels brought to it, is the perpetuity on the land: the private claim on the land itself, which capitalizes its surplus into a sale price. No parcel has reached entrust yet. This is not legal or tax advice.

## next

[A better lease is still a lease](/guide/a-better-lease-is-still-a-lease?from=guide), or [find a place on the map](/explore?from=guide).

## sources

[Adam Smith, *The Wealth of Nations* (1776), Book I, chapter 6, "Of the Component Parts of the Price of Commodities", Cannan edition at Econlib](https://www.econlib.org/library/Smith/smWN.html?chapter_num=9) — "the landlords, like all other men, love to reap where they never sowed"

[David Ricardo, *On the Principles of Political Economy and Taxation* (1817), chapter 2, "On Rent", Project Gutenberg](https://www.gutenberg.org/ebooks/33310) — the definition of rent and the warning about popular usage, both in the chapter's opening paragraph (first edition text)

[Gordon Tullock, "The Welfare Costs of Tariffs, Monopolies, and Theft", *Western Economic Journal* 5(3), June 1967, pp. 224–232](https://doi.org/10.1111/j.1465-7295.1967.tb01923.x) — the football pool, p. 232

[Anne O. Krueger, "The Political Economy of the Rent-Seeking Society", *American Economic Review* 64(3), June 1974, pp. 291–303](https://ideas.repec.org/a/aea/aecrev/v64y1974i3p291-303.html) — "perfectly legal", p. 291; India 7.3% of national income (1964), p. 294

[Henry George, *Progress and Poverty* (1879), Book VIII, chapter 2, "How Equal Rights to the Land May Be Asserted and Secured", Project Gutenberg](https://www.gutenberg.org/ebooks/55308) — "only necessary to confiscate rent" and "to appropriate rent by taxation"; his case against compensation is Book VII, chapter 3, "Claim of Land Owners to Compensation"

## the series

1. [rent is a perpetuity](/guide/rent-is-a-perpetuity?from=guide) — **Read first:** why land is priced like an income that never ends, and how a parcel leaves that contest
2. [three things called rent](/guide/three-things-called-rent?from=guide) — Contract rent, economic rent and rent-seeking, and which one entrust ends
3. [a better lease is still a lease](/guide/a-better-lease-is-still-a-lease?from=guide) — What reformed leases fix, and what community land trusts and purpose trusts already do
4. [the annuity that ends the perpetuity](/guide/the-annuity-that-ends-the-perpetuity?from=guide) — Time value of money as a way out that takes nothing from anyone
5. [usufruct: the use is given, the land is held](/guide/usufruct-land-access-without-debt?from=guide) — An old idea rebuilt: use and fruits, the substance kept, the land never for sale
6. [held for itself, used by many](/guide/held-for-itself-used-by-many?from=guide) — Who holds entrusted land, who uses it, and who keeps the holder honest