This is really a question or inquiry from me. I’m not an economist. Both of these terms are fairly new to me.
Table of Contents
Economic Rent
Adam Smith
Rent-seeking is an individual’s or entity’s use of company, organizational or individual resources to obtain economic gain without reciprocating any benefits to society through wealth creation.
Investopedia
Economic rent is an amount of money earned that exceeds that which is economically or socially necessary
Wall Street Mojo
Economic rent refers to the amount that is paid to the owner of a factor of production in excess of the cost that is to be necessarily incurred on utilizing such factors in the production process.
Britannica
rent, in economics, the income derived from the ownership of land and other free gifts of nature.
Fictitious Capital
Karl Marx
Having said that, Karl Marx wrote about Fictitious Capital.
Fictitious Capital is value, in the form of credit, shares, debt, speculation and various forms of paper money, above and beyond what can be realised in the form of commodities.
marxists.org
Fictitious Capital is value, in the form of credit, shares, debt, speculation and various forms of paper money, above and beyond what can be realised in the form of commodities.
Wikipedia (I know, but they provided citations)
Fictitious capital could be defined as a capitalisation on property ownership. Such ownership is real and legally enforced, as are the profits made from it, but the capital involved is fictitious; it is “money that is thrown into circulation as capital without any material basis in commodities or productive activity”.
Harvey, David (2006). Limits to Capital. London: Verso. p. 95. ISBN 978-1-84467-095-6.
Fictitious capital could also be defined as “tradeable paper claims to wealth“, although tangible assets may themselves under certain conditions also be vastly inflated in price.
Itoh, Makoto; Lapavitsas, Costas (1998). Political Economy of Money and Finance. London and Basingstoke: Macmillan. ISBN 978-0-312-21164-6.
So, are they the same thing?
At first glance it looks to me like Adam Smith and Karl Marx are assigning different names to what is essentially the same thing.
The basic idea is wealth is generated through production. We grow stuff. We dig stuff up. We make stuff. This creates wealth.
Making money through ownership, which is rents (rent paid for the use of land, dividends paid on owned stock, or interest paid on owned bonds, etc.) is not adding to the production of anything and actually removes value from an economy.
Adam Smith observed that it takes 3 things to create wealth. Land, capital, and labor. He argued that capital and labor make a real contribution to production, and that land really does not.
People obtaining income through rent did not add value to the economy. They extracted it.
Smith seemed to realize some level of rent is inherent in any economy, but he also seemed to consider excessive rent seekers to be economic parasites.
So back to my original question.
Is the Adam Smith concept of Economic Rent the same as the Karl Marx concept of Fictitious Capital?
