Theory of rent

The Theory of Rent explains how the income earned from land, called rent, is determined. It states that rent arises because land varies in fertility and location. The most productive land generates a base rent, while less fertile land earns less rent. As population and demand increase, more rent is paid for the most productive land. Rent is a surplus over the cost of bringing land into cultivation, reflecting its relative advantage. Essentially, rent is a return to land’s natural qualities and scarcity, not to labor or capital invested in it.