Sunday, April 5, 2015

Evan Soltas — The Rent Hypothesis


Even Soltas summarizes the controversy about economic rent, the basic objection being that rent is a theoretical unobservable and difficult if not impossible to measure empirically with any precision, so it can be ignored as a significant economic factor.

Where the rent hypothesis will be tested is through globalization. Developed countries that tack on  significant economic rent are simply not being to be able to compete with emerging countries, especially huge ones like China and India, as they catch up and actually compete in international markets on their own feet.

This is already showing up in the labor market where labor is fungible, embedded labor is exportable, and there are no protections for labor nationally. This will be met with increased automation and robotization, which China is already engaged in heavily and won't give developed countries any great advantage over time. This is going to be a deflationary influence on prices, which will benefit consumers as rents are reduced.

Evan Soltas
The Rent Hypothesis
ht Yves Smith at Naked Capitalism

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