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[Paper first received, March 1998; in final form, December 1998]
Summary. The idea that there might be some minimum rent below which a land-owner would not let to any tenant was put forward by Marx, but with little supporting argument. In this paper, it is shown that the modern concepts and analysis of transaction costs and monitoring costs can explain why such a minimum rent might exist. Further, that risk and uncertainty, coupled with the fact that tenancies are usually for some years, also provide an explanation for the reluctance of land- and property-owners to let at minimal rents. Some empirical evidence is cited, particularly the substantial rents which have to be paid to lay telecommunication cables across private land.
Introduction
In an associated paper (Evans, 1999) the concept of absolute rent in Marxian economics was discussed, in particular Marx's argument in Capital, where absolute rent is the minimum rent below which no land-owner will rent land to a tenant. It is shown there that Marx clearly holds that for absolute rent to exist in agriculture it is necessary that the ownership of land should be separated from its operation. So a landlord would not rent land to a tenant if the rent offered was less than the 'absolute' rent when a farmer who owned the land would nevertheless farm it since a positive return was possible. A piece of marginal land might lie idle in a system of landed property with landlords and tenants, but would be utilised in an owner-occupier system.
Although, in this author's view, Marx is quite clear that landlords will not let land at less than some minimum rent, which he calls absolute rent, he provides no explicit reasons why they should be unwilling to do so, merely that they will not be philanthropic. Because of this lack of economic justification, most economists since then have seen little or no reason why a minimum rent of this kind should exist.
In this paper, it is argued that the concept of a minimum rent can be explained in terms which have recently become standard in mainstream economic analysis. Whilst we have no reason to suppose that the argument is one with which Marx would have agreed, nevertheless it provides...