I need help to answers the questios from the economic thought book. 1- Understan

Question

I need help to answers the questios from the economic thought book.

1- Understand Ricardo's Rent Theory in its simple incarnation as a model?

a) How is economic rent determined in the model?

b) Is there a natural alignment between the interests of labor and capital and in what way?

2- What does Say's law of Markets Imply and Why? What is the basic idea of Ricardo's Chapter on Machinery?

a) What does this imply for the harmonious society promised by Smith?

b) Contrast Bentham's Utilitarianism with Smith's Theory of Moral sentiments?H

Explanation / Answer

1. David Recardo gave the theory of rent.

a) Ricardo defined rent as follows: “Rent is that portion of the produce of earth which is paid to the landlord for the use of the original and indestructible powers of soil.”It should be noticed that land rent, according to Ricardian definition, is a payment for the use of only land and is different from contractual rent which includes the return on capital investment made by the landlord in the form of hedges, drains, wells and the like. When return on the capital investment made by the land owner is deducted from the contractual rent, what is left is pure land rent which is the price for the use of only land or “the original and indestructible powers of the soil”.

b) The land provided by nature is not enough to cover total natural alignment. The rent depends not only on he quality of fertility & produce of the land, it also largely depends of various other factors like available resources for producing it or how easily its available at the particular place.

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