When is Profit Taxable Rent?

I. When is Profit Taxable Rent? 2 videos

II. Interest is the Price Paid for Capital

III. Enterprise and Business Profit 2

IV. Macro-Micro Conclusion 1

Updated 12/14/19 Please Share

Lecture Notes
1-page Wage Determination printable
I. When is Profit Taxable Rent?
   A. Economic rent applies to amounts above those required to keep factors
         employed at their current use, i.e., the factors' opportunity cost.
         1. Since economists include a normal return on investment in costs,
             any profit represents rent, a surplus.
         2. Companies with monopoly power that results in profit receive economic rent.
    B. Pure economic rent is the concept of economic rent applied to
         factors fixed in supply such as land and other natural resources.
    C. Economic implications of pure economic rent
        1. Supply is fixed, perfectly inelastic, and price therefore does not
            perform the incentive function of increasing quantity supplied.
        2. Socialist philosophers questioned whether pure economic rent should be paid.
            a. Originally free, owners of land receive pure economic rent which is a surplus.
            b. Henry George wanted to tax rent away in 19th century America.
                1) Called the single-tax movement, he wanted to replace
                     all taxes with one tax on land.
                2) Three problems exist with this philosophy.
                    a) Land is not free to current owners.
                    b) Capital improvements are necessary to make modern land useful.
                        c) Modern rent does perform a rationing function because
                       land is of such differing quality.
                3) The Story of the Georgist Movement for the latest on this movement.
                4) Henry George and The Single Tax 26 min video
                5) The Henry George Historical Archives 66 min video
    D. A modern demand schedule has land's rent derived from the
         revenue it generates (MRP_L). For those interested in finance,
         and is valued at the present value of future income.

    E. Wealth Tax Economics

    F. Readings
        1. Rent Seek and You will Find is a current perspective of modern rent seekers.
        2. The Compensation of Highly Paid Professionals: How Much Is Rent?
        3. 16 Stagflation and Supply-Side Econ
        4. When Does Income Inequality Affects Growth
        5. US Economic Normality 1945-2015   page 2
        6. World Changed and Good Jobs Disappeared 1p
    g. Check out AP Microeconomics Review Materials

Supplemental
Political Economy Stuff

Log Scale Needed

Leverage Up, Volatility Up

Source is a good post WW2 analysis
See Class Struggle Is Written On The Stock Market/

Answer to When is Profit Rent This is a Politics Question Not an Economic Question See Conversation with Mark Blyth: Economics and Social Justice, SHORT-TERM POLITICS VERSUS LONG-TERM RETURNS Unit 1 Review Economists define rent as the amount above that required to keep factor resources employed. It is an excess.
II. Interest is the price paid for capital A. The price of capital goods (any person-made aid to production) will be analyzed. B. Our main concern will be the cost of the funds required to buy the physical goods, i.e., interest. C. Supply and demand for loanable funds determine Interest rates. 1. Demand for funds is a function of individual, business, and government attitudes toward investment risk. a. These attitudes determine the required rate of return an asset must earn to be part of the production process. b. The more the risk, the higher the required rate of return. 2. Supply of funds is a function of individual, business, and government saving and Federal Reserve policy. D. Characteristics of a loanable funds (debt) market 1. Demand comes from the needs on individuals, business, and government to borrow for investments. 2. Supply comes from the savings of individuals, business, our governments, and foreigners who loan us profits from trading with us. 3. During the 1980's a dramatic increase in the demand for loanable funds combined with a decrease in savings to yield a dramatic rise in real interest rates. This increase caused a decrease in business capital investment and slow economic growth. Unit II. Review Interest is the price of capital goods (any person-made aid to production)

III. Enterprise and business profit A. Economic profit is revenue minus explicit + implicit costs B. An amount greater than zero represents economic rent. C. Entrepreneurs receive economic rent for these activities. 1. Initiative 2. Decision making 3. Innovation 4. Risk taking 5. Monopolizing markets 6. Controlling Government D. Modern methods of creating rent include 1. domestic outsourcing 2. inter-firm contracting 3. growing importance of production networks to E. Economic profit exists in expanding industries and will disappears as a result of competitive forces or result in social unrest. See Why the Fed simply doesn't get it (creative destruction) video F. Mark Blyth: Economics and Social Justice Video G. Fixing The Economy looks at finance sector rent. H. Generating rent is difficult Source Performance of startups vs. established firms	seekingalpha.com

Editor's Note: The "carried interest rule" allows the managers of private-equity funds (formerly called leveraged buyout firms) to call their 20% bonus for success a capital gains rather than income. The bonus is in addition to the 2% of assets they get as asset managers which is taxes at 35%. One estimate has the carried interest as 1/3 of company profits.

US corporate governance is a bonus system based on profit so much is gained by lowering factor costs (wages, materials.. when price pressure increases while the German corporate governance system includes worker representation so wages are to some degree sheltered forum price pressures.

I

U.S. is an entrepreneurial country

Source The Economist Magazine 10/5/13
New book explains why business
investment has been low profits-prophet The Economist Magazine 10/5/13

Source

The Algorithm Kingdom China May Match or Beat America in AI

Spread of 3D Models Creates Intellectual Property Problems

         Politics plays a role
Editors Note: After it was discovered that presidential candidate M. Romney's average tax bill runs under 15%, the rates were being questioned. While the poor pay little or no income tax, they pay 6.2% of wages up to an annual wage maximum ($110,100 in 2012) for Social Security and a tax of 1.45% of all wages for Medicare. The total of 7.64% can be doubled to 15.28% as employee portions are matched by employees. A near majority of the poor die before being able to collect Social Security and Medicare See

U.S. Investment Taxes:191-1921
U.S. Investment Taxes: the 1920's

Source businessinsider.com Editor's Note: Given increased competition, maintaining marquis has been amazing. We will see that wages bore much of the cost with science helping some especially lately with frocking.

Profits Above Norm for 20 Years



IV. Rise of Monopoly Power in the United States - Washington Center for Equitable Growth
        is a technical video tying recent micro and macro developments to financial markets.

Unit III. Review Enterprise profit is the rent for Initiative, decision making, innovation and risk taking.

Last Chapter Part III Government Activity, Capitalism, and Our Mixed

Chapter 29 Class Discussion Questions Table of Contents

Chapter 29 Homework Questions Economics Internet Library

Last Chapter	Part III Government Activity, Capitalism, and Our Mixed
Chapter 29 Class Discussion Questions	Table of Contents
Chapter 29 Homework Questions	Economics Internet Library