Ryan-Collins, Josh; Mazzucato, Mariana; gouzoulis, giorgos; (2020) Theorising and mapping modern economic rents. (Working Paper Series: IIPP WP 2020-13). UCL Institute for Innovation and Public Purpose: London, UK.

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Abstract

There is increasing consensus that modern capitalist economies suffer from excessive rent extraction. The neoclassical approach sees rents as emerging from market imperfections—often created by state intervention—which lead to prices above the optimum equilibrium level. Using a mark-up pricing framework, we argue instead that rising rents—which increase the underlying cost structure of the economy through higher overheads—may also induce redistribution of income between capital and labour without price changes. This approach provides a framework for understanding how rising modern economic rents are related to increasing inequality and declining investment and innovation, contributing to ‘secular stagnation’. We then illustrate how rents have become permanent rather than transient in a range of sectors in recent decades and consider how we might better recognise and reduce such rents via policy interventions

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