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Sam Bostaph asks: "Absent opportunity cost, what is the meaning of the term 
"relative worth"?" And Pat Gunning adds: "I think that Sam is right on 
target here. The break between classical and neoclassical economics occurs 
at precisely the point where value comes to be defined /exclusively/ in 
terms of opportunity cost. The Buchanan book of readings, mentioned by 
Steven, represents this neoclassical view." 
 
Pat also mentions Herbert Davenport as an exponent of the opportunity cost. 
Wasn't he the chap who wrote the ditty about how "corn is not high because 
rent is paid; rent is paid because corn is high"? 
 
This to me marks the passage from classical to neo-classical economics. 
 
In the classical view things had value because of their direct and indirect 
labour costs at the margin. Land qua land (rural and urban) has no labour 
cost of production -- it is a free gift of Nature. But it commands a price. 
The difference is Ricardian rent; a pure surplus arising from its fixity 
and scarcity relative to demand. Unlike commodities, a rise in the price of 
land has no tendency to be reversed by a rise in supply (though land-saving 
innovations might shift down the demand). 
 
As a pure surplus, there is an economic and ethical case for collecting 
these community-created rents for state revenues: the impot unique, 
anybody? 
 
Then along came the neo-classicals. There is no surplus. Intra-marginal 
land might attract high rents, but you could use it for either corn or 
potatoes, or for an office or a cinema. Look to the opportunity cost, and 
the surplus largely disappears. 
 
A much more comfortable theory for the property-owning classes. 
 
Roger Sandilands 
 
 
 
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