----------------- HES POSTING ----------------- 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 ------------ FOOTER TO HES POSTING ------------ For information, send the message "info HES" to [log in to unmask]