An extract from SOAS Professor Mushtaq Khan‘s illuminating chapter on ‘Rents, Efficiency and Growth’ which summarises the classical economists’ concern with the economic surplus. He discusses the relation of the surplus to economic rents, and how conflicts over their distribution can affect economic growth and development.
By drawing on ideas from classical economics in his discussion of rents and rent-seeking, it is possible to broaden the analysis of neo-classical economics, which dominates the modern mainstream, by bringing in the insights of Smith, Ricardo and Marx. The book that this quote comes from ‘radically’ extends the rent-seeking framework, ‘by incorporating insights developed by political scientists, institutional economists, and political economists’.
For me, an interdisciplinary political economy such as this can yield deeper insights into the nature of economic processes by considering notions such as power, conflict and the resultant distribution of resources and their effect on growth and development.
“Our analysis of rents can be substantially extended by introducing some insights from classical political economy. Classical economists were interested in the size and allocation of the economic surplus which constitutes the potential investment fund of a society. In particular, they were concerned with the allocation of the surplus since this determined growth. The surplus could be productively invested, or ‘wasted’ in luxury consumption, and, even when it was invested, its allocation across sectors could determine the rate of growth achieved. While there were differences between classical economists, they defined the surplus not as the excess income of any group but, rather, as the income accruing to property owners after paying the direct costs of production. In a capitalist economy, the principal property owners are capitalists, but landlords and some of the middle classes may also be recipients of parts of the economic surplus. What is interesting about the classical analysis is that distributive conflicts and the associated re-allocations of the ‘economic surplus’ can determine the rate of growth. Thus, like rents, surpluses can be associated with a wide range of economic outcomes, depending on the technological context, and the type of distributive conflict going on over the allocation of the surplus. Since rents too can be the subject of distributive conflicts, the classical analysis is of immediate relevance (my emphasis).”
Mushtaq Khan (2000), Rents, Rent-Seeking and Economic Development, Ch.1, p.23