Rent-Marginal-Wages theory of profit

Rent-Marginal-Wages theory of profit:

Rent theory of profits:

Professor Walker is the author of the rent theory of profits. In his vision, profits are the “rent of ability” and they are identical to rent. Rent takes place since of differences in fertility of land. Likewise profits occur since of differences in ability. That is why it is termed as the “rent of ability”. The main criticism alongside this theory is that it elucidates only why there are differences in profits. This does not respond the basic question why there are gains as such.

The Marginal productivity theory of profits:

The theory is an application of the common theory of distribution. According to this theory, below perfect competition, gains will be equivalent to the value of the marginal product of organization. We can apply all criticisms against marginal productivity theory to this theory too

The wages theory of Profits:

According to Professor Taussig, profits are not dissimilar from wages. Profits are the wages of the entrepreneur for his special capability. Profits are the wages of management. The criticism alongside the theory is that we can state of negative profits (i.e., losses) however we can’t speak of negative wages. Organization is a separate factor of production. And it is dissimilar from labor.


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