Economic Rent
“Hey! You gonna eat that candy bar? I’ll give you five bucks for it” You: “ohh...well, I only paid a dollar for it, but if you want it, sure…”
That’s economic rent at work: when you get more than you bargained for (well, someone does). For what it’s worth, “economic rent” has nothing to do with “rent,” like the kind of rent you pay to your landlord. No. Economic rent is when more money is earned than should have been, and is considered unearned. Working hard for economic rent isn’t possible. It’s one of those things you don’t say anything about...because you’d rather take your unearned dollars and run.
Economic rent happens when markets aren’t working efficiently, usually when something is really scarce with high demand. For instance, people trying to buy a home might put in an offer that’s higher than the market value for the home, just to increase their chances that they get the house. Anytime someone is offered something at a higher price than should’ve been offered in a perfect, efficient economy, we have economic rent. Shhh. Don’t say anything.
Related or Semi-related Video
Finance: What is Efficient Markets Theor...141 Views
Finance a la shmoop what is the efficient markets theory well
there should just be a big picture of Warren Buffett right here it should be [Two men carrying a framed picture of Warren Buffett]
the man Warren explaining the efficient market theory himself and that theory
states that it's impossible to beat the market over a sustained period of time
it should be Warren Buffett who explains that all relevant information comes [Warren Buffett giving a presentation on stage]
public in public stocks and that the market more or less immediately
incorporates all that information in its pricing
hence nobody can ever beat the market over a long period of time so why should [Men falling asleep during a presentation]
Warren Buffett be giving this little definition because the efficient market
theory is wrong Buffett has beaten the market for decades in a row in every way [Warren Buffett beating up the market with a stick]
shape and form so you have a really memorable huge figure in finance this
guy and then pipsqueak professors who are kind of a laughing stock whenever the [Professor jumping on the microphone stand trying to talk]
wealthy power crowds gather in Omaha for their National Convention that's what
they say at the Woodstock of Finance if you will fortunately most people keep [Man with arms folded standing naked in a corridor]
their clothes on for this one