Also known as: economic rent · economic renting · rent · rents
Written by attorneys · grounded in primary & secondary sources — see below
Windfall profits generated by sudden increases in the price of a resource without any corresponding increase in production costs.
Select any source to read its text and confirm it supports the definition.
Enzo Eastwood contracted to sell acreage to Eastern Electric before oil prices surged. After formation the buyer enjoyed the economic rents from the higher market value while the seller bore no added production costs. The equitable conversion placed the buyer in the position to capture those rents during the executory period.
Erika Echevarria received modest living-expense gifts from her pro bono counsel after energy prices rose sharply. The gifts covered rent without creating economic rents for the lawyer because no reimbursement was sought or promised. The arrangement preserved the client's ability to retain the windfall value of the representation.
Eric Espinoza signed a lease that omitted the rent amount just before a sudden spike in regional energy prices. Because the writing failed to state the rent the lease was unenforceable and Eric could not lock in the lower rate that would have prevented the landlord from capturing economic rents. The missing term blocked formation of the tenancy.
Ezra Eastman held title under a lien-theory mortgage when energy prices jumped and rents on the property rose. The mortgagor retained legal title and therefore collected the economic rents directly while the mortgagee held only a lien. The theory determined which party kept the windfall during the loan term.
Elliot Edmonds took possession and paid rent under an oral lease after energy prices rose. The statute of frauds had invalidated the original writing yet the periodic tenancy created by payment allowed the landlord to capture the new economic rents. Full effect was denied because the parties had not substantially performed all lease terms.
Esther Eisenberg faced a landlord's breach that reduced the value of leased commercial space after energy prices spiked. She obtained an abatement of rent measured by the extent of the interference and thereby avoided paying for space that no longer generated the expected economic rents. The remedy restored the balance between cost and revenue.
Economic rents arise solely from an external price increase that occurs without any added production cost. Ordinary profits reflect returns earned through normal business operations and cost management.
Regulators impose taxes or price controls on economic rents to prevent producers from retaining windfall gains created by cartel-driven price spikes rather than by their own efforts or investments.
No. Economic rents are a descriptive economic phenomenon. Liability or regulatory consequences arise only when a statute or doctrine expressly addresses windfall gains, such as a windfall profits tax.
…that a similar control might be exerted over other elements of cost, also affecting prices, such as the number of employees, rents, advertising, methods of doing business, etc. All the processes of production and distribution that enter into cost could likewise be controlled. If the cost of doing an intrastate business…