Nature of Competition: Soil Power Rental

 

There are many kinds of land; farm land, mining sites, deserts, Rocky Mountains, rain forests, Virgin Islands and the like. Some are in use, others not in use, still others of use, and the rest of no use. In the first place, the land is of no use until we cultivate it. We herein call cultivated land “soil.”

             Wayside, is there “land” of no use? As always, the answer depends on whom we ask the question of. Some economists, including many of Nobel would propose that the supply of land be “fixed.” Lo and behold, the production function, Y= f(L, K, N); the N for “land” is fixed all through the medium run, or per annum in vernacular. On the flipside, the land irrelevant to the GDP is of no use; particularly the GDP in equilibrium (Y*) as in IS-LM or AS-AD.

             Probably the Appalachian Mountains would be a superb example of absolutely and eternally beyond cultivation, regardless of the rental rate. No wonder, few macroeconomists are named as William O’Hill or nicknamed as Hill Billy. Heard of J.D. Benz, by the way?

             No matter what in Cambridge, certain classical economists, even more famous than so many Nobel laureates, would propose that the quantity supplied of usable soil depend on the rental rate in the market open for the community. For instance, we can turn so-far-barren land into fertile soil for rent per quarter, when the marginal cost of throwing fertilizers on the soil is worth its while at a higher rent as marginal opportunity benefit. Then, there will certainly be a demander for the arable site for the sake of creating, say, lettuce.

             Déjà vu, that’s due to none other than Economic Principle 3 “Rational People Think at the Margin” of Gregory Mankiw. At the household, in the market and all the way to the economy, “the only constant is change.” Once fixed, forever fixed. 

 

Definition. As opposed to land, soil means something of potential creativity in Mother Nature. As usual, we imagine a marginal unit of fertile space not only on the land, but also in the sea and in the air, which is not free to prefer or call in hands. It must be “demanded.”

            As a matter of semantics, while the soil is creating, we “extract” something utile therefrom. There are three large groups of extractive activities, farming, fishery and mining. In modern times, needless to say, all the fertile soil is owned by the communal households or assumed as such in theory.

 

Rental demand for soil. The demand is usually from a firm with a definitive capacity. The demand of each firm declines due to the law of diminishing returns to soil.

             At a lower rental rate, more firms can stand in the demand line from rest (with no opportunity) or further away (subject to additional transaction costs). No wonder, the deep sea far away from Homeland is busy by fishing boats which pay many transaction costs while taking advantage of a rock-bottom rental rate.   

Supply of soil. At a higher rental rate, new soil will be cultivated. In addition, some soil, out of sleep and from poorer opportunities, will join the supply line.

             As for the professional supplier, or the firm if in economics, the opportunity is never “fixed.” Recently, the firm can even mine cryptocurrencies from the thin air, literally.

The clapping. There we have the rental rate by the two hands, probably invisible.

 

The case of durable power. In the vast majority of cases, the creative function consists of multiple powers, or power-hours to be complete. Nevertheless, a single type of power can and do sometimes create a kind of good or service. For example, an apple tree, fertile enough, will perennially create apples for the renter. An apartment unit will supply the residential service over a couple of years or longer (T^-1 never L^-1). A maid all alone renders house-cleaning services. The whole firm is sometime rented.

             The single power on the run for the job might collectively be called a durable power. A power is to create while a good is to be created: we would rather avoid using the obscure term “durable good.” A power runs over the time while a force runs across a distance. Such oxymoronic names as “labor force” or “workforce” might be corrected, as well: the former means human assets or human resources in the nation, while the latter human power on the run in the economy.

 

A shepherd boy. Once upon a time in the West, there was a boy professionally telling unfounded tales. Typically, he from time to time cries that the invisible, nominal if you will, wolf attacks, most often in paralysis, the real sheep. Sometimes, on the other hand, he calls healthiness of the grass “land force” and other times names the beauty of the surrounding scenery as the “purchasing power.” He proposes, in effect, that people walk on the work site and than attraction or gravitation be a power to run over the time.

 

Ennio Morricone - Once upon a time in the West