The Ricardian Theory of Rent (12 Defects)

Some of the defects of the theory are as below:

1. Historical Wrong:

American economist Cray criticized the Ricardian theory on the ground that Ricardo assumed that the cultivators first of all cultivate the most fertile land but historically, the easily accessible lands were used at first stage because the best land was lying under thick forests.

2. Unrealistic Assumptions:

Ricardian theory of rent is based on the assumptions that there exists perfect competition in the economy. Accordingly, there will be one price of one agricultural product, but in real life we have imperfect competition and price of a given agricultural product is very much influenced by its quality. Produce of different soils may be different in quality and, thus, may fetch different price. Therefore, due to this wrong assumption, it becomes difficult to measure the rent.

3. Rent is not Paid Only for Land:

Ricardo assumed that rent is paid only for land. But, modern economists observed that part or full earnings of any factor of production may be rent provided its supply is not perfectly elastic.

4. Alternative Uses:

Ricardo maintained that land has no alternative use i.e. land is used only for farming. In actual life, land is used for many other purposes, which affects both its demand as well as its rent. These alternative uses have not been taken into account in Ricardian Theory. Therefore, under such circumstances, this theory cannot be reliable.

5. No Original and Indestructible Powers:

Ricardo observed that rent is paid for original and indestructible powers of the soil. But, it is very difficult to identify the extent of originality of these powers. In reality, no land in its natural form is cultivable as it has to be reclaimed through investment of labour and capital.

6. Law of Diminishing Returns:

Ricardo maintained that in agricultural sector, law of diminishing returns holds good. But, the law is not always applicable particularly in the initial stages of production. Moreover, due to the better techniques of farming and fertilizer, the applicability of the law of diminishing returns has been checked to a greater extent.

7. Marginal or No-rent Land:

The theory has been criticised on the ground that Ricardo assumes that there exists marginal land in every country, but the existence of such types of land is not necessary. In an over populated country even the most inferior lands also gets rent.

8. Rent Enters the Price:

Ricardo concluded that rent does not enter into price. He observed that rent is not included in the cost of marginal land. Since marginal land is no rent land, thus, rent does not enter into price. First the price of marginal land is determined and after that of the intra-marginal land. But, the modern economists opined that in many cases rent is a part of cost and enters into price. To a particular farmer, rent is a cost and it determines and thus affects the price.

9. Ignores Short-Run Rent:

Another criticism leveled against the Ricardian theory of rent is that it ignores the short-run rent. Ricardo proposed that rent arises only in the long period. Dr. Marshall maintained that rent also arises on the man-made capital equipment in the short period. Thus Ricardian theory of rent ignores the short-run rent.

10. Rent Arises Due to Scarcity:

Ricardo maintained that rent arises due to the difference in the fertility of soil. But in reality rent arises due to the scarcity of land. On this basis, this theory is defective.

11. Best Land is not Cultivated First of All:

Ricardo opined that the best fertile land cultivated first of all. But the critics maintained that inferior land is cultivated first of all because it is easily manageable.

12. Every Land has Some Fertility:

Ricardian theory observes that marginal land is no rent land which means that it has no original or indestructible powers of the soil. In fact every land has some fertility.