Law Of Rent/Ricardo

Law of Rent was formulated by David Ricardo back in 1809, however, the application of this law is more profound and ubiquitous nowadays. 

What this law means is that “The rent of land, therefore, considered as the price paid for the use of the land, is naturally a monopoly price. It is not at all proportioned to what the landlord may have laid out upon the improvement of the land, or to what he can afford to take; but to what the farmer can afford to give.” — Adam Smith, An Inquiry into the Nature and Causes of the Wealth of Nations, Book I, Chapter XI “Of the Rent of Land” – from the wiki page.

To put in simple terms, what you offer to the market is not proportional to the quality in a spectrum of similar products/services, but to the degree the needed are willing to pay. As a result, the users always want to obtain the best, therefore, all the money goes to the best, those who are ranked second or lower, end up with nothing. 

It is quite brutal for those who might just be very close to the best. But as the name claims, it is a law, hence, it is not alterable by any moral sympathy. 

At that time, David Ricardo made this observation about some special goods/services, especially the land, which is not reproducible, but is needed by massive people in the market. 

In this new era, when internet, portable smartphone are universal almost across every corner of the globe, the demand for the best became massive too. For example, not only the U.S. parents have the yearning desire to send their children to the best universities like Harvard or MIT, parents in China, in Korea, in South Africa… all want to give their offspring the best education. The prevalent you tubes, vlogs, online education platforms have made it possible to spread the best lectures around the world, hence, those who are secondary or mediocre teachers will find it harder and harder to even get a position, let alone secure tenure. 

It is particular important to be aware of this trend as technology is moving forward relentlessly. The only thing we should focus on is to make our goods/services – which more and more would be abstract creations, algorithm designing rather than concrete labors in industrial ages – outstanding, world-class, and meanwhile be able to market ourselves to the whole world.

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