Returns

Returns, in economics and political economy, are the distributions or payments awarded to the various suppliers of the factors of production. In classical economics, the factors of production are labour, land, and capital.

Wages

Wages are the return to labour. The return to an individual’s involvement (mental or physical) in the creation of goods or services. As we own our bodies and our minds wages are payments to the individual suppliers of labour even if the supplier is the self.

Rent

In classical economics (which assumed that land was “owned” by a noble) rent was the return to an “owner” of land. In later economic theory this term is more refined as economic rent which includes returns to other political contrivances as well. Some economists considered rent as unearned and always based on political contrivance.

Profit

In Classical Economics profit is the return to the owner(s) of capital stocks (machinery, tools, structures). Unlike labour, capital can be owned in shares and profit need not be individualized (though it often is). What is called “dividends” in current financial parlance would be considered as profits by classical economists and so too would “capital gains”. The classical economists referred to a fee paid for the use of money as “interest” but did not consider such interest a factor of production. Smith seems to assert that “interest” is paid from profits. Ricardo does likewise.

In Neoclassical economics, profit is total investment performance and includes economic rent.

Total Investment Return

The total investment return, also called investment performance, includes direct incomes (dividends, interests…) and capital gains (less capital losses) due to changes in the asset market value.

Cite Term

Definition Sources