There is increasing consensus that modern capitalist economies suffer from excessive rent
extraction. The neoclassical approach sees rents as emerging from market imperfections —
which lead to prices above the optimum equilibrium level. Using a markup pricing framework,
we argue instead that rising rents — which increase the underlying cost-structure of the
economy through higher overheads — may also induce redistribution of income between
capital and labour without price changes. The structure of these overheads is driven largely by
political-economy dynamics and power relationships much neglected in conventional policy.
Similarly, digital platforms can extract rents which affect market competition without price
effects. By taking a more objective view of these rents, building on classical theory, we can
better establish the processes of value creation and value extraction to identify modern rents.
We illustrate these dynamics in a number of key sectors to show rents have become
permanent rather than transient features and consider how we might better recognise and
reduce such rents via policy interventions. Our approach provides a framework for
understanding how rising modern economic rents are related to increasing inequality and
declining investment and innovation, contributing to ‘secular stagnation’