Question

Who amongst the following had given the 'average rent' theory?

• A. David Ricardo
• B. Karl Marx
• C. Adam Smith
• D. Francis Buchan

Hint:

According to Ricardo's theory, when land revenue is assessed, the state should only tax the surplus (rent) of rich soils. However, in practice, colonial land surveys overestimated the yield and taxed poor peasants heavily, leading to widespread distress.

Answer 1

The Correct Option is A

Step 1: Context of Colonial Economic Ideas:
In the $1820\text{s}$, when the British were designing land revenue policies in newly conquered territories in India (like the Ryotwari System in Madras and Bombay Presidencies), their administrators were highly influenced by classical English economic theories.

Step 2: David Ricardo's Theory of Rent:
The British economist David Ricardo formulated the economic theory of rent (often called the Ricardian theory of rent or “average rent” theory). Ricardo defined rent as that portion of the produce of the earth which is paid to the landlord for the use of the origil and indestructible powers of the soil. He argued that the landlord (or the state, acting as the ultimate landlord) was entitled only to the surplus value (or “average rent”) left after subtracting the cost of cultivation (wages of labor and interest on capital) from the total yield.

Step 3: Implementation in India:
Colonial officials in India used Ricardo's theory to justify high state land revenue rates. They argued that by taxing this surplus rent, the state was not taxing the peasant's capital or survival wages, but merely taking its legitimate Ricardian rent. Hence, option (A) is the correct answer.