The Modern Theory of Rent 1 Demand & Supply Theory of Rent:
The classical economists thought that land as a factor of production was different from other factors of production. But modern economists thought that all the factors of production are alike and there is no basic difference between them. Hence, a special theory of rent, developed by Ricardo is not necessary. Therefore, economists like Joan Robinson and Boulding have contributed their, ideas for the determination of rent, which is known as the "Modern Theory of Rent".
"The essence of the conception of rent is the conception of surplus earned by a particular part of a factor of production over and above the minimum earnings that is necessary to induce it to do work" - Joan Robinson Rent is the difference between the actual earnings of a factor of production and its transfer earning.
Rent = Actual earning - Transfer earning.
The minimum payment that has to be made to a particular factor of production to retain it in its present use is known as transfer earnings.

Marginal Productivity Theory of Distribution: Assumptions:
This theory is based on the following assumptions:
(i) All the factors of production are homogenous.
(ii) Factors of production can be substituted for each other.
(iii) There is perfect competition both in the factor market and product market.
(iv) There is perfect mobility of factors of production.
(v) There is full employment of factors.
(vi) This theory is applicable only in the long-run.
(vii) The entrepreneurs aim at profit maximization.
(viii) There is no government intervention in fixing the price of a factor.
(ix) There is no technological change.

The Abstinence Theory was propounded by N.W. Senior. To him, interest is the reward for obstaining from the immediate consumption of wealth.
According Senior, Capital is the result of saving, but saving involves "abstinence" (or) "sacrifice". It is possible to save only if one obstains from present consumption. Such abstinence from present consumption involves some suffering. Hence it is necessary to reward the saver (capitalist) to compensate for the sacrifice he has to undergo by obstaining from present consumption. Marshall accepted the Abstinence Theory of Interest. But he used the word "waiting" instead of "abstinence". Saving implies-waiting. According to him, interest is the reward for waiting. But people do not like to wait. So, in order to make them wait and in turn to save we have to pay some reward. Therefore, interest is the reward paid to the saver (capitalist) for his "waiting".
Criticisms:
i) According to this theory, saving involves suffering, but savings may not always involve suffering to some rich people.
ii) Rich people have money for which they do not get interest.
iii) Hoarding of money is to quench the thirst for liquidity.

a. Profits: Profits are the reward for organization or entrepreneurship. Risk-taking and uncertainty-bearing are the main functions of an entrepreneur. So we may consider profit as the reward for the above functions.
b. The Risk - bearing theory of profits: According to Prof.Hawley, profits are the reward for an entrepreneur for risk-taking. Risk-taking is an important function of an entrepreneur. Risk-taking and profit-making go together. The main criticism against this theory is that it does not make distinction between known risks and unknown risks Known risks (eg. theft, fire) can be insured against. We may say that profits are the reward for taking unknown risks. For there is a lot of uncertainty about such risks.

(i) Land differs in fertility
(ii) The law of diminishing returns operates in agriculture
(iii) Theory assumes perfect competition
(iv) Land is used for cultivation only
(v) Most fertile lands are cultivated first.