Rent seeking

The article itself says some interesting things:

In a healthy society, people acquire wealth by making stuff people want. Farmers till plots to provide for their nutritional wants. Workers assemble motorcycles for consumers who pay money because they find the motor bikes valuable. Perhaps the worker serves a philanthropic organization and earns a salary by serving the official goal of the organization. Or perhaps the worker earns money by creating crafts that others in the community value.

A society structured as the above has two great benefits. First, incentives are aligned to produce more output. A person can only acquire wealth by producing wealth. Thus the production of wealth is encouraged, as man’s natural greed is channeled towards productive ends. Second, humans are innately goal seeking creatures. It makes us fundamentally happy to strive towards a goal – whether that goal be winning a football game, learning a new song on the piano, leveling up in Warcraft, or producing a product that people want.

In a dysfunctional society, people acquire wealth via corruption, rent-seeking, and theft. Perhaps they steal it at the point of a sword. Perhaps they acquire wealth through outright corruption. Perhaps they acquire wealth through holding a position in a completely dysfunctional management structure that requires internal politicking and Kabuki make work rather than actual performance.

… but the comments, as ever, make things clearer in the mind:

#  The American people do not begrudge an entrepreneur the opportunity to reap large rewards, very large rewards, as profitable return on the investment of their own money, and for employing their vision, innovation and effort – provided that those efforts are directed at useful and productive industry, and earned fairly in competition, and without exploitation of labor or destruction of the environment.

However, the situation we have now, is that the rewards have become very, very large.

The larger issues though, is that the rest of the bargain has been avoided. There is precious little innovation or productive industry going on. What we have now is fortunes being made through:

• Extreme exploitation of labor and destruction of the environment
• Developing cronies in government to stifle competition, create captive markets, protect them from liability, and pass along subsidies and supports
• Placing themselves as middle man in transactions and exchanges solely to extract rents from the flow
• Raiding public assets and common wealth through privatization and government contracting
• Earning of profits by the destruction of productive enterprises (a strategy only viable due to tax preferences, monetary subsidies, and lax regulation)
• The production of obscenely inferior products supported largely by marketing tactics, arcane pricing schemes, and the like
• Collusion with peers to restrict competition and inflate prices
• The perpetration of scams and frauds on services and financial products
• The breaking of promises, be they contractual with workers or in terms of services promised to customers

#  Rent-seeking is a quite legitimate activity when its purpose is the provision of real, unencumbered, money-good, unlevered capital. But when government corrupts and debauches the currency, when regulatory and tax impediments make real business risk-taking inadvisable, and when government favouritism and monopoly-granting destroy the pricing of risk, then it becomes little more than state-supported theft.

 

 

 

 

 

[H/TChuckles]

1 comment for “Rent seeking

  1. April 20, 2015 at 9:44 am

    The rent-seeking scum. The Family Court is full of them.

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