Thursday, September 5, 2013

The rent (seeking) is too damned high

Liberals like to say that "government is the things we do together". Libertarians like to say that government is the use of power to take money and privilege from unfavored groups to give to favored groups.

Historians call these transfers "rents" and the desire for them "rent seeking". Rents and rent seeking seem to have been with us since the very dawn of history.

In my last post, I stated that the institutions of society have been corrupted; we can lay 90% of the cause on rent seeking.

Rents come in many forms, and cash money is perhaps the least valuable. The most insidious rents are in the form of restrictions on the population: licensing requirements are the chief villain here. Why on earth should you need a license from The Man to cut hair? The reason you do is that the barber's association lobbied government (sought after rents) for restrictive licensing to reduce competition.

The rent they received is a loss of some of your freedom.

This sort of thing almost always is sold as "protecting the consumer", although it's almost always impossible to demonstrate a net benefit to the consumer. Instead, histerical straw man arguments are raised.

Remember when the outgoing Clinton administration imposed new purity rules for well water? When the Bush administration revoked them as being excessively expensive and scientifically dubious, remember the cries of "arsenic in the water supply will ZOMG kill teh children's!!!!!!one!!"

So here's the question: who was seeking rents in that episode?
The answer, of course, is that it was the professional environmentalism lobby that was seeking a rent in the form of a reduction in your freedom. If its too expensive to purify water, it's not possible to live, and people won't be able to develop their land.

The wetlands protection act under Bush pere is one that resulted in precisely the same rent being extracted from people living east of the Mississippi river. Too little water, too much water, it doesn't matter. The rent extracted from you is the same, and it's "paid" to the same people.

There is an orgy or rent seeking happening today, occurring at levels that would have been seen as scandalous in prior years. Now it's a yawn - what, are you a rube? Don't you know that this is how the game is played?

In my post I asked what was the dynamic causing the American people to become enfeebled. There were some good comments as to why (and you should go read them). My thought can be expressed in the form of the Two Things:

1. Rent seeking and rent payouts are proportional to the size of government.

2. As American government approaches the size of European government we will see the effect of regulatory rent seeking cause our economic performance to approach what has been seen in Europe (GDP growth of ~ 1% a year for a decade or more).

The rents are what have enfeebled us. The worst of the situation is that they are largely invisible and fall most heavily on those willing to invest private capital. And by "invest" I mean invest in production. Leftists like to use the term when they mean "consumption".

And so to my point, that the Tea Party reaction of 2010 wasn't about financial rents and arguing about an extra 5% marginal tax rates. It was about the non-financial rents that make it difficult or impossible to start or expand a business, and the onerous Regulatory State that is blocking what used to be called the "American Dream".

The rent (seeking) is too damned high, whether it's the Barber's association or the Environmental movement, or the Ivy League.


TheAxe said...

That's also a big one I was thinking for my #2 below. I had typed EPA/OSHA/Activists but couldn't articulate how it weakened us so I deleted and wrote what's below about complication (which also gives more opportunity for rent seeking yay 10,000 pg omnibus bills). You articulated it great. Also when did we start letting the "experts" have so much control over policy.

foxmarks said...

It isn’t quite accurate to call all licensing the product of businesses seeking protection.

Often enough, some shady or negligent operator does something that causes real, irreversible harm, and the people themselves initiate the call for regulation.

And we cannot dismiss the recreational do-gooders who seek to correct problems that have not yet presented themselves.

I say the best way to limit the scourge of rent-seeking is to decentralize gov’t power as much as possible. If my town has onerous barber restrictions, I can go across the border for a cheaper (riskier?) haircut. It is much harder for me to leave my county or my State.

Divemedic said...

"The greater the rent, the greater the costs people are willing to incur to win it. When government hands out what appears to be free money, people are going to scramble to get some of it, incurring costs as long as those costs raise the chances of winning the 'free' money sufficiently. But in our political system, we have an industry dominated by two firms, Republicans and Democrats. Together they have a 99 percent market share. They have undertaken actions at the state and national levels to make it practically impossible for any other party to enter. This system forecloses good competition, the kind that raises new ideas or asks embarrassing questions. We have been fooled into thinking the system is competitive, because we constantly see vigorous rent-seeking competition for access to the public purse. This bad competition is an expensive gladiatorial combat, where Congress keeps a lot of the ticket receipts. Some of the rest of the spending is simply wasted building those expensive office suites on K Street and using the time of those lobbyists who could be doing something more productive."
Michael Munger
Rent-Seek and You Will Find
Library of Economics and Liberty
July 3, 2006