Monday, March 28, 2016

Yves Smith — Oxfam Report on Rent Seeking Among the Top Wealthy Reinforces Neoliberal Shibboleths


Yves Smith on economic rent and rent seeking.
At a higher level of abstraction, having a business that achieves sustainable profits over time entails creating or exploiting market inefficiencies. Perfectly efficient markets generate thin to no profit.
Even in neoclassical economics, which assumes perfect markets (money, goods and labor), rent is gain resulting from market inefficiencies. Rent seeking is active exploitation of market inefficiencies.

Thus, it is rational to promote inefficiencies that one can exploit. According to Peter Thiel, entrepreneurs loathe competition and seek monopoly.

It is very difficult to compute rent in that every market that is not perfect, which is all markets. There are knock on effects among markets that amplify rents throughout the system. In addition, externality and transaction cost further complicate the issue since they are not measured.
Rentier activity is a lot like pornography: hard to define in a way you can operationalize, but you know it when you see it.

This conundrum illustrates why almost always a bad idea to try to come up with single point estimates of complex phenomena. If you do attempt to put metrics on them, its better to measure what you can measure reasonably well, paramaterize other important issues as best you can, and make qualitative conclusions.
Just as there is soft and hard-core pornography, just as there is economic rent and egregious economic rent.
 
Naked Capitalism
Oxfam Report on Rent Seeking Among the Top Wealthy Reinforces Neoliberal Shibboleths
Yves Smith

18 comments:

Matt Franko said...

Right like when a leftist govt imposes rent its NOT rent... but if a right govt imposes rent then THAT is rent.... yes now I understand...

So if Venezuela imposes rent that is ok, while if Saudi Arabia imposes rent then that is NOT ok... yes this all makes sense now...

Rent for left: GOOD

Rent for right: BAD

Tom Hickey said...

Huh? You lost me.

nivekvb said...

If the government gets rent and uses it to create a better society for the majority of its citizens then that is good. Also, people can vote the government out of power if they don't like it.

andy blatchford said...

"Huh? You lost me"

You're not the only only one, guessing means left is the same as right.



Matt Franko said...

C'mon look at the headline... Venezuela is among the "top wealthy"?????

Jeff65 said...

Matt,

Economic rent, where it exists, should be captured by the government. If the government does not, then a few in the private sector will to the disadvantage of the rest. This is the entire point of the thesis of economic rent.

Tom Hickey said...

Economic rent, where it exists, should be captured by the government. If the government does not, then a few in the private sector will to the disadvantage of the rest. This is the entire point of the thesis of economic rent.

Right, although I would say rather "committed to public purpose" rather than "captured by government," even though that's what is involved as a means.

The whole justification of unequal distribution is based on meritocracy and just deserts, based by marginalism, that is, all factors being correctly reward for productive contribution. That's the scam of neoclassical economics, which assumes perfect competition, as Michael Hudson has been tirelessly pointing out.

Matt Franko said...

No its not it's about productive vs non productive contribution....

Matt Franko said...

So Venezuela extracts yuge USD via monopoly rents from us consumers for 12 years and now when the rent is removed they can't even wipe their assets as they dont even know how to produce toilet paper anymore down in that hellhole of a nation.... F them imo let them EAT shit....

Matt Franko said...

We've been suffering with the high oil prices for over a decade while they and MENA are down there practicing how to jerk off into swimming pools as their main export product .... F them all .... we have to shut the borders pronto and force those pieces of garbage nations to figure it out..

Bob said...

Matt, stop drinking the tap water.

Ryan Harris said...

Public purpose varies based on beliefs and ideology. Lefties like to 'make investments' (in education, climate change... basically rich people welfare, cash, tax and market subsidies for the rich to 'have less impact' so they harm the rest of us less as they jet around and help their kids 'get ahead' in the pack) and eventually make cuts to social programs to make them 'sustainable' while Righties like to cut taxes for the rich because the rich need a helping hand and reduce social welfare because Y'all a bunch of no-good lazy tramps and pretty much any labor violations or pollution can be ignored, no need for stinking subsidies. Left or right, they are helping the rich screw the poor.
Both are ready to vigorously defend their beliefs as superior blah blah blah. I see both as forms of delivering economic Rent to partisans at the expense of the public interest. I'm sure my framing pisses everyone off, but I was trying to make a point about the arbitrary and capricious nature of government spending when left to partisan interests and corrupt elected officials that accept vast sums of money from rich, privileged contributors large (Hillary Cruz) and small "feel the Bern!" that want to impose their policies of self interest on the rest rather than broad goals like raise standards of living, reduce pollution and promote equality that would actually be in the public interest.

Matt Franko said...

" rent, where it exists, should be captured by the government."

Well it was captured by the govt of Venezuela and redistributed and now the place has atrophied so much they dont have food, electricity, toilet paper, etc... literally a turd world nation...

It was captured by the govt of Brazil and redistributed to govt cronies/kickbacks/bribes/nepotism and now the whole govt of that nation is in peril down there with the military ready to intervene...

So it shouldnt be captured it should be prevented from existing in the first place thru proper regulation of markets...

Ryan Harris said...

But how.

Bob said...

But how.
Venezuela should give away its oil for free. That would prevent any "rent" from being collected by them or any other "rent" seeker.

Ignacio said...

If rents exists it means there is some inefficiency in the system allowing some asymmetry to be leveraged by one economic actor (it doesn't matter if it's the private sector or the public sector). This is always bad.

We should define what constitutes a good/perfect economy, regardless of the public/private mix, and walk from there, to achieve that, the best way possible. What does not form of a perfect economy is rents.

John said...

Matt: "Well it was captured by the govt of Venezuela and redistributed and now the place has atrophied so much they dont have food, electricity, toilet paper, etc... literally a turd world nation..."

A good example of the post hoc ergo propter hoc fallacy. What was Venezuela like before Chavez? It was a US client state, and nobody knew or cared about its awful problems. When Chavez ceased Washington's global "rent seeking" racket in Venezuela, we woke up to the threat Venezuela posed! What nonsense.

The oil price is too low. It should be a minimum of $100 and ranging up to $200 per barrel. Washington's client states keep it at the price set by Washington. Let these dictatorships fall, and then we'll see what the true price of oil is. I can tell you one thing, democratic governments are not going to set the price of a valuable resource at $30 per barrel. The rise of fracking has complicated matters, so $200 isn't currently feasible. Dictatorships who owe their survival to Washington set it at these unusually low prices. And then they set it higher when Washington tells them to, as you'll find in declassified government papers and political histories of oil. John M Blair's book "The Control of Oil" is a good place to start. Even someone as establishment as Daniel Yergin occasionally spills the beans (his two huge books on the history of oil and then more generally energy are nevertheless very useful). Oil Politics, by Francisco Parra is also good, as are Michael Klare's numerous books, as long as you can read between the lines.

John said...

Bob: "Venezuela should give away its oil for free. That would prevent any "rent" from being collected by them or any other "rent" seeker."

Hahahahahahahahaha! That's such a brilliant reply to all this nonsense about "rent seekers"!

The only price that isn't "rent seeking" is what exactly? Free? Cost price? A slight mark up? How slight should the mark up be? And to whose satisfaction, their people, their economy, foreign powers, the biggest corporations, the world economy as a whole?