Eliminating rent seeking and toughening enforcement of antitrust laws are “critical” to reducing rising inequality, said two Nobel Laureates, Angus Deaton and Joseph Stiglitz, during a panel of Nobel laureates last Friday. Two fellow laureates, Roger Myerson and Edmund Phelps, echoed their message and warned of a return to 1930s-style corporatism.Rent extraction is made possible by asymmetric power. The way to reduce rent-seeking is to level the power. Symmetrical power is an assumption of neoclassical economics as the basis of free markets that are fair.
“To the very considerable extent that inequality is generated by rent seeking, we could sharply reduce inequality itself if rent seeking were to be somehow reduced,” said Angus Deaton, recipient of the 2015 Nobel Prize in Economics. Deaton described inequality in the U.S. as being primarily driven by industry rents, and rejected proposals to increase taxes on the rich as a way to reduce rent seeking.
“I don’t think that rent seeking, which is incredibly profitable, is very sensitive to taxes at all. I don’t think taxes are a good way of stopping rent seeking. People should deal with rent seeking by stopping rent seeking, not by taxing the rich,” he said.
The panel was part of the annual Allied Social Sciences Associations (ASSA) meeting in Chicago. Fellow Nobel Laureate Joseph Stiglitz, recipient of the 2001 prize, offered a more sympathetic view of higher taxes on the rich as a method to reduce inequality, but stressed the importance of rent-seeking to the rise in inequality in the U.S....
But markets are not naturally symmetrical because societies are structured on the basis of class and power is distributed asymmetrically as matter of social structure.
The problem in addressing rent this way is that this was a key insight of Marx. So anyone proposing such a solution is bound to be attacked as a 'Marxist," "socialist," or 'communist." Most people capable of making difference don’t' want to go there, at least alone, and no one wants to go first.
Nobel Laureates: Eliminating Rent Seeking and Tougher Antitrust Enforcement Are Critical to Reducing Inequality