Randy Wray — Wall Street’s Rent Seeking Vampires Kill Innovation

I can't tell you how excited I am to see Randy going after rent-seeking. I had though that was missing as an MMT emphasis previously, although Michael Hudson has been on it for a long time. As Randy pointed out in his previous post, "euthanizing the rentiers" in the sense of ending parasitical economic rent and extractive rent-seeking was high on the policy agenda of Keynes at the conclusion of the General Theory.

While there are moral arguments against economic rent, rent-seeking is inefficient and constitutes an unnecessary drag on circular flow that inhibits productive investment and innovation. It also leads to inequality that also becomes an economic drag, as well as increasing the political power of wealth.

Perhaps most significantly in the long run, without addressing rentierism and rent-seeking, capitalism becomes increasing incompatible with democracy and distributive justice, and leads to corporate statism.

Even from the side of capitalism, economic rent and rent-seeking are also disruptive to price discovery in markets by favoring vested interests that able to extract rents and thereby to exact privilege as well. This leads to artificially imposed market power and artificial scarcity, as well as exclusion of disruptive innovation that would shift the status quo.

Economonitor — Great Leap Forward
Wall Street’s Rent Seeking Vampires Kill Innovation
L. Randall Wray | Professor of Economics, UMKC