Putting an End to the Rent Economy — Vlado Plaga interviews Michael Hudson

Interview with Vlado Plaga in the German magazine FAIRCONOMY, September 2017.

VP: You are advocating a revival of classical economics. What did the classical economists understand by a free economy?

MH: They all defined a free economy as one that is free from land rent, free from unearned income. Many also said that a free economy had to be free from private banking. They advocated full taxation of economic rent. Today’s idea of free market economics is the diametric opposite. In an Orwellian doublethink language, a free market now means an economy free for rent extractors, free for predators to make money, and essentially free for financial and corporate crime.

Good one.

Counterpunch
Putting an End to the Rent Economy

Vlado Plaga interviews Michael Hudson, President of The Institute for the Study of Long-Term Economic Trends (ISLET), a Wall Street Financial Analyst, Distinguished Research Professor of Economics at the University of Missouri, Kansas City, and Guest Professor at Peking University

Guy Rolnik — Rents and the High Cost of High Finance: Q&A with Gerald Epstein

New study estimates that the total costs of America’s flawed financial system–rents, misallocation costs, and the costs of the 2008 crisis–will add up to an estimated $22.7 trillion between 1990 and 2023.

Pro-Market
Rents and the High Cost of High Finance: Q&A with Gerald Epstein

Guy Rolnik

Financial Diversion — Gordon Long interviews Michael Hudson

On the FIRE economy.

MichaelHudson.com
Financial Diversion

Gordon Long interviews Michael Hudson

Days of Revolt: How We Got to Junk Economics — Chris Hedges interviews Michael Hudson

Michael Hudson is a Distinguished Research Professor of Economics at the University of Missouri, Kansas City. He is the author of The Bubble and Beyond and Finance Capitalism and its Discontents. His most recent book is titled Killing the Host: How Financial Parasites and Debt Bondage Destroy the Global Economy.

CHRIS HEDGES: Hi, I'm Chris Hedges. Welcome to Days of Revolt. Today in a two-part series we're going to be discussing a great Ponzi scheme that not only defines not only the U.S. but the global economy, how we got there, in the first segment, and secondly, where we're going. And with me to discuss this issue is the economist Michael Hudson, author of Killing the Host: How Financial Parasites and Debt Destroy the Global Economy. A professor of economics who worked for many years on Wall Street, where you don’t succeed if you don’t grasp Marx's dictum that capitalism is about exploitation. And he is also, I should mention, the godson of Leon Trotsky.…

Real News Network
Days of Revolt: How We Got to Junk Economics

Chris Hedges interviews Michael Hudson

Junk Economics and the Parasites of Global Finance — Justin Ritchie interviews Michael Hudson

Financial rent.

Counterpunch
Junk Economics and the Parasites of Global Finance

Justin Ritchie interviews Michael Hudson

Mark Gongloff — Piketty Is Right: These Wealthy Men Make Billions For Basically Doing Nothing

To make matters even worse, some of this vast income is being taxed at just the 15 percent capital-gains rate.

The Huffington Post
Piketty Is Right: These Wealthy Men Make Billions For Basically Doing Nothing
Mark Gongloff

I wouldn't hardly call managing risk doing nothing, since it is highly intense, intellectually challenging and demanding of time, not to mention risky. The question really is how necessary it is and what contribution it makes socially and economically other than increasing nominal wealth. Primary investment is obvious productive or the investment is lost. However, financial investment?

Risk management is an effect of capitalism, which is based on risk assumption in both productive or primary investment and financial or secondary investment. The assumption is that unlimited speculative gain from both types of risk assumption is the required incentive to drive entrepreneurial investment in capital formation, or at least provide the optimal incentive. What this assumes is that there is no economic rent involved.

Randy Wray — How Wall Street’s Rent-Seeking Vampire Squid Sucks All Life Out Of The Economy

In economics there is the notion of economic rent—payment in excess of what is required to mobilize factors of production. For example, such rents accrue to those who have “cornered the market”—by artificially restricting supply of some resource, they are able to dictate usurious terms to buyers. We call them “rentiers”.

Here’s the point that is critical to understand: the rentier performs no useful function, and the economic rent can be eliminated without reducing the supply of the resources needed for production. This is why J.M. Keynes advocating “euthanizing” the rentier. As you know, “euthanasia” means “mercy killing”—you kill to reduce pain and suffering. Keynes was serious about this—his recommendation came in the final chapter of his great General Theory, as one of his two fundamental policy proposals.

Brilliant lede. Best short explanation of economic rent and rentier I've seen yet. Great to see it being brought into MMT analysis.

Economonitor — Great Leap Forward
How Wall Street’s Rent-Seeking Vampire Squid Sucks All Life Out Of The Economy
L. Randall Wray | Professor of Economics, UMKC

Merijn Knibbe on land rent and financial rent.

Paul Krugman is tinkering with a model which explains monopoly rents on products with ‘zero’ or at least very low production costs (pharmaceutical products, computer programs like Excel). But he does not yet mention that (A) electronic fiat money is the ultimate zero production costs product while (B) the seigniorage interest profits made by the banks which produce it are to quite some extent based upon ‘land’related loans. Think of a loan for house purchase, financed by freshly produced money and a 4% interest rate. This income often is, to the extent that it’s used to buy already existing land with a high location value or leads to an inflationary increase of house prices, an often overlooked rent income.

Real-World Economics Review Blog
Links and fests (4 pics)
Merijn Knibbe

Yves Smith — Thirty Years of Financial Inefficiency

Arjun Jayadev at Triple Crisis provides a quote from Thomas Phillipon that somehow never sees the light of day in the financial press:

…the unit cost of intermediation is higher today than it was a century ago, and it has increased over the past 30 years. One interpretation is that improvements in information technology may have been cancelled out by increases in other financial activities whose social value is difficult to assess.

This of course is a very understated way of suggesting that the bankers have found new ways to sell or bundle other products or services along with the ones made cheaper by information technology, or create new ones of dubious additional value, so as to allow them to fatten their total pricing.

This is a big and important topic, so let me take just an initial slice at it, and I’ll hopefully come back to it in future posts. We can certainly see the net effect, which is the financialization of the economy, which suggest that IT (and other developments) have allowed the banks to move into an oligopoly position and are extracting economic rents. Simon Johnson, in his important 2009 article, The Quiet Coup, described how the financial sector had accomplished the surprising feat of increasing average worker pay packages and increasing their share of GDP. Wages rose from roughly comparable to average private sector worker wages from just after World War II through 1982. They increased to 181% of private sector worker wages right before the crisis. From 1973 to 1982, the financial sector never garnered more than 16% of corporate profits. By the 2000s, it hit 41%.

Naked Capitalism
Thirty Years of Financial Inefficiency
Yves Smith

Steve Randy Waldman — Hidden profits, hidden rents

Evan Soltas attracts the attention of SRW with his analysis of profits and rents.

Evan Soltas has a very good post on the explosive growth of the financial industry since the end of World War II. As a share of GDP, in terms of profits, and in terms of payroll, postwar America has been truly been a golden age for bankers, brokers, and fund managers.
In fact, it’s even better than it looks!

Interfluidity
Hidden profits, hidden rents
Steve Randy Waldman

Evan Soltas — 5 More Graphs on Finance

Profits and rent in the financial sector.

Evan Soltas | economics & thought

5 More Graphs on Finance

Michael Hudson and Dirk Bezemer — Incorporating the Rentier Sectors into a Financial Model

Michael Hudson has put up his and Dirk Bezemer's recent paper on rentierism at his place, if you haven't read it yet. It's short.

ABSTRACT

Current macroeconomics ignores the roles that rent, debt and the financial sector play in shaping our economy. We discuss the Classical view on rents and policy responses to the rentier sector in the 19th century. The finance, insurance & real estate sector is today’s incarnation of the rentier sector. This paper shows how financial flows can be conceptually and statistically studied separately from (but interacting with) the real sector. We discuss finance’s interaction with government and with the international economy.

Michael Hudson
Incorporating the Rentier Sectors into a Financial Model
Michael Hudson, Visting Professor, UMKC, and Dirk Bezemer, Associate Professor, University of Groningen

Glad to see MMT allies bringing economic rent to attention. It is not only central to the problems we face, in many ways it is the problem as the fat underbelly of modern capitalism, filled with parasites, that is resulting in many diseased conditions, just as happens in human physiology.