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

Noah Smith — Monopolies Are Worse Than We Thought

But before we devise strategies to fight the tide of monopoly, we need a more complete diagnosis. Why is monopoly power increasing? The best minds in the econ profession are on the case, but there’s no definitive answer yet...

If "the best minds in the econ profession" are on the case, we'll never know the actual reasons.

Bloomberg View

Monopolies Are Worse Than We Thought

Noah Smith
ht Mark Thoma at Economist's View

Matias Vernengo — An increase in rents is behind the rise in inequality

Eileen Appelbaum delivered the David Gordon Memorial Lecture at the Chicago Meetings of the Union of Radical Political Economics (URPE). The lecture, and the comments by John Schmitt will be published later in the Review of Radical Political Economics (RRPE). The gist of the argument is that ever stronger corporations use their dominant position in markets, patent and copyright protections, and their political influence to obtain favorable regulations and tax breaks to earn monopoly rents at the expense of consumers....

This, the fact that workers with similar skills get paid significantly different wages, suggests to her that the old story that inequality results from skill-biased-technical-change (SBTC) is incorrect, and that the power of corporations to extract rents can be seen as a New Labor Segmentation, which is superimposed on the old one, researched by David Gordon and his co-authors.

Naked Keynesianism

An increase in rents is behind the rise in inequality
Matias Vernengo | Associate Professor of Economics, Bucknell University

James A. Schmitz, Jr. — The Costs of Monopoly: A New View

Neoclassical economists dismiss monopoly as of insignificant consequence in modern economies. Not so, says this study.

Contrary to conventional wisdom, monopolies inflict substantial economic harm, particularly on the poor.

FRB Minneapolis
The Costs of Monopoly: A New View
James A. Schmitz, Jr. | Senior Research Economist
ht Mark Thoma at Economist's View

Beverly Mann — Phil Ebersole: Monopoly power and what to do about it

Phil Ebersole: The solution to this problem, [Elizabeth] Warren said, is simply to enforce the anti-trust laws as originally written.

The reason that they aren’t is a neoliberal philosophy of business regulation that took hold in the late 1970s, which held that the most important thing was not competition, but business efficiency. If Amazon can serve customers more efficiently that a local bookstore, then, according to this idea, there was no reason for the local bookstore to exist.

That could be true only if Amazon, Wal-Mart, Comcast and other big corporations were owned and operated by altruists, who passed along the gains in economic efficiency to customers, workers, suppliers and the local community.

But even when consolidation produces economic efficiency that benefits consumers, economic efficiency isn’t everything. Concentration of economic power means concentration of political power, which results in the kind of dysfunctional economic system we have now.…

Monopoly power = monopoly rent

Monopoly rent is one of the chief forms of rent along with profit as surplus value, land rent, and  financial rent.

Rent extraction is based on market power and market power is based on political power.

Somewhat ironically, government is both a source of political influence that enable special interests to garner market power and also a level of power through all, such as anti-trust, regulation, such as the which controls negative externality, and public goods and public utilities that provide goods that are more effectively and efficiently provided publicly than privately.

Beverly Mann: This movement, our movement, which began in the fall of 2011 with Occupy Wall Street, is on track to cause a political and economic earthquake.

Angry Bear
Monopoly power and what to do about it

Beverly Mann

See also

The Irish Review
Markets and states are complements

Kevin O'Rourke

ht Brad DeLong

Monthly Review
Monopoly Capital at the Half-Century Mark
John Bellamy Foster

Mark Thoma — Paul Krugman: Robber Baron Recessions

Krugman on monopoly power.

Finally, some economists are waking up to the fact that it's the rent, stupid, and that economic rent flows from economic power that is based on political power.

Economist’s View
Paul Krugman: Robber Baron Recessions
Mark Thoma | Professor of Economics, University of Oregon

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

Joshua Gans — Another choice: The Intellectual Property Strategy

Over the past two weeks, I have been outlining broad strategic options for entrepreneurs of which a disruption strategy is just one choice. The concept is that a given entrepreneurial idea can be commercialised in many different ways. The key to entrepreneurial strategy is to identify the feasible set of choices available to start-ups and to write a business plan for each. After all, you can’t have a strategic choice without actually having a choice and I maintain that entrepreneurs often have many more choices than they think at the outside.

Thusfar, I have considered two options that have in common that they are focused on execution. Recall that being focused on execution means that a start-up embraces potential and on-going competition and formulates a plan to continually beat that competition by developing and continually re-investing in capabilities that allow the venture to beat the next wave of competition on quality, cost or some combination of the two. However, in choosing to focus on execution, a start-up can choose whether to be oriented towards competition (and building out a new value chain in competition with established firms) or to be oriented towards cooperation (and work within existing value chains). These two strategies were termed disruption and value chain respectively and each might be the appropriate one to be matched with an entrepreneurial idea.

Today I want to turn to strategies that are based on investing in control rather than execution. As I pointed out in a previous post, investing in control represents a somewhat familiar — or textbook — path to earning monopoly rents (or competitive advantage) as it involves undertaking a strategy that gives the entrepreneur control over key resources or assets that themselves allow the entrepreneur (or others) to create entry barriers. Thus, in contrast to focusing on execution, control involves more investment upfront but then, if successful, an easier competitive life later on as the venture can live off the future monopoly rents as it would an annuity because its customers would have fewer options to switch out to in the future.…

Digitopoly
Another choice: The Intellectual Property Strategy
Joshua Gans

(h/t Mark Thoma at Economist's View)

Philip Pilkington — False Profit: How Paul Krugman’s Comments on Monopoly Distract From the Important Issues

So, what then is Krugman avoiding by positing what seems to be an emotionally appealing narrative? Simple: class power. Those two words neoclassical economists cannot stand to hear. The fact is that the idea of neoclassical competition is, at best, a relic of the 19th century, at worst, a fantasy pure and simple and income distribution has far more to do with class power than anything else. Class power is, of course, a political issue first and an economic issue second – one of the reasons that neoclassicals, who claim to practice “pure economics”, tend to avoid it. But it is class power that underlies the manner in which income is distributed today – especially when we are considering the role of finance.

Fixing the Economists
False Profit: How Paul Krugman’s Comments on Monopoly Distract From the Important Issues
Philip Pilkington

The plot (wrt rents) thickens. This single paragraphs sums it up.

For elaboration, see Michael Perelman, The Power of Economics vs. The Economics of Power (pdf) and C. Wright Mills, The Power Elite (pdf).

Mark Thoma — Paul Krugman: Profits Without Production

It's the rent, stupid. Has Paul Krugman been reading Michael Hudson, or could any fool figure this out? What's taken so long?

Congrats to Professor Krugman for mentioning the unmentionable from the bully pulpit.

Economist's View
Paul Krugman: Profits Without Production

Mark Thoma

James Allworth — Explainer: How Corruption Is Strangling U.S. Innovation

Tesla. Uber. Netflix. Most economies would kill to have a set of innovators such as these. And yet at every turn, these companies are running headlong into regulation (or lack thereof) that seems designed to benefit incumbents. The reason? The devastating impact of money in politics and how it discourages disruptive innovation among new businesses. Click through this explainer to learn more about legal bribery and U.S. competitiveness:

Harvard Business Review — HBR Blog Network
Explainer: How Corruption Is Strangling U.S. Innovation
James Allworth

Wenonah Hauter — The Elephants in the Room: Citizens United, Trade and Corporate Ownership of Our Natural Resources Read more at http://www.nakedcapitalism.com/2013/04/the-elephants-in-the-room-citizens-united-trade-and-corporate-ownership-of-our-natural-resources

Yves here. This is a short but useful reminder of how the failure to enforce anti-trust laws leads to oligopolies. MBAs are taught how to make markets inefficient to increase corporate profits, and one of the most lasting ways is to achieve a dominant position, ideally in a concentrated industry. “Roll ups” which is a consolidation play, is a favorite among private equity firms (but they often stumble in integrating the companies).

The author describes how dominant players preserve their profits through aggressive lobbying in the food space, and why that is particularly troubling.

Naked Capitalism
The Elephants in the Room: Citizens United, Trade and Corporate Ownership of Our Natural Resources
Wenonah Hauter | Executive Director of Food & Water Watch

Bonnie Kavoussi — Google, Apple Allegedly Conspired To Keep Wages Low: Lawsuit

Despite a heated rivalry, there's one thing Google and Apple allegedly worked together on: underpaying their workers.

Former employees of the companies filed a new complaint on Monday in an attempt to expand a lawsuit they filed last year into a class action case representing up to 100,000 technology workers. Much of the complaint was redacted for privacy reasons.

The lawsuit claims that Apple, Google, Intel, Intuit, Adobe, Lucasfilm and Pixar made "gentleman's agreements" to not recruit each other's employees between 2005 and 2009. By doing so, the lawsuit claims, these companies "artificially suppressed" wages in a rigid pay structure.

In addition, the suit alleges that former Apple CEO Steve Jobs, former Google CEO Eric Schmidt, and Intuit chairman Bill Campbell helped enforce recruiting bans. The lawsuit cites "CEO-to-CEO emails," do-not-call lists, and an analysis by UCLA economist Edward Leamer finding that the alleged poaching bans kept wages low.

The Huffington Post
Google, Apple Allegedly Conspired To Keep Wages Low: Lawsuit
Bonnie Kavoussi

Gar Alperovitz — Wall Street Is Too Big to Regulate

It’s also true that not all Chicago School economists (not to mention their descendants) agreed with Simons, especially on the controversial issue of nationalization. But the logic of his argument remains: With high-paid lobbyists contesting every proposed regulation, it is increasingly clear that big banks can never be effectively controlled as private businesses. If an enterprise (or five of them) is so large and so concentrated that competition and regulation are impossible, the most market-friendly step is to nationalize its functions.

What about breaking up the banks, as many on the left favor? Recent history confirms another Chicago School judgment: while a breakup might work in the short term, the most likely course is what happened with Standard Oil and AT&T, which were broken up, only to essentially recombine a few decades later.

The New York Times | Opinion
Wall Street Is Too Big to Regulate
by Gar Alperovitz
(h/t Kevin Fathi via email)

Of course, it would probably take another financial meltdown to make banking nationalization politically tenable. But given how the sector has behaved since the last crisis, a repetition seems inevitable, and sooner rather than later.

This is the way that the scenario unfolds in my view at this point.