11 ms·

The Upward Redistribution of Income: Are Rents the Story?

79 points by vezzy-fnord 11y ago

CuriousSkeptic 11y ago
"The argument on rents is important because, if correct, it means that there is nothing intrinsic to capitalism that led to this rapid rise in inequality, as for example argued by Thomas Piketty." Isn't rent seeking the defining characteristic of capitalism? (compared to other ways to implement a market economy)
- sputknick 11y ago
  Nope. Capitalism is about capital going to where it is most productive. Rent Seeking is about capital going to where it's told to go based on rules.
  - epistasis 11y ago
    That's a pretty unusual definition of rent seeking; what sort of other axioms are you assuming in order to get to that? Here's another definition: >When a company, organization or individual uses their resources to obtain an economic gain from others without reciprocating any benefits back to society through wealth creation. http://www.investopedia.com/terms/r/rentseeking.asp http://www.investopedia.com/terms/r/rentseeking.asp
  - danharaj 11y ago
    That is a laughable definition. Let's just define our favorite economic system as "the system where the best things happen". Capitalism is merely a kind of economic system where the means of production are controlled privately for the purpose of profit. Observed consequences of capitalism are commodity production, competitive markets, sophisticated financial markets and instruments of debt and credit, wage labour, capital accumulation, and rent seeking.
    - vezzy-fnord 11y ago
      Rent-seeking is relatively agnostic of any particular economic order. To some extent, the Marxist-Leninist planned economies were nothing but that.
      - danharaj 11y ago
        I didn't say rent seeking only occurs in capitalist systems, only that it is a consequence of the premises.
    - ArkyBeagle 11y ago
      "... for the creation of consumer surplus." Adam Smith describes mercantilism, which is nearly pure rent-seeking and capitalism. which is oh so much less so. If you have a royal patent on all beaver pelts from the New World - to where your corporation can order the sinking of ships carrying contraband beaver pelts - then this is nearly pure rent-seeking. Rent seeking grows like weeds at the edges of capitalism, but it is not, strictly speaking, capitalist but rather that which capitalism replaces. This may seem pedantic but it's actually pretty useful.
      - CuriousSkeptic 11y ago
        Did Adam Smith differentiate between free market economies in general and capitalism in particular? It seems to me that much of his work is about the former rather than the latter,taking capitalism as the only instance. A quote from Wikipedia[1]: "Smith defined "capital" as stock, and "profit" as the just expectation of retaining the revenue from improvements made to that stock. Smith also viewed capital improvement as being the proper central aim of the economic and political system" So, in capitalism this is implemented as private property. (A perpetual, transferable, exclusive right to some resource) If we f.ex. changed the implementation from perpetual to time limited non-transferable, we could do so in a manner that would retain the expectation of retaining just enough revenue from improvements. Would this still be capitalism? [1] https://en.m.wikipedia.org/wiki/History_of_capitalist_theory https://en.m.wikipedia.org/wiki/History_of_capitalist_theory (The actual source was a broken link)
  - CuriousSkeptic 11y ago
    A market economy redistributes capital according to demand. I don't really see how capitalism is necessary to achieve that from a market. I take capitalism to mean a market economy in which capital is traded as private property in a manner where the property holder gets to extract rents from ownership. As a contrast, I've been thinking of a system where property laws are altered so that property rights imply rent going from the propery holder, not too. I think this can be done in a manner so that the market manages to distribute capital to where it is needed, even more effective than the current system, while also have a few interesting side effects toward social justice and welfare. Land value taxes are the obvious example. But take copyright. What if those rights could only be claimed as long as you pay for them? It could for example make it much easier for streaming services as either there is an entity paying for the exclusive right, whom you could negotiate streaming rights with, or there is none, implying the work is in he public domain.
    - fineIllregister 11y ago
      Something like Georgism? https://en.wikipedia.org/wiki/Georgism https://en.wikipedia.org/wiki/Georgism
      - CuriousSkeptic 11y ago
        Or all out geo-libertarianism https://en.m.wikipedia.org/wiki/Geolibertarianism https://en.m.wikipedia.org/wiki/Geolibertarianism
    - vezzy-fnord 11y ago
      The Georgist ideal is problematic because it exalts "land" as being this special component of the general welfare over another factor of production. Yet, all production of capital goods and consumer goods must start from nature-given resources (thus land) mixed with labor. A land value tax would then be a penalty on the entire time structure of production. I'd wager a government levying an LVT would negate its benefits since such an undertaking would give it sufficient velocity to expand its actions and thus be able to collude with the private sector in all the other, more damaging I'd think, forms of rent-seeking. The progressive income tax has become a failure due to the wealth elasticity of demand being higher amongst those with more assets (thus being least sensitive to it), along with them finding it easier to avoid it. I don't see an LVT as faring much better.
  - VikingCoder 11y ago
    Society would have to give up property rights, in order to not have "rules" forcing capital to "go where's it's told." Contracts, holding shares, property... These are pretty dang fundamental, but you're just brushing them all off as "rules." It's absurd to try to study Capitalism SEPARATE from those rules.
  - malandrew 11y ago
    If productivity is defined as capital going to where it can generate the most new additional capital, then both statements you made are identical. The rules distort reality so that some activities are productive in excess of their marginal utility instead of productive proportional to their marginal utility. Housing rents in pretty much all markets are productive in excess of the real life utility from the housing that earns that rent due to the myriad restrictions that prevent supply from growing proportionally to demand. Lawmakers should as a general rule try manage both supply and demand curves so that the intersection between the two moves towards the origin or stays relatively the same.
- crdoconnor 11y ago
  Quite: https://en.wikipedia.org/wiki/Capital_accumulation https://en.wikipedia.org/wiki/Capital_accumulation
  - vezzy-fnord 11y ago
    What do you intend to say by this?
- zo1 11y ago
  Well, you could argue it's a component of a capitalist system. But not really the defining characteristic.
  - CuriousSkeptic 11y ago
    Maybe I put too much emphasis on the structure of private property. I sort of connect trading of private property rights as rent seeking almost by definition. If there were no profits in such trades, we would call them swaps no? And capitalism being explicitly about making property tradable is by implication about rent seeking.
    - vezzy-fnord 11y ago
      "Trading of private property rights" is redundant, because it's literally just trade. That's not rent-seeking.
      - CuriousSkeptic 11y ago
        Yes and no. Trading services does not involve property, so no. But yes goods and capital can be bundled up as property when talking about trade. I do think there is a distinction somewhere, not exactly sure where yet. Such that even trade in goods is excluded from the kind of property rights I'm thinking of. I guess the line goes somewhere between scarse and abundant. But even then I guess we have to separate scarse as in unique talents, and scarse as in accumulated resources.
        vezzy-fnord 11y ago
        Trading services does not involve property, so no. It does. Everyone has self-ownership, and as such services can only be sold in the units contracted. A contract for a single indefinite unit service (slavery) would be logically consistent, but a property rights violation and therefore invalid.
        AnimalMuppet 11y ago
        Start at the beginning. Here's a tin mine. But it wasn't always there; it's there because a prospector found a tin deposit, presumably as the result of a large amount of effort. It's there because somebody invested in equipment to make it economically viable to extract the tin. So viewing that as "rent" seems a bit off. Same thing with farmland. There's a farm there because somebody made a farm there; it wasn't always farmland. Somebody cut down the trees, cleared the brush, broke the ground, and started planting. It wasn't easy. Later, somebody (a series of somebodies) bought the equipment for the farm to be economically viable in the current environment. Real rent is when the king or somebody gives you a monopoly on selling boot blacking (or whatever), so you can charge whatever you decide, and everybody has to pay it or go without boot blacking. I don't see a farm or a mine in the same category. (I do see a house for rent in an area with zoning restrictions in the category of economic rent, though.) I guess I also didn't give a concrete place to draw the line, though...
- deleted 11y ago
  [deleted]
- Mikeb85 11y ago
  > Isn't rent seeking the defining characteristic of capitalism? I wouldn't say the defining characteristic, but it certainly happens a lot, and is what Marx and now Piketty warn about... (rent seeking of course being the movement of capital to where it can obtain economic gain without any benefit to society)
  - dnautics 11y ago
    I think it's a defining characteristic of Capital-ism - as in the belief that seeking the accumulation of capital for its own sake is strictly positive for society (which is closer to what Marx meant) but these days capitalism seems to lean more "free market"-ism, which doesn't care much for rent-seeking.
- ArkyBeagle 11y ago
  I would say - using Adam Smith - that that which is rent-seeking is not actually capitalism.
advisedwang 11y ago
Please be aware that the source, the Center for Economic and Policy Research, is a think-tank and not a journal or research institute. This does not mean the work or conclusions are invalid, but it does mean the authors likely have an agenda.
- api 11y ago
  Are there any authors who don't have an agenda?
  - bronson 11y ago
    No, but there are authors who attempt to avoid an agenda, and authors who attempt to advance one. It's an important distinction.
    - dnautics 11y ago
      I'd be more scared of the former since they have self-deluded themselves into believing themselves more objective. This will lead to all sorts of strange contortions to maintain the author's impossible self-image.
      - chc 11y ago
        Attempting to be fair and objective isn't a delusion, it's an effort. Similarly, I try to be kind to people, but sometimes I'll get a little irritated — this doesn't mean I'm deluded into thinking I'm perfectly kind, and it also doesn't mean I'm just as mean as somebody who revels in other people's pain. Put another way: Just because no software is 100% error-free doesn't mean it's better to go with software that has had no QA whatsoever and is known to be very buggy.
      - AnimalMuppet 11y ago
        It can also lead to attempts to actually be more objective. Remember, you're contrasting them to authors who attempt to advance an agenda, and are almost certainly therefore deliberately being less objective.
iandanforth 11y ago
I wish this were actually about housing rents, since that behaviour certainly warrants a discussion over government regulation.
- nostromo 11y ago
  Here's a recent paper that did take on that issue: http://www.mit.edu/~mrognlie/piketty_diminishing_returns.pdf http://www.mit.edu/~mrognlie/piketty_diminishing_returns.pdf > Recent trends in both capital wealth and income are driven almost entirely by housing, with underlying mechanisms quite different from those emphasized in Capital. If the paper reads too academic, here's an accessible write-up: https://medium.com/the-ferenstein-wire/a-26-year-old-mit-graduate-is-turning-heads-over-his-theory-that-income-inequality-is-actually-2a3b423e0c https://medium.com/the-ferenstein-wire/a-26-year-old-mit-gra...
  - MilnerRoute 11y ago
    The paper defines "rents" differently than its common meaning (e.g. the monthly payment for an apartment). "this upward redistribution comes from the growth of rents in the economy in four major areas: patent and copyright protection, the financial sector, the pay of CEOs and other top executives, and protectionist measures that have boosted the pay of doctors and other highly educated professionals." The Medium blogger seems to only be talking about housing.
    - Mikeb85 11y ago
      It's defined as 'economic rent', of which housing rent is a type. "In classical economics, economic rent is any payment made (including imputed value) or benefit received for non-produced inputs such as location (land) and for assets formed by creating official privilege over natural opportunities (e.g., patents)." https://en.wikipedia.org/wiki/Economic_rent https://en.wikipedia.org/wiki/Economic_rent
      - ArkyBeagle 11y ago
        Rack rent ( the sort you pay your landlord) is distinct from (Ricardian) land rents. FTA:"The argument on rents is important because, if correct, it means that there is nothing intrinsic to capitalism that led to this rapid rise in inequality, as for example argued by Thomas Piketty." I find Baker mostly moderate and nicely curmudgeonly.
vinceguidry 11y ago
> As a result of this upward redistribution, most workers have seen little improvement in living standards from the productivity gains over this period. I believe this to be a myth caused by lamp-posting. The world is a much better place than it was 30 years ago, we just haven't found the right way to quantify exactly how much value 'high technology' has brought to their lives. Measurable wealth might have been redistributed upwards, but everyone is still better off regardless. I'd rather be poor today than rich twenty years ago.
- siavosh 11y ago
  Can you elaborate on why you'd rather be poor today than rich 20 years ago (~1995) ?
  - vinceguidry 11y ago
    Essentially, it boils down to how effective I can be with my time. I can be far more productive today, using modern information tools, than I ever could have in the mid-nineties. It's not just a function of experience, in 1995 I'd already had like 8 years of exposure to computers and programming. The main barriers I had to success were in knowing what to do and how to do it. Now, there are practically no informational barriers at all. I've shifted from looking for options to take to sifting through all the available, great ones. The quality of what you can find on the Internet these days is just mind-bogglingly better. What this means is that time spent 20 years ago is worth less than time spent now. And since time is far more valuable than money, there isn't an amount of money you could throw at me to make me yearn for those old days. I use the similar logic to come to the conclusion that I'd rather be a lower-class American than a Chinese billionaire. I'd actually rather be a middle class Chinese than a Chinese billionaire, if only because that means I could move to the States. Everything I've read about these people indicate myopic, ugly personalities. The social fluidity of the US is worth more money than I could ever imagine, as increasing the value of time spent is worth more than any amount of money.
- ssalenik 11y ago
  > I'd rather be poor today than rich twenty years ago. This makes it sound like rich people 20 years ago had it pretty bad... What did technology add to their lives aside from convenience?
arca_vorago 11y ago
I would say it's about the lack of structure in the old landholding aristocratic way of doing things when we are in a population explosion, which will inherently create an upward redistribution of wealth due to physical limitations of land. That being said, I think as our technology progresses, we, at least in America, have plenty of land that would be good once we can figure out reliable ways to generate energy (already mostly there with solar, wind, geo) but more importantly water. I have always imagined my off the grid setup as sufficient to power a dehumidifier that pulls water from the air and filters it to potable. (in concjuction with a well if possible, sometimes though the water is below rock or other tough structures or is too deep.) The original point is though, that the more wealth you have the more you can generate and create (for yourself or others), but the less you have in a growing population of less-havers, pulling yourself up is harder than ever. tldr - The middle class is what's really under attack here, as the poor have formerly had more upward mobility into becoming middle class. That is going away with the current growing inequality.
crdoconnor 11y ago
>patent and copyright protection Seems legit. >the financial sector Seems legit. >the pay of CEOs and other top executives Seems legit. >and protectionist measures that have boosted the pay of doctors Wait a second... https://3.bp.blogspot.com/_ZPUIbpPl1ME/SwLM3Q8Nl6I/AAAAAAAAAMc/DuMyKl0Gjtw/s1600/Falling+Physician+Income.png https://3.bp.blogspot.com/_ZPUIbpPl1ME/SwLM3Q8Nl6I/AAAAAAAAA... I looked in the paper and he doesn't seem to address this, he just complains that doctors earn more than in other rich countries. He also doesn't mention that doctors in the US have to pay enormous malpractice insurance premiums when comparing them. So who is Dean Baker and why does he hate doctors?
- debacle 11y ago
  It isn't unfair in any way to point to the American healthcare system as a massive protectionist racket. Doctors, insurance companies, pharma companies, and hospitals are all hard at work ensuring their profits at the expense of patients and the American tax payer. The AMA is a highly self-interested organization.
  - crdoconnor 11y ago
    >The AMA is a highly self-interested organization. The decline and extinction of self interested organisations that represent labor is pretty much the only reason why all wealth as accumulated with the 0.01%. AMA is, like most other unions, apparently not doing a very good job of keeping doctors' incomes up. That apparently doesn't stop self interested economists going on an academia-themed anti-union rant.
    - vezzy-fnord 11y ago
      That apparently doesn't stop self interested economists going on an academia-themed anti-union rant. Your promotion of this odd conspiracy about bourgeoisie capitalist economists being bought out by think tanks and promoting anti-labor, pro-capitalist propaganda is just completely baffling to me. You did the same in a previous thread about minimum wages and here again you insinuated in a different post about how Dean Baker's motivation for this paper (being an ACA supporter) must be conspiring to drive down wages of the medical profession to make ACA cheaper. I just don't know how one can respond to you.
doctorpangloss 11y ago
> "For computer software, patents together with copyright protection are the entire price of the product." That doesn't ring true. Software is sold in far more complex ways that in no way benefit from the copyright regime. That could mean software consulting and support for open source projects, or it could mean advertising and IAP-supported free-to-play games. Both are extremely lucrative. You might want to call in-app purchases something that corresponds to copyright. I think all that matters is what is enforceable (ask the movie and music industries). That game services have figured out how to make the enforceability of copyright irrelevant by centralizing hosting and matchmaking is the far bigger story. Put another way, the researchers bring up removing patent regimes on drugs in order to save money and reduce rents. That's only because of the peculiar way that drugs work—it doesn't necessarily make sense. Jana Hunter, an indie musician, had this great phrase: "If technology provided loopholes for free food and shelter, that’s what we’d be arguing about." [0] But technology only provides loopholes for some free stuff, like music and drugs, and we can't just decide that property rights can be ignored when they're cheap to exploit (like copyright or patent infringement). On the other hand, we will just, in a Darwinian way, end up in a world where the technological loopholes intrinsically don't exist. This happened in commercial video games, and it happened so quickly only because of enormous ingenuity, an extremely competitive market and a complete disconnect from the conventional political process (ever heard of a video game studio lobbyist?). If you want to improve wealth distribution, messing with the mechanics of how things are bought and sold, as always, isn't going to get you very far. Maybe just raise taxes, you know? [0] http://lowerdens.tumblr.com/post/34308869231/on-spotify-and-music-consumption http://lowerdens.tumblr.com/post/34308869231/on-spotify-and-...
- VikingCoder 11y ago
  Advertising and IAP-supported free-to-play games, if they did not have copyright protection, would be IMMEDIATELY hacked to not have advertising or IAP.
- vezzy-fnord 11y ago
  we can't just decide that property rights can be ignored when they're cheap to exploit (like copyright or patent infringement) Copyrights and patents are state-granted exclusionary privileges, not property titles. If you want to improve wealth distribution, messing with the mechanics of how things are bought and sold, as always, isn't going to get you very far. What are you talking about? Abolishing and reforming institutions is one of the most powerful tools there is. Maybe just raise taxes, you know? The whole point of this paper is that simplistic fiscal shenanigans like this don't work.
PaulHoule 11y ago
Certainly you can think of it this way, if definitionally, it is a kind of a "rent" to be so lucky to be in any situation where you can get paid vastly more than the average.
vannevar 11y ago
The argument on rents is important because, if correct, it means that there is nothing intrinsic to capitalism that led to this rapid rise in inequality... Whatever the paper shows, I'm not sure you can draw this conclusion from it. The fact that systematic inequality takes some specific form and prefers some assets over others doesn't mean that it isn't a feature of capitalism, only that within capitalism, not all assets behave identically. I'm not sure why you would expect them to.
- vannevar 11y ago
  Would the downvote care to elaborate? Why would the nature of the asset imbalance absolve capitalism itself?
zygomega 11y ago
Rents can be seen as a future cash flow stream, at least partially protected from erosion by competition, that is a reward for past efforts. In a world where interest rates decline after the establishment of the rent, super-normal profits flow to the rentier. Keynes missed this in his 'euthanasia of the rentier' tirade.
- dnautics 11y ago
  wrong "rent". rent in this case is "rent-seeking" which means seeking favor from government disbursal, regulation, or generally something which tilts the economic landscape in their favor (e.g. bailouts, FOMC operations, first-access to government-issued loans, etc).
  - gozur88 11y ago
    But the paper in question included "patent and copyright protection" and the entire financial sector in its definition of rents. That's just odd.
    - dnautics 11y ago
      patent and copyright restriction is a HUGE rent. Even more so now that we're first-to-file and not first-to-invent. The financial sector subsists on two government-policy pillars. 1) access to lower-than-market interest rates on juicy loans which can then be flipped to the public at a higher rate (resulting in overall increased public exposure to the pain of systemic risk) and 2) secular inflation, which drives the general public into subsidizing corporate risk (via the stock market, e.g.) in order to be able to retire, since savings won't cut it. And that's not even getting into bailouts.
      - gozur88 11y ago
        >patent and copyright restriction is a HUGE rent. Even more so now that we're first-to-file and not first-to-invent. Technically to consider it a rent the copyright holder would not be producing anything, which just isn't true. Well, not for patents on genuine inventions. The same is true for financial services. They do provide a service for the money.
ChuckMcM 11y ago
I would like to believe this is the dominant factor. It would provide a good argument for the abolishment of rents quickly (copyright length, patent length) and make another argument against extending patent protection to genes or software less compelling. That said, the "boom" in startups is all about creating rents as a way of funding the business. Whether its the percentage cut that Uber or AirBnB takes or the price you charge advertisers for access, those are by this definition just rents transferring wealth from the consumers and workers into a third party's pocket.
- pm90 11y ago
  I guess you can look at it that way. But the "rent" that Uber and AirBnB are demanding, is actually from a very tangible service that they provide: Uber, for finding a cab, AirBnB, for finding a place to live. I would gladly pay this "rent" to make use of their service. Software patents on the other hand, don't seem to do anyone a service, and yet we have to pay a price for them.
- gozur88 11y ago
  By the normal definition companies running a matching service or a platform for advertisers aren't engaged in rent seeking because they're providing a service.
  - ChuckMcM 11y ago
    My definition is that you are constrained from providing the service unless you pay a third party as rent seeking. If an Uber driver could offer someone a ride and they could accept and pay for it without paying Uber a commission (who has a no participation in that transaction at all) then I would agree it isn't a rent, however they use the lock in of the payment service to extract a rent whether or not they provide the matching service.
squozzer 11y ago
All I can say is good luck with that project.
EGreg 11y ago
The main explanation is not considered here: Automation and Outsourcing. Both reduce the demand for local human labor, and thus depress wages. They cause wealth redistribution upwards by providing a power imbalance between the capitalist and the worker. David Harvey did a nice talk about this: http://m.youtube.com/watch?v=qOP2V_np2c0 http://m.youtube.com/watch?v=qOP2V_np2c0

79 points by vezzy-fnord 11y ago

"The argument on rents is important because, if correct, it means that there is nothing intrinsic to capitalism that led to this rapid rise in inequality, as for example argued by Thomas Piketty." Isn't rent seeking the defining characteristic of capitalism? (compared to other ways to implement a market economy)

sputknick 11y ago
Nope. Capitalism is about capital going to where it is most productive. Rent Seeking is about capital going to where it's told to go based on rules.
- epistasis 11y ago
  That's a pretty unusual definition of rent seeking; what sort of other axioms are you assuming in order to get to that? Here's another definition: >When a company, organization or individual uses their resources to obtain an economic gain from others without reciprocating any benefits back to society through wealth creation. http://www.investopedia.com/terms/r/rentseeking.asp http://www.investopedia.com/terms/r/rentseeking.asp
- danharaj 11y ago
  That is a laughable definition. Let's just define our favorite economic system as "the system where the best things happen". Capitalism is merely a kind of economic system where the means of production are controlled privately for the purpose of profit. Observed consequences of capitalism are commodity production, competitive markets, sophisticated financial markets and instruments of debt and credit, wage labour, capital accumulation, and rent seeking.
  - vezzy-fnord 11y ago
    Rent-seeking is relatively agnostic of any particular economic order. To some extent, the Marxist-Leninist planned economies were nothing but that.
    - danharaj 11y ago
      I didn't say rent seeking only occurs in capitalist systems, only that it is a consequence of the premises.
  - ArkyBeagle 11y ago
    "... for the creation of consumer surplus." Adam Smith describes mercantilism, which is nearly pure rent-seeking and capitalism. which is oh so much less so. If you have a royal patent on all beaver pelts from the New World - to where your corporation can order the sinking of ships carrying contraband beaver pelts - then this is nearly pure rent-seeking. Rent seeking grows like weeds at the edges of capitalism, but it is not, strictly speaking, capitalist but rather that which capitalism replaces. This may seem pedantic but it's actually pretty useful.
    - CuriousSkeptic 11y ago
      Did Adam Smith differentiate between free market economies in general and capitalism in particular? It seems to me that much of his work is about the former rather than the latter,taking capitalism as the only instance. A quote from Wikipedia[1]: "Smith defined "capital" as stock, and "profit" as the just expectation of retaining the revenue from improvements made to that stock. Smith also viewed capital improvement as being the proper central aim of the economic and political system" So, in capitalism this is implemented as private property. (A perpetual, transferable, exclusive right to some resource) If we f.ex. changed the implementation from perpetual to time limited non-transferable, we could do so in a manner that would retain the expectation of retaining just enough revenue from improvements. Would this still be capitalism? [1] https://en.m.wikipedia.org/wiki/History_of_capitalist_theory https://en.m.wikipedia.org/wiki/History_of_capitalist_theory (The actual source was a broken link)
- CuriousSkeptic 11y ago
  A market economy redistributes capital according to demand. I don't really see how capitalism is necessary to achieve that from a market. I take capitalism to mean a market economy in which capital is traded as private property in a manner where the property holder gets to extract rents from ownership. As a contrast, I've been thinking of a system where property laws are altered so that property rights imply rent going from the propery holder, not too. I think this can be done in a manner so that the market manages to distribute capital to where it is needed, even more effective than the current system, while also have a few interesting side effects toward social justice and welfare. Land value taxes are the obvious example. But take copyright. What if those rights could only be claimed as long as you pay for them? It could for example make it much easier for streaming services as either there is an entity paying for the exclusive right, whom you could negotiate streaming rights with, or there is none, implying the work is in he public domain.
  - fineIllregister 11y ago
    Something like Georgism? https://en.wikipedia.org/wiki/Georgism https://en.wikipedia.org/wiki/Georgism
    - CuriousSkeptic 11y ago
      Or all out geo-libertarianism https://en.m.wikipedia.org/wiki/Geolibertarianism https://en.m.wikipedia.org/wiki/Geolibertarianism
  - vezzy-fnord 11y ago
    The Georgist ideal is problematic because it exalts "land" as being this special component of the general welfare over another factor of production. Yet, all production of capital goods and consumer goods must start from nature-given resources (thus land) mixed with labor. A land value tax would then be a penalty on the entire time structure of production. I'd wager a government levying an LVT would negate its benefits since such an undertaking would give it sufficient velocity to expand its actions and thus be able to collude with the private sector in all the other, more damaging I'd think, forms of rent-seeking. The progressive income tax has become a failure due to the wealth elasticity of demand being higher amongst those with more assets (thus being least sensitive to it), along with them finding it easier to avoid it. I don't see an LVT as faring much better.
- VikingCoder 11y ago
  Society would have to give up property rights, in order to not have "rules" forcing capital to "go where's it's told." Contracts, holding shares, property... These are pretty dang fundamental, but you're just brushing them all off as "rules." It's absurd to try to study Capitalism SEPARATE from those rules.
- malandrew 11y ago
  If productivity is defined as capital going to where it can generate the most new additional capital, then both statements you made are identical. The rules distort reality so that some activities are productive in excess of their marginal utility instead of productive proportional to their marginal utility. Housing rents in pretty much all markets are productive in excess of the real life utility from the housing that earns that rent due to the myriad restrictions that prevent supply from growing proportionally to demand. Lawmakers should as a general rule try manage both supply and demand curves so that the intersection between the two moves towards the origin or stays relatively the same.
crdoconnor 11y ago
Quite: https://en.wikipedia.org/wiki/Capital_accumulation https://en.wikipedia.org/wiki/Capital_accumulation
- vezzy-fnord 11y ago
  What do you intend to say by this?
zo1 11y ago
Well, you could argue it's a component of a capitalist system. But not really the defining characteristic.
- CuriousSkeptic 11y ago
  Maybe I put too much emphasis on the structure of private property. I sort of connect trading of private property rights as rent seeking almost by definition. If there were no profits in such trades, we would call them swaps no? And capitalism being explicitly about making property tradable is by implication about rent seeking.
  - vezzy-fnord 11y ago
    "Trading of private property rights" is redundant, because it's literally just trade. That's not rent-seeking.
    - CuriousSkeptic 11y ago
      Yes and no. Trading services does not involve property, so no. But yes goods and capital can be bundled up as property when talking about trade. I do think there is a distinction somewhere, not exactly sure where yet. Such that even trade in goods is excluded from the kind of property rights I'm thinking of. I guess the line goes somewhere between scarse and abundant. But even then I guess we have to separate scarse as in unique talents, and scarse as in accumulated resources.
      - vezzy-fnord 11y ago
        Trading services does not involve property, so no. It does. Everyone has self-ownership, and as such services can only be sold in the units contracted. A contract for a single indefinite unit service (slavery) would be logically consistent, but a property rights violation and therefore invalid.
      - AnimalMuppet 11y ago
        Start at the beginning. Here's a tin mine. But it wasn't always there; it's there because a prospector found a tin deposit, presumably as the result of a large amount of effort. It's there because somebody invested in equipment to make it economically viable to extract the tin. So viewing that as "rent" seems a bit off. Same thing with farmland. There's a farm there because somebody made a farm there; it wasn't always farmland. Somebody cut down the trees, cleared the brush, broke the ground, and started planting. It wasn't easy. Later, somebody (a series of somebodies) bought the equipment for the farm to be economically viable in the current environment. Real rent is when the king or somebody gives you a monopoly on selling boot blacking (or whatever), so you can charge whatever you decide, and everybody has to pay it or go without boot blacking. I don't see a farm or a mine in the same category. (I do see a house for rent in an area with zoning restrictions in the category of economic rent, though.) I guess I also didn't give a concrete place to draw the line, though...
deleted 11y ago
[deleted]
Mikeb85 11y ago
> Isn't rent seeking the defining characteristic of capitalism? I wouldn't say the defining characteristic, but it certainly happens a lot, and is what Marx and now Piketty warn about... (rent seeking of course being the movement of capital to where it can obtain economic gain without any benefit to society)
- dnautics 11y ago
  I think it's a defining characteristic of Capital-ism - as in the belief that seeking the accumulation of capital for its own sake is strictly positive for society (which is closer to what Marx meant) but these days capitalism seems to lean more "free market"-ism, which doesn't care much for rent-seeking.
ArkyBeagle 11y ago
I would say - using Adam Smith - that that which is rent-seeking is not actually capitalism.

advisedwang 11y ago

Please be aware that the source, the Center for Economic and Policy Research, is a think-tank and not a journal or research institute. This does not mean the work or conclusions are invalid, but it does mean the authors likely have an agenda.

api 11y ago
Are there any authors who don't have an agenda?
- bronson 11y ago
  No, but there are authors who attempt to avoid an agenda, and authors who attempt to advance one. It's an important distinction.
  - dnautics 11y ago
    I'd be more scared of the former since they have self-deluded themselves into believing themselves more objective. This will lead to all sorts of strange contortions to maintain the author's impossible self-image.
    - chc 11y ago
      Attempting to be fair and objective isn't a delusion, it's an effort. Similarly, I try to be kind to people, but sometimes I'll get a little irritated — this doesn't mean I'm deluded into thinking I'm perfectly kind, and it also doesn't mean I'm just as mean as somebody who revels in other people's pain. Put another way: Just because no software is 100% error-free doesn't mean it's better to go with software that has had no QA whatsoever and is known to be very buggy.
    - AnimalMuppet 11y ago
      It can also lead to attempts to actually be more objective. Remember, you're contrasting them to authors who attempt to advance an agenda, and are almost certainly therefore deliberately being less objective.

iandanforth 11y ago

I wish this were actually about housing rents, since that behaviour certainly warrants a discussion over government regulation.

nostromo 11y ago
Here's a recent paper that did take on that issue: http://www.mit.edu/~mrognlie/piketty_diminishing_returns.pdf http://www.mit.edu/~mrognlie/piketty_diminishing_returns.pdf > Recent trends in both capital wealth and income are driven almost entirely by housing, with underlying mechanisms quite different from those emphasized in Capital. If the paper reads too academic, here's an accessible write-up: https://medium.com/the-ferenstein-wire/a-26-year-old-mit-graduate-is-turning-heads-over-his-theory-that-income-inequality-is-actually-2a3b423e0c https://medium.com/the-ferenstein-wire/a-26-year-old-mit-gra...
- MilnerRoute 11y ago
  The paper defines "rents" differently than its common meaning (e.g. the monthly payment for an apartment). "this upward redistribution comes from the growth of rents in the economy in four major areas: patent and copyright protection, the financial sector, the pay of CEOs and other top executives, and protectionist measures that have boosted the pay of doctors and other highly educated professionals." The Medium blogger seems to only be talking about housing.
  - Mikeb85 11y ago
    It's defined as 'economic rent', of which housing rent is a type. "In classical economics, economic rent is any payment made (including imputed value) or benefit received for non-produced inputs such as location (land) and for assets formed by creating official privilege over natural opportunities (e.g., patents)." https://en.wikipedia.org/wiki/Economic_rent https://en.wikipedia.org/wiki/Economic_rent
    - ArkyBeagle 11y ago
      Rack rent ( the sort you pay your landlord) is distinct from (Ricardian) land rents. FTA:"The argument on rents is important because, if correct, it means that there is nothing intrinsic to capitalism that led to this rapid rise in inequality, as for example argued by Thomas Piketty." I find Baker mostly moderate and nicely curmudgeonly.

vinceguidry 11y ago

> As a result of this upward redistribution, most workers have seen little improvement in living standards from the productivity gains over this period. I believe this to be a myth caused by lamp-posting. The world is a much better place than it was 30 years ago, we just haven't found the right way to quantify exactly how much value 'high technology' has brought to their lives. Measurable wealth might have been redistributed upwards, but everyone is still better off regardless. I'd rather be poor today than rich twenty years ago.

siavosh 11y ago
Can you elaborate on why you'd rather be poor today than rich 20 years ago (~1995) ?
- vinceguidry 11y ago
  Essentially, it boils down to how effective I can be with my time. I can be far more productive today, using modern information tools, than I ever could have in the mid-nineties. It's not just a function of experience, in 1995 I'd already had like 8 years of exposure to computers and programming. The main barriers I had to success were in knowing what to do and how to do it. Now, there are practically no informational barriers at all. I've shifted from looking for options to take to sifting through all the available, great ones. The quality of what you can find on the Internet these days is just mind-bogglingly better. What this means is that time spent 20 years ago is worth less than time spent now. And since time is far more valuable than money, there isn't an amount of money you could throw at me to make me yearn for those old days. I use the similar logic to come to the conclusion that I'd rather be a lower-class American than a Chinese billionaire. I'd actually rather be a middle class Chinese than a Chinese billionaire, if only because that means I could move to the States. Everything I've read about these people indicate myopic, ugly personalities. The social fluidity of the US is worth more money than I could ever imagine, as increasing the value of time spent is worth more than any amount of money.
ssalenik 11y ago
> I'd rather be poor today than rich twenty years ago. This makes it sound like rich people 20 years ago had it pretty bad... What did technology add to their lives aside from convenience?

arca_vorago 11y ago

I would say it's about the lack of structure in the old landholding aristocratic way of doing things when we are in a population explosion, which will inherently create an upward redistribution of wealth due to physical limitations of land. That being said, I think as our technology progresses, we, at least in America, have plenty of land that would be good once we can figure out reliable ways to generate energy (already mostly there with solar, wind, geo) but more importantly water. I have always imagined my off the grid setup as sufficient to power a dehumidifier that pulls water from the air and filters it to potable. (in concjuction with a well if possible, sometimes though the water is below rock or other tough structures or is too deep.) The original point is though, that the more wealth you have the more you can generate and create (for yourself or others), but the less you have in a growing population of less-havers, pulling yourself up is harder than ever. tldr - The middle class is what's really under attack here, as the poor have formerly had more upward mobility into becoming middle class. That is going away with the current growing inequality.

crdoconnor 11y ago

>patent and copyright protection Seems legit. >the financial sector Seems legit. >the pay of CEOs and other top executives Seems legit. >and protectionist measures that have boosted the pay of doctors Wait a second... https://3.bp.blogspot.com/_ZPUIbpPl1ME/SwLM3Q8Nl6I/AAAAAAAAAMc/DuMyKl0Gjtw/s1600/Falling+Physician+Income.png https://3.bp.blogspot.com/_ZPUIbpPl1ME/SwLM3Q8Nl6I/AAAAAAAAA... I looked in the paper and he doesn't seem to address this, he just complains that doctors earn more than in other rich countries. He also doesn't mention that doctors in the US have to pay enormous malpractice insurance premiums when comparing them. So who is Dean Baker and why does he hate doctors?

debacle 11y ago
It isn't unfair in any way to point to the American healthcare system as a massive protectionist racket. Doctors, insurance companies, pharma companies, and hospitals are all hard at work ensuring their profits at the expense of patients and the American tax payer. The AMA is a highly self-interested organization.
- crdoconnor 11y ago
  >The AMA is a highly self-interested organization. The decline and extinction of self interested organisations that represent labor is pretty much the only reason why all wealth as accumulated with the 0.01%. AMA is, like most other unions, apparently not doing a very good job of keeping doctors' incomes up. That apparently doesn't stop self interested economists going on an academia-themed anti-union rant.
  - vezzy-fnord 11y ago
    That apparently doesn't stop self interested economists going on an academia-themed anti-union rant. Your promotion of this odd conspiracy about bourgeoisie capitalist economists being bought out by think tanks and promoting anti-labor, pro-capitalist propaganda is just completely baffling to me. You did the same in a previous thread about minimum wages and here again you insinuated in a different post about how Dean Baker's motivation for this paper (being an ACA supporter) must be conspiring to drive down wages of the medical profession to make ACA cheaper. I just don't know how one can respond to you.

doctorpangloss 11y ago

> "For computer software, patents together with copyright protection are the entire price of the product." That doesn't ring true. Software is sold in far more complex ways that in no way benefit from the copyright regime. That could mean software consulting and support for open source projects, or it could mean advertising and IAP-supported free-to-play games. Both are extremely lucrative. You might want to call in-app purchases something that corresponds to copyright. I think all that matters is what is enforceable (ask the movie and music industries). That game services have figured out how to make the enforceability of copyright irrelevant by centralizing hosting and matchmaking is the far bigger story. Put another way, the researchers bring up removing patent regimes on drugs in order to save money and reduce rents. That's only because of the peculiar way that drugs work—it doesn't necessarily make sense. Jana Hunter, an indie musician, had this great phrase: "If technology provided loopholes for free food and shelter, that’s what we’d be arguing about." [0] But technology only provides loopholes for some free stuff, like music and drugs, and we can't just decide that property rights can be ignored when they're cheap to exploit (like copyright or patent infringement). On the other hand, we will just, in a Darwinian way, end up in a world where the technological loopholes intrinsically don't exist. This happened in commercial video games, and it happened so quickly only because of enormous ingenuity, an extremely competitive market and a complete disconnect from the conventional political process (ever heard of a video game studio lobbyist?). If you want to improve wealth distribution, messing with the mechanics of how things are bought and sold, as always, isn't going to get you very far. Maybe just raise taxes, you know? [0] http://lowerdens.tumblr.com/post/34308869231/on-spotify-and-music-consumption http://lowerdens.tumblr.com/post/34308869231/on-spotify-and-...

VikingCoder 11y ago
Advertising and IAP-supported free-to-play games, if they did not have copyright protection, would be IMMEDIATELY hacked to not have advertising or IAP.
vezzy-fnord 11y ago
we can't just decide that property rights can be ignored when they're cheap to exploit (like copyright or patent infringement) Copyrights and patents are state-granted exclusionary privileges, not property titles. If you want to improve wealth distribution, messing with the mechanics of how things are bought and sold, as always, isn't going to get you very far. What are you talking about? Abolishing and reforming institutions is one of the most powerful tools there is. Maybe just raise taxes, you know? The whole point of this paper is that simplistic fiscal shenanigans like this don't work.

PaulHoule 11y ago

Certainly you can think of it this way, if definitionally, it is a kind of a "rent" to be so lucky to be in any situation where you can get paid vastly more than the average.

vannevar 11y ago

The argument on rents is important because, if correct, it means that there is nothing intrinsic to capitalism that led to this rapid rise in inequality... Whatever the paper shows, I'm not sure you can draw this conclusion from it. The fact that systematic inequality takes some specific form and prefers some assets over others doesn't mean that it isn't a feature of capitalism, only that within capitalism, not all assets behave identically. I'm not sure why you would expect them to.

vannevar 11y ago
Would the downvote care to elaborate? Why would the nature of the asset imbalance absolve capitalism itself?

zygomega 11y ago

Rents can be seen as a future cash flow stream, at least partially protected from erosion by competition, that is a reward for past efforts. In a world where interest rates decline after the establishment of the rent, super-normal profits flow to the rentier. Keynes missed this in his 'euthanasia of the rentier' tirade.

dnautics 11y ago
wrong "rent". rent in this case is "rent-seeking" which means seeking favor from government disbursal, regulation, or generally something which tilts the economic landscape in their favor (e.g. bailouts, FOMC operations, first-access to government-issued loans, etc).
- gozur88 11y ago
  But the paper in question included "patent and copyright protection" and the entire financial sector in its definition of rents. That's just odd.
  - dnautics 11y ago
    patent and copyright restriction is a HUGE rent. Even more so now that we're first-to-file and not first-to-invent. The financial sector subsists on two government-policy pillars. 1) access to lower-than-market interest rates on juicy loans which can then be flipped to the public at a higher rate (resulting in overall increased public exposure to the pain of systemic risk) and 2) secular inflation, which drives the general public into subsidizing corporate risk (via the stock market, e.g.) in order to be able to retire, since savings won't cut it. And that's not even getting into bailouts.
    - gozur88 11y ago
      >patent and copyright restriction is a HUGE rent. Even more so now that we're first-to-file and not first-to-invent. Technically to consider it a rent the copyright holder would not be producing anything, which just isn't true. Well, not for patents on genuine inventions. The same is true for financial services. They do provide a service for the money.

ChuckMcM 11y ago

I would like to believe this is the dominant factor. It would provide a good argument for the abolishment of rents quickly (copyright length, patent length) and make another argument against extending patent protection to genes or software less compelling. That said, the "boom" in startups is all about creating rents as a way of funding the business. Whether its the percentage cut that Uber or AirBnB takes or the price you charge advertisers for access, those are by this definition just rents transferring wealth from the consumers and workers into a third party's pocket.

pm90 11y ago
I guess you can look at it that way. But the "rent" that Uber and AirBnB are demanding, is actually from a very tangible service that they provide: Uber, for finding a cab, AirBnB, for finding a place to live. I would gladly pay this "rent" to make use of their service. Software patents on the other hand, don't seem to do anyone a service, and yet we have to pay a price for them.
gozur88 11y ago
By the normal definition companies running a matching service or a platform for advertisers aren't engaged in rent seeking because they're providing a service.
- ChuckMcM 11y ago
  My definition is that you are constrained from providing the service unless you pay a third party as rent seeking. If an Uber driver could offer someone a ride and they could accept and pay for it without paying Uber a commission (who has a no participation in that transaction at all) then I would agree it isn't a rent, however they use the lock in of the payment service to extract a rent whether or not they provide the matching service.

squozzer 11y ago

All I can say is good luck with that project.

EGreg 11y ago

The main explanation is not considered here: Automation and Outsourcing. Both reduce the demand for local human labor, and thus depress wages. They cause wealth redistribution upwards by providing a power imbalance between the capitalist and the worker. David Harvey did a nice talk about this: http://m.youtube.com/watch?v=qOP2V_np2c0 http://m.youtube.com/watch?v=qOP2V_np2c0