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Am I the only one who thinks that "rent-seeking" is a wildly misleading name for this phenomenon? To normal people, "rent-seeking" means "looking to collect on

by gaur 11y ago

Am I the only one who thinks that "rent-seeking" is a wildly misleading name for this phenomenon? To normal people, "rent-seeking" means "looking to collect on a payment for leased property". Same for "moral hazard". I'm not sure what phenomenon that phrase should be applied to, but it certainly shouldn't be applied to the phenomenon of people taking more risks because they won't have to deal with the fallout. That phenomenon should be called something like "risk asymmetry".

chubot 11y ago
It's an established name from economics. The wikipedia definition is: "seeking to increase one's share of existing wealth without creating new wealth". You can think of it as a generalization of seeking rent for a property. For better or worse, that is what you are doing when you lease a property. You want to be paid just for owning something, not for doing anything. Analogously, if you provide service X, you can seek "rent" in addition to the value you provide. One way to do this is by manipulating the market for X by reducing the supply of those who provide X, e.g. through an unnecessarily onerous licensing process. The additional amount you make with the licensing process in place falls under the category of economic "rent". https://en.wikipedia.org/wiki/Rent-seeking https://en.wikipedia.org/wiki/Rent-seeking
- mcguire 11y ago
  While you're at it, look up 'usury'.
- gaur 11y ago
  > The wikipedia definition is: "seeking to increase one's share of existing wealth without creating new wealth". I think I figured it out. "Rent seeking" means "trying to get something for nothing" economically. This would be a lot less confusing if people would just use straightforward terminology ("getting something for nothing") rather than an opaque phrase that sounds like something else ("rent seeking").
  - Kalium 11y ago
    It's a term of art. It has a very precisely defined technical meaning that specialists are familiar with and share a common understanding of. Its primary purpose is to permit those educated in the subject to converse clearly and unambiguously with one another in an efficient manner. It is perhaps not the most reasonable thing to expect specialists conversing with their peers in the argot of their field to reduce all their conversations to the point of intelligibility to the average layman. It's also perhaps not the most reasonable thing to expect all terms of art to be re-named every few decades as language shifts. Never mind the challenges of achieving consensus every time someone wants to rename something.
dota_fanatic 11y ago
Alone has some nice writing on the moral hazard concept: http://thelastpsychiatrist.com/2007/08/the_moral_hazard.html http://thelastpsychiatrist.com/2007/08/the_moral_hazard.html "If you behave badly because you know you'll get away with it, that's being "bad." A Moral Hazard is different. If you behave "worse" than you would have otherwise, solely because you know that you won't have to bear the consequences, then you have a Moral Hazard. I'll emphasize: the key is that your behavior is in itself not necessarily "bad." It is simply worse than your behavior otherwise would have been, because you know there won't be consequences. Here's why it's called a Moral Hazard: if there are no external consequences, the only thing that would prevent you from behaving worse is an internal set of rules. Where do these internal rules come from?"
- gaur 11y ago
  > Here's why it's called a Moral Hazard: if there are no external consequences, the only thing that would prevent you from behaving worse is an internal set of rules. That sentence does not at all explain why it's called "moral hazard".
  - Dylan16807 11y ago
    It's a hazard because it tempts worse behavior, and it's moral because the only thing stopping you would be morality.
    - gaur 11y ago
      So "moral hazard" means "any situation where the only thing stopping you from acting badly is your morals". Got it.
      - dota_fanatic 11y ago
        No, I'm afraid you don't got it. Try reading the entire essay, perhaps, and not just the snippet? Even just the snippet I quoted is contrary in meaning to the phrasing you just used. Here's a bit more from the linked essay, going into one variant of the concept, active now: "Insurance: If you have no car insurance, you drive very, very, very carefully. The Moral Hazard describes when a person, upon getting insurance, drives “worse” (read: less slowly, rolling stops; doesn’t avoid talking on cell phone.) NB: he is not driving badly; he is actually driving normally. But he's driving worse than "very carefully." The term “worse” is relative to other behavior. The point is that his behavior has comparatively worsened because he doesn’t have to worry as much about the consequences."
holmak 11y ago
I agree that the names are confusing or misleading to modern readers. The strange choice of words in both cases seems to be due to the terms being used in a technical sense with a more specific meaning than in plain English. Plus, they are both based on terms coined long ago, and the connotations (or definitions) of English words do tend to change over the centuries. From the Wikipedia page on moral hazard: > [...] the term dates back to the 17th century [...] Dembe and Boden point out, however, that prominent mathematicians studying decision making in the 18th century used "moral" to mean "subjective", which may cloud the true ethical significance in the term. From the Wikipedia page on rent seeking: > The word "rent" does not refer here to payment on a lease but stems instead from Adam Smith's division of incomes into profit, wage, and rent. The origin of the term refers to gaining control of land or other natural resources.
lawpoop 11y ago
I agree. Do you have an idea for a more intuitive name? I feel I don't understand the phenomenon well enough to come up with one myself : /
- gaur 11y ago
  "Getting something for nothing"? It's vague, but so is "rent seeking". From reading the examples in the Wikipedia article, it seems that almost any economic behavior in which one tries to get something for nothing qualifies as "rent seeking".
  - lawpoop 11y ago
    "Passive Income"? :S

by gaur 11y ago

chubot 11y ago

It's an established name from economics. The wikipedia definition is: "seeking to increase one's share of existing wealth without creating new wealth". You can think of it as a generalization of seeking rent for a property. For better or worse, that is what you are doing when you lease a property. You want to be paid just for owning something, not for doing anything. Analogously, if you provide service X, you can seek "rent" in addition to the value you provide. One way to do this is by manipulating the market for X by reducing the supply of those who provide X, e.g. through an unnecessarily onerous licensing process. The additional amount you make with the licensing process in place falls under the category of economic "rent". https://en.wikipedia.org/wiki/Rent-seeking https://en.wikipedia.org/wiki/Rent-seeking

mcguire 11y ago
While you're at it, look up 'usury'.
gaur 11y ago
> The wikipedia definition is: "seeking to increase one's share of existing wealth without creating new wealth". I think I figured it out. "Rent seeking" means "trying to get something for nothing" economically. This would be a lot less confusing if people would just use straightforward terminology ("getting something for nothing") rather than an opaque phrase that sounds like something else ("rent seeking").
- Kalium 11y ago
  It's a term of art. It has a very precisely defined technical meaning that specialists are familiar with and share a common understanding of. Its primary purpose is to permit those educated in the subject to converse clearly and unambiguously with one another in an efficient manner. It is perhaps not the most reasonable thing to expect specialists conversing with their peers in the argot of their field to reduce all their conversations to the point of intelligibility to the average layman. It's also perhaps not the most reasonable thing to expect all terms of art to be re-named every few decades as language shifts. Never mind the challenges of achieving consensus every time someone wants to rename something.

dota_fanatic 11y ago

Alone has some nice writing on the moral hazard concept: http://thelastpsychiatrist.com/2007/08/the_moral_hazard.html http://thelastpsychiatrist.com/2007/08/the_moral_hazard.html "If you behave badly because you know you'll get away with it, that's being "bad." A Moral Hazard is different. If you behave "worse" than you would have otherwise, solely because you know that you won't have to bear the consequences, then you have a Moral Hazard. I'll emphasize: the key is that your behavior is in itself not necessarily "bad." It is simply worse than your behavior otherwise would have been, because you know there won't be consequences. Here's why it's called a Moral Hazard: if there are no external consequences, the only thing that would prevent you from behaving worse is an internal set of rules. Where do these internal rules come from?"

gaur 11y ago
> Here's why it's called a Moral Hazard: if there are no external consequences, the only thing that would prevent you from behaving worse is an internal set of rules. That sentence does not at all explain why it's called "moral hazard".
- Dylan16807 11y ago
  It's a hazard because it tempts worse behavior, and it's moral because the only thing stopping you would be morality.
  - gaur 11y ago
    So "moral hazard" means "any situation where the only thing stopping you from acting badly is your morals". Got it.
    - dota_fanatic 11y ago
      No, I'm afraid you don't got it. Try reading the entire essay, perhaps, and not just the snippet? Even just the snippet I quoted is contrary in meaning to the phrasing you just used. Here's a bit more from the linked essay, going into one variant of the concept, active now: "Insurance: If you have no car insurance, you drive very, very, very carefully. The Moral Hazard describes when a person, upon getting insurance, drives “worse” (read: less slowly, rolling stops; doesn’t avoid talking on cell phone.) NB: he is not driving badly; he is actually driving normally. But he's driving worse than "very carefully." The term “worse” is relative to other behavior. The point is that his behavior has comparatively worsened because he doesn’t have to worry as much about the consequences."

holmak 11y ago

I agree that the names are confusing or misleading to modern readers. The strange choice of words in both cases seems to be due to the terms being used in a technical sense with a more specific meaning than in plain English. Plus, they are both based on terms coined long ago, and the connotations (or definitions) of English words do tend to change over the centuries. From the Wikipedia page on moral hazard: > [...] the term dates back to the 17th century [...] Dembe and Boden point out, however, that prominent mathematicians studying decision making in the 18th century used "moral" to mean "subjective", which may cloud the true ethical significance in the term. From the Wikipedia page on rent seeking: > The word "rent" does not refer here to payment on a lease but stems instead from Adam Smith's division of incomes into profit, wage, and rent. The origin of the term refers to gaining control of land or other natural resources.

lawpoop 11y ago

I agree. Do you have an idea for a more intuitive name? I feel I don't understand the phenomenon well enough to come up with one myself : /

gaur 11y ago
"Getting something for nothing"? It's vague, but so is "rent seeking". From reading the examples in the Wikipedia article, it seems that almost any economic behavior in which one tries to get something for nothing qualifies as "rent seeking".
- lawpoop 11y ago
  "Passive Income"? :S