6 ms·

Are you stating those implements mentioned there are forms of rent seeking? I think not. Through real work at one time they still offer value on repeat.

by gech 10y ago

danbruc 10y ago
If you spent a year building something and then live from the income for ten years, then you are at the very least selling at an inflated price. Your customers should take their money, recreate your work, save 90 % and of course put you out of business.
- branchless 10y ago
  I think it's okay if the opportunity is there. If people choose not to exercise the saving it may be they know the pitfalls better than outsiders. Rent seeking is where an individual/business is exercising some kind of monopoly, often granted by the state, to basically compel people to pay him an income at no further effort to himself. Usually they are exploiting some kind of situation where someone needs something and they are erecting a barrier. They are appropriating wealth rather than creating it. Examples of this would be people buying up land near a new development to profit from it, given land is scarce and more cannot be made (though zoning can in theory be changed). Or grabbing a patent to stop someone developing a rival product as they know the barrier to entry is not high without using the state legal apparatus. Or buying up apartment in the middle of an urban centre in the expectation of being able to capture wages due to an extreme shortage of accommodation. Or abusing your position as an issuer of fiat money to capture labour. Or some big land owner in the UK or USA whose grandfather grabbed land and now they descendants are sitting on this and demanding rent for use. If someone builds an app and people can replicate it but choose not to then it's not stopping people doing that, also they can choose to simply not use the app. I haven't read the article yet btw I don't have time just yet, just responding to this comment. Compare this to the epi-pen thing where they are gouging because people are desperate and they hold a patent. The patent being enforced by the state. http://ounodesign.com/wp-content/uploads/2013/02/henry-george-fay-lewis.png http://ounodesign.com/wp-content/uploads/2013/02/henry-georg... http://www.goodreads.com/book/show/552175.Progress_and_Poverty http://www.goodreads.com/book/show/552175.Progress_and_Pover...
  - danbruc 10y ago
    That is why I worded my comment carefully and called it selling at an inflated price instead of rent-seeking. As far as I can tell definitions vary and at least some only call it rent-seeking if the state is involved in one way or another. If you take the definition Wikipedia currently gives, [...] seeking to increase one's share of existing wealth without creating new wealth [...], then you are looking at a very broad definition that also includes selling at inflated prices, at least that would be my interpretation.
    - branchless 10y ago
      Hmm. I wouldn't take selling at inflated prices as rent seeking. It's just a market inefficiency on the surface which may be efficient were we the person deciding not to replicate it. I'd look to the reason behind the ability to sell at inflated prices before knowing which side this falls on.
      - danbruc 10y ago
        I think I agree, the definition from Wikipedia seems overly broad and goes far beyond what the term was initially coined for. But if you are using this definition, then inflated prices would probably fall under it because it does not make any reference to motives or means. Whether it is any good to broaden the definition in this way is certainly a matter of debate.
      - wycx 10y ago
        Isn't the market inefficiency to which you refer merely all market participants choosing to sell at inflated prices? In what scenario would universally inflated prices not be rent seeking? Erecting artificial regulatory barriers via lobbying? Rent-seeking. Collusion between market participants to keep the price significantly above the cost of production? Rent-seeking.
        branchless 10y ago
        I put that above.
- dasmoth 10y ago
  That "save 90%" seems to be ignoring any possibility that the original developer might have a comparative advantage.
  - danbruc 10y ago
    Even if it takes them five times the effort, they can still save 50 %, but without a concrete example it is hard to argue. But we can also look at it from a very different point of view - if everybody would try to live for ten years on the work of one year, then we would have a problem. This alone shows that this is not a sustainable behavior and looking at it this way avoids the need to know any specific details. EDIT: I think I made a mistake in my argument but I have to rethink this and will leave it as it for the moment.
    - mikekchar 10y ago
      Just want to encourage you to think about it, because I'm curious what you think. > if everybody would try to live for ten years on the work of one year, then we would have a problem. I suspect this is the crux of the issue because I completely agree with this even though it is arguably untrue. For example, let's imagine that I could farm for a year and by making preserves could live on the food for 10 years. If everybody wanted to do this, then there would be no problem. We would all work for 1 year and eat for 10. Assuming that there are enough resources, it will not cause any problem at all. In the same way, when the 1st world switched to a 40 hour week, it did not cause a problem. In fact, the extra leisure time resulted in the demand for goods and services. This combined with minimum wage meant that people would buy things and spur the economy. So why do both of us think there is a problem? I suspect that it has to do with growth. To make a different example, imagine that I take a loan and use the money to build a business. Without the money, I can't do business and therefore people can't use the products I make and growth for everyone is restricted. Let's say that I choose, instead, to spend the loan on Farmville. Now, the makers of Farmville get some income, which they will appreciate. Some of that will trickle down into the economy and help other businesses as well. But quite a lot of the money will be tied up in things like the rapid rise of real estate prices. This doesn't really generate any growth because no work is done. If you compare the 2 situations: one builds a business making things that other people can use and overall society grows. In the other, we are mostly transferring wealth and only growing a little bit based on the small amount that trickles down to people who use it for something productive. In the case where someone wants to work 1 year and receive money for 10, we have 1 year of growth producing work and 9 of simply spending the money. As a society, there is a balance of stoking the economy (the distribution of money acts as a kind of oil that allows production to increase), and ensuring that money is used efficiently. Sitting on a passive income for 10 years means that society is deprived of 9 years of production -- and subsequent growth resulting from the use of those products. Do I think one is morally better or worse? Not really. But I think, as a society, we should choose what we want to encourage.
- RhysU 10y ago
  A trade occurs at a price both parties believe is beneficial to them. Otherwise there's no trade.
  - danbruc 10y ago
    That is certainly true but my argument aimed at a different point. Assume something used to cost $100 and people were willing to pay $100 for it. If you manage to produce the same thing for $10, you should pass this increased efficiency on to the customer so that the society is better of, not capture the difference making only you rich. But I may have made a mistake in my reasoning and am currently rethinking the argument.
    - ericd 10y ago
      I think you're ignoring the fact that many times when you do something like that, you'll make much less than you put in. In order to make it desirable to do something risky, there has to be some payoff, otherwise you might as well just get a job with a guaranteed salary (this is oversimplifying, there are other benefits to starting your own thing, but I don't agree that economic benefit shouldn't be one of them if you want people to keep starting companies)
    - webmaven 10y ago
      Well, selling for $10 (plus a 10-20% markup, you do need to make some profit), would have the effect of putting many of your competitors out of business, and at the same time increase the volume of your orders far beyond your ability to fulfil (and far beyond your ability to expand capacity as well), leading to a long waiting list of back-orders. Quality would likely fall as well as you scramble to meet demand. Some second-order effects of the scarcity would be hoarding, scalping, etc. OTOH, selling for $90 (at first) pushes your competitors to cut their own profit margins to match your price (or else gradually abandon the lower end of the market, a classic Christensen disruption) and lets you pocket a lot more money which you can invest aggressively in capacity as you gradually continue to lower your price (always keeping it just below the 2nd lowest price) and increase demand (growing the market) and your market share. In fact, the increase in market size under those circumstances will lull your competitors into ignoring your increased market share for a while as the pie gets bigger and bigger. BTW, the latter is exactly what Amazon is doing with AWS pricing. Imagine how that would have played out if they had launched in 2007 with prices 80% lower (their rumored profit margin) than anyone else.
vacri 10y ago
The confusion is that the article is not actually talking about renting, but corruption and gaming the system. 'rent-seeking' is a bad term for it.

Are you stating those implements mentioned there are forms of rent seeking? I think not. Through real work at one time they still offer value on repeat.

by gech 10y ago

Are you stating those implements mentioned there are forms of rent seeking? I think not. Through real work at one time they still offer value on repeat.

danbruc 10y ago

If you spent a year building something and then live from the income for ten years, then you are at the very least selling at an inflated price. Your customers should take their money, recreate your work, save 90 % and of course put you out of business.

branchless 10y ago
I think it's okay if the opportunity is there. If people choose not to exercise the saving it may be they know the pitfalls better than outsiders. Rent seeking is where an individual/business is exercising some kind of monopoly, often granted by the state, to basically compel people to pay him an income at no further effort to himself. Usually they are exploiting some kind of situation where someone needs something and they are erecting a barrier. They are appropriating wealth rather than creating it. Examples of this would be people buying up land near a new development to profit from it, given land is scarce and more cannot be made (though zoning can in theory be changed). Or grabbing a patent to stop someone developing a rival product as they know the barrier to entry is not high without using the state legal apparatus. Or buying up apartment in the middle of an urban centre in the expectation of being able to capture wages due to an extreme shortage of accommodation. Or abusing your position as an issuer of fiat money to capture labour. Or some big land owner in the UK or USA whose grandfather grabbed land and now they descendants are sitting on this and demanding rent for use. If someone builds an app and people can replicate it but choose not to then it's not stopping people doing that, also they can choose to simply not use the app. I haven't read the article yet btw I don't have time just yet, just responding to this comment. Compare this to the epi-pen thing where they are gouging because people are desperate and they hold a patent. The patent being enforced by the state. http://ounodesign.com/wp-content/uploads/2013/02/henry-george-fay-lewis.png http://ounodesign.com/wp-content/uploads/2013/02/henry-georg... http://www.goodreads.com/book/show/552175.Progress_and_Poverty http://www.goodreads.com/book/show/552175.Progress_and_Pover...
- danbruc 10y ago
  That is why I worded my comment carefully and called it selling at an inflated price instead of rent-seeking. As far as I can tell definitions vary and at least some only call it rent-seeking if the state is involved in one way or another. If you take the definition Wikipedia currently gives, [...] seeking to increase one's share of existing wealth without creating new wealth [...], then you are looking at a very broad definition that also includes selling at inflated prices, at least that would be my interpretation.
  - branchless 10y ago
    Hmm. I wouldn't take selling at inflated prices as rent seeking. It's just a market inefficiency on the surface which may be efficient were we the person deciding not to replicate it. I'd look to the reason behind the ability to sell at inflated prices before knowing which side this falls on.
    - danbruc 10y ago
      I think I agree, the definition from Wikipedia seems overly broad and goes far beyond what the term was initially coined for. But if you are using this definition, then inflated prices would probably fall under it because it does not make any reference to motives or means. Whether it is any good to broaden the definition in this way is certainly a matter of debate.
    - wycx 10y ago
      Isn't the market inefficiency to which you refer merely all market participants choosing to sell at inflated prices? In what scenario would universally inflated prices not be rent seeking? Erecting artificial regulatory barriers via lobbying? Rent-seeking. Collusion between market participants to keep the price significantly above the cost of production? Rent-seeking.
      - branchless 10y ago
        I put that above.
dasmoth 10y ago
That "save 90%" seems to be ignoring any possibility that the original developer might have a comparative advantage.
- danbruc 10y ago
  Even if it takes them five times the effort, they can still save 50 %, but without a concrete example it is hard to argue. But we can also look at it from a very different point of view - if everybody would try to live for ten years on the work of one year, then we would have a problem. This alone shows that this is not a sustainable behavior and looking at it this way avoids the need to know any specific details. EDIT: I think I made a mistake in my argument but I have to rethink this and will leave it as it for the moment.
  - mikekchar 10y ago
    Just want to encourage you to think about it, because I'm curious what you think. > if everybody would try to live for ten years on the work of one year, then we would have a problem. I suspect this is the crux of the issue because I completely agree with this even though it is arguably untrue. For example, let's imagine that I could farm for a year and by making preserves could live on the food for 10 years. If everybody wanted to do this, then there would be no problem. We would all work for 1 year and eat for 10. Assuming that there are enough resources, it will not cause any problem at all. In the same way, when the 1st world switched to a 40 hour week, it did not cause a problem. In fact, the extra leisure time resulted in the demand for goods and services. This combined with minimum wage meant that people would buy things and spur the economy. So why do both of us think there is a problem? I suspect that it has to do with growth. To make a different example, imagine that I take a loan and use the money to build a business. Without the money, I can't do business and therefore people can't use the products I make and growth for everyone is restricted. Let's say that I choose, instead, to spend the loan on Farmville. Now, the makers of Farmville get some income, which they will appreciate. Some of that will trickle down into the economy and help other businesses as well. But quite a lot of the money will be tied up in things like the rapid rise of real estate prices. This doesn't really generate any growth because no work is done. If you compare the 2 situations: one builds a business making things that other people can use and overall society grows. In the other, we are mostly transferring wealth and only growing a little bit based on the small amount that trickles down to people who use it for something productive. In the case where someone wants to work 1 year and receive money for 10, we have 1 year of growth producing work and 9 of simply spending the money. As a society, there is a balance of stoking the economy (the distribution of money acts as a kind of oil that allows production to increase), and ensuring that money is used efficiently. Sitting on a passive income for 10 years means that society is deprived of 9 years of production -- and subsequent growth resulting from the use of those products. Do I think one is morally better or worse? Not really. But I think, as a society, we should choose what we want to encourage.
RhysU 10y ago
A trade occurs at a price both parties believe is beneficial to them. Otherwise there's no trade.
- danbruc 10y ago
  That is certainly true but my argument aimed at a different point. Assume something used to cost $100 and people were willing to pay $100 for it. If you manage to produce the same thing for $10, you should pass this increased efficiency on to the customer so that the society is better of, not capture the difference making only you rich. But I may have made a mistake in my reasoning and am currently rethinking the argument.
  - ericd 10y ago
    I think you're ignoring the fact that many times when you do something like that, you'll make much less than you put in. In order to make it desirable to do something risky, there has to be some payoff, otherwise you might as well just get a job with a guaranteed salary (this is oversimplifying, there are other benefits to starting your own thing, but I don't agree that economic benefit shouldn't be one of them if you want people to keep starting companies)
  - webmaven 10y ago
    Well, selling for $10 (plus a 10-20% markup, you do need to make some profit), would have the effect of putting many of your competitors out of business, and at the same time increase the volume of your orders far beyond your ability to fulfil (and far beyond your ability to expand capacity as well), leading to a long waiting list of back-orders. Quality would likely fall as well as you scramble to meet demand. Some second-order effects of the scarcity would be hoarding, scalping, etc. OTOH, selling for $90 (at first) pushes your competitors to cut their own profit margins to match your price (or else gradually abandon the lower end of the market, a classic Christensen disruption) and lets you pocket a lot more money which you can invest aggressively in capacity as you gradually continue to lower your price (always keeping it just below the 2nd lowest price) and increase demand (growing the market) and your market share. In fact, the increase in market size under those circumstances will lull your competitors into ignoring your increased market share for a while as the pie gets bigger and bigger. BTW, the latter is exactly what Amazon is doing with AWS pricing. Imagine how that would have played out if they had launched in 2007 with prices 80% lower (their rumored profit margin) than anyone else.

vacri 10y ago

The confusion is that the article is not actually talking about renting, but corruption and gaming the system. 'rent-seeking' is a bad term for it.