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from Wikipedia: The classic example of rent-seeking, according to Robert Shiller, is that of a feudal lord who installs a chain across a river that flows throug

from Wikipedia: The classic example of rent-seeking, according to Robert Shiller, is that of a feudal lord who installs a chain across a river that flows through his land and then hires a collector to charge passing boats a fee to lower the chain. There is nothing productive about the chain or the collector. The lord has made no improvements to the river and is not adding value in any way, directly or indirectly, except for himself. All he is doing is finding a way to make money from something that used to be free.

chewz 6y ago
This feudal lord probably have invested in an upkeep of few knights who enforce that chains stays in place. And then lobbied at the court against complaints from merchants and peasants. He might have also have to bribe few judges. Also historically feudal lords had been constantly in debt spending more on representation then they have earned. Some moneylenders might have taken all this rent from river chain. Or the feudal lord have spent that income on luxury items stimulating demand for art or trade with far away corners of the globe. This is an example of how economist have no idea how making money works..
- sweeneyrod 6y ago
  If I offer you the opportunity of not having your kneecaps broken in exchange for only $100/month, is this potentially completely fine because I could spend the money on "stimulating demand"?
  - chewz 6y ago
    Many great American companies started exactly from that. Time Warner comes to mind.. :-) https://en.m.wikipedia.org/wiki/Kinney_Parking_Company https://en.m.wikipedia.org/wiki/Kinney_Parking_Company
- enragedcacti 6y ago
  Stupid Economists, already making your points for you: > An example of rent-seeking in a modern economy is spending money on lobbying for government subsidies in order to be given wealth that has already been created, or to impose regulations on competitors, in order to increase market share. > The concept of rent-seeking would also apply to corruption of bureaucrats who solicit and extract "bribe" or "rent" for applying their legal but discretionary authority for awarding legitimate or illegitimate benefits to clients. What is it about a feudal lord or moneylender that the way they spend money is better than the way the merchants would have spent it? Further, just because the money has downstream effects doesn't mean that it was rightfully earned. All of your arguments could equally apply to pirates or bankrobbers. [1] https://en.wikipedia.org/wiki/Rent-seeking https://en.wikipedia.org/wiki/Rent-seeking
- sacred_numbers 6y ago
  Just because rent seekers spend their money does not make them productive members of society. In nature parasites have their own parasites, which can again have their own parasites. I suppose in a zero sum economy rent seeking doesn't hurt the economy (just certain members of the economy), but in a positive sum economy, if non-productive rent seekers are taking money from productive people this will cause the economy to be worse than it could have been. If people who would otherwise be productive are lured into rent seeking by the potential profits then it's a double loss. Not only are they taking capital from productive people that could have been used to create more wealth, but they themselves could have been producing wealth instead of being a drag on wealth creation. There are certainly situations where organizations that seem like rent seekers are not entirely rent seekers, though. Government is the main example. Taxes can seem like a drag on wealth creation, and sometimes they are, but they also fund infrastructure, education, and stability, which are wealth multipliers. The issue is also complicated by the fact that the world economy is very connected, but economic growth is often measured on a per country, corporation, or even individual basis. Also, aggregate wealth is not the be-all end-all metric. Wealth redistribution can sometimes lead to greater aggregate happiness, even if the amount of wealth stays the same or even decreases. Overall, though, I think that the majority of rent seeking hurts the economy and the people in the economy more than it helps, but I would be very interested to see empirical data showing otherwise.

chewz 6y ago

This feudal lord probably have invested in an upkeep of few knights who enforce that chains stays in place. And then lobbied at the court against complaints from merchants and peasants. He might have also have to bribe few judges. Also historically feudal lords had been constantly in debt spending more on representation then they have earned. Some moneylenders might have taken all this rent from river chain. Or the feudal lord have spent that income on luxury items stimulating demand for art or trade with far away corners of the globe. This is an example of how economist have no idea how making money works..

sweeneyrod 6y ago
If I offer you the opportunity of not having your kneecaps broken in exchange for only $100/month, is this potentially completely fine because I could spend the money on "stimulating demand"?
- chewz 6y ago
  Many great American companies started exactly from that. Time Warner comes to mind.. :-) https://en.m.wikipedia.org/wiki/Kinney_Parking_Company https://en.m.wikipedia.org/wiki/Kinney_Parking_Company
enragedcacti 6y ago
Stupid Economists, already making your points for you: > An example of rent-seeking in a modern economy is spending money on lobbying for government subsidies in order to be given wealth that has already been created, or to impose regulations on competitors, in order to increase market share. > The concept of rent-seeking would also apply to corruption of bureaucrats who solicit and extract "bribe" or "rent" for applying their legal but discretionary authority for awarding legitimate or illegitimate benefits to clients. What is it about a feudal lord or moneylender that the way they spend money is better than the way the merchants would have spent it? Further, just because the money has downstream effects doesn't mean that it was rightfully earned. All of your arguments could equally apply to pirates or bankrobbers. [1] https://en.wikipedia.org/wiki/Rent-seeking https://en.wikipedia.org/wiki/Rent-seeking
sacred_numbers 6y ago
Just because rent seekers spend their money does not make them productive members of society. In nature parasites have their own parasites, which can again have their own parasites. I suppose in a zero sum economy rent seeking doesn't hurt the economy (just certain members of the economy), but in a positive sum economy, if non-productive rent seekers are taking money from productive people this will cause the economy to be worse than it could have been. If people who would otherwise be productive are lured into rent seeking by the potential profits then it's a double loss. Not only are they taking capital from productive people that could have been used to create more wealth, but they themselves could have been producing wealth instead of being a drag on wealth creation. There are certainly situations where organizations that seem like rent seekers are not entirely rent seekers, though. Government is the main example. Taxes can seem like a drag on wealth creation, and sometimes they are, but they also fund infrastructure, education, and stability, which are wealth multipliers. The issue is also complicated by the fact that the world economy is very connected, but economic growth is often measured on a per country, corporation, or even individual basis. Also, aggregate wealth is not the be-all end-all metric. Wealth redistribution can sometimes lead to greater aggregate happiness, even if the amount of wealth stays the same or even decreases. Overall, though, I think that the majority of rent seeking hurts the economy and the people in the economy more than it helps, but I would be very interested to see empirical data showing otherwise.