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Not a question, just some thoughts: It seems to me that economic rent, far from being an immoral oversight, is the fundamental law of capitalism. In all cases

Not a question, just some thoughts: It seems to me that economic rent, far from being an immoral oversight, is the fundamental law of capitalism. In all cases a capitalist seeks to charge more than it cost them to produce an item, or to gain some information, or to acquire a property. The more that item, or information, or property is worth to the market, the greater rent/profit the rentier can extract. While this function can clearly be abused by those with great means, the basic concept is exactly what makes capitalism so efficient when it comes to growth: any person has the chance (hypothetically) to find and exploit differences in cost and value to increase their personal wealth. I can't find anything immoral with this form of rent-seeking. Which seems to imply it isn't so much the practice that we hate, but who chooses to practice it. When the laborer exploits, he makes a living. When the banks exploit, our whole economy shifts. We applaud the former and fear the latter, and that fear appears to be the motivator behind most criticism along the lines of that in your paper (apt criticism). But, fear aside, there is no effective way to control inequities of power. If you cap access to power too low, you rob your economy of potential growth. If you cap access to power too high, the cap is meaningless: the powerful will circumvent your laws and do as they wish. And no matter how you cap it, the real effect will be to entrench the current elite and prevent new blood from cycling into the upper echelons (which is to say, you will have institutionalized inequality). Those currently in power will simply find a way to conceal or transform their power and rule in a shrinking market of rivals. All of this is to say: inequality is an issue of power, not money. And in that context, inequality is a law of nature. If our goal is ending inequality in nature, we are wasting our time. If our goal is unseating those currently in power, we need to be honest with ourselves about that. In the end, questions of fiscal inequality are about power (a real force), not morality (an imagined one). While power can be taken, it can't be destroyed. And if we take fiscal dominance from the powerful, that dominance will just take a different form. tl;dr What we're really grappling with is fear of nature, inequality being a natural and unavoidable result of differing degrees of individual and collective power. Really enjoyed the paper, and I'd love to see these principles tested in the coming years. Any plans to develop the blockchain protocol you described anytime soon?

skilesare 12y ago
Economic rent is immoral...and awesome. Like being able to collect taxes and defend ourselves. That is why I propse a new social contract that keeps the power of economic rent. I'm launching a kickstarter tomorrow to build an experiment on test net.
Dn_Ab 12y ago
It depends, some people distinguish economic rent from economic profit by restricting it to economic profits that cannot be reduced to normal by competition in the long run. Some additionally include profits without any opportunity costs. Economic rents run counter to properly functioning markets, e.g. by raising artificial barriers such as patents or counterproductive regulation. The key tenet of perfect competition is that in the long run, only normal profits exist. Since economic rent stands contrary to this, it cannot be a fundamental law of capitalism. In fact, economic rent is a sign of market failure. But this is reality and markets can't be perfect, so we try for good tax policies to redress this imbalance. Look at the section on rents here: http://www.economist.com/economics-a-to-z/r#node-21529784 http://www.economist.com/economics-a-to-z/r#node-21529784 As an aside, people think Thiel's idea on monopoly is controversial, but really it's just a catchy way of portraying the observation that, since in well functioning markets, competition leads to zero economic profit, you should always be seeking advantages (innovating) and situations which allow you to (temporarily) extract economic profit.
- shredprez 12y ago
  That makes sense, especially when it comes to production. I'm curious how the distinction you noted applies to non-physical services? Many services seem to qualify as rent-seeking: you pay a one-time fee to obtain information or a connection others will need and the costs to maintain this information are usually minimal. I assumed selling access to that information would qualify as a form of rent-seeking since information retrieval is incredibly low-cost for whoever owns that information. And it seems like competition, even hypothetically, would never drive such services down toward cost without eradicating the industry entirely. So all info-centric services are built on economic rent. Am I off the mark? Edited to add: The more I think about it, the more it seems all business is really about rent on information: profits are extracted by discovering a cost-effective source and repackaging that information at a higher price to an ignorant market. Innovation as a source of profit seems like rent-seeking on initially exclusive knowledge. Even production is a cascade of information bundled with profit margin and sold to the next party who lacks access you have. The physical product is only the end-game of that information chain. The profit all comes from privileged information, ie charging for something that, once obtained, costs nothing to continue profiting from. Which is economic rent, no? I feel like I must be missing something. Edited once again: Looked into normal profit, which reframes my question slightly: is the phrase "economic rent" used to describe an objective behavior or a behavior relative to the local market (where average profits and opportunity costs vary)?

skilesare 12y ago

Economic rent is immoral...and awesome. Like being able to collect taxes and defend ourselves. That is why I propse a new social contract that keeps the power of economic rent. I'm launching a kickstarter tomorrow to build an experiment on test net.

Dn_Ab 12y ago

It depends, some people distinguish economic rent from economic profit by restricting it to economic profits that cannot be reduced to normal by competition in the long run. Some additionally include profits without any opportunity costs. Economic rents run counter to properly functioning markets, e.g. by raising artificial barriers such as patents or counterproductive regulation. The key tenet of perfect competition is that in the long run, only normal profits exist. Since economic rent stands contrary to this, it cannot be a fundamental law of capitalism. In fact, economic rent is a sign of market failure. But this is reality and markets can't be perfect, so we try for good tax policies to redress this imbalance. Look at the section on rents here: http://www.economist.com/economics-a-to-z/r#node-21529784 http://www.economist.com/economics-a-to-z/r#node-21529784 As an aside, people think Thiel's idea on monopoly is controversial, but really it's just a catchy way of portraying the observation that, since in well functioning markets, competition leads to zero economic profit, you should always be seeking advantages (innovating) and situations which allow you to (temporarily) extract economic profit.

shredprez 12y ago
That makes sense, especially when it comes to production. I'm curious how the distinction you noted applies to non-physical services? Many services seem to qualify as rent-seeking: you pay a one-time fee to obtain information or a connection others will need and the costs to maintain this information are usually minimal. I assumed selling access to that information would qualify as a form of rent-seeking since information retrieval is incredibly low-cost for whoever owns that information. And it seems like competition, even hypothetically, would never drive such services down toward cost without eradicating the industry entirely. So all info-centric services are built on economic rent. Am I off the mark? Edited to add: The more I think about it, the more it seems all business is really about rent on information: profits are extracted by discovering a cost-effective source and repackaging that information at a higher price to an ignorant market. Innovation as a source of profit seems like rent-seeking on initially exclusive knowledge. Even production is a cascade of information bundled with profit margin and sold to the next party who lacks access you have. The physical product is only the end-game of that information chain. The profit all comes from privileged information, ie charging for something that, once obtained, costs nothing to continue profiting from. Which is economic rent, no? I feel like I must be missing something. Edited once again: Looked into normal profit, which reframes my question slightly: is the phrase "economic rent" used to describe an objective behavior or a behavior relative to the local market (where average profits and opportunity costs vary)?