Rent Seeking: Taking Without Giving
And organized Jewry are the most flagrant rent-seekers of all; their “banking” scam alone drains off probably half the wealth that would otherwise be in the hands of the people.
RENT-SEEKING IS a behavior that describes the tendency of people to seek profits without doing any real work. This reduces economic efficiency through the misallocation of resources. Rent-seeking also hinders the creation of wealth, reduces government revenue, increases income inequality, and potentially leads to national decline.
THE FULL STORY
In economics and public choice theory, rent-seeking is a behavior that is aimed to increase one’s existing wealth without creating new wealth for others. In other words, it describes the tendency of some people to seek profits without doing any real work.
THE CLASSIC EXAMPLE
A classic example of rent-seeking is the story of a lord. The lord inherited a lot of land and wealth and never worked a day in his life. However, as the lord knows of another man who has even more than him, being wealthy isn’t enough. He needs more and he has an idea.
The lord sets up a chain across the river that flows through his land and hires a collector to charge fishermen a fee if they want to pass through. There is nothing productive about the chain.
The lord has made no improvements to the river and is not adding value to society 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.
To society there are three costs to this.
DIRECT COSTS
First, the direct costs. The fisherman, who now has to pay a fee, needs to sell the fish at a higher price to make a living. On the market fish become more expensive for everybody.
OPPORTUNITY COSTS
Then the opportunity costs. The lord invests his money and resources into equipment that adds no value to society, instead of investing into something meaningful, such as fixing up the broken school building.
MORAL COSTS
Lastly, the moral costs. The fisherman feels that paying for something that used to be free is unfair and, following the lord’s example, is more likely to engage in rent-seeking himself. What if he were to eliminate all his competitors and then increase prices?
The fisherman turns to his friend — a smooth talker who cares for the environment — to help him convince the lord of an idea: If a fence were to be running down the banks, it would protect the river from overfishing because access would be limited.
When rent-seekers and moral advocates lobby in teams, economists speak of bootleggers and baptists. The lord agrees and soon after the river is being protected.
Once the fence is built, only a few fishermen are able to access the river. That means our fisherman not only has more fish than ever before, but he can also keep selling them at very high prices.
To keep it that way, the fisherman and his lobbyist soon form the fishery department under the royal patronage of the lord. From this day on, only those who pay a license fee are allowed to fish in the river. The lord gets a nice cut for his growing empire.
On the market the fish has become so expensive that the commoners begin to complain. Unfortunately there is little they can do.
Without ever taking notable risks the landlord, the lobbyists, and the fisherman get richer every day. Or as economists would say, without having skin in the game, they create a lot of wealth for themselves but no wealth for society.
RENT-SEEKING REDUCES ECONOMIC EFFICIENCY
In theory, rent-seeking behavior reduces economic efficiency through the misallocation of resources. It also hinders the creation of wealth, reduces government revenue, increases income inequality, and potentially leads to national decline.
The term itself was coined by the British economist David Ricardo, who had built his ideas on the thoughts of the Scottish economist Adam Smith. The original meaning of “rent” does not refer specifically to payment on a lease, but to gaining control of land or other natural resources.
ADAM SMITH’S DEFINITION
In 1776 Adam Smith wrote: “As soon as the land of any country has all become private property, the landlords reap where they never sowed, and demand a rent. The wood of the forest, the grass of the field, and all the natural fruits of the earth, which, when the land was incommon, cost the laborer only the trouble of gathering them, come to have an additional price fixed upon them.
He must then pay for a license and must give up to the landlord a portion of what his labor either collects or produces. This portion constitutes the rent of land.”
SHARE YOUR THOUGHT
How about you, where do you see rent-seekers? Are they in your government and in the corporations? Or do you see them in the streets in the form of gangsters or corrupt police?Maybe you even have your own personal story where you seek to profit without adding any value?
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Source: Sprout via David Sims
For further reading:
rent-seeking is the story of Jews. They use laws to protect themselves, and govn. force to extract the rent.
This is what British Columbia Hydro companies do to Americans. They dam up all of our water sources flowing toward us from the North, depriving us of many months of fishing and water access along the border, at times, the Columbia River looks like a barren desert, like the Rio Grande, a mere trickle, while BC Hydro get enormously fat off their profits from their Hydropower. While they get fat, at our expense, from water, naturally flowing toward the US, from Alaska and the Yukon, down. They squeeze the clamp as if they created the water and own it. Canada treats Americans worse than they treat Mexicans, as well. Funny, they seem to have a lot more in common with Mexicans, alcoholism, drugs, whoring…
In 1776 Adam Smith wrote: “As soon as the land of any country has all become private property, the landlords reap where they never sowed, and demand a rent.”
Poppycock. Either you improve and keep up the property with your own labor, or you hire someone else. If you do it yourself, you improve the property and keep your money. If you pay someone else, you stimulate the economy.
I am a landlord—or, as I prefer, a Landed Lord of Property. I know whereof I speak.
Simon Hebrides
Landed Lord of Property
A familiar story here of seeing the trees, but failing at noting the forest those trees made. Rent-seeking offers one the ability to amass great wealth and therefore a substantial advantage in obtaining more property. This is done because a rent-seeker can and has amassed wealth. Because he has more capital at his disposal, he can then afford to pay higher prices to obtain property. With reduced inventory of property on the market and the subsequent higher prices that have to be paid due to landlords buying up properties, the ability of any non-rent-seekers to purchase property of their own is reduced. In the competition for resources, the non-rent-seeker is at a disadvantage. Incidentally, landlords improve/keep up their properties zealously and there are those who do not, seeking to extract… Read more »
The forest is constantly changing, and so is the housing market. Right now I am on top of the heap, at long last, after 40 yrs, but there were many times that I was in the red, even after doing all the carpentry, plumbing, carpet-laying, painting, etc. by myself, on all my rental houses. It is a hard business, and you have to roll with the punches. I got into the habit of fueling myself with alcohol, which I am now breaking away from. Most people do not take even moderate care of a rental house, and let the yard and garden turn ghetto, not to mention the inside of the house. That is one big reason that prices are going up—if you hire people to do all these things… Read more »
I know the business well, and understand exactly what you mean. It’s not for amateurs, except maybe for the owner who inherited a house from a relative and that’s the extent of their real estate holdings. Even then, as you have said, it’s a business. Some businessmen are better than others, none are created equal. As for those who don’t take care of your property, well, you screened them before you signed the lease/agreement/contract and you can inspect the property as they’re renting with proper notice in accordance with state/local laws. As they say, an ounce of prevention… The forest remains the same in regards to the basic capitalist structure that landlords operate under. It’s like a big game of monopoly here in America, but this time one of the… Read more »
Well, they won’t get my houses! I get phone calls and letters every day, wanting to buy my houses.
“Like a rhinestone cowboy
Getting cards and letters from people I don’t even know
And offers comin’ over the phone”
the key issue with rent & land ownership is that of unearned income. or income extracted from someone else. on stolen land. all land being stolen, at least in britain (william the conqueror, henry 8th, etc) renting houses as you do is not technically being a landlord by the standards of henry george (a v wise fellow on this subject). you put the work in to your houses & the rent you charge should reflect this. however if all land wasn’t stolen & hogged by a few – & fraudulent mortgages charging interest on money created from nothing doubled house prices – homes would be much more affordable & you might have trouble renting your houses out. on the flip side the economy – not being dragged down by the… Read more »
David Ricardo was a Sephardic jew. His father was Abraham Israel Ricardo. Of course he stole his ideas from Adam Smith.
individualism controls our world today & the economy itself, which is run by large businesses along with some small businesses. The vast majority of people cant own property without it being controlled by those with more money than them. A world where group cohesion however would provide more equal opportunities for people to own property without the overlordship of wealthy people.
this is a key subject, along with money/usury & the moneylenders. the top 3 problems we face as a species that everyone needs to study.
if you can add any good sources to this article it will be of benefit to all who read it & wish to know more. for myself i’ve got to add american henry george. his “Progress & Poverty” is an absolute masterpiece. Paul Cudenecs “The Stifled Soul of Mankind” is also good (it’s a history of land ownership / land theft in britain going back 100s of years & the corrosive effects this has had on british “culture”)
Khosher food is rent fixing on a whole other level