I love it when I come across an article that exposes me to new concepts. I was interested in economics in graduate school and might have pursued it if I hadn’t had a firm idea of what I wanted to do (not that my firm idea did me a damn bit of good), so read with interest things economic when I come across them. This article contains an interview with a Nobel prize winning economist:
The Price of Inequality: Interview with Joseph E. Stiglitz
http://www.rollingstone.com/politics/blogs/national-affairs/the-price-of-inequality-interview-with-joseph-e-stiglitz-20120625
One of the things he discusses is ‘rent seeking‘ which is an element of ‘economic rent‘. Both, as used in economics, are new terms for me and basically are referring to the ability (through monopolies like patents, copyrights, etc.) to charge money in excess of what the product or service would be worth in a competitive society. Some rents are paid by society in an effort to improve society (such as royalties on patents with the intention (that is no longer realized in the US) of stimulating innovation), but others might be created by the oligarchy to extract wealth from the rent payers, such as loopholes in the tax or regulation systems favoring one industry participant over another.
There are a couple of quotes I want to put in here in case my reader(s) need extra incentive to explore the links above. From the rent seeking wiki page:
From a theoretical standpoint, the moral hazard of rent-seeking can be considerable. If “buying” a favorable regulatory environment is cheaper than building more efficient production, a firm may choose the former option, reaping incomes entirely unrelated to any contribution to total wealth or well-being. This results in a sub-optimal allocation of resources — money spent on lobbyists and counter-lobbyists rather than on research and development, improved business practices, employee training, or additional capital goods — which retards economic growth. Claims that a firm is rent-seeking therefore often accompany allegations of government corruption, or the undue influence of special interests.
Any of that sound topical and relevant to today’s situation? From the interview:
Some people say we have this inequality because some people have been contributing much more to our society, and so it’s fair that they get more. But then you look at the people who are at the top and you realize they’re not the people who have transformed our economy, our society. They’re not the inventers [sic] of the lasers the transistors, the computer, the discoverers of DNA. They’re the bankers that exploited the poor, the CEOs who took advantage of the deficiencies of our corporate governing structure to a larger and larger share of the corporate revenues without increasing the productivity and performance of the companies or our economy as a whole.
How about that? Any of that sound eerily familiar?
Granted, finding that some dry old economist has already written tomes discussing how fucked up our society is today, generations ago, is only interesting, but as ‘they’ so cutely say, those who ignore history are doomed to repeat it. The thing I hate about that statement (being doomed) is that those who did study history and can see that the lemmings are heading off the cliff are never-the-less carried along by the momentum of the movement and wind up going over the same damn cliff anyway. Which is why I keep coming back to “ignorance is bliss”.
One final quote, just for shits and giggles:
Let’s talk for a second about current events. So much economic policy today both here and especially in Europe, seems like medieval medicine: bleed the patient, and when she gets worse, add more leeches. In other words, “austerity.”
Let me put it very forcefully: No large economy has ever recovered from an economic downturn through austerity. It’s not going to happen in the United States and it’s not going to happen in Europe.
Not that my blog will change a damn thing if a Nobel winning economist is ignored.
