Friday, November 06, 2009

Explaining "Rent Seeking" to Joe Soucheray

Garage Logic, as some of you know, is one of my favorite radio shows to listen to. Joe Soucheray is no doubt incredibly busy and so, on the rare occasion, I send an e-mail or a letter to the show, it usually is lost in the pile or never read. Not out of spite, but sheer time-saving, I decided not to really write into radio shows or call, simply because you rarely get on and by the time you do, the platform has moved on, it's a waste of time. But I slipped recently after Joe was talking about the behavior of "Mysterians" because all he was describing was "rent seeking." I wrote a letter, but then caught myself and realized, it isn't worth driving to the post office.

However, I do believe that in order to understand leftist ideology and psychology, we all could use a lesson in rent seeking and what it is. Therefore, I post the letter, that was never sent, below;

Dear Joe,

I’ve been listening to your show for about 5 years now however when you speak about The Mystery I think you do not realize you are explaining an economic phenomenon that you are unaware of called “rent seeking” and hopefully in my explaining this to you, you may be able to solve The Mystery.

“Rent seeking” is a form of economic behavior where a person or an entity wishes to extract compensation or wealth for essentially doing nothing, or in short, getting paid to produce nothing of worth. A text book example would be the US mafia in the 1930’s offering “protection” for various shop owners when in reality it was nothing but extortion. Regardless, the example still holds. The mafia acts like it is offering a service (protection) and receives compensation for this “protection” even though no real service or good has been produced.

Today you do not have such flagrant examples of “rent seeking,” but they do exist and are largely the primary sources of employment for your “Mysterians” and goes a long way in explaining The Mystery. The primary and most common example you cite on your show would be your mysterian politicians who are on constant crusades to enact various legislation that limits the freedoms of Americans under the guise of protection. Most of your liberal (and for the most part, conservative) politicians do nothing productive nor produce anything of worth. Therefore to make it look like they are actually working they have to seek out “crusades” or fabricate “crises” so they may keep their jobs as politicians. Fresh in my memory is the ban on candy cigarettes in St. Paul. This does nothing to help society. There was no crisis, there was no problem. And therefore there was not one cent of production in enacting this law, but you still pay these elected officials to do such nonsensical things.

Another example of rent seeking would be your professional protestors or activists. These people do not produce anything of value, but regardless, be it through ACORN or some other non-profit organization, they are still paid to essentially produce nothing of value. The kid working at Burger King is producing more for this nation than a professional activist from Macalester.

Lawyers that sue companies for fraudulent claims is another example of rent seeking. One can claim that a lawyer is providing a service for a plaintiff or a defendant, but in the end, the lawyer produced nothing. He or she simply took money from a company that actually did produce something of value. The finance industry is another. An investment bank repackaging mortgages into CDO’s or ABS’s creates no additional value in doing so. It is merely taking a commission to repackage production that is already existing.

Whatever the instance of rent seeking may be, the key to understanding rent seeking and how it relates to The Mystery is that people who engage in rent seeking put themselves ahead of society. And not only do they put themselves ahead of society, they must engage in an “act” or a “farce” as if they are doing some kind of real work so as not to destroy their egos and permit them an excuse to deny they are actually just living off of society. Therefore you will never see a Mysterian just sit there on government assistance for that would be too much of a blow to their pride. But at the same time you will never see them work hard to become an engineer, a doctor, a pharmacist, etc., because the schooling required is too difficult. Therefore you see the majority of your Mysterians employed in very rent seeking industries;

Education – very few people who work in education actually educate children. Most are in administration and counseling and literally do nothing to advance the education of the children. Even those that do, based on international PISA scores, do a poor job overall.

Politics/government – with no competition from the private sector there is no urgency to work hard or be efficient let alone productive. You just tell people what they want to hear and never bother studying what laws (or perhaps lack of laws) would be best for society and still collect a check. Barack Obama is a perfect example of a life-time rent seeker who has done nothing (bar write a book) productive yet still collects a check.

Colleges – There is no limit to professors in worthless subjects such as sociology, women’s studies, anthropology, communications, journalism, etc., that require no rigorous study, yet still provide employment (usually financed in part by government money). You could pay taxes to get a road or more defense, but instead your money goes to one of the “prematurely gray-haired woman” you talk about to espouse theories of philosophy to her students that will never result in a penny of worth or production.

Non-profits – Non-profits are big rent seekers because their goal is first and foremost NOT to solve a problem, but to employ people to act like they are solving a problem. I would even claim some non-profits purposely avoid solving the problem because that would be the end of the cash stream for them to do nothing. The UN is a perfect example of the world’s largest non-profit that has achieved nothing yet has been compensated to the amounts of many billions of dollars.

There are other industries, but I assume you get the idea of what types of industries would employ Mysterians.

Why you have a “mystery” or why Mysterian’s behavior does not make sense is because it is contrary to reality. It is hypocritical. They need a job and some kind of employment not just for money, but for pride. But since the reality is that they are producing nothing, when they are criticized or this reality is pointed out, they then come up with the most inane and irrational explanations and excuses because their entire life existence, their entire purpose of being is being called into question.

“Don’t tell me we don’t have any money” is a perfect example of Garage Logicians calling out these rent seekers on their hypocrisy. Americans spend more money on their education system (per pupil) than any other country in the world. Yet they constantly need more money. Their illogical excuse is that it is for the children and how dare you cut off funding for children. In reality they are just cowards for hiding behind children to keep their unnecessary jobs.

The “Flower Pot Gang” is another example. Basically middle aged women who were rich enough to afford to run for public office because they were bored. Nancy Pelosi is another example who was nothing but the daughter of Baltimore’s mayor. And Mark Dayton is a perfect example of a bored “trust fund baby” who has nothing to do but run for public office even though he is not qualified and has no real skills. These people did not run for office because of some noble intent to become a statesman, they ran because they were bored, had the money, wanted an easy job and needed something to point to in their lives as being an accomplishment. And when you question their policies or their qualifications, you get bland, vague, indirect answers that never really answer direct questions because you are getting too close to the truth; they put themselves ahead of the people they represent, they do NOTHING and they don’t want to be exposed.

Therefore I think if you look at these rent seekers as merely people looking for an easy job, whose egos and personalities cannot handle the fact they are not producing anything of worth, and they find no problems putting themselves ahead of society you might be able to understand the Mysterian’s behavior better as well as the Mystery overall.

Good luck


Anonymous said...

Do not worry. I sent it for you.

Anonymous said...

LOL, what a funny expression: "Obama is the perfect example of a life-time rent seeker". True, true.

Elizabeth said...

I wish I had found your blog much sooner!.

I wasted two years writing back and forth to a socialist pen-pal. I didn't expect to change her views or vice versa, but I wanted to at least understand where she was coming from. However, she could never give a straight answer and shrugged at simple reality such as wealth needs to be produced before she could redistribute it.

We stopped talking to each other this summer and it's been a huge burden off my shoulders. Yet, I still wanted to understand such people as her. Then I found your "How to Argue Against Socialism and Defend Capitalism" speech on youtube, watched every minute of it, looked up your blog and here I am.

You've described my ex-pen-pal in so many ways (in your speech, on this blog, ect)! It is refreshing to finally come upon the answers to my questions.

Gut gemacht!

Payner44 said...

Joe and Rookie are friends of mine, so I sent them the link to the blog. Trust me, it will be read.

Captain Capitalism said...

Hi Elizabeth,

Good, glad you liked the speech. I'll try to keep the blog going.

Captain Capitalism said...

Hi Payner,

Great! Many thanks!

Anonymous said...

Nice, but these are not actually examples of rent seeking. A barrier to entry that stymies competition creates above-market-returns (rents). A company that pursues government policy (such as regulations or trade barriers) is engaged in rent-seeking behavior.