Climate Change/Mass Extinction Megathread

[Barrister]

Yeah the landlord who doubles the rent without making any improvements is not a "rent seeker".

Either he's been charging below-market rates and as such will still be able to keep his apartments full, or he's priced himself out of the market and his apartment will be empty.

[Admiral Yi]

https://www.tutor2u.net/economics/reference/what-is-rentier-capitalism

I looked up rentier capitalism.  AFAICT it's a rewording of Marx.

[grumbler]

Jacob is pretty much right about Norway.
We produce little else than oil and gas. And guns and ammo. Some salmon and car parts. And mediocre journalists like me. We were pretty effective at producing Waffen-SS volunteers, though.

And Roland the Headless Thompson Gunner. 

[Jacob]

This is entirely different than the understanding of rents that I learned in class.  There I was taught that rents only have relevance in relation to the hypothetical free market price, which is determined by the intersection of marginal cost and marginal revenue.  In a competitive market the producer is a price taker, not a price maker.  If he raises his price one penny per unit all his demand will disappear because his customers will immediately desert him and buy his homogeneous product from a competitor.

In our less than perfectly competitive market economy, it seems that a non-trivial amount of economic activity is aimed at manufacturing opportunities for rent-collection (via legislation or market capture in various ways). It's basically the silicon valley start up playbook (well that, and starting up to be purchased by the rent-collector as a defensive move to maintain or enhance control of their captured market).

How will your slum lord double his rents if he is renting out an identical slum apartment to the slum lord next door?

Maybe the identical slum apartment next door is already occupied, and the tenants are not inclined to move.

Alternatley, maybe the slumlord next door decides that raising his rent charges as well is personally and mutually beneficial, thus effectively joining a price fixing cartel.

Perhaps there are other obstacles to moving - inability to get time off to move, deposit requirements, contract requirements, additional fixed costs (time and money) for moving (movers, switching utilities, mail forwarding, insurance), lack of guarantee that the currently lower priced slum-dwelling won't see a price increase in short order, that make moving less than trivial and perhaps practically impossible.

Yes, I suppose you could say that IP is a state protected form of granting rents.  IP laws prevent people from simply copying a work, like say a video game, and selling it more cheaply than you are.

For sure. The challenge with IP laws of various kinds is to make it strict enough that innovation is rewarded (I make this thing, I reap rewards), but not so strict it undermines the public good and stifles innovation (everyone has to pay IP rents to exist and do business, acting as an effective tax; innovation is complicated because multiple IP owners will claim they own underlying rights, raising cost barriers to innovation).

... if we're looking for the public good, at least.

[Jacob]

https://www.tutor2u.net/economics/reference/what-is-rentier-capitalism

I looked up rentier capitalism.  AFAICT it's a rewording of Marx.

I understand it to be a state of capitalism that tends towards rent-seeking overall (by exploiting and even promoting imperfections in the free market to collect rents), thereby to distinguish it from a state of capitalism where the holders of capital primarily allocate it in pursuit profit by means of productivity gains or the creation of utility.

I believe that is the understanding people speaking of rentier capitalism today are using.

Some critics of capitalism hold that it inevitably turns into rentier capitalism. I don't; I believe that well-regulated capitalism is superior for allocating resources and generating productivity and utility, but that it has to be well regulated for this to work.

When people speak about rentier capitalism today, I believe it's another way of saying that the regulatory and norm foundation has been changing (and continues to change), enabling more opportunities for rent-seeking. Furthermore that rent-seeking is becoming much more prevalent and not seen as negative, and that if this trend continues it will undermine the health of our economies and the societies that depend on them.

[Admiral Yi]

In our less than perfectly competitive market economy, it seems that a non-trivial amount of economic activity is aimed at manufacturing opportunities for rent-collection (via legislation or market capture in various ways). It's basically the silicon valley start up playbook (well that, and starting up to be purchased by the rent-collector as a defensive move to maintain or enhance control of their captured market).

Sure, but I don't see what this has to do with our differing understandings of economic rents and its relation to monopolies.

Maybe the identical slum apartment next door is already occupied, and the tenants are not inclined to move.

Alternatley, maybe the slumlord next door decides that raising his rent charges as well is personally and mutually beneficial, thus effectively joining a price fixing cartel.

Perhaps there are other obstacles to moving - inability to get time off to move, deposit requirements, contract requirements, additional fixed costs (time and money) for moving (movers, switching utilities, mail forwarding, insurance), lack of guarantee that the currently lower priced slum-dwelling won't see a price increase in short order, that make moving less than trivial and perhaps practically impossible.

A cartel is a monopoly.  That was my point.

Yes, there are a host of reasons why a rational person would willingly pay a higher price for the a commodity good.  However, these are not conditions created by the seller, thus not accurately described as rent seeking.

[Admiral Yi]

I understand it to be a state of capitalism that tends towards rent-seeking overall (by exploiting and even promoting imperfections in the free market to collect rents), thereby to distinguish it from a state of capitalism where the holders of capital primarily allocate it in pursuit profit by means of productivity gains or the creation of utility.

I believe that is the understanding people speaking of rentier capitalism today are using.

Some critics of capitalism hold that it inevitably turns into rentier capitalism. I don't; I believe that well-regulated capitalism is superior for allocating resources and generating productivity and utility, but that it has to be well regulated for this to work.

When people speak about rentier capitalism today, I believe it's another way of saying that the regulatory and norm foundation has been changing (and continues to change), enabling more opportunities for rent-seeking. Furthermore that rent-seeking is becoming much more prevalent and not seen as negative, and that if this trend continues it will undermine the health of our economies and the societies that depend on them.

I would go further and say the desire for rent is inherent in the system (or more accurately in human nature) because we all want to maximize profit.

I have a different narrative than yours about monopoly regulation.  We have been confronting a totally new type of monopoly than that which prevailed in the classic days of the robber barons.  They formed cartels and fixed prices.  We know exactly what the costs and benefits were and broke them up.  Everybody lived happily ever after.  The current situation is also different than regulating natural monopolies like power transmission and cable TV.  Now we're talking about winner take all markets and network effects.  These are not the results of malicious acts, they are the result of consumer preference.  You could theoretically compel English footie fans to evenly divide their ticket money among all the 15 leagues, but they would not be as happy as they are now.  Similarly if you chopped Facebook into 10 different entities.  Networks are more enjoyable the more people are on.  The more products are sold on Amazon, the better the shopping experience.

[Jacob]

Sure, but I don't see what this has to do with our differing understandings of economic rents and its relation to monopolies.

It describes the tendency towards rentier capitalism that triggered our languishtastic discussion of definitions

A cartel is a monopoly.  That was my point.

My point also. So we are in agreement on this

Yes, there are a host of reasons why a rational person would willingly pay a higher price for the a commodity good.  However, these are not conditions created by the seller, thus not accurately described as rent seeking.

Hmmm... I think that's too fine a distinction. To me rent-seeking applies to anyone looking for opportunities to collect rent, whether they directly create the conditions or just identify that they exist and takes advantage of them.

[Jacob]

I would go further and say the desire for rent is inherent in the system (or more accurately in human nature) because we all want to maximize profit.

That makes you more of a marxist than me

... but sure, some measure of rent-seeking is inherent in the system.

I think you agree that the market serves us better collectively if capital generally is put to use to generate productivity and utility (goods and services) than if it is used to capture rents. Like... we're better off if most of the economy creates goods and services rather than if it collects payments from people playing the back catalogue of the Beatles.

Presumably there's some threshold above which if the proportion of the economy that consists of rent-collection it generates negative outcomes. The question, I think, is whether we're approaching that point.

And if so, what steps should be taken to counter that - as you say perfectly human  - tendency. Everyone wants to collect rents if they can, but if everyone does we'll have problems, so let's avoid that scenario.

I have a different narrative than yours about monopoly regulation.  We have been confronting a totally new type of monopoly than that which prevailed in the classic days of the robber barons.  They formed cartels and fixed prices.  We know exactly what the costs and benefits were and broke them up.  Everybody lived happily ever after.  The current situation is also different than regulating natural monopolies like power transmission and cable TV.  Now we're talking about winner take all markets and network effects.  These are not the results of malicious acts, they are the result of consumer preference.  You could theoretically compel English footie fans to evenly divide their ticket money among all the 15 leagues, but they would not be as happy as they are now.  Similarly if you chopped Facebook into 10 different entities.  Networks are more enjoyable the more people are on.  The more products are sold on Amazon, the better the shopping experience.

I mostly agree with you here... the one thing that doesn't sit right with me is that I think you're implying that the modern monopolies (or near cartels) built on the power of the network effect happened sort of "accidentally" or "naturally" as opposed to "maliciously". I don't think that's true at all (and if you don't either then I apologize for misreading you), and I definitely don't think that just because it's "consumer preference" it makes the problems with monopolies and cartels disappear.

The big tech companies long pursued strategies of buying out competitors, bundling services, building walled gardens and so on in their pursuit to utterly dominate their various spaces. Their strategies are taught as the golden standard in entrepreneurship classes for MBAs across the West (at the very least). Find an opportunity to ride the network effect to near-monopoly conditions and rake in the cash (or alternately and more realistically today, construct a threat to an existing price setter or a vector building a deeper moat and be bought out by the price setter or one of their challengers).

That said, I don't have some sort of clear proposal for how to address this, but I do agree with those who are concerned that a trend towards increasing rent collection in the economy is a cause for concern.

THAT said, perhaps it's polemical and a careful examination of the data will show that the proportion of the economy that represents rent-collection is not actually increasing. I don't know.[/quote]

[Sheilbh]

Back on why I'm not sure UK should follow in imposing big tariffs on Chinese EV manufacturers - it's only a little bit below, but from Climate Change Committee we're now below the track we need to be on on EV adoption to reach net zero on target:


Interestingly it seems Labour broadly where I am. Rachel Reeves, the new Chancellor speaking to Bloomberg, seemed to be against those tariffs noting "we are a small open trading economy and we benefit from those trade links with countries around the world, both for exports and imports...We benefit from those trade links around the world including with China."

As I say my view is case by case. There are some industries and sectors that we should probably support because there's a base in this country we should support. There are other areas where we should look at trade restrictions because of security/dependency risks with China (or the US insists). But if neither of those are engaged, especially in things for getting to net zero, I think the cost saving and benefits of wider, quicker, cheaper adoption incline me against tariffs or other protectionist measures - and I think EVs are in this category.

[Grey Fox]

We need much more cheaper EVs, halving their price. However, I don't think giving China more leeway over our economies is a good idea at all. VW group & Renault, I guess, need to be given massive subsidies to actually compete on price vs BYD & Volvo.

[Sheilbh]

Also fine with that.

AS I say I didn't fully agree with the very left-wing article about this (which I can't find now). But these are sectors with lots of state aid, subsidies, tax breaks and support. I am struck with the point they made of the contrast between the Chinese national champions getting all of that leading to "overproduction" of EVs - meaning their cheap - is seen as bad, while a lot of the Western national champions are producing an appropriate amount - so less cheap - but have very, very high market caps.

We should probably think about what the benefit we want in exchange for those various forms of state aid and being more explicit about it (aware that's probably subject to all sorts of challenges under investment treaties, so we should maybe rip them up ).

[Admiral Yi]

I think you agree that the market serves us better collectively if capital generally is put to use to generate productivity and utility (goods and services) than if it is used to capture rents. Like... we're better off if most of the economy creates goods and services rather than if it collects payments from people playing the back catalogue of the Beatles.

First, it's not an either or.  R&D spending improves products and services and if successful captures rents. 

Second, the Beatles example describes portfolio investment (as opposed to capital investment).  The Beatles wrote songs, because of IP protection those songs had monetary value.  If someone buys the catalogue they are not improving or creating anything.  They are doing the exact same thing I'm doing when I buy stocks--buying the rights to a future revenue stream.  That's exactly what Warren Buffet is doing.  If I follow what you're saying to it's logical conclusion, you seem to be suggesting that what I did when I invested was immoral, that what I should have done is start my own business, because then my capital would have been creating goods and services.  I don't think that argument holds up.

I will try to respond to the rest of your post later.  If I do it now my train of thought will fall apart.

[Valmy]

If someone buys the catalogue they are not improving or creating anything.

That only happened because of Allen Klein 

Though I think Paul McCartney bought it back at some point

[Jacob]

First, it's not an either or.  R&D spending improves products and services and if successful captures rents.

For sure. For my part, I was positing a continuum and describing its two poles - many ventures (especially ones relying on IP development) are somewhere in between those poles.

And that's kind of the point of IP regulation and potentially one of the components of the shift towards rentier capitalism (as currently employed).

If IP rights are eternal, we'll quickly choke off innovation. No one will be able to do anything new because existing IP owners will claim underlying rights and choke of new ideas with demands for rent. Conversely if there's no IP regulation, large swathes if R&D and innovation will be abandoned because why invest in it when others can immediately steal the fruits of your labour?

Second, the Beatles example describes portfolio investment (as opposed to capital investment).  The Beatles wrote songs, because of IP protection those songs had monetary value.  If someone buys the catalogue they are not improving or creating anything.  They are doing the exact same thing I'm doing when I buy stocks--buying the rights to a future revenue stream.  That's exactly what Warren Buffet is doing.  If I follow what you're saying to it's logical conclusion, you seem to be suggesting that what I did when I invested was immoral, that what I should have done is start my own business, because then my capital would have been creating goods and services.  I don't think that argument holds up.

I'll agree that that argument doesn't hold up, but it's not the one I'm trying to make.

A few points:

1: Portofolio investment or not, you're still allocating capital to use - which can be more or less productive.

2: I don't really consider my view to have a moral dimension to this at all. My primary lens is what creates the best economy for the benefit of society as a whole; my second lens is there are some outcomes I desire in terms of wealth distribution and opportunity for those who are not rich. Those are perhaps value judgements, but I don't consider not conforming to my desired values to be immoral.

3: Agreed that the owner of the Beatles back catalogue is not producing anything. The argument is that while that may be desirable from the perspective of the rent collector, if too large a proportion of the economy are investments like that it may have negative social and economic repercussions. That argument could be wrong, mind you... but that's the argument as I understand it.

I will try to respond to the rest of your post later.  If I do it now my train of thought will fall apart.

Looking forward to it