The Rent is Too Damn High
I am going to go out on a limb and suggest that Jimmy McMillan, who ran for President on Americans Elect and for Governor of New York on Saturday Night Live is not using the word “rent” as did economist, Adam Smith. Of course, if he did, his popularity would plummet though he might get some votes.
This is probably a good moment to insert the words Kim Kardashian because she trends much better than Adam Smith or economic concepts like “rent seeking.” In the battle for eyeballs, Jimmy McMillan is good but he is no Kim Kardashian.
According to Smith, rent is neither a rock musical nor what you pay each month for an apartment. It is the income derived from controlling a resource rather than creating it. The first example of rent seeking in Wikipedia is spending money for political lobbying.
The behavior is not new or Smith might not have thought about it. Guilds have existed for centuries and guilds are classic rent seeking activities. By limiting the number of guild members, they limit the competition and thus increase the cost of the service. Those who run the guild and develop the licensing and accreditation procedures skim a little off the top of each tradesman’s pay. Though the head of the guild might once have been a stonemason, he quickly learned that it was easier to arm twist government officials than to break rocks.
Fast forward. Though we don’t hear much about guilds today, we certainly have them.
Bar associations are guilds. Under the guise of protecting the public from charlatans, competition is limited through elaborate applications and setting the failure rate for bar exams. Too many lawyers? Hourly rates going down? Easy: raise the failure rate on next year’s test. Better still: control the number of law schools. Throw in every other kind of professional association and every licensed activity with the possible exception of driving a car.
Professional sports ownership is a guild because it limits the number of teams that can join a league. For a time, it was especially successful until the players learned that they would do better if they formed their own guilds. Now, in each sport, the two guilds try to work out a fairer division of the monopoly profits while seat prices for the fans skyrocket. By the way, in this context, “fairer” means whatever I can extract from my opponent, but since the two guilds can’t live without each other, a solution is always reached.
Can you think of any others? Of course, unions are guilds as are financial advisors and stockbrokers. Guilds are neither inherently good nor inherently bad unless what they do is either inherently good or inherently bad and this is where it gets muddy.
In the eyes of some, AARP is the definition of God’s work, but to others limiting discussion of unaffordable social benefits is harmful. Few would argue that collecting vast numbers of older people and threatening to turn them against a political candidate is an example of rent seeking. Pays pretty well too. Trade unions function in much the same way, particularly those that look after government employees because they get to elect their bosses.
No need to pick on left-leaning groups, the National Rifle Association and Americans for Tax Reform do the same thing. The promoters assemble a group of people with a common interest, mobilize them, use them as a threat to candidates for office, raise money from them and purchase the desired candidate.
Nice work if you can get it, but none of it is additive. It is all based on toll collecting.
Why might Jimmy McMillan have gotten some votes if he had chosen this meaning for rent? Perhaps, because the two political parties thrive off those rent seekers. Each collects its group of donors who seek one advantage or another whether a tax break, a tariff, a contract or a law that impedes competition.
Maybe rent seeking lies behind the choice of a plurality of voters to be independents.
Hats off to you Jimmy, you have nailed it. The rent is too damn high.