5 ms·

The idea of rent seeking is becoming very popular and the best place to see it is Silicon Valley. Everything is becoming subscription based and housing is prett

The idea of rent seeking is becoming very popular and the best place to see it is Silicon Valley. Everything is becoming subscription based and housing is pretty much out of reach for everybody. Only way to afford anything is to rent it. Things my parent owned by the time they were 26 I have no choice to rent, since I couldn't even imagine right now buying them (even though I make 3x what they were making at the same age). For example I rent a house with friends ($5000 a month spilt by 4), a parking sport ($200), and lease a car ($200). I don't own any music or movies (Netflix and Spotify). Its a convenient way to live in terms of flexibility but you never feel like these things are yours and that leaves this sense of detachment. At any time these things could be taken away and you would have nothing. I grew up in the country and have the ultimate goal of buying myself land where I can build a house and workshop.

conistonwater 10y ago
That's not rent-seeking as the term is usually used: https://en.wikipedia.org/wiki/Rent-seeking#Description https://en.wikipedia.org/wiki/Rent-seeking#Description It uses the word rent in a somewhat different sense.
mljoe 10y ago
Rent seeking is a transaction where the rent seeker accumulates money without contributing to the overall wealth of a society, basically getting paid without labor effort, offering a product or otherwise advancing innovation or the human condition in some way. Land rent is the original example of rent seeking. SV rents would probably qualify, since the cost of rent in SV is more connected to the land and location, as well as the regulations on that land, versus the improvements on the property. Maybe $4000/mo of your rent is based on "rent-seeking" and $1000/mo is based on the property itself.
- nojvek 10y ago
  I think it would suffice. SV home owners are very much against new properly building. If that happens the supply increases and demand drops. $5000 on rent is absurd. Wow!
- ScottBurson 10y ago
  Right. As Henry George pointed out over a century ago [0], the increase in property values in urban areas as their populations grow is mostly caused not by investments made by the property owners, but simply by the network effects of having more people living in the area. So the ability of property owners, under the commonly used taxation schemes, to benefit from those network effects presents a golden opportunity for rent-seeking. Looking for example at Silicon Valley, it's easy to see that rental property owners are sucking large amounts of wealth out of the region. It's not just rental property, though. Anyone who bought a house prior to the recent run-up in prices, and then sold it for a large gain, is effectively also removing wealth from the area, in the form of the mortgage payments the new owner has to pay. George argues that wealth that is collectively created should be collectively enjoyed, and that the best way to make that happen is through a Land Value Tax (LVT) -- that taxes only the unimproved value of land, not that of any structures that may be built on it. [0] http://www.henrygeorge.org/pcontents.htm http://www.henrygeorge.org/pcontents.htm
dleightful 10y ago
I'm not sure you understand what rent-seeking is. Rent-seeking is the deployment of resources by firms, organizations, or any concentrated special interest group to pass or preserve legislation that benefits its directly in the short-term and possibly long-term while harming progress, growth, and innovation in that field by being able to bargain for higher prices from people who need those services. In less abstract and wonky terms, it's when you change laws in ways that benefit you directly but harm others who have to use what you're providing. Examples of rent-seeking occur in the beer industry where "regulation capture"--another beautiful term from the literature--restricts, I believe, the sale or transport of beers into states. The people who have established oligopolies within a particular state have access to the market whereas other smaller breweries have difficulty to making inroads on that market. Deaton is talking about the legislation and policies that health care and finance are introducing that protects them from competition with the knowledge that others will still need to use their services. Usually, this sort of rent-seeking is done under the justification that it provides quality control over goods and services being provided which is, to be fair, sometimes the case or atleast a possible outcome. More often than not it is preserve advantages and create barriers to entry to prevent competition from eroding revenue and, of course, margins. It's only business school that you learn about the powers of competition. In reality, businesses hate competition and they'll do whatever they can to prevent it from entering. Rent-seeking describes how that occurs.
binarymax 10y ago
Per the sibling comments, here are some good examples of rent seeking. From Wikipedia, a feudal lord puts a chain over a river and charges a toll to lower the chain. No value add, just money in the pocket of the lord. And the contemporary version: an investment firm buys out the intellectual property of a medical delivery device. They charge additional royalties to the manufacturers of the device. No value added.

conistonwater 10y ago

That's not rent-seeking as the term is usually used: https://en.wikipedia.org/wiki/Rent-seeking#Description https://en.wikipedia.org/wiki/Rent-seeking#Description It uses the word rent in a somewhat different sense.

mljoe 10y ago

Rent seeking is a transaction where the rent seeker accumulates money without contributing to the overall wealth of a society, basically getting paid without labor effort, offering a product or otherwise advancing innovation or the human condition in some way. Land rent is the original example of rent seeking. SV rents would probably qualify, since the cost of rent in SV is more connected to the land and location, as well as the regulations on that land, versus the improvements on the property. Maybe $4000/mo of your rent is based on "rent-seeking" and $1000/mo is based on the property itself.

nojvek 10y ago
I think it would suffice. SV home owners are very much against new properly building. If that happens the supply increases and demand drops. $5000 on rent is absurd. Wow!
ScottBurson 10y ago
Right. As Henry George pointed out over a century ago [0], the increase in property values in urban areas as their populations grow is mostly caused not by investments made by the property owners, but simply by the network effects of having more people living in the area. So the ability of property owners, under the commonly used taxation schemes, to benefit from those network effects presents a golden opportunity for rent-seeking. Looking for example at Silicon Valley, it's easy to see that rental property owners are sucking large amounts of wealth out of the region. It's not just rental property, though. Anyone who bought a house prior to the recent run-up in prices, and then sold it for a large gain, is effectively also removing wealth from the area, in the form of the mortgage payments the new owner has to pay. George argues that wealth that is collectively created should be collectively enjoyed, and that the best way to make that happen is through a Land Value Tax (LVT) -- that taxes only the unimproved value of land, not that of any structures that may be built on it. [0] http://www.henrygeorge.org/pcontents.htm http://www.henrygeorge.org/pcontents.htm

dleightful 10y ago

I'm not sure you understand what rent-seeking is. Rent-seeking is the deployment of resources by firms, organizations, or any concentrated special interest group to pass or preserve legislation that benefits its directly in the short-term and possibly long-term while harming progress, growth, and innovation in that field by being able to bargain for higher prices from people who need those services. In less abstract and wonky terms, it's when you change laws in ways that benefit you directly but harm others who have to use what you're providing. Examples of rent-seeking occur in the beer industry where "regulation capture"--another beautiful term from the literature--restricts, I believe, the sale or transport of beers into states. The people who have established oligopolies within a particular state have access to the market whereas other smaller breweries have difficulty to making inroads on that market. Deaton is talking about the legislation and policies that health care and finance are introducing that protects them from competition with the knowledge that others will still need to use their services. Usually, this sort of rent-seeking is done under the justification that it provides quality control over goods and services being provided which is, to be fair, sometimes the case or atleast a possible outcome. More often than not it is preserve advantages and create barriers to entry to prevent competition from eroding revenue and, of course, margins. It's only business school that you learn about the powers of competition. In reality, businesses hate competition and they'll do whatever they can to prevent it from entering. Rent-seeking describes how that occurs.

binarymax 10y ago

Per the sibling comments, here are some good examples of rent seeking. From Wikipedia, a feudal lord puts a chain over a river and charges a toll to lower the chain. No value add, just money in the pocket of the lord. And the contemporary version: an investment firm buys out the intellectual property of a medical delivery device. They charge additional royalties to the manufacturers of the device. No value added.