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Tag Archives: rent-seeking

The Problem of Rent-Seeking

Money is in theory just a liquid means of exchange so every bit of it should represent real world wealth.
The core problem of a society based on financialization is everyone starts to believe money itself is wealth.  Then society rewards the manipulation of money more than it does the creation of real wealth that actually helps people.

Why would anyone of means do anything productive if they can just collect interest and rent?
Rent-seekers use property to extract wealth indefinitely, making their living from a distortion of reality.
In the world of material things, there is no such thing as a gold mine that never runs out.  There is a limit in value to all things.  Yet those who control property can extract rents in perpetuity.

Patent law recognizes a limit in the claim to the rights of an idea or invention.  In time, the patented material becomes the natural inheritance of those who benefit from it.  So by what principle then does rented property stay forever in the hands of an owner who never uses it for themselves and never produces anything?

In Cincinnati, where I currently live, I noticed there are small patches of land used as paid parking in downtown.  Someone bought a small lot, threw down some asphalt on it, installed a ticket machine and voila, they can rake in cash every day.
The person who provides the parking lot, I thought, provides a useful service.  Not to mention most of these lots are cheaper than the parking garages, so they can save people money too.
On the other hand, I noticed these lots were minimally maintained. The asphalt was worn down, cracked, with weeds growing through it.  I supposed other than checking for freeloaders every once in awhile, there was no incentive for the property owner to do anything else while they reaped their dividends forever.

So the problem here is we need people to develop property and provide services but the value they bring to the table must also be recognized as finite.
The property owner must make a reasonable profit if we want them to bother but it is unnatural and improper for them to bring in an indefinite and infinite harvest once they have long since ceased to contribute new value.

So would it not make sense if there were limits to ownership of property that collects rents?  Like patents, you profit for awhile, but eventually it passes on into the public domain.
This could be especially relevant where there is opportunity cost.
Those little flat, run-down parking lots in Cincinnati are surrounded by 10 story buildings.
So while the land is put to a use that creates some value, surely it would create far more value if it re-entered the market and was used for a multiple story building owned and used by a business that actively creates new value every day.

The total gain appropriate to a renter could be determined by a number of factors.

-Absolute quantity of wealth invested in the property.(Did someone spend millions or billions of dollars on it?)
-Percentage of personal wealth invested.(Did someone put a lot of their money into the property?)
-Riskiness of the investment.
-Amount of effort to develop and maintain.
-Value the property gives back to society.(Penalize houses that sit empty just to get flipped later and/or keep rents artifically high.)
-Opportunity cost to society based on the property’s location.
-Is the property a strategic chokepoint that people have to pay for and therefore easy to command unreasonably high prices for?

The point would be to impose especially harsh penalties against large, lazy property holders who try to be dogs in the manger using the state’s monopoly on force— without which they own nothing—to parasitize others.  Without the threat of armed enforcers, they would probably be shot in the head trying to impose their will.  Why do they deserve state backing that not only hurts society, but delegitimizes the state by association?

Money acquired through parasitism is heresy.  Not only is the sacred relationship of money and wealth desecrated and distorted, every penny of false money-as-wealth is real wealth stolen from those who are trying to help the social order.  Once a society rewards clever defectors, while punishing honest cooperators, it is doomed.  Society cannot exist without maintaining the integrity of its wealth.

A worthwhile society understands that money used as counterfeit real-world wealth is nothing but theft and fraud—not just against one person but against the entire social order.  There could be a generous grace period after implementing such rules after which, perpetrators would be regarded as far worse than mere murderers.

See Also: White Collar Criminals Are Worse Than Street Criminals

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