Reminder: Ports-To-Plains Website And Registration Information -- Conference October 6 - 8, 2015

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Original post here.

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Why The Rich Are So Much Richer

That is the title of an article in the most recent issue of The New York Review of Books. Other than the definition of "rent-seeking," I doubt I agree with anything in the books reviewed or the review itself. I was quite amazed at all the blind spots of the both author reviewed and the reviewer. I could have missed it but when I see an article on rent-seeking and I don't see Bill or Hillary mentioned, Elon Musk mentioned, or Tom Steyer mentioned, it suggests to me the writer has a huge blind spot when it comes to rent seeking.

From the article:

He sees the boom in the incomes of the one percent as largely the result of what economists call “rent-seeking.” Most of us think of rent as the payment a landlord gets in exchange for the use of his property.

But economists use the word in a broader sense: it’s any excess payment a company or an individual receives because something is keeping competitive forces from driving returns down. So the extra profit a monopolist earns because he faces no competition is a rent. The extra profits that big banks earn because they have the implicit backing of the government, which will bail them out if things go wrong, are a rent. And the extra profits that pharmaceutical companies make because their products are protected by patents are rents as well.

And immediately, the first problem: confusion between the CEO and the company they run. The definition of rent-seeking applies to a corporation in most cases.  

Other rent-seekers, based on that definition, not mentioned in the article are: pro athletes, movie stars, faux environmentalists, and Hilly Clinton (in a class of her own). Some of these (pro athletes and movie stars, for example), may not be "rent-seekers" by the strict definition, but any book or review discussing why the rich are getting richer needs to include pro athletes, movie stars, and other entertainers, such as singers.