, chapters 7 and 8: Telltale Marks and Welcome. Hope you will join in the discussion.Rent-Seeking:
What Does Rent-Seeking Mean?
When a company, organization or individual uses their resources to obtain an economic gain from others without reciprocating any benefits back to society through wealth creation.
Investopedia explains Rent-Seeking:
An example of rent-seeking is when a company lobbies the government for loan subsidies, grants or tariff protection. These activities don't create any benefit for society, they just redistribute resources from the taxpayers to the special-interest group.
Responding to a ridiculous case from the fifties where government essentially ordered a business to stop being so good at what it did:
Methinks1776 July 7, 2011 at 11:00 am
Unfortunately, United Shoe Machinery didn’t learn the most important lesson in business. If you were a logical thinker, you would assume that the most important lesson is that you have to be the best at serving your customer’s needs. That’s just silly. The most important thing you can do in business is buy political power.
Economiser July 7, 2011 at 1:47 pm
I don’t think large businesses start out thinking that way. They start out growing by being good at what they do. Once they reach a certain size, though, they realize that the rate of return from rent seeking exceeds the rate of return from trying to expand an already-large business. It’s harder to get market-beating growth rates on a large amount of assets, and when they’re really big they can get their calls answered by senior government officials, so rent seeking becomes more profitable. Naturally they shift their focus to the easier way to make money.
Rent-seeking businesses are not admirable, but the real blame lies on the government for granting them favors. The business is just doing what it’s set up to do — make money.
vikingvista July 7, 2011 at 2:21 pm
There is no more efficient and rewarding tool for all manner of larceny and violence than government. It is the strongest available magnet for those wishing harm upon their neighbors.
And yet a great many people oddly believe government to be the best solution to those problems.
USM could have accounted for 100% of the market and burned down competitors’ factories while providing broken down machinery and no service to its customers to maintain market share. As long as it had political cover, it could’ve done whatever it wanted. Government Sachs learned that lesson very well. The upside is that buying politicians is easier and cheaper than serving the needs of your customers.
How can you stay in business with such a poor business model, you ask? Your purchased protectors in congress will hold a gun to the heads of taxpayers and demand they transfer their wealth to you. After all, part of your “who gives a crap about cost” structure includes employing lots of people to be as inefficient as possible, so we can’t lose all that employment in the economy what with the-unemployed-not-able-to-spend-which-is-a-tragedy-etc. etc. etc.
The financial markets will love it! There’s no easier way to boost cash flow than a wealth transfer from taxpayers to shareholders! Expectations of future transfers will rise. The S&P stocks will party and Muirdiot will hop on this blog to ask “o yeeagh? Undder WICH addminustrashun did the stuk markette rize the mostest?” as proof that Democrap thieves are better than Rethuglican thieves.
I hope we have all learned our lesson that hard work, honesty, productivity and wealth creation just passe. Rent Seeking is the only way to ensure wealth.
GM auto bail-out- Obama's Czar:
“Ron Bloom, the president’s former auto czar, knows the seven words you probably don’t want to say in connection with Team Obama’s taxpayer-financed bailout of two Detroit automakers,” writes News columnist Dan Howes today.”I did this all for the unions.”
Bloom has repeatedly denied before Congress that he uttered those explosive words before a rowdy, celebratory auto task force dinner in the (upscale, natch) Rosa Mexicano restaurant in D.C. in late July 2009.
“Trouble for Bloom, the president’s adviser for manufacturing policy, is he’s quoted twice as saying just that — first by his then-boss, Steven Rattner, on page 269 of his auto bailout book Overhaul and second, on Nov. 24 of that same year, by my savvy colleague David Shepardson, Washington bureau chief of the Detroit News,” continues Howes.
When Shepardson reported Bloom’s comment at the time, neither Bloom nor the White House complained or sought a correction.
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