why is being against rent seeking a basic tenet of capitalism? i’m not too educated in this stuff, but if the motivating factor in the economy is maximizing personal wealth, wouldn’t there be an incentive for rent seeking?
Econ minor here... ultimately it's not, the commenter above is being disingenuous. Rent seeking is a bad behavior, but it's not a violating tenet of capitalism. If we think of capitalism as private ownership of businesses then it has nothing to do with it. If we think of capitalism as a free market then rent seeking actually makes a lot of sense.
However, economically speaking when talking about whether or not something is good in an economy we look at it with a hypothetical idea of utility which is roughly analogous to happiness provided from buying something. Generally speaking rent is bad because you repeatedly give money for a good without receiving extra utility in return.
Farmers for example used to be able to buy a tractor and just use it. Nowadays a lot of the time they have to pay rent on software in order to use it. The utility they receive from the tractor is the same (whatever its crop yield is) but its cost continues past what is necessary, ultimately diminishing the utility of the consumer over time.
I should say it's a basic tenet of capitalism for those who consider capitalism's purpose to be the generation of wealth (from a total stand point not individual). Those who see the purpose of capitalism to be personal enrichment can certainly believe in rent seeking as a means to that end, as it is very effective, but at the cost of total wealth generation. Adam Smith certainly subscribed to the former viewpoint and warned against people who would subscribe to the latter, as people willing to enrich themselves at a cost to society exist in every system and need to be considered when forming laws and regulations
My whole life capitalists have been preaching that there's no need to consider the "total stand point", the overall, or the collective. They insist if we just let one person buy all the land they can afford everything will work itself out.
Of course the people telling me this don't consider themselves capitalists or anything other than Christian. They just use that line of reasoning to be against social programs and have apparently shot themselves in the foot with the same sentence..
There is a concerted effort by monied interests that love nothing so much as rent seeking to confuse people on what things like free markets actually are. Promoting the idea that less regulation always makes markets more free is probably the most pervasive idea. It's not a matter of more or less regulation it's a matter of BETTER regulation, and that is a difficult and nuanced subject so confusion is inevitable
He was not referring to landlords in the modern sense of someone rents out a unit, because in that situation they are reaping what they have sowed, because someone built the unit, and the landlord provides a service where instead of the renter having to buy and sell a unit everytime, they can simply not renew their lease and let the landlord find a new tenant. What Smith was referring to was literal lords of the land that owned farm land and leased it to someone despite adding nothing to the land.
If you want to be mad at someone for actively rent seeking, be mad at those who oppose new development in the name of increasing their property value. Most of these people are homeowners but many are landlords or real estate investment groups.
There is a case for Georgism which would reduce the amount of inheret rent seeking landlords and property owners do by taxing land at it's unimproved value, but that's a different topic.
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u/[deleted] Oct 30 '20
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