Great Problems: An Epidemic of Rent-Seeking
devinhelton.com
devinhelton.com
Without something to motivate that, it'll be a tough slog.
There is a good discussion of this here: https://news.ycombinator.com/item?id=13151687
http://qz.com/169767/the-century-old-solution-to-end-san-fra...
Protectionism doesn't generally involve the former, and I suspect that the author of the original post wouldn't appreciate the bureaucracy necessitated by such a large...safety net. It's a form of nonviolent warfare, with the state propping up those industries (and the strongest companies within those industries) in order to remain internationally competitive. In that sense, as far as I can tell, there is no meaningful difference between the current state of affairs and that proposed by the author, beyond perhaps which corporations get protected.
The way I tend to think of this is that the government's best role is to increase competition. Sometimes this means increased regulation, sometimes it means decreased regulation, depending on the market and situation. Sometimes the government should provide more services, sometimes it means it should exit.
My biggest concern about all of this is that the regulatory capture and rent-seeking solutions don't get applied equally--that the banner of libertarianism is used to prop up certain monopolies and tear down their competition.
So, for example, we have a concerted effort to tear down labor unions while maintaining or even expanding obscene "intellectual property" laws that do little but stifle free speech. It's for these reasons I have concerns about tearing down, as opposed to reforming, unions, which are often the last best defense against exploitation when the government doesn't act to protect its citizens. I have little sympathy for arguments that public school teachers earning 35k a year, with decent benefits, are somehow not worthy of that scant protection against the ultra-wealthy who want to hoard even more money through their own government protections. It's not only hypocritical, but morally bankrupt to argue that the humble public school teacher should somehow be stripped of all their protection, while the financial market should somehow be saved from the consequences of their reckless mistakes, or should be protected from competitors who "steal their ideas." Who is more of a crybaby? Or is it a psychopath?
Even in his examples, he uses architecture and law to illustrate problems with licensing systems, but omits discussion of medical licensing, which is arguably far more pernicious in terms of its societal costs because it has such wide-reaching scope (I'd argue the failed war on drugs, not to mention lack of access to health care services, are examples of the long reach of overly strict medical licensing). Note that you are legally entitled to represent yourself legally, but not to treat yourself as you see best. I find it troubling that he seems (perhaps unintentionally, or only by suggestion) to confuse accreditation, which are often systems set up by fields themselves, with actual legally enforced licensing regimes. I see nothing wrong with accreditation--it's a way for private citizens to certify themselves by third parties--but I do have problems with licensure, which mandate certain certification regimes.
Anyway, it's an interesting read. I wish there were more discussions around these issues, and about building up alternative systems and what they would look like.
Rent seeking is where an individual/business is exercising some kind of monopoly, often granted by the state, to basically compel people to pay him an income at no further effort to himself. Usually they are exploiting some kind of situation where someone needs something and they are erecting a barrier. They are appropriating wealth rather than creating it.
Examples of this would be people buying up land near a new development to profit from it, given land is scarce and more cannot be made (though zoning can in theory be changed). Or grabbing a patent to stop someone developing a rival product as they know the barrier to entry is not high without using the state legal apparatus. Or buying up apartment in the middle of an urban centre in the expectation of being able to capture wages due to an extreme shortage of accommodation. Or abusing your position as an issuer of fiat money to capture labour. Or some big land owner in the UK or USA whose grandfather grabbed land and now they descendants are sitting on this and demanding rent for use.
If someone builds an app and people can replicate it but choose not to then it's not stopping people doing that, also they can choose to simply not use the app.
I haven't read the article yet btw I don't have time just yet, just responding to this comment.
Compare this to the epi-pen thing where they are gouging because people are desperate and they hold a patent. The patent being enforced by the state.
http://ounodesign.com/wp-content/uploads/2013/02/henry-georg...
http://www.goodreads.com/book/show/552175.Progress_and_Pover...
If you take the definition Wikipedia currently gives, [...] seeking to increase one's share of existing wealth without creating new wealth [...], then you are looking at a very broad definition that also includes selling at inflated prices, at least that would be my interpretation.
In what scenario would universally inflated prices not be rent seeking? Erecting artificial regulatory barriers via lobbying? Rent-seeking. Collusion between market participants to keep the price significantly above the cost of production? Rent-seeking.
EDIT: I think I made a mistake in my argument but I have to rethink this and will leave it as it for the moment.
> if everybody would try to live for ten years on the work of one year, then we would have a problem.
I suspect this is the crux of the issue because I completely agree with this even though it is arguably untrue. For example, let's imagine that I could farm for a year and by making preserves could live on the food for 10 years. If everybody wanted to do this, then there would be no problem. We would all work for 1 year and eat for 10. Assuming that there are enough resources, it will not cause any problem at all.
In the same way, when the 1st world switched to a 40 hour week, it did not cause a problem. In fact, the extra leisure time resulted in the demand for goods and services. This combined with minimum wage meant that people would buy things and spur the economy.
So why do both of us think there is a problem? I suspect that it has to do with growth. To make a different example, imagine that I take a loan and use the money to build a business. Without the money, I can't do business and therefore people can't use the products I make and growth for everyone is restricted.
Let's say that I choose, instead, to spend the loan on Farmville. Now, the makers of Farmville get some income, which they will appreciate. Some of that will trickle down into the economy and help other businesses as well. But quite a lot of the money will be tied up in things like the rapid rise of real estate prices. This doesn't really generate any growth because no work is done.
If you compare the 2 situations: one builds a business making things that other people can use and overall society grows. In the other, we are mostly transferring wealth and only growing a little bit based on the small amount that trickles down to people who use it for something productive.
In the case where someone wants to work 1 year and receive money for 10, we have 1 year of growth producing work and 9 of simply spending the money.
As a society, there is a balance of stoking the economy (the distribution of money acts as a kind of oil that allows production to increase), and ensuring that money is used efficiently. Sitting on a passive income for 10 years means that society is deprived of 9 years of production -- and subsequent growth resulting from the use of those products.
Do I think one is morally better or worse? Not really. But I think, as a society, we should choose what we want to encourage.
Some second-order effects of the scarcity would be hoarding, scalping, etc.
OTOH, selling for $90 (at first) pushes your competitors to cut their own profit margins to match your price (or else gradually abandon the lower end of the market, a classic Christensen disruption) and lets you pocket a lot more money which you can invest aggressively in capacity as you gradually continue to lower your price (always keeping it just below the 2nd lowest price) and increase demand (growing the market) and your market share.
In fact, the increase in market size under those circumstances will lull your competitors into ignoring your increased market share for a while as the pie gets bigger and bigger.
BTW, the latter is exactly what Amazon is doing with AWS pricing. Imagine how that would have played out if they had launched in 2007 with prices 80% lower (their rumored profit margin) than anyone else.
> Software has very natural returns to scale, because all engineering costs and up front. The marginal cost of serving one more customer is very low.
One of the interesting things that we've seen over the past decade is that while Software-as-a-Product has nearly all of it's engineering costs up front, Software-as-a-Service does not. And I don't mean that the software is being improved continuously. There are significant ongoing engineering costs simply keeping the system working (consider, for example, the effort required to stay ahead of advanced persistent threats).
That said, when you're operating SaaS at a large scale, generally speaking the marginal cost of serving one more customer is still fairly low. Just not as low as with SaaP.