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haven't economists talked about how, in general, charging rent is not really creating economic value? patent trolls, landlords, rich investors, for example... all to some degree just rake it in based on what they already have.

When economists talk about rents and rent -seeking behavior, that's somewhat different from the common meaning of "rent". So for example you can get a monopoly rent by having all your (smaller) competitors regulated our of existence even if nothing is being rented in the traditional sense, while a landlord renting out properties in a healthy competitive market won't receive any economic rent.

Charging rent does have economic value.

Example: a retiree, using his retirement savings, purchases an apartment building. Now, he has a steady income, that he can use to pay for his expenses indefinitely -- as opposed to knowing he will run out of money at some point. The tenants benefit as well, because they have little savings, but an income instead (because they are still able to work, as opposed to the retiree). By exchanging income for wealth, the tenants and the retiree mutually satisfy each other's interests without harming anyone.

Rent is almost always higher than a mortgage payment but that requires a downpayment (i.e. not being poor) -- thereby they are saving less than if they can own. Basically the point of this article -- poor people who have to rent are subsidizing this retiree's retirement... its profitable.

An income is not a profit (capital gain). Retirees aren't profiting from their ability to convert their wealth into income, they're simply surviving.

I'm not talking about rich retirees. I'm talking about hundreds of millions of people all over the world, who've saved up something and therefore, when they come to the point where they are unable to work, they purchase an asset with a yield -- it can be anything: a bond, shares in companies that rent out apartments, stocks, land lease etc. -- in order to convert their savings into an income. The more your savings, the higher the income, but when you are no longer physically able to work, you have no choice left (unless you're lucky enough to live in a country where there's someone to help you).

Also, who do you think is the recipient of mortgage payments? People who've deposited money with the bank in question, eg. retirees. A mortgage is an exchange of wealth for income using a bank/credit union as an intermediary.

The argument would be that the right to seek rent from your capital goods, whether created, bought, or inherited, is what drives people to create these rent-creating systems in the first place.

If people didn't have the right to seek rent from the houses they build or inventions they come up with, why would they expend the effort in the first place?

(note, I don't take that view exactly, I believe motivation comes from a whole lot of places)

Not your view exactly, perhaps, but cuts to the heart of Efficient Market Hypothesis.

yes, its a good point to make. and not wrong, but i wouldn't say its the whole story. people have been creative and ingenious long before money existed. i certainly dont have enough historical knowledge, evidence, or thinking to make a compelling argument that money doesn't inspire creativity, but i really do have a suspicion that most good stuff comes from people who do it "just because", not to get rich. look at the incredible academics, artists, writers etc throughout history that weren't ever rich, nor really made the effort to be. but, for lots of day to day stuff, i do think money keeps the gears turning. so, i guess "why would they expend the effort in the first place?" ... because its fun.

> landlords, rich investors, for example... all to some degree just rake it in based on what they already have.

This is a simplistic view that is demonstrably incorrect. For example, I rent out part of my house but do so to help pay the mortgage. So technically I do not fully own the property I rent. Furthermore, maintaining a property and assuming liability are not free.

sure. not you personally then. but a lot of landlords.

If you don't rent, then you have to buy. Now you are paying money to the banks who "just rake it in". If you can't save up for the 5% downpayment, you have no choice but to rent. There will always be a percentage of people who don't have the capital to buy and need renting options. Note: I'm not saying slumlords are good. I'm saying people need to have a place to live. People need to have jobs. The economy will always have to encourage people who provide housing and jobs as it is so critical to everything.

It seems like you are most upset about people who inherited money using it to their advantage. I think the biggest problem is not poverty but how the middle class is forced to pay for it. The powers that be tell the middle class that it is the lazy poor people's fault so they get the blame while the rich get richer.

But housing only exists because of the economic incentives provided by the rent.

The act of building housing takes significant resources: lots of labor, purchase of physical building materials, purchase of equipment. The investor takes on the risk that pouring money into construction efforts will ultimately be paid back in the form of valuable housing that can be sold or rented.

If not for the returns provided by rent, no one would put up the investment in order to build more housing.

(just to clear things up, the act of charging rent is different than what economists refer to as rent-seeking behavior https://en.wikipedia.org/wiki/Rent-seeking)

i dont dispute that getting rich has motivated people. but its worth mentioning that houses existed before money, as have many other valuable things.

Charging rent is the means by which the owner is compensated for managing the risk of the asset for the sake of the inhabitant, dealing with local regulations, and checking the depreciation. The other examples are just abstractions, but the principle is the same: value isn't static. The underlying asset often has to be managed and its risks reevaluated. There is no guarantee that you just get to "sit there and rake in dividends".

that is true and your point is well taken. i think the crux of my point is that its out of scale with what i feel is fair. that is, the risks do not seem big enough to warrant the returns. i get that the returns are determined by the market, but i dont think thats a compelling argument in favor of fairness.

obviously you are not a landlord. there are many, many risks and costs to owning property, which is why not all landlords even make any money at all.

are you really disputing the fact that there are some people who make a shit ton of money owning property that dont really deserve it? thats crazy.

if they own the property and someone is willing to pay the rent then yes, absolutely they deserve it. are you suggesting we take away property rights?

i think thats a very simple and flawed way of thinking about it. it sounds like all you are using to determine if someone deserves something is if it is legal- the problem is your idea of "deserve" changes when the laws change. that seems silly.

hardly, obviously there is a difference between what is "legal" via a governing body and "natural law" or "right and wrong". I would agree with you that not everything that is "legal" is "right".

but in this case if I take on the risk of investing in real property, and of the risks that comes with that, then I deserve fair market rent on that property. and if over decades I accumulate multiple properties that produce in your opinion large amounts of income then I deserve that, too. and if I leave these properties to my descendents, then there's nothing inherently wrong with them owning those properties and getting that income, is there?

using your logic, you could also ask the question if people who cash out in IPOs "deserve" to become millionaires overnight.

correct, i think in lots of cases, including several i have first hand experience with, many people didn't deserve to become millionaires overnight that did. also, people who hit the lottery buying domain names in the early 90's... same thing. do we really think those people deserved millions, in anything other than the most technical sense of the word?

i understand your argument about compensating for risk, it's not dumb and not outrageous, but i'd like to challenge it to some degree. hopefully it's fair to assume that risk is simply the financial risk, i.e. how much you could lose, and at what probability? in that case, would it be fair to say that any positive expected value investment would result in undeserved profits? in other words, wouldn't there be cases where the rewards outweighed the risks?

if we accept that narrow definition of "deserve", then i guess it would be my job to argue that the three categories i mentioned show an imbalance. or course, knowing true risks is impossible, but you might be able to make a pretty good case in some instances. but i really dont know enough to do that.

but, i think that formulation doesn't really fully resonate with the way most people intuitively judge desert.

six people ante 200k each, then roll a die. who ever had the number that is rolled takes all the money. does the winner deserve the money more than the losers? in that example, sure, i think most people would agree, its a game of chance and they all entered willingly. did he "earn" it? ehhh, i guess?

now what if six people go off and build houses for a year. at the end of that year, they get paid proportion of the sum of all houses value based how many sq feet of house they personally made? someone might build a really shitty but huge house. would they deserve their pay? "but the rules were pay based on sq ft"... well, sure, but the spirit of the rules? probably the spirit is to pay people based effort, skill and product, so as to incentivize them. so maybe a flaw in the incentives then? i realize this is meandering from my original point... but i think its on us to do the right thing, not rules to force us to. ok, anyway... i think in this case most people would probably say this person doesn't deserve all the money because the house they built is so shitty, and they just found a loophole and exploited it.

that is all just a very long winded way of saying that i think desert is based on more than explicit contracts.

Up voted for admitting it violates a perception of fairness - can't argue with that! To put it in stark perspective where I agree with your sentiment, if not in policy perhaps, note how rental prices skyrocketed in the depressed town of Williston, ND when oil was found and it became a boom town. These landlords are siphoning off an infuriating amount of this boon while adding little to no net new value for luck of having bought and held onto their deeds in that town which not long ago had been worth little. One might even argue that the men gainfully employed in oil extraction are better tenants than the people who scrape by in life when the town was depressed. But, even then, thesee landlords held out when the property was worth little; they took risk to maintain land and provide shelter when the town's prospects were dim rather than buy bonds, perhaps, or something else better diversified and with less risk than real estate.

Support the estate tax! And do it vocally, it will be coming under fire soon.

i.e. support double taxation. no thanks.

All taxation is double (triple, quadruple, etc) taxation.

like sales tax on net income?