Winston
Platinum Member
We have been down this road before. Rent seeking does not require government action. I can understand why some entities would want to perpetuate the falsehood that it does, but it does not. From Investopedia, not really one of my favorite sources as it's own bias can be revealed with the examples of rent seeking they provide, but here is thier definition of rent -seeking.
Rent-seeking is an individual's or entity's use of company, organizational or individual resources to obtain economic gain without reciprocating any benefits to society through wealth creation.
You see any mention of government in that definition? And tell me, just what is the economic benefit to society of all those albatross empty former Walmarts, those operating under non-compete clauses, where the building owners are prevented from leasing to Walmart competitors. Maybe this example will help. What if a drug company purchases the only competing drug in a drug class of one of their firms best selling medications. Then shelves the former competitor and jacks the price of their own drug by, oh, 4,000%. You got a benefit to society that results in wealth creation for me on that "investment"? No, that is classic rent seeking and it does not involve any government actions other than the protection of intellectual property rights, which it does for everyone.
And when stock buybacks are merely a tool used to manipulate stock prices in order to generate increased compensation for executives within the company whose compensation is based on stock price and is often supplemented by stock options and warrants, then it becomes rent seeking. It is money that could have been used for capital improvements, research and development, or market expansion. Activities that make more pie. But stock buybacks used as I have described result, not in the production of more pie, but corporate executives garnishing more of the pie that is already there. Classic rent seeking.
Rent seeking does not require government action.
Rent seeking could include buying government inaction.
Rent-seeking is an individual's or entity's use of company, organizational or individual resources to obtain economic gain without reciprocating any benefits to society through wealth creation.
Corporate officers/employees can certainly use corporate resources for personal gain.
The Clinton "Foundation" took bribes from individuals, companies, organizations and foreign governments without creating benefits to society.
And tell me, just what is the economic benefit to society of all those albatross empty former Walmarts, those operating under non-compete clauses,
WalMart signed contracts with corporations or individuals to lease land/buildings.
How are these contracts rent-seeking? What "company, organizational or individual resources" are being unfairly used? Who is unfairly gaining?
What if a drug company purchases the only competing drug in a drug class of one of their firms best selling medications. Then shelves the former competitor and jacks the price of their own drug by, oh, 4,000%.
Yeah, I guess that could be considered rent-seeking. It would only work when there is a barrier to new competitors, like a ridiculously long and expensive approval process for new or generic competitors.
And when stock buybacks are merely a tool used to manipulate stock prices in order to generate increased compensation for executives within the company whose compensation is based on stock price and is often supplemented by stock options and warrants, then it becomes rent seeking.
But all shareholders benefit from the higher price caused by the buybacks. Not like the old days when corporate raiders could be fended off by greenmail. In that case the raider and the corporate officers benefitted when company funds were used to buy back shares at above market value in a private transaction.
Using corporate money like that would tend to cause the share price to fall, harming other shareholders, unlike buybacks in the market tending to make prices rise.
It seems that you are beginning to understand that rent seeking does not require a government action. Yes, perhaps the most example of rent seeking is the use of political contributions to gain access to favorable government actions. And it is rather ironic that you mentioned rent seeking could be buying government inaction. That is the one "achievement" of the Trump presidency. The complete dismantlement of decades worth of environmental legislation. The gutting of enforcement activities in regards to those regulations that remain. The whole global warming denial campaign is nothing more than rent-seeking activities by outfits like Koch with the soul goal of achieving government inaction. What you and other's fail to realize is that environmental regulations merely prevent corporations from externalizing too much of their cost of production.
Here is the thing. When you and I were kids there was much, much, more competition is almost every single market. You had more choice when it come to where you purchased your groceries, your clothes, your insurance, or even what institution handled your money. There has been a massive consolidation in almost every category of the economy. Those consolidation activities can also be considered rent seeking. And that consolidation has resulted in higher prices for damn near everything because now the suppliers have far more "pricing power". We are virtually surrounded by oligopolies. So much so that corporations get a forty percent higher return on equity here in the United States than they do abroad.
It seems that you are beginning to understand that rent seeking does not require a government action. Yes, perhaps the most example of rent seeking is the use of political contributions to gain access to favorable government actions.
Well, a company raising the price of their product is a business decision, not corruption.
An employee or corporate officer using corporate assets to enrich themselves is corruption and so is
buying government favors. That's why the latter two, but not the former, are usually what is being referenced when the evils of rent-seeking are discussed.
The complete dismantlement of decades worth of environmental legislation.
Sounds scary! Tell me more.
You had more choice when it come to where you purchased your groceries, your clothes, your insurance, or even what institution handled your money.
WalMart may have "killed" competition, but they did it with efficiency and lower prices.
Clothes and insurance (life insurance) are cheaper than they used to be.
I have the ability to have institutions across the world handle my money, not just the local bank
I used to walk to when I updated by passbook savings account.
And that consolidation has resulted in higher prices for damn near everything because now the suppliers have far more "pricing power".
Be more specific. Who has all this pricing power?
So much so that corporations get a forty percent higher return on equity here in the United States than they do abroad.
Link?
And stock buy-backs still aren't rent-seeking.
Here is you an article, and a speech by Elizabeth Warren. I am sure I am wasting my time.
Elizabeth Warren Opens Broad Attack Against Rent-Seeking Oligopolists Like Amazon, Apple, Google, Walmart, Comcast | naked capitalism
But yes, stock buy-backs can be rent seeking when they are used as price manipulation to inflate executive compensation packages. Tell me, why were stock buybacks illegal until the Reagan administration? And I believe it was the other Roosevelt administration that first adopted those restrictions.
This is all really simple. The numbers clearly indicate that the EFFECTIVE marginal tax rate for corporations was too low before the damn Trump tax cut. Numbers like corporate tax percentage of total government revenue, inflated returns on equity, ever climbing gross profit margins across industry sectors. But most importantly, the continued rise in rent seeking activities. Many of the world's leading economists have been pointing this fact out for years. Even Hayek warned of it before his death. The reality is that as effective corporate tax rates decline the incentive to engage in risk taking activities also declines. The least riskiest means of distributing capital is through rent seeking activities. It was easily predictable and legislative actions could have easily prevented much of it.
But yes, stock buy-backs can be rent seeking when they are used as price manipulation to inflate executive compensation packages."Rent seeking is an individual's or entity's use of company, organizational or individual resources to obtain economic gain without reciprocating any benefits"
Name the individual that is not gaining any benefit, from the stock buy back program, or the stock options, or whatever.
Who is it that is being forced to pay, without gaining benefit?
LMAO.
The company, that is "who" is not benefiting. Does the market capitalization go up after a stock buyback? Hell no, most of the time it actually goes down. Does it make the company more productive? No, it doesn't do jackshit for the company itself. If a company is using it's own money to buy stock instead of investing, or hell, even paying dividends, it means the company sees no profitable investment opportunities. It is flippin giving up. But you know that is not true. The only other logical explanation is that it is little more than an attempt to inflate the market price of the stock, usually because the compensation of executives within the company is based on that price and/or they have stock options and warrants. Stock buybacks, when broken down to it's simplest form, are employee theft, theft of company resources to inflate their compensation without delivering any benefit to the company. It's despicable and has no place in a properly functioning economy.