The rent-seeking of Ross Gittins

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From Ross Gittins today:

In political economist Mancur Olson’s pathbreaking book, The Rise and Decline of Nations, published in 1982, he argued that a country’s economic stability ultimately leads to decline as it becomes increasingly dominated by organised interest groups, each seeking to advance their interests at the expense of others.

By contrast, countries that have a collapse of the political regime, and the interest groups that have coalesced around it, can radically improve productivity and increase national income because they start with a clean slate in the aftermath of the collapse. Examples are the rapid growth of postwar Germany and Japan, as Wikipedia reminds us.

…What these days passes for the political debate seems to be dominated by ”distributional coalitions”, in Olson’s phrase, arguing for ”reforms” from which the chief beneficiaries would be their good selves, or desperately opposing government reforms that would impose even the most modest sacrifice on their members.

What gets me is how blatantly self-seeking our lobby groups have become. It is as if the era of economic rationalism – with its belief that the economy is driven by self-interest – has sanctified selfishness and refusal to co-operate for the common good.

This is one of those occasional pieces by Ross Gittins that rescues him from regular light-weight ruminations about confidence and the triumph of the services economy. I very much agree with Mr Gittins about the problem he describes. Trouble is, I see him as one of the worst rent-seekers of all.

How so, you cry?!

Fundamentally it is this: if rent-seeking prevents the most efficient flow of capital for productive purposes, and thus the rise of national wealth and with it the common good, then why does Mr Gittins spend so much of his time defending an economic model in which services and mining are seen as the natural evolution of the economy? Above all else, it is the embrace of this model of growth that is killing the productivity that Mr Gittins’ purports to champion.

There are three legs to the argument that Mr Gittins is as bad a rent-seeker (perhaps worse) than those he criticises. The first leg is that the services economy is largely non-tradable. As such, it doesn’t tend to generate capital in and of itself. It relies instead upon debt to grow. In Australia that debt is largely expressed through mortgages. Such a system can run successfully for a long time, especially if it is underpinned by another export sector that is producing traded capital – like mining.

But at a certain point, Minskian dynamics start of overwhelm the system as more and more capital is sucked into the unproductive venture of mortgages and productivity starts to fall. That, I submit to you, is where the Australian economy is today, with our banks pouring far larger proportions of the nation’s capital into mortgages than at time since records were kept:

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Indeed, my fellow blogger, Cameron Murray, has estimated that a considerable slice of Australia’s declining multi-factor productivity has resulted directly from escalating land prices:

The ABS explains that they take the balance sheet value of land from the national accounts to include as the land component of capital stock. We can observe in the chart below the rise in the value of the land balance sheet value against the estimate of MFP, and indeed against an estimate of the land balance if land values simply tracked inflation.  Quite clearly, from about 2002 onwards the abnormal increase in the value of land lead to a flattening and falling estimate of MFP.  More telling is that fall in all land asset values in 2009 lead immediately to an increase in the MFP measure, only for the next wave of land price escalation, especially FHOB stimulated residential land, to cause a deterioration in MFP during 2011.

We can dig a little deeper into the ‘land balance sheet’ in the system of national accounts, and look closely at the type of increases in land value estimated.  The chart below shows in blue the neutral holding gains – that is, the change in the value of land expected if prices tracked inflation.  This measure is the result of In red we see the real holding gains, which are market-based increases in land values.  As the ABS notesHolding gains and losses accrue to the owners of assets and liabilities purely as a result of holding the assets or liabilities over time, without transforming them in any way”. In economic terms, they are pure rents.

wbter4bv

When red is greater than blue, we find a significant downward bias in the MFP estimate.  It is really that simple.   And we are not alone in this either.  Spain’s land price boom resulted similar pattern of declining MFP during their land price boom in the early 2000s.

Notice the terminology: untransformed gains from holding assets and liabilities are pure rents.

The second leg of the argument is that Gittins is a key defender of both sides of politics and the policy executive in the shedding of the manufacturing sector of the economy. Again, if you believe productivity is the best and brightest path to greater prosperity (which is what Gittins’ argument is all about) then you cannot ignore the fact that manufacturing is the single greatest contributing sector to productivity gains in any economy. As I’ve pointed out before:

The following chart from McKinsey makes the point. Manufacturing contributes disproportionately to  productivity, innovation and exports:

Capture

These out-sized gains make a country richer more quickly which is why every example of successful catch-up development – North Asia in this century or the US in the last – has focused very heavily on growing a dynamic manufacturing sector. Of course the manufacturing changes as an economy gets more expensive but the economic rationale doesn’t change.

Quite! So as Australian manufacturing investment plunges toward extinction in the recent capex report, why is Mr Gittins cheering it along:

sagfeaw

Now, don’t get me wrong. Defending rent-seekers within manufacturing isn’t going to help. Manufacturing needs competitive pressures as much as any other sector to remain innovative and lean. But completely shedding your manufacturing sector in pursuit of productivity that has been destroyed by the debt-driven cost-input inflation of the services sector doesn’t make much sense either!

The final leg of this argument is that although Mr Gittins is absolutely right about the proliferation of professional lobbyists, they are at least visible if one looks closely. On the other hand, Mr Gittins occupies a reified communal space defined intrinsically as objective. He is the clear-thinker atop a soap box in the town square delivering truth to compromised power, captured most eloquently in his masthead’s sub-title “Independent. Always”.

But as Fairfax Media dies its slow death, it is being eaten by its own real estate businesses, which now constitute almost half the firm’s value. In short, the box that Mr Gittins is standing upon is stamped all over with “bought to you by the Australian real estate sector”; the same sector that is at the centre of the services economy and productivity bog into which the Australian economy is sinking.

That is not to say that Mr Gittins is deliberately misleading anyone. But such systems tend to self-perpetuate, more by inertia than design.

So! When I read Mr Gittins opine about the rise of the rent-seekers, my own analytical framework – which is part Minsky, part Keynes, part Schumpeter and part Hamilton (Alexander that is) – sees a jewel-encrusted and supine emperor gesturing lazily at baby elephants from atop a giant mammoth crushing all else in the room.

 

 

54 Responses to “ “The rent-seeking of Ross Gittins”

  1. ceteris paribus says:

    Ross’s Digest.

  2. ceteris paribus says:

    On the other hand, there is also active citizen participation for mutual interest and the development of the commons. And armies of volunteers for the interest of others.

    But I do take his point.

  3. Jake Gittes says:

    A good take-down but Gittins did confess to being a consummate rent seeker. He, like Kohler, pushes an argument for a while and then changes his position. It’s hedging with his readers who don’t feel that one line is being pushed. That’s why MB is better than MSM,

  4. Crocodile Chuck says:

    Post of the month and great integration of ideas. Well done.

    • PhilBest says:

      I agree, terrific post, drawing in the Cameron Murray analysis too; should be read at the top in Canberra.

      The urban land rent issue is the biggie. That alone will be responsible for most of the “rent” problem in the Aussie economy; a lot of the other rents are derivatives from that. For example, finance sector rents due to the need for larger sums to be financed per unit of land.

      This rent is in my opinion “THE” major contributor to the decline of tradables and productivity. Other things are peripheral by comparison.

  5. Pfh007 says:

    Yes – just about bang on.

    Ross has a few blind spots – all too common amongst those who learnt their trade and “eternal economic truths” during the great moderation.

    Chief amongst them is as you note – his almost lack of critical thinking about the topic of debt, the difference between trade in goods and services and international capital flows.

    Free flowing capital is bedrock for Ross, he sees NO difference between trade in goods and trade in capital. It is ALL good as it brings money to people who need it from people who have it.

    Furthermore he doesn’t really understand debt and banking – he often sounds a bit like Krugman at times – and the impact that borrowing from offshore lenders has on our exchange rate.

    If private debt (or public for that matter) stops growing – i.e. if banks stop creating deposits and creating loans, where will the additional money required to pay the interest on the loans already created come from?

    Deposits created by creating loans may eventually flow around and pay back the principal loan amounts but those original deposits cannot be sufficient to pay back the interest on the loans as well.

    The economic energy of debt quickly dissipates as the need to repay the principle to extinguish the debt draws near but the need to pay interest on the principle is like an economic black hole sucking energy from the economy.

    Is the rate of credit expansion by the private banks in Australia sufficient, even now, to generate enough new money supply to avoid the deflation that is driven by the existing stock of debt and the interest accruing on it?

    At what point does the demand for money generated by the interest payments required on huge public and private debt start driving deflation.

    Of course Government might be able to expand the money supply by ‘printing’ and thereby supply money that can make its way through the economy to quench the demand for money to meet the interest payments on the debt but we are a long way off any public discussion of that.

    At the moment the best the govt can do is reluctantly issue public interest bearing debt that is just going to make the problem worse as it increases demand for the existing money supply.

    Debt deflation may already be here and it may partly explain why in a sea of debt we are not fighting off inflation. The interest payments on the mountain of past debt are driving up the demand for money and thereby pushing down prices.

    Perhaps, Ross will address this issue next week.

    “How to escape debt deflation when you are already in it”

    Tip: More interest bearing debt (public or private) is not going to work.

    • migtronix says:

      Well said Pfh, this is what sh!ts me about the liberals/conservatives always talking about “paying down debt” – fine pay down existing debt (how?) but if you do nothing about government being able to issue debt, as opposed to issuing credit w/o bearing interest, what changes? Nothing changes

    • Opinion8red says:

      You can’t escape it. Especially not by creating even more interest-owing “money”.

      The debt has to be written off.

      The ancients were right all along.

      Jubilee time.

      • migtronix says:

        I have always disagree with the Jubilee idea what we need is incarceration of the perps! Their f#$@ing jail time can be the unwinding of the debt …

      • Opinion8red says:

        No, Rusty Penny (I think it was?) had it right a little while ago.

        Death penalty.

      • athalone says:

        Nah
        Feed them to the lions.

      • interested party says:

        You both better keep a seat for me at this shin-dig….you know that don’t you?

        edit…athalone..you beat me. another seat please.

      • athalone says:

        Yeah IP, when you see the people in charge at the RBA and in government make the same old mistakes time after time, all you can do is try to protect your own family… then visit this site so that you don’t go crazy.

    • Opinion8red says:

      “Is the rate of credit expansion by the private banks in Australia sufficient, even now, to generate enough new money supply to avoid the deflation that is driven by the existing stock of debt and the interest accruing on it?

      At what point does the demand for money generated by the interest payments required on huge public and private debt start driving deflation.”

      Pfh007, these are great and critically important questions, that no one in the mainstream ever bothers to ask. Doubtless because they are clueless as to the fundamental structure of the “money” system, so they are not questions that would ever occur to them.

      I’ve asked myself exactly these questions for several years now … surely there must be a way to gather together the data necessary to calculate the answers, or at least a decent approximation?

      Alas, that task has always appeared to be beyond my own meagre knowledge and research skills.

      Anyone else care to give it a try?

      • interested party says:

        I can’t help on the algebra side but can offer a suspicion……I don’t think this machine we live in will run well in reverse!!!! We forgot to fit a handbrake…..or parachute…..or airbags…

        What amazes me is that we can send objects far into space, we can clone almost anything we want, we have developed incredible technologies, astounding medical feats……and yet we know little to nothing on the genetics of money/debt, yet give so much of ourselves to the service of money/debt. It perplexes me.

    • interested party says:

      Pfhoo7

      Richard Heinberg wrote ‘The end of growth’ recently, and also Dmitri Orlov with ‘The seven stages of collapse’. What we are seeing is going according to the script and is well on track.
      Gandhi wrote this…
      First they ignore you, then they mock you, then they fight you….and then they lose.

      ‘They’ being us..and ‘you’ being reality. We are in the fighting stage.

  6. mikeinnz says:

    “There are three legs to the argument that Mr Gittins is as bad a rent-seeker (perhaps worse) than those he criticises. The first leg is that the services economy is largely non-tradable. As such, it doesn’t tend to generate capital in and of itself. It relies instead upon debt to grow. In Australia that debt is largely expressed through mortgages. Such a system can run successfully for a long time, especially if it is underpinned by another export sector that is producing traded capital – like mining.

    But at a certain point, Minskian dynamics start of overwhelm the system as more and more capital is sucked into the unproductive venture of mortgages and productivity starts to fall. That, I submit to you, is where the Australian economy is today, with our banks pouring far larger proportions of the nation’s capital into mortgages than at time since records were kept:”

    Well written HnH. Three cheers from me. NZ can be substituted for Australia. Try and tell this to the property pushers.

  7. China-Bob says:

    I’m just back from a quick trip to Hsinchu Taiwan. I met with Semiconductor Industry leaders from both the Design and Production side. At one stage the topic shifted to how my Australian manufacturing plans were proceeding. I had to tell them my plans were stone dead, killed by lack of committed investment capital and the complete absence of political interest in manufacturing.

    I’m relating the story because we had a big group of friends assembled from around the world, so we went once around the room discussing the manufacturing investment environment in our own countries. What emerged was a very clear trend of capitulation in most of the worlds the second tier manufacturing countries. In contrast those countries that have already won the volume are doubling down their investments and shifting their focus to mopping up as many niche sectors as possible. I think it’s easy to sit in Australia and think this is a uniquely Australian problem whereas the reality is that manufacturing capitulation is happening globally, all second tier manufactures are suffering the same fate.

    In a way excess production capacity has been the underlying problem with manufacturing since the GFC got into full swing, so this capitulation is finally returning pricing power to the remaining manufactures. With increased pricing power comes improved ROI and increased investment, and so on.

    Australia is in the rather unique position that this manufacturing collapse is not having a direct flow through effect on our countries balance of trade. The same cannot be said for many of the other countries that were represented at our gathering. This trend raises some very interesting globalization questions about the fate of those countries that have no manufacturing and no mining, what exactly will they do to obtain tradeable goods?

    The consensus was that these loosing countries are actually all selling assets to feed their need for Imported products (sounds familiar). Being a bunch of engineers we all had to shake our heads and wonder how long can such a trend last?

    It’s a pity there were no Eonomists present to explain the magic of the infinite CAD system, because the realization that second tier countries had no real way to pay for their goods did somewhat dampen the animal spirits of those participants that moments earlier had spruiked their successes in cornering this and that market. Hmmm

    Maybe the capitalist end game is nearer than I thought!

    • The Lorax says:

      Australia is in the rather unique position that this manufacturing collapse is not having a direct flow through effect on our countries balance of trade.

      True, but this only accelerated the decline of manufacturing here. The elite decided in the late naughties that the mining boom would run forever so there was no need for manufacturing (or any other sectors) that earn us export income. Therefore, the dollar was allowed to rip to $1.10 which accelerated our transition into a quarry economy.

      • China-Bob says:

        There is no doubt in my mind that the political acceptance of our manufacturing collapse came before the actual collapse and made possible the over-valuation of the Aussie that than sealed our fate.

    • interested party says:

      CB
      “Maybe the capitalist end game is nearer than I thought!”
      Coming from you, this is a worry. As I read your post I was playing this out into the future and had concerns..but your last line……Hmmm

      The manufacturing beast has started eating itself.

      • China-Bob says:

        Yea IP, I’m not normally scared by the process of change but there were some comments that really bought home just how much the manufacturing world has changed over the last 15 years.

        The comment that really sticks in my mind came from an Egyptian colleague, his observation was that not only was local manufacturing disappearing all over North Africa but also locally based importing agents were quickly becoming a thing of the past. So while 10 to 15 years ago an Importer typically had a geographically diverse base of manufactures that they worked with, this business model had been replaced by locally based Chinese export agents. They sourced only from China and therefore had much lower operating costs, however it also meant a much narrower product selection for the consumer, which of course increases volume (for the importer) which further decreases costs and cements them in place.

        The death of the genuine Importer, reduces the market for local (Import replacement goods) and similarly reduces the viability of small scale manufactured goods exporters in neighboring countries. This point was expanded upon by several German colleagues that had previous Middle Eastern business experience, basically you cant sell into another countries value chain.

    • Explorer says:

      “This trend raises some very interesting globalization questions about the fate of those countries that have no manufacturing and no mining, what exactly will they do to obtain tradeable goods?”

      Exactly! If you don’t have a manufacturing base to support your own economy you won’t be able to attract it because of overcapacity in some countires and low wages in some of them and in others.

      This is the problem Australia will face as the terms of trade, AUD and resource prices fall. We will have the recession we have to have to drive down labour prices and net personal income while we rebalance the economy towards tradeables/export replacement. This will be almost impossible if we let the manufacturing sector decline much more as critical mass and skills will have been lost.

      While not blaming Abbott for the mess (other than for his part in the Howard Gov’t and his failure to address the real issues in opposition instead of populist slogan disruption) he is the one in government at the critical time and will bear the odium for failing to fix it.

      The fall in the AUD will only increase input costs in mining and agriculture, rather than stimulating manufacturing as the capital base shrinks and the labour cost base continues to be excessive.

    • interested party says:

      Political responses? Possible trade barriers?

      This can get ugly.

    • spleenblatt says:

      Under a truly harmonised global economic and legal system without national/cultural boundaries, where there is effectively a consolidated balance sheet, the present CAD is in fact infinite. The goal for us now is to ensure we achieve that consolidated framework, otherwise, prepare for war.

    • 3d1k says:

      ChinaBob I tend to share your view. The transformation of manufacturing has been taking place for a couple of decades – for multiple reasons primarily connected to changes in global trade and capital investment.

      I suggest what you fear from the potential diversity/supply chain outcome is echoed by many in Western middle and working classes – continued downward pressure on living standards eventually resulting in no/low growth stagnation – in effect damaging the entire model.

      Think the Walmart dilemma: to pay workers more thereby increasing purchasing power or resist wage increases thereby capping costs but…is it the Henry Ford moment or not?

      • PhilBest says:

        “…… to pay workers more thereby increasing purchasing power or resist wage increases thereby capping costs…..”

        This concept breaks down somewhat when housing costs rise to swallow increased incomes, due to a rent-extractive structure in the property market.

      • 3d1k says:

        Phil I agree however the US seems a few steps closer to the future than we. Even in areas with housing very affordable when compared to Oz, those on Walmart (and similar) incomes struggle financially.

        In many sectors there are or will be increasing downward pressure on incomes, it is an inevitable outcome.

      • China-Bob says:

        @3d1k, you’re right, what I mentioned in Egypt is really a different side of the Walmart problem. In the US Walmart is this “China only importer” I even been in warehouses in China where Walmart containers were packed for direct shipping to US stores. That;s amazing logistics but it deskills the entire US operation, turning everyone into an extension of the $7 / hour Meet-n-greet man.

        WRT the Import supply chain, local (export replacement industries) have always relied on their inherent supply chain advantage and priced in this premium. When the supply chain changes the local manufacturer must not only match the price, they must discount for access to their own markets, if this access is even possible (store direct container filled in China makes local sourcing difficult)

        For Australia its a no-worries problem Mining volume is ramping and ore prices are holding up reasonably, so it might not be pretty but we’ll still be amoungst the least ugly

        For lots of other countries it could turn very ugly very quickly. Take Solomon Islands what was it in 2007 when China was actively supporting the Solomon’s and most of the businesses in the main street were Chinese. Eventually the locals got sick of being excluded from the business loop and burnt out the Chinese merchants. It was maybe the precursor of whats to come, I’m thinking something like the a pan Arab KristallNacht.

        If this gets started it’ll feed the racist sentiments that run rampant in that part of the world . It’s not simply underpaid workers that cant afford the products they sell, it’s the long term youth unemployed running riot, today their displeasure is directed at their own “leaders” however if thing dont improve their frustration will find a new enemy.

      • interested party says:

        To be fair, 3d, Henry Ford grew into a huge supply of cheap oil. We don’t have that luxury.

  8. The Lorax says:

    Abbott wants to be seen to be putting an end to rent-seeking (through his tough stance on corporate handouts) but in reality he’s killing off the sectors with the weaker lobbyists (manufacturers, airlines) while doing the bidding of the stronger lobby groups (mining, housing, agriculture).

    Our resident mining lobbyist (3d1k) must be pleased.

    • PhilBest says:

      I fail to see why mining is such a “rent seeking” problem in Australia. The biggest problems lie elsewhere in the economy. Mining would not have to be a burden if the policy settings relating to the rest of the economy resulted in a “value added” component to the economy that is really commensurate with being a developed nation of Australia’s maturity.

      If Australia was Sweden with mining, say. It is not the mining that makes Australia “NOT Sweden”. Or if Australia was Texas. Texas has huge natural resource extraction but that does not stop it being a favourite location for manufacturing investment as well.

  9. athalone says:

    Yes great article.

    Ross Gittins had no clue that the GFC was coming, when most people with a keen interest in economics read it as obvious.Even after it had arrived his articles carried on as though nothing was happening.I sent a few emails to him about it through Fairfax and even sent him a congratulatory email when he finally did get it. No replies of course…he thinks of himself as the all-knowing wizard who should not be criticised.

    Having said that, I didn’t study economics at school or university, but fell in love with it through his Fairfax articles over about 30 years.
    I thank him for that and believe him to be a very good teacher and communicator.

    But like a lot of so-called Keynesians, he just doesn’t understand debt.

    • migtronix says:

      [...]he just doesn’t understand debt
      When everyone’s constant solution to too much debt is more debt, a-la b_b, we know they’ve been taught economics very well! Pity no one gave them a hand with mathematics though…

      • athalone says:

        Yeah, I guess it has been a great albatross around the necks of people being taught economics over the last 60 years or so, compared to the common sense approach of the previous hundreds of years.

  10. Pat20 says:

    The Gittins article is one of the best things he has written in recent years.
    I would not normally defend him, but I think your argument is a bit weak.

    “you cannot ignore the fact that manufacturing is the single greatest contributing sector to productivity gains in any economy”. Do you have data for Australia to support this claim?

    At a time when taxpayers and consumers are under siege from rent-seeking as a result of a decade of weak politicians bereft of any kind of framework for economic reform, I think Gittins is right to highlight and support the glimmer of resistence that is being shown at present.

  11. Explorer says:

    Gittins and the Modest Member have contributed greatly to my economic education, as have those who have posted rebuttals to them. Gittins deserves lots of recognition for his lifetime’s work, even from those who find fault with many of his articles.

    • Pfh007 says:

      I have no problem with giving credit where credit is due and plenty is due to Mr Gittins.

      That is why I went to the launch of his latest book and had him sign a copy. A lot of the time he is on the money.

      Ross has done a great job over the years but he doesn’t pull his punches when he thinks he is right.

      So I am sure he is up for a debate about the possible short comings of the current dominant approach to managing the economy by driving debt onto household balance sheets.

      • PhilBest says:

        Yep, “household debt driven Keynesian stimulus”, as Fred Harrison (I think) once put it.

  12. Lori says:

    Did I say that we are in a post feudalism with the worst taken from capitalism – usury and fictitious capital domination?

    In a totalitarian system intelligent people joked with the government ideological propaganda. The government always preached that capitalism is decaying, but people secretly joked: “It may be rotting, but it smells wonderful!”

    Maybe the 20 century magic smell is gone and now the smell becomes really bad.

    • Slambo says:

      Perhaps the main benefits of globalisation have already been realised.

      From here on in it is a cannibalistic free-for-all.

  13. Jake89 says:

    “The first leg is that the services economy is largely non-tradable. As such, it doesn’t tend to generate capital in and of itself. It relies instead upon debt to grow.”

    Huh?

    • PhilBest says:

      It CAN grow from discretionary spending generated elsewhere in the economy. But if there ISN’T any growth in primary income sources, then there isn’t any discretionary spending, and it will be just debt. And it is, in Aussie right now.

  14. spleenblatt says:

    There is no refusal to co-operate for the common good. The common good is achieved by everyone pursuing their self-interest. If the pursuit of my self-interest entails curtailing the degree to which others can pursue their proper self-interest (to the detriment of my self-interest), the common good is still served by the fact that in aggregate self-interest is being pursued, and others are still free to pursue their proper self-interests in so much as those interests do not reduce, in aggregate, my own self-interest. It is in the common good, therefore, to ensure that people understand that the pursuit of their self-interest, which in aggregate is critical to the efficient allocation of competing self-interests, is also necessarily concurrently subordinate to the greater of any particular self-interest which enables the framework of individual’s pursuing their self-interest.

    Such pursuit of self-interest has been the bedrock of civilised peoples and what some might call ‘social’ progress since time immemorial.

    I am not prone to ad hominem, but Gittins is clearly a Communist and hates successful people.

    • Slambo says:

      Any suggestion for those who are incapable of pursuing their own self-interest, or who were never given similar opportunities as the more privileged in society?

      Perhaps I missed the sarcasm, or this is a great recipe for a dog-eat-dog society.

      Self-interest has been a primary motivator for a long time. It bears much responsibility for where we are now, and not just the good bits.

      • spleenblatt says:

        You missed the sarcasm ? Help me, Rhonda !

      • PhilBest says:

        It was a bit too arcane for good satire.

        I would say that pursuit of self-interest by way of rent-seeking is always bad; however the pursuit of self-interest as Adam Smith put it, by the butcher, baker and brewer, anxious to supply something we want at a price we are happy to pay, always leads to common good.

      • spleenblatt says:

        But where that simplified free economic system (butcher, baker, banker) necessary to facilitate basic human activity is almost wholly underpinned by a creed of private morality, it is inevitable that you end up where we are today. That is not to say that monopoly rents are not extracted in times of rigidly enforced public morality, but we are clearly in a period of disequilibrium.

  15. Senexx says:

    Any economic commentator is noticeably a rentseeker when they mention anything involving the FIRE sector which in my view defeats the purpose of their title ‘Economist’.

    That’s not to say they don’t help great gauges to measure various economic inputs but the summative view remains they are also a rentseeker.