rent-seeking

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pages: 481 words: 120,693

Plutocrats: The Rise of the New Global Super-Rich and the Fall of Everyone Else by Chrystia Freeland

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Albert Einstein, algorithmic trading, banking crisis, barriers to entry, Basel III, battle of ideas, Bernie Madoff, Big bang: deregulation of the City of London, Black Swan, Branko Milanovic, Bretton Woods, BRICs, business climate, call centre, carried interest, Cass Sunstein, Clayton Christensen, collapse of Lehman Brothers, conceptual framework, corporate governance, credit crunch, Credit Default Swap, crony capitalism, Deng Xiaoping, don't be evil, double helix, energy security, estate planning, experimental subject, financial deregulation, financial innovation, Flash crash, Frank Gehry, Gini coefficient, global village, Goldman Sachs: Vampire Squid, Gordon Gekko, Guggenheim Bilbao, haute couture, high net worth, income inequality, invention of the steam engine, job automation, joint-stock company, Joseph Schumpeter, knowledge economy, knowledge worker, linear programming, London Whale, low skilled workers, manufacturing employment, Mark Zuckerberg, Martin Wolf, Mikhail Gorbachev, Moneyball by Michael Lewis explains big data, NetJets, new economy, Occupy movement, open economy, Peter Thiel, place-making, Plutocrats, plutocrats, Plutonomy: Buying Luxury, Explaining Global Imbalances, postindustrial economy, Potemkin village, profit motive, purchasing power parity, race to the bottom, rent-seeking, Rod Stewart played at Stephen Schwarzman birthday party, Ronald Reagan, self-driving car, short selling, Silicon Valley, Silicon Valley startup, Simon Kuznets, Solar eclipse in 1919, sovereign wealth fund, stem cell, Steve Jobs, The Spirit Level, The Wealth of Nations by Adam Smith, Tony Hsieh, too big to fail, trade route, trickle-down economics, Tyler Cowen: Great Stagnation, wage slave, Washington Consensus, winner-take-all economy

And at a time of increasing economic complexity, what chance does government have of keeping up with business if the best and the brightest go to the private sector? Finally, the age of globalization has brought one more twist to the story of rent-seeking and how it has helped to create the super-elite: like so much else, rent-seeking has now gone global. That’s not entirely a new story—multinationals have long paid bribes to secure contracts abroad, and some of the most lucrative examples of historic rent-seeking have involved overseas concessions, like the East India Company’s right to trade in India granted by the British Crown, or the Hudson’s Bay Company’s rights to the Canadian fur trade. But the international ripple effect of rent-seeking is today even more extensive. A fortune created by rent-seeking in one country can have a powerful effect thousands of miles away. Britain’s football clubs and, increasingly, its newspapers are being bought up by emerging markets oligarchs, particularly Russians.

More broadly, they are also a reminder that, for all its success in raising 300 million of its 1.3 billion citizens out of poverty since the introduction of market reforms in the late 1980s, Beijing has also created one of the world’s most conducive economies for rent-seeking. “There are skeletons behind every entrepreneur in China,” Rupert Hoogewerf, publisher of the Hurun Report, told a reporter. We don’t often equate the rise of China with the rise of the red oligarchs. That’s partly because, unlike most economies that are friendly to rent-seeking, China has been so phenomenally successful: rent-seeking and the sustained high growth that China has experienced don’t often go together. It is also because, in contrast with the countries of the former Warsaw Pact, which transferred the property of the communist state into private hands with a big-bang sell-off, China’s market reforms have been slower and its avenues for rent-seeking have been more varied and more opaque than a quick privatization drive led from the top.

Witness, for example, the 2007 McKinsey/Bloomberg/Schumer report prepared by McKinsey for Michael Bloomberg on the threat that other, less onerously regulated financial centers, particularly London, posed to New York’s pole position as the world’s preeminent financial capital. One of the key recommendations was that the United States shift to the British “light touch” regulatory philosophy. As rent-seeking wealth spills across borders from the country where it was granted to other parts of the world, as rent-seeking plutocrats do deals with one another, and as economic rules go global, the question Professor Rajan asked of the Bombay Chamber of Commerce may need to be adjusted. He asked his Indian audience if their country was at risk of political capture by rent-seeking national oligarchs. An equal, and probably greater, danger is the rise of an international rent-seeking global oligarchy. SIX PLUTOCRATS AND THE REST OF US If you really wanted to examine percentage-wise who was hurt the most on their income, it was Wall Street brokers.

 

pages: 580 words: 168,476

The Price of Inequality: How Today's Divided Society Endangers Our Future by Joseph E. Stiglitz

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affirmative action, Affordable Care Act / Obamacare, airline deregulation, Andrei Shleifer, banking crisis, barriers to entry, Basel III, battle of ideas, Berlin Wall, capital controls, Carmen Reinhart, Cass Sunstein, central bank independence, collapse of Lehman Brothers, collective bargaining, colonial rule, corporate governance, Credit Default Swap, Daniel Kahneman / Amos Tversky, Dava Sobel, declining real wages, deskilling, Exxon Valdez, Fall of the Berlin Wall, financial deregulation, financial innovation, Flash crash, framing effect, full employment, George Akerlof, Gini coefficient, income inequality, income per capita, indoor plumbing, inflation targeting, invisible hand, John Harrison: Longitude, John Maynard Keynes: Economic Possibilities for our Grandchildren, Kenneth Rogoff, labour market flexibility, London Interbank Offered Rate, lone genius, low skilled workers, Mark Zuckerberg, market bubble, market fundamentalism, medical bankruptcy, microcredit, moral hazard, mortgage tax deduction, obamacare, offshore financial centre, paper trading, patent troll, payday loans, price stability, profit maximization, profit motive, purchasing power parity, race to the bottom, rent-seeking, reserve currency, Richard Thaler, Robert Shiller, Robert Shiller, Ronald Coase, Ronald Reagan, shareholder value, short selling, Silicon Valley, Simon Kuznets, spectrum auction, Steve Jobs, technology bubble, The Chicago School, The Fortune at the Bottom of the Pyramid, The Myth of the Rational Market, The Spirit Level, The Wealth of Nations by Adam Smith, too big to fail, trade liberalization, transaction costs, trickle-down economics, ultimatum game, uranium enrichment, very high income, We are the 99%, women in the workforce

All told, more than $3.2 billion was spent on lobbying in 2011 alone.25 The main distortion is to our political system; the main loser, our democracy. But often rent seeking involves a real waste of resources that lowers the country’s productivity and well-being. It distorts resource allocations and makes the economy weaker. A byproduct of efforts directed toward getting a larger share of the pie is shrinkage of the pie. Monopoly power and preferential tax treatment for special interests have exactly this effect.26 The magnitude of “rent seeking” and the associated distortions in our economy, while hard to quantify precisely, are clearly enormous. Individuals and corporations that excel at rent seeking are amply rewarded. They may garner immense profits for their firms. But this does not mean that their social contribution is even positive. In a rent-seeking economy such as ours is becoming, private and social returns are badly misaligned.

In this section, I recap the essential points of divergence: The Right has in mind a perfectly competitive economy with private rewards equal to social returns; we see an economy marked by rent seeking and other distortions. The Right underestimates the need for public (collective) action, to correct pervasive market failures. It overestimates the importance of financial incentives. And, as a result of all of these mistakes, the Right overestimates the costs and underestimates the benefits of progressive taxation. Rent seeking and the inequality/efficiency trade-off A central thesis of this book is that rent seeking is pervasive in the American economy, and that it actually impairs overall economic efficiency. The large gaps between private rewards and social returns that characterize a rent-seeking economy mean that incentives that individuals face often misdirect their actions, and that those who receive high rewards are not necessarily those who have made the largest contributions.

This should not come as a surprise: we have a political system that gives inordinate power to those at the top, and they have used that power not only to limit the extent of redistribution but also to shape the rules of the game in their favor, and to extract from the public what can only be called large “gifts.” Economists have a name for these activities: they call them rent seeking, getting income not as a reward to creating wealth but by grabbing a larger share of the wealth that would otherwise have been produced without their effort. (We’ll give a fuller definition of the concept of rent seeking later in the chapter.) Those at the top have learned how to suck out money from the rest in ways that the rest are hardly aware of—that is their true innovation. Jean-Baptiste Colbert, the adviser to King Louis XIV of France, reportedly said, “The art of taxation consists in so plucking the goose as to obtain the largest amount of feathers with the least possible amount of hissing.” So, too, for the art of rent seeking. To put it baldly, there are two ways to become wealthy: to create wealth or to take wealth away from others.

 

pages: 607 words: 133,452

Against Intellectual Monopoly by Michele Boldrin, David K. Levine

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accounting loophole / creative accounting, agricultural Revolution, barriers to entry, cognitive bias, David Ricardo: comparative advantage, Dean Kamen, Donald Trump, double entry bookkeeping, en.wikipedia.org, Ernest Rutherford, experimental economics, financial innovation, informal economy, interchangeable parts, invention of radio, invention of the printing press, invisible hand, James Watt: steam engine, Jean Tirole, John Harrison: Longitude, Joseph Schumpeter, linear programming, market bubble, market design, mutually assured destruction, Nash equilibrium, new economy, open economy, pirate software, placebo effect, price discrimination, profit maximization, rent-seeking, Richard Stallman, Silicon Valley, Skype, slashdot, software patent, the market place, total factor productivity, trade liberalization, transaction costs, Y2K

Indeed, even after their patent expired, Boulton and Watt were able to maintain a substantial premium over the market by virtue of having been first, despite the fact that their competitors had had thirty years to learn how to make steam engines. The wasteful effort to suppress competition and obtain special privileges is referred to by economists as rent-seeking behavior. History and common sense show it to be a poisoned fruit of legal monopoly. Watt’s attempt to P1: KNP head margin: 1/2 gutter margin: 7/8 CUUS245-01 cuus245 978 0 521 87928 6 April 29, 2008 17:24 4 Against Intellectual Monopoly extend the duration of his 1769 patent is an especially egregious example of rent seeking: the patent extension was clearly unnecessary to provide incentive for the original invention, which had already taken place. On top of this, we see Watt using patents as a tool to suppress innovation by his competitors, such as Hornblower, Wasborough, and others.

Repeatedly, in surveys of R&D lab and company managers, only 23 percent to 35 percent indicate that patents are effective as a means of appropriating returns. By way of contrast, 51 percent argue that trade secrecy is effective.23 Although in the simplest case patent law does not have an impact on trade secrecy, in cases where it is possible to expend real resources to make secrets less accessible, the innovator faces a real trade-off between private rent seeking through secrecy and public rent seeking through patents. This is true also in the case of copyright, as publicly enforced copyright is potentially an alternative to socially undesirable methods such as encryption and digital rights management that are designed to limit reproduction. There is a small literature in economics on this trade-off.24 One issue is how information that changes rival firm beliefs may work to the advantage of the firm releasing the information.

Monopolies innovate as little as possible and only when forced to; in general, they would rather spend time seeking rents via political protection while trying to sell at a high price their old refurbished products to the powerless consumers, via massive doses of advertising: “[Pharmaceutical] Companies today have found that the return on investment for legal tactics is a lot higher than the return on investment for R&D,” says Sharon Levine, the associate executive director of the HMO Kaiser Permanente. “Consumers today are paying an inordinate premium under the guise of the creating the stream of innovation in the future. But it’s actually funding lawyers.”37 Economists call this socially inefficient rent seeking. It is ugly, but the polite academic jargon rent seeking means “corruption” and all that comes with it. We have already mentioned the music industry, where corruption has become the standard marketing practice, as exemplified by the sorry story of payola. In industries that are highly monopolized and in which the returns from capturing the main distribution and information channels are enormous, the temptation to bend and then break the rules is too strong to resist, as public choice theory and economic common sense suggest.

 

pages: 561 words: 87,892

Losing Control: The Emerging Threats to Western Prosperity by Stephen D. King

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Admiral Zheng, asset-backed security, barriers to entry, Berlin Wall, Bernie Madoff, Bretton Woods, BRICs, British Empire, capital controls, Celtic Tiger, central bank independence, collateralized debt obligation, corporate governance, credit crunch, crony capitalism, currency manipulation / currency intervention, currency peg, David Ricardo: comparative advantage, demographic dividend, demographic transition, Deng Xiaoping, Diane Coyle, Fall of the Berlin Wall, financial deregulation, financial innovation, Francis Fukuyama: the end of history, full employment, George Akerlof, German hyperinflation, Gini coefficient, hiring and firing, income inequality, income per capita, inflation targeting, invisible hand, Isaac Newton, knowledge economy, labour market flexibility, labour mobility, low skilled workers, market clearing, Martin Wolf, Mexican peso crisis / tequila crisis, Naomi Klein, new economy, Ponzi scheme, price mechanism, price stability, purchasing power parity, rent-seeking, reserve currency, rising living standards, Ronald Reagan, savings glut, Silicon Valley, Simon Kuznets, sovereign wealth fund, spice trade, statistical model, technology bubble, The Great Moderation, The Market for Lemons, The Wealth of Nations by Adam Smith, Thomas Malthus, trade route, transaction costs, Washington Consensus, women in the workforce, working-age population, Y2K, Yom Kippur War

Obvious ways to increase rental payments include the development of economies of scale, the creation of barriers to entry which keep competitors out, becoming a Hollywood superstar, friendly government regulation (otherwise known as protectionism), military action, bribery, racism in its many forms and slavery. Apart from Hollywood, these examples suggest that nation states have strong incentives to collude with commercial interests. Rent-seeking is not confined to the private sector alone. In modern-day parlance, we might call linkages between governments and commercial interests ‘state capitalism’. Western governments have used the methods of state capitalism for hundreds of years in their bid to shape the world around them. Indeed, rent-seeking behaviour was, over the centuries, closely linked to colonization. The discovery and exploitation of lands and peoples offered an abundance of raw materials and cheap labour designed to furnish Western economic tastes. So long as the local population could be bribed, destroyed or enslaved, the Malthusian constraint, at least for the West, could be removed (Incas, Aztecs, Native Americans, Aborigines and Black Africans doubtless didn’t feel the same).

It also led to excessive flows of savings into emerging investments where returns for investors were, frankly, suspect. Rent-seeking behaviour is not confined to greedy Western capitalists. It is found all over the emerging world where the distinction between private companies and government control is, at best, tenuous. Pretending that corporate governance will somehow be good enough to protect the interest of developed-world investors is, in some cases, laughable. In The Writing on the Wall, Will Hutton criticizes China’s Communist Party for failing to disentangle itself from corporate China, arguing that China is suffering as a result from endemic corruption or, in Ricardo’s terminology, abusive rent-seeking behaviour. Whether or not the corruption is endemic, the key point is, surely, that investors in the developed world have no guarantee that they’ll receive the returns they expect from investing in Chinese capital markets.

(i) healthcare (i), (ii), (iii), (iv), (v), (vi), (vii) hedge funds (i), (ii), (iii) Hertz, Noreena (i) Hitler, Adolf (i) Hobbes, Thomas (i) Home Office (i) Hong Kong (i) ‘hot money’ inflows (i) housing market anarchy in capital markets (i), (ii) capital controls (i) population ageing (i) price stability (i), (ii), (iii), (iv) savings (i) trade (i) human capital theory (i) human ingenuity argument (i), (ii) Hume, David (i), (ii) Hungary (i) hunt for yield (i), (ii), (iii), (iv), (v), (vi), (vii), (viii) Huntingdon, Samuel (i) Hutton, Will (i), (ii) hyperinflation (i), (ii) IFS see Institute for Fiscal Studies IMF see International Monetary Fund immigration economic integration, political proliferation (i) nationalism (i) number of migrants to US (i) political economy and inequalities (i), (ii), (iii) population demographics (i) Spain and silver (i) Immigration Act (i), (ii) Immigration and Naturalization Act (1965) (i), (ii), (iii), (iv) imperialism (i), (ii), (iii), (iv), (v) imports (i), (ii), (iii), (iv), (v), (vi) income inequality globalization (i), (ii) political economy and inequalities (i) education (i) the emerging gap (i) emerging nations and income inequality in the developed world (i) food shortages (i) globalization (i) living with inequality (i) new modes of redistribution (i) not getting just rewards (i) a three-country model (i) too much domesticity (i) United Kingdom (i) winners and losers (i) price stability and economic instability (i) resource scarcity (i) state capitalism (i), (ii) Western progress (i), (ii), (iii) the West’s diminished status (i) income per capita argument (i) incomes China (i), (ii), (iii), (iv) political economy and inequalities (i), (ii) price stability and economic instability (i), (ii), (iii), (iv), (v), (vi) rent-seeking behaviour (i) scarcity (i), (ii), (iii), (iv) trade (i), (ii), (iii), (iv) India anarchy in capital markets (i), (ii) Islam (i) political economy and inequalities (i), (ii), (iii), (iv), (v), (vi), (vii) population demographics (i), (ii), (iii) price stability and economic instability (i) rent-seeking behaviour (i) scarcity (i), (ii), (iii), (iv) state capitalism (i), (ii), (iii) trade (i), (ii), (iii), (iv), (v) the West’s diminished status (i), (ii), (iii), (iv), (v) Indonesia (i), (ii), (iii) Industrial and Commercial Bank of China Ltd (ICBC) (i) Industrial Revolution (i), (ii), (iii), (iv), (v), (vi) infant mortality rate (i), (ii), (iii) inflation anarchy in capital markets (i) economic integration, political proliferation (i) indulging the US no more (i), (ii) political economy and inequalities (i), (ii) population demographics (i), (ii), (iii) price stability and economic instability (i) back to the 1970s (i) defining and controlling inflation (i) emerging economies (i), (ii) inflation as an instrument of income and wealth distribution (i) inflation as a result of currency linkages (i) overview (i), (ii), (iii) from stability to instability (i) we are not alone (i) resource scarcity (i) state capitalism (i), (ii) trade (i), (ii) the West’s diminished status (i), (ii), (iii) information technology (i), (ii) Institute for Fiscal Studies (IFS) (i), (ii) interest rates anarchy in capital markets (i), (ii), (iii), (iv), (v), (vi) globalization (i) indulging the US no more (i), (ii) price stability and economic instability (i), (ii), (iii), (iv), (v), (vi), (vii) savings (i) state capitalism (i), (ii), (iii) trade (i) the West’s diminished status (i), (ii) International Monetary Fund (IMF) (i), (ii), (iii), (iv), (v), (vi) International Olympic Committee (i), (ii) Internet (i) investment anarchy in capital markets (i), (ii), (iii), (iv), (v), (vi) capital flows and nation states (i), (ii) economic integration, political proliferation (i) nineteenth century (i) political economy and inequalities (i) population demographics (i), (ii), (iii) price stability and economic instability (i) protectionism (i) resource scarcity (i) state capitalism (i) trade (i), (ii), (iii) investment banks (i), (ii) ‘invisible hand’ (i), (ii), (iii), (iv), (v), (vi) Iran (i), (ii), (iii), (iv), (v) Iraq (i), (ii), (iii) Ireland (i), (ii) Islam (i), (ii), (iii) Isutani, Minoru (i) Italy (i), (ii), (iii), (iv), (v), (vi), (vii), (viii) Izvolsky, Count Alexander (i) Japan anarchy in capital markets (i), (ii), (iii), (iv) political economy and inequalities (i), (ii), (iii), (iv), (v) population demographics (i), (ii), (iii), (iv), (v), (vi), (vii) price stability and economic instability (i), (ii) scarcity (i), (ii) secrets of Western success (i), (ii) state capitalism (i), (ii), (iii), (iv) trade (i), (ii), (iii) US trade deficit (i) the West’s diminished status (i), (ii), (iii), (iv), (v) Jay, Peter (i) Jefferson, Thomas (i) jet airline industry (i) Jewish populations (i), (ii), (iii) Jin Mao Tower (i) Jones, Francis (i) Judt, Tony (i) junk bonds (i), (ii) juntas (i) Kamin, Steven B.

 

State-Building: Governance and World Order in the 21st Century by Francis Fukuyama

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Asian financial crisis, Berlin Wall, Bretton Woods, centre right, corporate governance, demand response, Doha Development Round, European colonialism, failed state, Fall of the Berlin Wall, Francis Fukuyama: the end of history, George Akerlof, Hernando de Soto, Nick Leeson, Potemkin village, price stability, principal–agent problem, rent-seeking, road to serfdom, Ronald Coase, structural adjustment programs, technology bubble, The Market for Lemons, The Nature of the Firm, transaction costs, Washington Consensus

It is common to characterize regimes in sub-Saharan Africa as “neopatrimonial”— that is, with political power used to service a clientelistic network of supporters of the country’s leaders (Joseph 1987; Fatton 1992). In some cases, as with Mobutu Sese Seko of Zaire, neopatrimonial regimes result in what Evans (1989) characterizes as “predatory” behavior, where a large part of society’s resources are stolen by a single individual. In others, it merely amounts to rent-seeking—that is, use of the public sector to reallocate property rights to the benefit of a particular interest—that is directed toward a single family, tribe, region, or ethnic group. As van de Walle (2001) points out, the neopatrimonial regime, usually embodied in the office of the president, exists side-by-side with a Weberian rational bureaucracy, often created in colonial times, that seeks to perform routine public administration tasks.

Other observers pointed out that it was not presidentialism per se but rather the type of electoral system used in the legislative branch that frequently led to major problems like political gridlock (e.g., the combination of a presidential system with legislative proportional representation that is typical in much of Latin America—see Horowitz 1990; Lijphart 1996; Lardeyret 1996; Cowhey and Haggard 2001). Tendencies toward rent-seeking and pork-barrel politics are encouraged under a number of conditions, such as multimember electoral districts, geographically small constituencies, and open-list proportional representation, though the embedding of patronage in the party system depends heavily on the historical sequencing of franchise expansion and bureaucratic reform (Shefter 1993). All of this research leads to a realistic contextual richness but a relatively limited clear-cut theory of optimal political system design. 26 state-building Basis of Legitimization The third aspect of stateness is closely related to the question of systemic institutional design but goes beyond it by including a normative dimension—that is, the state’s institutions not only have to work together properly as a whole in an administrative sense, they also have to be perceived as being legitimate by the underlying society.

In the end, the empirical relationship between democracy and development remains complex and ambiguous: It does not support either authoritarian transitions as a general approach to economic reform or democratization as a growth strategy. Barro’s (1997) cross-country survey shows that democracy is positively correlated with growth at low levels of development but then becomes negatively correlated at medium levels of per capita GDP. Patronage and rent-seeking (Turkey, Argentina, Brazil), populism (Venezuela), and corruption (Pakistan under Bhutto and Sharif) all remain democratic vices. It the missing dimensions of stateness 29 is hard to see a clear causal relationship between the wave of democratization that hit sub-Saharan Africa during the 1990s and the continent’s slightly improved economic performance in this period. Cultural and Structural Factors The fourth aspect of stateness that is relevant to institutional capacity is subpolitical and related to norms, values, and culture.

 

pages: 288 words: 76,343

The Plundered Planet: Why We Must--And How We Can--Manage Nature for Global Prosperity by Paul Collier

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agricultural Revolution, Berlin Wall, business climate, Doha Development Round, energy security, food miles, megacity, new economy, offshore financial centre, oil shock, profit maximization, rent-seeking, Ronald Coase, Scramble for Africa, sovereign wealth fund, stem cell, Stewart Brand

No authority would be able to construct and enforce property rights over natural assets. In this society physical control of the asset is all that matters. This gives rise to three problems: mal-distribution, rent-seeking, and uncertainty. Mal-distribution comes about partly because the strong are advantaged over the weak, but it is compounded by chance: some territories are better endowed than others. If we imagine the population distinguished in the two dimensions of strength and luck, the natural assets are acquired disproportionately by those who are lucky and strong. “Rent-seeking” is the technical term for ways, including violence, to acquire ownership. Basic economics predicts that the value of natural assets, which technically are unearned “rents,” will be matched by the efforts to “seek” those rents, so that the potential social value of natural assets will be dissipated by the costs incurred.

With business-as-usual, the likely outcome is that more will mean worse just through sliding further down the list of priorities. If the government publicly decides to make a quantum leap in investment the outcome could be even worse than that. The political special-interest lobby groups that try to capture public spending are alerted that there is more money on the table and so exert themselves, through legitimate and illegitimate means. The resources burned up in such lobbying contests are called “rent-seeking.” If rent-seeking is frustrated by checks and balances such as veto points, the lobbies may try to dismantle them. Nuhu’s departure for Oxford was induced by effective lobbying, and dismantled one important check. Michael Ross, a political scientist from UCLA, aptly terms this higher-order destructiveness “rent-seizing.” The experience that gave Ross that insight was not oil in Africa but timber in Thailand, where he documented the systematic dismantling of the checks which impeded the plunder of the country’s forests.

For example, a country might argue that it should have rights to emit carbon based on the carbon it was emitting when the cap was imposed. Or the right to emit as much carbon as some other country. Or because it is poor. Or because it did not emit any of the carbon that caused the problem. Rent-seeking over carbon rights can occur both nationally and internationally. At the national level it is already apparent in the U.S. Congress. Potentially, the assignment of carbon rights could make the huge rent-seeking machine that is the American agricultural lobby look like a side-show. Internationally, the scope for scams may well be even larger. Firms that want to continue emitting carbon simply need to purchase a piece of paper certifying that some firm somewhere elsewhere is emitting correspondingly less carbon than it otherwise would have done.

 

pages: 504 words: 143,303

Why We Can't Afford the Rich by Andrew Sayer

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accounting loophole / creative accounting, Albert Einstein, asset-backed security, banking crisis, banks create money, Bretton Woods, British Empire, call centre, capital controls, carbon footprint, collective bargaining, corporate social responsibility, credit crunch, Credit Default Swap, crony capitalism, David Graeber, David Ricardo: comparative advantage, debt deflation, decarbonisation, declining real wages, deglobalization, deindustrialization, delayed gratification, demand response, don't be evil, Double Irish / Dutch Sandwich, en.wikipedia.org, Etonian, financial innovation, financial intermediation, Fractional reserve banking, full employment, Goldman Sachs: Vampire Squid, high net worth, income inequality, investor state dispute settlement, Isaac Newton, James Dyson, job automation, Julian Assange, labour market flexibility, laissez-faire capitalism, low skilled workers, Mark Zuckerberg, market fundamentalism, Martin Wolf, means of production, moral hazard, mortgage debt, neoliberal agenda, new economy, New Urbanism, Northern Rock, Occupy movement, offshore financial centre, oil shale / tar sands, patent troll, payday loans, Plutocrats, plutocrats, predatory finance, price stability, pushing on a string, quantitative easing, race to the bottom, rent-seeking, Ronald Reagan, shareholder value, short selling, sovereign wealth fund, Steve Jobs, The Nature of the Firm, The Spirit Level, The Wealth of Nations by Adam Smith, Thorstein Veblen, too big to fail, transfer pricing, trickle-down economics, universal basic income, unpaid internship, upwardly mobile, Washington Consensus, Winter of Discontent, working poor, Yom Kippur War

There are intermediate cases too of ‘soft power’ where goods are provided, but as a means of getting rent: social networking sites provide users with ways of keeping in contact with people but their income is mainly economic rent from letting out advertising space. Businesses can compete not only by providing better products more cheaply but by ‘rent-seeking’, that is, seeking control of assets and resources that can be used to extract rent from users. Joseph Stiglitz, former Chief Economist at the World Bank, claims that the return of the rich is largely the result of a massive growth in rent-seeking, particularly in the financial sector. He argues that this not only transfers income from one group to another, but has a negative effect on the economy because it diverts resources from productive uses that create wealth, to mere wealth extraction.22 Instead of being reinvested in production, the money is merely siphoned off to the unproductive rentier.

What claim have they, on the general principle of social justice, to this accession of riches?’116 Actually, some of them would also have been active rentiers when they were awake, working to find more sources of rent, interest and capital gains. But the question remains: how can income in the form of salary for work be ‘unearned’? It can if the work involves extracting unearned income through rent-seeking, interest-charging or any of the other methods covered in this book. ‘Even today’s rent-seeking plutocrats work for a living – Carlos Slim or the Russian oligarchs owe their fortunes to rents they’ve captured themselves, not to estates conquered by distant ancestors,’ writes Chrystia Freeland.117 Remembering the definitions in Chapter Three of earned income as conditional on producing goods and services (‘use-values’), and unearned income as derived from control of existing assets that others lack but need, then the salary earned – or rather received – by someone whose work consists of extracting rent or interest and getting control of new sources belongs to the second category.

But once they were privatised – and this first happened during a period in which top rates of tax fell to 40% in the UK – the rich could pay what to them were trifling sums for their services, while the rest had to pay dearly.26 Politicians may wring their hands when privatised suppliers push their prices up far above inflation, but it’s also out of their hands. But there’s another new area in which rent-seeking is advancing. ‘Intellectual property’ may sound dull, but it’s opened up huge new possibilities for companies to extract rent from others, with major consequences. Intellectual property is the ownership of ideas and the representation of those ideas, covering trademarks, patents (allowing ownership of inventions – tangible or virtual – for specific periods of time) or copyright, protecting authorship of books, music, art, images and films, again for specific periods of time.

 

pages: 370 words: 102,823

Rethinking Capitalism: Economics and Policy for Sustainable and Inclusive Growth by Michael Jacobs, Mariana Mazzucato

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There is no easy way of providing a neat quantitative answer, but recent events and studies have lent persuasive weight to theories putting greater focus on rent-seeking and exploitation. We shall discuss this evidence in the next section, before turning to the institutional and political factors which are at the root of the recent structural changes in income distribution. Rent-seeking and top incomes The term ‘rent’ was originally used to describe the returns to land, since the owner of the land receives these payments by virtue of his or his ownership and not because of anything he or she does. The term was then extended to include monopoly profits (or monopoly rents)—the income that one receives simply from control of a monopoly—and in general returns due to similar ownership claims. Thus, rent-seeking means getting an income not as a reward for creating wealth but by grabbing a larger share of the wealth that would have been produced anyway.

The chapters by Joseph Stiglitz and Colin Crouch look at two of the major gaps between orthodox economic theory and the reality of modern capitalism. Stiglitz addresses the growth of inequality over the past thirty years. He takes on the neoclassical view that wages and salaries reflect the marginal productivity of workers, showing that the very high incomes of corporate executives in fact reveal a form of ‘rent-seeking’, in which rewards are extracted without relation to productivity or economic desert. Moreover he points out—again contrary to the orthodox view—that such inequality is not the price that has to be paid for greater economic prosperity, but actually retards growth. Stiglitz offers a range of policy measures which would reverse recent trends, including changes to executive compensation schemes, macroeconomic policies to reduce unemployment, greater investment in education and the reform of capital taxation.

A framework that sees policy as simply fixing imperfections in order to let markets achieve an exogenously determined equilibrium state is of little use when policy is needed to dynamically create and shape new markets in processes of evolution and transformation. Within the orthodox framework, the existence of some market failure is a necessary but not sufficient condition for state intervention.26 If government is to step in, it is claimed that gains from the intervention must outweigh the associated costs due to ‘governmental failures’27 such as capture by private interests (cronyism, corruption, rent-seeking),28 misallocation of resources (for example, ‘picking losers’)29 or undue competition with private initiatives (‘crowding out’).30 There is thus a presumed trade-off between two inefficient outcomes, one of which is generated by free markets (market failure) and the other by public intervention (government failure). Neo-Keynesian economists tend to emphasise market failures, especially those related to imperfect information,31 and thus to advocate more extensive government intervention, while public choice theorists32 tend to see the market as usually able to ‘self-correct’ and worry more about government failures.

 

Culture and Prosperity: The Truth About Markets - Why Some Nations Are Rich but Most Remain Poor by John Kay

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Unless we allow indiscriminate development, construction sites will be limited and permission to develop them valuable. These restrictions often create large rents, and firms will spend correspondingly large sums to get them. A government that creates or assigns these resources can impose heavy taxes, or large up-front fees, for their use-as with specific taxes on oil and mineral deposits, or the allocation of spectrum for mobile phone companies. These fees and taxes yield revenue and discourage rent seeking. Rent seeking impedes the functioning of a market economy-the pursuit of gains from trade through specialization and differences in capabilities. It limits innovation though disciplined pluralism. It corrodes the integrity of politics. These adverse political and economic effects often reinforce each other. Rents and Competitive Advantages ••••••••••••••••••••••••••••••••••••• Firms derive rents from their competitive advantages.

The mechanics of coordination were less effective under central direction then in the spontaneous order of market economies. No economy has ever been so vulnerable to rent-seeking as the collapsed Soviet Union. Russia is rich in natural resources. Its centralized economy had established many monopolies of production, communication, and transportation. Western firms, anxious to do the business that had been opened to them, required political and economic connections. Never have so many rents been on offer in such a short space of time. The beneficiaries of the process were the politically well connected, managers of established Russian businesses, and criminal gangs. Public choice-the self-amplifying cycle of political corruption and economic rent-seeking described by Buchanan's model (p. 294)found its fullest expression. As oligarchs bought politicians, they could demand further favors. 3 Few rents in Russia are derived from scarce talents or the competitive advantages of firms.

If there are no scarce factors in an economy, bargaining and productivity theories converge. This is an intriguing result, but it probably does not reveal much of the truth about markets. In modern economies, many factors are scarce and there are many sources of rents. The acquisition and defense of rents, and bargaining and dispute over their distribution, are the main influences on income distribution. Rent Seeking ••••••••••••••••••••••••••••••••••••• Economic rents are returns to scarcities-the exceptional talents of individuals, the distinctive capabilities of corporations. But not all individuals have scarce talents, not all corporations have distinctive capabilities. If scarcity does not naturally exist, perhaps it can be invented, and rents garnered anyway. The grant of monopolies has been a source of patronage and revenue for governments for thousands ofyears and continues today in poor countries and corrupt states. 7 In postcommunist Russia, the Orthodox Church won an alcohol monopoly.

 

pages: 225 words: 61,388

Dead Aid: Why Aid Is Not Working and How There Is a Better Way for Africa by Dambisa Moyo

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affirmative action, Asian financial crisis, Bretton Woods, colonial rule, correlation does not imply causation, credit crunch, diversification, diversified portfolio, en.wikipedia.org, European colonialism, failed state, financial innovation, financial intermediation, Hernando de Soto, income inequality, invisible hand, M-Pesa, market fundamentalism, Mexican peso crisis / tequila crisis, microcredit, moral hazard, Ponzi scheme, rent-seeking, Ronald Reagan, sovereign wealth fund, The Chicago School, trade liberalization, transaction costs, trickle-down economics, Washington Consensus, Yom Kippur War

Others estimate that of the US$525 billion that the World Bank has lent to developing countries since 1946, at least 25 per cent (US$130 billion) has been misused. Vast sums of aid not only foster corruption – they breed it. Aid supports rent-seeking – that is, the use of governmental authority to take and make money without trade or production of wealth. At a very basic level, an example of this is where a government official with access to aid money set aside for public welfare takes the money for his own personal use. Obviously, there cannot be rent-seeking without a rent. And because foreign aid (the rent) is fungible – easily stolen, redirected or extracted – it facilitates corruption. Were donor conditionalities remotely effective, this would not be the case. But, as described previously, conditionalities carry little punch.

Yet another explanation put forward for Africa’s poor economic showing is the absence of strong, transparent and credible public institutions – civil service, police, judiciary, etc. In The Wealth and Poverty of Nations, David Landes argues that the ideal growth and development model is one guaranteed by political institutions. Secure personal liberty, private property and contractual rights, enforced rule of law (not necessarily through democracy), an ombudsman-type of government, intolerance towards private rent-seeking and optimally sized government are mandatory. In Empire: How Britain Made the Modern World, Niall Ferguson points to the common-law system and the British-type civil administration as two institutions that promoted development. Ferguson also notes that it is a country’s underlying legal and political institutions that make it conducive to investment (and counter-disinvestment through less capital flight) and innovation.

As discussed earlier, among development practitioners there is increasing acknowledgement that ‘soft’ factors – such as governance, the rule of law, institutional quality – play a critical role in achieving economic prosperity and putting countries on a strong development path. But these things are meaningless in the absence of trust. And while trust is difficult to define or measure, when it is not there the networks upon which development depends break down or never even form. Foreign aid does not strengthen the social capital – it weakens it. By thwarting accountability mechanisms, encouraging rent-seeking behaviour, siphoning off scarce talent from the employment pool, and removing pressures to reform inefficient policies and institutions, aid guarantees that in the most aid-dependent regimes social capital remains weak and the countries themselves poor. In a world of aid, there is no need or incentive to trust your neighbour, and no need for your neighbour to trust you. Thus aid erodes the essential fabric of trust that is needed between people in any functioning society.

 

pages: 740 words: 217,139

The Origins of Political Order: From Prehuman Times to the French Revolution by Francis Fukuyama

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Admiral Zheng, agricultural Revolution, Andrei Shleifer, Asian financial crisis, Ayatollah Khomeini, barriers to entry, Berlin Wall, blood diamonds, California gold rush, cognitive dissonance, colonial rule, conceptual framework, correlation does not imply causation, currency manipulation / currency intervention, demographic transition, Deng Xiaoping, double entry bookkeeping, equal pay for equal work, European colonialism, failed state, Fall of the Berlin Wall, Francis Fukuyama: the end of history, Francisco Pizarro, Hernando de Soto, hiring and firing, invention of agriculture, invention of the printing press, Khyber Pass, labour market flexibility, land reform, land tenure, means of production, offshore financial centre, out of africa, Peace of Westphalia, principal–agent problem, RAND corporation, rent-seeking, Scramble for Africa, spice trade, Stephen Hawking, Steven Pinker, the scientific method, The Wealth of Nations by Adam Smith, Thomas L Friedman, Thomas Malthus, trade route, transaction costs, Washington Consensus

Again, we are back to the problem of the stacked turtles. It is possible that patrimonial officeholding itself rests on a set of prior social conditions even as it is fostered by deliberate government policy. RENT-SEEKING SOCIETIES Ancien régime France was an early prototype of what is today called a rent-seeking society. In such a society, the elites spend all of their time trying to capture public office in order to secure a rent for themselves—in the French case, a legal claim to a specific revenue stream that could be appropriated for private use. Was this rent-seeking coalition a stable one? It lasted for almost two centuries and provided a political basis for France’s emergence as the dominant continental power. On the other hand, we know that the grandeur of the French court masked enormous weaknesses.

Mancur Olson has made the general argument that entrenched interest groups tend to accumulate in any society over time, which aggregate into rent-seeking coalitions in order to defend their narrow privileges.19 They are much better organized than the broad mass of people in a society, whose interests often fail to be represented in the political system. The problem of a dysfunctional political equilibrium can be mitigated by democracy, which at least theoretically allows nonelites to have a greater share in political power. But even then there is usually a large disparity in the organizational capacity of elites and nonelites that prevents the latter from acting decisively. We have seen numerous examples of rent-seeking coalitions that have prevented necessary institutional change and therefore provoked political decay. The classic one from which the very term rent derives was ancien régime France, where the monarchy had grown strong over two centuries by co-opting much of the French elite.

THE VICTORY OF SOCIETY OVER POLITICS NATION BUILDING BY FOREIGNERS CHINA VERSUS INDIA 13 - SLAVERY AND THE MUSLIM EXIT FROM TRIBALISM CREATION OF A MUSLIM STATE THE ORIGINS OF MILITARY SLAVERY 14 - THE MAMLUKS SAVE ISLAM MAMLUK DECAY STATES AS ORGANIZED CRIMINALS 15 - THE FUNCTIONING AND DECLINE OF THE OTTOMAN STATE A ONE-GENERATION ARISTOCRACY MILITARY SLAVERY PERFECTED THE OTTOMAN STATE AS A GOVERNING INSTITUTION REPATRIMONIALIZATION AND DECAY THE OTTOMAN LEGACY 16 - CHRISTIANITY UNDERMINES THE FAMILY EUROPEAN EXCEPTIONALISM MARX’S MISTAKE FROM STATUS TO CONTRACT THE SOCIAL BACKGROUND TO STATE BUILDING IN EUROPE PART THREE - The Rule of Law 17 - THE ORIGINS OF THE RULE OF LAW CONTEMPORARY CONFUSIONS CONCERNING THE RULE OF LAW HAYEK’S THEORY THAT LAW IS PRIOR TO LEGISLATION FROM CUSTOMARY TO COMMON LAW 18 - THE CHURCH BECOMES A STATE THE CATHOLIC CHURCH DECLARES INDEPENDENCE THE REAPPEARANCE OF ROMAN LAW LAW AND THE RISE OF THE MODERN STATE HOW THE MEDIEVAL CHURCH SET PRECEDENTS FOR CONTEMPORARY RULE OF LAW 19 - THE STATE BECOMES A CHURCH RULE OF LAW IN THE MIDDLE EAST SEPARATION OF MOSQUE AND STATE HOW THE RULE OF LAW FAILED TO SURVIVE CONTACT WITH THE WEST IN BOTH INDIA AND ISLAM WHY THE RULE OF LAW WAS STRONGER IN WESTERN EUROPE 20 - ORIENTAL DESPOTISM CHINA’S MODERNITY AFTER THE TANG-SONG TRANSITION THE EVIL EMPRESS WU THE MANDATE OF HEAVEN 21 - STATIONARY BANDITS GOOD GOVERNMENT, BAD GOVERNMENT THE “BAD EMPEROR” PROBLEM INSTITUTIONS AREN’T ENOUGH PART FOUR - Accountable Government 22 - THE RISE OF POLITICAL ACCOUNTABILITY EUROPE’S LATE STATE BUILDING THE MARCH OF EQUALITY HE WHO KNOWS ONLY ONE COUNTRY KNOWS NO COUNTRIES EUROPE’S EASTERN ZHOU PERIOD THE ROLE OF LAW IN EUROPEAN DEVELOPMENT A FRAMEWORK FOR STATE BUILDING 23 - RENTE SEEKERS THE BEGINNINGS OF PATRIMONIAL ABSOLUTISM THE INTENDANTS AND CENTRALIZATION THE LIMITS OF CENTRALIZED POWER AND THE IMPOSSIBILITY OF REFORM THE FAILURE OF RESISTANCE TO ABSOLUTISM IN FRANCE RENT-SEEKING SOCIETIES 24 - PATRIMONIALISM CROSSES THE ATLANTIC THE BANKRUPT SPANISH STATE TAXATION AND NO REPRESENTATION TRANSFER OF INSTITUTIONS TO THE NEW WORLD THE IRON LAW OF LATIFUNDIA 25 - EAST OF THE ELBE LORDSHIP AND BONDAGE CONSTITUTIONALISM AND DECLINE IN HUNGARY FREEDOM AND OLIGARCHY 26 - TOWARD A MORE PERFECT ABSOLUTISM SOURCES OF RUSSIAN ABSOLUTISM FREE ALTERNATIVES THE PEASANT-OWNING CARTEL AFTER PETER ABSOLUTISM ACHIEVED 27 - TAXATION AND REPRESENTATION THE ROOTS OF ENGLISH POLITICAL SOLIDARITY FREE CITIES AND THE BOURGEOISIE THE STRUGGLE OVER TAXATION THE GLORIOUS REVOLUTION TO THE AMERICAN AND FRENCH REVOLUTIONS 28 - WHY ACCOUNTABILITY?

 

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The Devil's Derivatives: The Untold Story of the Slick Traders and Hapless Regulators Who Almost Blew Up Wall Street . . . And Are Ready to Do It Again by Nicholas Dunbar

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Such dangers are well understood in consumer financial markets.13 Where customers are confused about their buying decisions, they can fall prey to “rent seeking” by sophisticated vendors, who extract outsized profits without delivering real value for their customers. With bespoke over-the-counter derivatives and structured products, opaque pricing allows dealers to build hefty margins into the transaction. This means that the difference between the true manufacturing cost and what the customer actually pays can be earned as “rent” by the dealer over the life of the trade. So long as the customer feels that they are getting a good deal, such rent seeking can be extremely profitable for large financial institutions. Take the most common type of retail structured product, a low-risk bond coupled with equity options.

By branding their products and selling them like toothpaste, the dealers fulfilled Miller’s fears. Since the late 1990s, financial institutions have earned billions annually in rent by selling these structured products to price-indifferent consumers and hedging their exposure over time.14 At first glance, institutional derivative customers would seem to offer fewer opportunities for rent seeking by banks. Shareholders require and reward managers to avoid the fog of confusion that makes consumers easy victims of rent seeking. The managers, in turn, expect the bankers that compete for their business to genuinely act in their best interest and not try to pull the wool over their eyes. “Our best relationship banks think intensively about our capital structure and hedging strategy,” is how the head of corporate finance at Lufthansa expresses it. This requires a certain kind of skill among derivatives salespeople.

The bells and whistles attached to this derivative made it much more costly to trade than a standardized product, enough to justify a bid-offer spread in the region of fifty basis points. On a single transaction that reached $250 million in size, that meant J.P. Morgan could book a profit of over $10 million. One might say that there was no value being created here for Poste Italiane, just rent seeking by J.P. Morgan. If this wasn’t sufficient evidence of his lack of competence, Catasta made things worse by adjusting his derivatives, exposing himself to more trading costs and even more rent seeking. According to sources at the company, Catasta would periodically dismantle older deals and replace them with new ones, until July 2003. This last tweak—possibly a result of an earlier bet’s losing money—alone cost Poste Italiane €50 million. This was bad news for Catasta, but Polverino quickly became a star within J.P.

 

pages: 577 words: 149,554

The Problem of Political Authority: An Examination of the Right to Coerce and the Duty to Obey by Michael Huemer

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The worry is that too many consumers would foolishly choose to buy services from unqualified doctors, lawyers, and so on. As these examples illustrate, legal paternalism is quite widespread in modern Western society. All of these are unjustified laws. 7.1.3 Rent seeking Rent seeking is behavior designed to extract wealth from others, especially through the vehicle of the state, without providing compensatory benefits in return.6 The most straightforward example is a company lobbying the government for subsidies. But many of the policies that exemplify legal paternalism are also motivated partly by rent seeking. Consider the following. – Prescription drug laws. These laws transfer money from consumers to doctors and pharmacists. If a person wishes to buy a prescription drug, he must first pay a doctor to see him and give him permission to buy it

Those who are not corrupted do little to restrain those who are. 6.8 Conclusion: anatomy of an illusion The common belief in authority is the product of nonrational biases. Belief in authority is socially harmful. 7 What if There Is No Authority? 7.1 Some policy implications 7.1.1 Prostitution and legal moralism If there is no authority, legal moralism, as in the case of laws against prostitution, is unjustified. 7.1.2 Drugs and paternalism Legal paternalism, as in the case of drug laws, is unjustified. 7.1.3 Rent-seeking Laws motivated by rent-seeking are obviously unjustified. 7.1.4 Immigration Immigration restrictions are unjustified. 7.1.5 The Protection of individual rights Laws that protect individual rights are justified. 7.1.6 Taxation and government finance Taxation is justified if and only if voluntary methods of government finance prove unworkable. 7.2 The case of aid to the poor 7.2.1 Welfare and drowning children It is sometimes permissible to force someone to help a third party in an emergency.

These motives are analogous to those displayed in policies of types (3)–(9) listed above.23 The specific examples I have given of policy types (3)–(9) are not important, so long as one agrees that there are (a nontrivial number of) policies of each of these types. It does not greatly matter, for instance, whether one agrees that licensing laws are motivated by rent seeking as long as one agrees that a significant number of laws are motivated by rent seeking. The point is that the state has many policies and laws whose motivations do not justify the coercion required to implement them. This is a problem because the state’s authority is generally held to be comprehensive and content-independent. On a very strict reading of the comprehensiveness and content-independence conditions, the existence of just a few laws that the state is not entitled to make would preclude the state’s having genuine authority.

 

pages: 828 words: 232,188

Political Order and Political Decay: From the Industrial Revolution to the Globalization of Democracy by Francis Fukuyama

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14 The answer that scholars such as Richard Joseph have given is that politics in Nigeria is what he labels “prebendal,” involving a fatal mixture of rent seeking, clientelism, and ethnicity. Because of oil, the state has ready access to a steady flow of resource rents, which the elites have shared among themselves. While all poor people—the 70 percent of the population below the poverty line—in theory have a common interest in ending corruption and redistributing those resources more fairly, they are divided into more than 250 ethnic and religious communities that do not want to work with one another. Their ties are instead vertical, to clientelistic networks controlled by the elites, who dole out just enough patronage and subsidies to mobilize support at the next election. The system is stable because members of the elite rent-seeking coalition realize that using violence to grab a larger share of the total pie will hurt everyone’s interests, including their own.

Any effort to override the price signals given by the market can be dangerous if politicians get their hands on the process: investment decisions will be made on political rather than economic grounds. The history of developing countries in Latin America, Africa, and the Middle East is littered with cases of industrial policy gone bad and collapsing in a flurry of corruption and rent seeking, like the Argentine effort to create a domestic car industry noted in chapter 18. For government intervention to work, the state must have what Peter Evans labels “embedded autonomy”: bureaucracies have to respond to social needs, but also must be free of pressures to satisfy rent-seeking political constituencies, allowing them to promote longer-term goals that serve a broad public interest. This kind of policy worked in Japan, South Korea, Taiwan, and China but failed elsewhere. The difference in outcomes lies in the quality of government.3 Where does this strong Asian state come from?

Public good may be invoked during election campaigns, but the state is not impersonal: favors are doled out to networks of political supporters in exchange for votes or attendance at rallies. This pattern of behavior is visible in countries from Nigeria to Mexico to Indonesia.2 Douglass North, John Wallis, and Barry Weingast have an alternative label for neopatrimonialism, what they call a “limited access order,” in which a coalition of rent-seeking elites use their political power to prevent free competition in both the economy and the political system.3 Daron Acemoglu and James Robinson use the term “extractive” to describe the same phenomenon.4 At one stage in human history, all governments could be described as patrimonial, limited access, or extractive. The question is, How did such political orders ever evolve into modern states?

 

pages: 151 words: 38,153

With Liberty and Dividends for All: How to Save Our Middle Class When Jobs Don't Pay Enough by Peter Barnes

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Another way to say this is that rent is the extra money people pay above what they’d pay in truly competitive markets. The contemporary concept of rent also includes income from privileges granted by government—import quotas, mining rights, subsidies, tax loopholes, and so on. Many economists use the term rent seeking to describe the multiple ways in which special interests manipulate government to enrich themselves at the expense of others. If you’re wondering why Washington, DC, and its environs have grown so prosperous in recent decades, it’s not because government itself has become gargantuan, it’s because rent seeking has. In short, rent is income received not because of anything a person or business produces but because of rights or power a person or business possesses. It consists of takings from the larger whole rather than additions to it. It redistributes wealth within an economy but doesn’t add any.

Further, it not only adds no value to the economy but “distorts resource allocation and makes the economy weaker.”14 And finally: “There’s no begrudging the wealth accrued by those who have transformed our economy—the inventors of the computer, the pioneers of biotechnology. But, for the most part, these are not the people at the top of our economic pyramid. Rather, to a too large extent, it’s people who have excelled at rent seeking in one form or another.” EIGHTY YEARS AGO, JOHN MAYNARD KEYNES looked forward to what he called “the euthanasia of the rentier.” That day would come when the supply of capital was so large, relative to the demand for it, that the return to capital “would have to cover little more than [its] exhaustion by wastage and obsolescence together with some margin to cover risk and the exercise of skill and judgment.”

At the same time, though less noticed, Congress also missed an opportunity to create a fund that pays dividends to all Americans. The revenue for this fund would have come from selling rights to dump carbon dioxide into our co-owned air. The story of these failures is both political and intellectual. In this chapter, I trace the transformation of a good idea—a market-based limit on carbon pollution—into a compromised and beaten one. This transformation was driven by the familiar Washington process of rent seeking, and its story yields a number of lessons. THE IDEA OF CAPPING FLOWS of harmful substances, and then letting markets allocate them, goes back to 1968, when a Canadian economist, the late John Dales, floated the idea in a book called Pollution, Property & Prices1 At the time, Dales wasn’t thinking about climate change; he was thinking about farmers who polluted streams with chemical runoffs.

 

pages: 381 words: 101,559

Currency Wars: The Making of the Next Gobal Crisis by James Rickards

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Asian financial crisis, bank run, Benoit Mandelbrot, Berlin Wall, Big bang: deregulation of the City of London, Black Swan, borderless world, Bretton Woods, BRICs, British Empire, business climate, capital controls, Carmen Reinhart, Cass Sunstein, collateralized debt obligation, complexity theory, corporate governance, Credit Default Swap, credit default swaps / collateralized debt obligations, currency manipulation / currency intervention, currency peg, Daniel Kahneman / Amos Tversky, Deng Xiaoping, diversification, diversified portfolio, Fall of the Berlin Wall, family office, financial innovation, floating exchange rates, full employment, game design, German hyperinflation, Gini coefficient, global rebalancing, global reserve currency, high net worth, income inequality, interest rate derivative, Kenneth Rogoff, labour mobility, laissez-faire capitalism, liquidity trap, Long Term Capital Management, mandelbrot fractal, margin call, market bubble, Mexican peso crisis / tequila crisis, money: store of value / unit of account / medium of exchange, Network effects, New Journalism, Nixon shock, offshore financial centre, oil shock, open economy, paradox of thrift, price mechanism, price stability, private sector deleveraging, quantitative easing, race to the bottom, RAND corporation, rent-seeking, reserve currency, Ronald Reagan, sovereign wealth fund, special drawing rights, special economic zone, The Myth of the Rational Market, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, Thomas Kuhn: the structure of scientific revolutions, time value of money, too big to fail, value at risk, War on Poverty, Washington Consensus

One of the best measures of the rent seeking relationship between elites and citizens in a stagnant economy is the Gini coefficient, a measure of income inequality; a higher coefficient means greater income inequality. In 2006, shortly before the recent recession began, the coefficient for the United States reached an all-time high of 47, which contrasts sharply with the all-time low of 38.6, recorded in 1968 after two decades of stable gold-backed money. The Gini coefficient trended lower in 2007 but was near the all-time high again by 2009 and trending higher. The Gini coefficient for the United States is now approaching that of Mexico, which is a classic oligarchic society characterized by gross income inequality and concentration of wealth in elite hands. Another measure of elite rent seeking is the ratio of amounts earned by the top 20 percent of Americans compared to amounts earned by those living below the poverty line.

Bureaucracies that started out as efficient organizers turn into inefficient obstacles to improvement more concerned with their own perpetuation than with service to society. Elites who manage the institutions of society slowly become more concerned with their own share of a shrinking pie than with the welfare of society as a whole. The elite echelons of society go from leading to leeching. Elites behave like parasites on the host body of society and engage in what economists call “rent seeking,” or the accumulation of wealth through nonproductive means—postmodern finance being one example. By 2011, evidence had accumulated to show that the United States was well down the return curve to the point where greater exertions by more people produced less for society while elites captured most of the growth in income and profits. Twenty-five hedge fund managers were reported to have made over $22 billion for themselves in 2010 while forty-four million Americans were on food stamps.

Capital and currency markets are powerful complex systems nested within the larger Tainter model of civilization. As society becomes more complex, it requires exponentially greater amounts of money for support. At some point productivity and taxation can no longer sustain society, and elites attempt to cheat the input process with credit, leverage, debasement and other forms of pseudomoney that facilitate rent seeking over production. These methods work for a brief period before the illusion of debt-fueled pseudogrowth is overtaken by the reality of lost wealth amid growing income inequality. At that point society has three choices: simplification, conquest or collapse. Simplification is a voluntary effort to descale society and return the input-output ratio to a more sustainable and productive level. An example of contemporary systemic simplification would be to devolve political power and economic resources from Washington, D.C., to the fifty states under a reinvigorated federal system.

 

pages: 538 words: 121,670

Republic, Lost: How Money Corrupts Congress--And a Plan to Stop It by Lawrence Lessig

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asset-backed security, banking crisis, carried interest, cognitive dissonance, corporate personhood, correlation does not imply causation, crony capitalism, David Brooks, Edward Glaeser, Filter Bubble, financial deregulation, financial innovation, financial intermediation, invisible hand, jimmy wales, Martin Wolf, meta analysis, meta-analysis, Mikhail Gorbachev, moral hazard, place-making, profit maximization, Ralph Nader, regulatory arbitrage, rent-seeking, Ronald Reagan, Silicon Valley, single-payer health, The Wealth of Nations by Adam Smith, too big to fail, upwardly mobile, WikiLeaks, Zipcar

And these interests could leverage their power to achieve this rapaciousness because—in part at least—of the “self-reinforcing cycle of mutual financial dependency” between members of Congress and the lobbyists, as the American Bar Association’s Lobbying Task Force put it.8 Reagan couldn’t see this in the early 1970s when his philosophy was finally set. The dynamic hadn’t quite taken hold. No doubt there was “rent seeking”—efforts by special interests to secure favors through the government that they couldn’t get through the free market. But then, the level of this rent seeking was nothing close to the level that is now the new normal. It’s not the game that has changed. It is the scale. Reagan can be forgiven for missing this scale. Likewise with the alleged rapaciousness of bureaucrats. It’s easy to see how Reagan’s fear was engendered. In the early 1970s, Nixon, a Republican, had established the Environmental Protection Agency (EPA), the Occupational Safety and Health Administration (OSHA), the Consumer Product Safety Commission (CPSC), and the Mining Enforcement and Safety Administration (MESA), and had expanded the Office of Management and Budget (OMB).

This was Teddy Roosevelt’s view: “Corporate expenditures for political purposes… have supplied one of the principal sources of corruption in our political affairs.”51 But however clever political antitrust might be, a more fundamental response would be to weaken the ability of wealth to leverage political power. Never completely. That would not be possible. But at least enough to weaken the return from rent seeking, perhaps enough to make ordinary innovation seem more profitable. Any reform that would seek to weaken the ability of wealth to rent-seek would itself be resisted by wealth. So long as private money drives public elections, public officials will work hard to protect that private money. And if you doubt this, look to Wall Street: never has an industry been filled with more rabid libertarians; but never has an industry more successfully engineered government handouts when the gambling of those libertarians went south.

Crawford, The Pressure Boys, 7. 13. Lynn, Cornered, 5–7, 258–59, n. 23. 14. The theory of regulatory capture raises questions about whether cartel-like industries will use their power to extract rents in the market or through government. And indeed, as Posner writes, the strongest examples of successful rent seeking come from relatively competitive industries. See Posner, “Theories of Economic Regulation,” 335, 343–45. The success of the “deregulation” movement may have now shifted the rent-seeking game toward the focus that now concerns Rajan and Zingales. 15. Rajan and Zingales, Saving Capitalism from the Capitalists, 296. 16. Eastern Railroad Presidents Conference v. Noerr Motor Freight, Inc., 365 U.S. 127 (1961); United Mine Workers v. Pennington, 381 U.S. 657 (1965). 17. Obama for America, “Barack Obama and Joe Biden’s Plan to Lower Health Care Costs and Ensure Affordable, Accessible Health Coverage for All” (2008), 5–6, available at link #143. 18.

 

pages: 566 words: 163,322

The Rise and Fall of Nations: Forces of Change in the Post-Crisis World by Ruchir Sharma

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3D printing, Asian financial crisis, backtesting, bank run, banking crisis, Berlin Wall, Bernie Sanders, BRICs, business climate, business process, call centre, capital controls, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, central bank independence, centre right, colonial rule, Commodity Super-Cycle, corporate governance, crony capitalism, currency peg, dark matter, debt deflation, deglobalization, deindustrialization, demographic dividend, demographic transition, Deng Xiaoping, Doha Development Round, Donald Trump, Edward Glaeser, Elon Musk, eurozone crisis, failed state, Fall of the Berlin Wall, falling living standards, Francis Fukuyama: the end of history, Freestyle chess, Gini coefficient, hiring and firing, income inequality, indoor plumbing, industrial robot, inflation targeting, Internet of things, Jeff Bezos, job automation, Joseph Schumpeter, Kenneth Rogoff, knowledge economy, labor-force participation, Malacca Straits, Mark Zuckerberg, market bubble, megacity, Mexican peso crisis / tequila crisis, mittelstand, moral hazard, New Economic Geography, North Sea oil, oil rush, oil shale / tar sands, oil shock, pattern recognition, Peter Thiel, pets.com, Plutocrats, plutocrats, Ponzi scheme, price stability, Productivity paradox, purchasing power parity, quantitative easing, Ralph Waldo Emerson, random walk, rent-seeking, reserve currency, Ronald Coase, Ronald Reagan, savings glut, secular stagnation, Shenzhen was a fishing village, Silicon Valley, Silicon Valley startup, Simon Kuznets, smart cities, Snapchat, South China Sea, sovereign wealth fund, special economic zone, spectrum auction, Steve Jobs, The Wisdom of Crowds, Thomas Malthus, total factor productivity, trade liberalization, trade route, tulip mania, Tyler Cowen: Great Stagnation, unorthodox policies, Washington Consensus, WikiLeaks, women in the workforce, working-age population

Rising Japanese billionaires like Hiroshi Mikitani, an e-commerce magnate known for adopting ideas from American corporate culture and criticizing his countrymen for their lack of English proficiency, get a lot of media attention precisely because they are so unusual. It’s not a good sign when dynamism is seen as offbeat. Quality: The Good versus Bad Billionaires Though new faces on the billionaire list can be a favorable sign for the economy, this holds true only if they are good billionaires, emerging outside what economists call “rent-seeking industries.” These industries include construction, real estate, gambling, mining, steel, aluminum and other metals, oil, gas, and other commodity industries that mainly involve digging natural resources out of the ground. The competition in these sectors is often focused on securing access to a greater share of the national wealth in natural resources, not on growing the wealth in fresh, innovative ways.

Since 2010 Dilip Shanghvi, who is the founder of Sun Pharmaceuticals and perhaps the most unassuming and least flashy billionaire I have ever met, has shot from number thirteen on India’s list to number two. These trends may have taken the edge off the anticorporate, antigrowth sentiment that had been building in Delhi over the prior decade. An Indian brokerage firm called Ambit started tracking the fate of crony capitalists through its “connected companies index,” which monitors seventy-five firms that operate in rent-seeking industries and are believed to have benefited significantly from close ties to government officials. The stock prices for these companies have collapsed with the growing backlash against political influence peddling and the public’s intense focus on corrupt deals. Between mid-2010 and mid-2015, India’s stock market rose 50 percent, while the connected companies’ index lost half its value, a sign that crony capitalism was in decline, along with the luster of making money on rising commodity prices.

The return of the good billionaires is hardly universal, however. Few new or good billionaires are to be found in nations where an aging regime has turned away from reform and cultivated a class of politically connected tycoons. Two of these regimes are in Putin’s Russia and Erdoan’s Turkey. The billionaire class in Turkey controls a rising share of the economy, and the share of wealth that comes from rent-seeking industries has spiked. Nine out of every ten Turkish billionaires live in Istanbul, long the commercial center of the country. Even billionaires who hail from the heartland of Anatolia tend to relocate to Istanbul, to be closer to the action. But no city rivals the concentration of wealth and power in Moscow. In Russia, 85 of the country’s 104 billionaires live in Moscow, which remains unrivaled as the world capital of bad billionaires.

 

pages: 543 words: 147,357

Them And Us: Politics, Greed And Inequality - Why We Need A Fair Society by Will Hutton

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Andrei Shleifer, asset-backed security, bank run, banking crisis, Benoit Mandelbrot, Berlin Wall, Bernie Madoff, Big bang: deregulation of the City of London, Bretton Woods, capital controls, carbon footprint, Carmen Reinhart, Cass Sunstein, centre right, choice architecture, cloud computing, collective bargaining, conceptual framework, Corn Laws, corporate governance, credit crunch, Credit Default Swap, debt deflation, decarbonisation, Deng Xiaoping, discovery of DNA, discovery of the americas, discrete time, diversification, double helix, Edward Glaeser, financial deregulation, financial innovation, financial intermediation, first-past-the-post, floating exchange rates, Francis Fukuyama: the end of history, Frank Levy and Richard Murnane: The New Division of Labor, full employment, George Akerlof, Gini coefficient, global supply chain, Growth in a Time of Debt, Hyman Minsky, I think there is a world market for maybe five computers, income inequality, inflation targeting, interest rate swap, invisible hand, Isaac Newton, James Dyson, James Watt: steam engine, joint-stock company, Joseph Schumpeter, Kenneth Rogoff, knowledge economy, knowledge worker, labour market flexibility, Long Term Capital Management, Louis Pasteur, low-wage service sector, mandelbrot fractal, margin call, market fundamentalism, Martin Wolf, means of production, Mikhail Gorbachev, millennium bug, moral hazard, mortgage debt, new economy, Northern Rock, offshore financial centre, open economy, Plutocrats, plutocrats, price discrimination, private sector deleveraging, purchasing power parity, quantitative easing, race to the bottom, railway mania, random walk, rent-seeking, reserve currency, Richard Thaler, rising living standards, Robert Shiller, Robert Shiller, Ronald Reagan, Rory Sutherland, shareholder value, short selling, Silicon Valley, Skype, South Sea Bubble, Steve Jobs, The Market for Lemons, the market place, The Myth of the Rational Market, the payments system, the scientific method, The Wealth of Nations by Adam Smith, too big to fail, unpaid internship, value at risk, Washington Consensus, working poor, éminence grise

There is a distinction to be made between genuine entrepreneurship, invention and innovative leadership that create wealth, and being clever at capturing wealth that others have made and redistributing it to oneself – what economists call ‘rent’ or a return for inert property possession. Three leading theorists from Harvard and MIT – Kevin Murphy, Robert Vishny and Andrei Shleifer – argue in an important paper that countries in which talent pursues such rent-seeking activity rather than genuine entrepreneurship grow at a slower rate: ‘Pure entrepreneurial activities raise current income because resources are used more efficiently, contribute to growth because technology is improved, and take profits away from competitors.’19 Rent-seeking does the opposite. Moreover, as Schumpeter pointed out, the innovating entrepreneur who had to overcome the resistance of the conservative to change probably expended more energy and effort. No less an insightful commentator than Machiavelli agrees: ‘there is nothing more difficult to execute, nor more dubious of success, nor more dangerous to administer than to introduce a new system of things, for he who introduces it has all those who profit from the old system as his enemies and he has only lukewarm allies in all those who profit from the new system’.

Murphy, Shleifer and Vishny concede that ‘Trading probably raises efficiency since it brings security prices closer to their fundamental values. It might even indirectly contribute to growth if more efficient financial markets reduce the cost of capital. But the main gains from trading come from the transfer of wealth to the smart traders from the less astute who trade with them out of institutional needs or outright stupidity.’ Finance – along with the law and piracy – has always been a route to great wealth, a classic rent-seeking occupation. Today, it is even more so. In their defence, bankers and financiers usually point to ‘financial innovation’ as an attribute that society should desire and value, but their arguments are hamstrung by their own astonishing inability to distinguish between innovation that is economically and socially useful and that which is not. For example, James Kwak argues it was this blindness that lay behind the crisis in so-called ‘sub-prime’ mortgages – financing offered to ‘sub-prime’ borrowers.

The cases for inheritance tax – a tax on good luck – and social insurance – a means to counter bad luck – are both deeply rooted in human motivation. Moreover, fairness suggests that the operation of markets should be limited when they create economic ‘bads’. Fairness undermines the spurious justification for the explosion in executive pay and demands activism to ensure that entrepreneurship maximises genuine wealth-creation rather than rent-seeking. Obstacles to social mobility and self-improvement by the disadvantaged are similarly unfair. However, fairness poses a challenge to the political left in respect to need. The left has largely adopted a Rawlsian position on poverty: put simply, it believes that inequality is not driven by personal capacities, choices and values. Rather, it is the structure of the market economy, which creates class and status, that determines the distribution of both income and the majority of life chances.

 

pages: 1,205 words: 308,891

Bourgeois Dignity: Why Economics Can't Explain the Modern World by Deirdre N. McCloskey

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Admiral Zheng, agricultural Revolution, Albert Einstein, BRICs, British Empire, butterfly effect, Carmen Reinhart, clockwork universe, computer age, Corn Laws, dark matter, David Ricardo: comparative advantage, Donald Trump, Edward Lorenz: Chaos theory, European colonialism, experimental economics, financial innovation, Fractional reserve banking, full employment, George Akerlof, germ theory of disease, Gini coefficient, greed is good, Howard Zinn, income per capita, interchangeable parts, invention of agriculture, invention of air conditioning, invention of writing, invisible hand, Isaac Newton, James Watt: steam engine, John Maynard Keynes: technological unemployment, John Snow's cholera map, joint-stock company, Joseph Schumpeter, Kenneth Rogoff, knowledge economy, means of production, Naomi Klein, New Economic Geography, New Urbanism, purchasing power parity, rent-seeking, road to serfdom, Robert Gordon, Ronald Coase, Ronald Reagan, Scientific racism, Scramble for Africa, Shenzhen was a fishing village, Simon Kuznets, Slavoj Žižek, spinning jenny, Steven Pinker, The Wealth of Nations by Adam Smith, Thorstein Veblen, too big to fail, total factor productivity, transaction costs, tulip mania, union organizing, Upton Sinclair, urban renewal, V2 rocket, very high income, working poor, World Values Survey, Yogi Berra

Every few kilometers, at every country village, the railroad would end at a Gare du Nord to be resumed after job-creating expenditure by travelers and freight handlers at a Gare du Sud. All the national income of France and Spain would come to be “generated” by the railroad, at the cost of all other forms of production. It would be a negative railroad, a triumph of protectionism and industrial planning achieved through what economists call “rent seeking.” But if the opportunity is an actual improvement in how things are provided — rather than one of the rent-seeking opportunities for legalized theft in which the old aristocracy and priesthood had so long specialized, and in which the new democratic politicians also came to be skilled — then the society is made better off. Move the marketplace to a 21 more convenient location. Buy Greek olive oil at a low price to sell high. Invent the container ship.

Mokyr writes that “The Enlightenment affected the economy through two mechanism. One of them is the attitude toward technology and the role it should play in human affairs. The other has to do with institutions and the degree to which rent-seeking and redistribution should be tolerated.” But such an answer to the question Was ist Aufklärung?” comes very close to my alleged “dignity and liberty of the bourgeoisie.” An instrumental (and bourgeois) attitude towards technology gives ordinary affairs a dignity they did not formerly have. And resistance to the rent-seeking and redistribution that characterize an ageless mercantilism and, later, national economy is precisely the liberty from interference that the bourgeoisie sought — once it had been compelled to surrender its medieval attitude towards preserving the home market for itself.

The move from bad to good Sir Botany is what North has in mind as the alleged cause of the Industrial Revolution. But the trouble is that it had already happened — that shift to Good Sir Botany. Likewise the wild Norsemen of Bergen became Hansa 281 merchants, or at any rate welcomed German and Frisian merchants into the wooden warehouses of the Hansa, many hundreds of years before the final end of blipping on the head and violent rent-seeking in North’s unhistorical account is supposed to have happened in, of all places, England. As late as the seventeenth century in England, North is claiming, Max U saw his best chance in violence or influence, not in voluntary exchange. The claim is factually mistaken. Violence had been blocked by law and politics in England for centuries. Even the barons had at length been denied their independent armies, by the early Tudor kings.

 

pages: 464 words: 116,945

Seventeen Contradictions and the End of Capitalism by David Harvey

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accounting loophole / creative accounting, bitcoin, Branko Milanovic, Bretton Woods, BRICs, British Empire, business climate, California gold rush, call centre, central bank independence, clean water, cloud computing, collapse of Lehman Brothers, colonial rule, Credit Default Swap, David Ricardo: comparative advantage, deindustrialization, demographic dividend, Deng Xiaoping, deskilling, falling living standards, fiat currency, first square of the chessboard, first square of the chessboard / second half of the chessboard, Food sovereignty, Frank Gehry, future of work, global reserve currency, Guggenheim Bilbao, income inequality, informal economy, invention of the steam engine, invisible hand, Isaac Newton, Jane Jacobs, Jarndyce and Jarndyce, John Maynard Keynes: Economic Possibilities for our Grandchildren, Joseph Schumpeter, Just-in-time delivery, knowledge worker, low skilled workers, Mahatma Gandhi, market clearing, Martin Wolf, means of production, microcredit, new economy, New Urbanism, Occupy movement, peak oil, phenotype, Plutocrats, plutocrats, Ponzi scheme, quantitative easing, rent-seeking, reserve currency, road to serfdom, Robert Gordon, Ronald Reagan, short selling, Silicon Valley, special economic zone, The Wealth of Nations by Adam Smith, Thomas Malthus, Thorstein Veblen, transaction costs, Tyler Cowen: Great Stagnation, wages for housework, Wall-E, women in the workforce, working poor, working-age population

The bankers in pursuit of their individual interests plainly did not contribute to the general welfare and in the USA the Federal Reserve bailed out the banks but not the people. This has now led to an admission that monopoly power is more than an aberration but a systemic problem that arises out of what economists refer to as ‘rent seeking’. ‘To put it baldly,’ says the economist Joseph Stiglitz, ‘there are two ways to become wealthy: to create wealth or to take wealth away from others. The former adds to society. The latter typically subtracts from it, for in the process of taking it away, wealth gets destroyed.’1 Rent seeking is nothing more than a polite and rather neutral-sounding way of referring to what I call ‘accumulation by dispossession’. The virtue of Stiglitz’s somewhat truncated account of rent seeking or accumulation by dispossession is that it recognises the seamless way in which monopoly power in economic transactions is paralleled by monopoly power in the political process.

Regressive taxes and write-offs; regulatory capture (in which the foxes are put in charge of the henhouse); acquiring or leasing state or private assets at discount prices; inflated cost-plus contracts with state agencies; writing legislation to protect or subsidise particular interests (energy and agribusiness); buying political influence through campaign contributions – these are all political practices that give a free hand to big moneyed and monopolistic interests while permitting them to plunder the public treasury at the expense of the taxpayer. These political practices supplement conventional rent seeking in land and property markets; rents on resources and on patents, licences and intellectual property rights; plus excess returns due to monopoly pricing. Then there are all the quasi-legal ways of gaining excess profits. The creation of financial markets that lack any transparency or in which adequate information is lacking creates a fog of misunderstanding in which sharp practices are impossible to curb.

When we add in the proliferation of abusive practices such as predatory lending in housing markets that transferred billions in asset values from the public to the financiers, abusive credit card practices, hidden charges (on phone and medical bills), as well as practices that skirt if not infringe the law, we end up with a vast array of practices where big corporations and big moneyed interests add to their wealth hand over fist even as the economy as a whole collapses and then stagnates. As Stiglitz remarks, ‘Some of the most important innovations in business in the last three decades have centered not on making the economy more efficient but on how better to ensure monopoly power or how better to circumvent government regulations intended to align social returns and private rewards.’2 What is missing from Stiglitz’s account of rent seeking as a strategy (though not from his account of the social outcomes) is the demolition of a wide range of democratic rights, including economic rights to pensions and health care, and free access to vital services such as education, police and fire protection, and state-funded programmes (like nutritional supplements and food stamps in the case of the USA) that have hitherto helped to support low-income populations at an adequate standard of living.

 

pages: 339 words: 109,331

The Clash of the Cultures by John C. Bogle

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asset allocation, collateralized debt obligation, corporate governance, corporate social responsibility, Credit Default Swap, credit default swaps / collateralized debt obligations, diversification, diversified portfolio, estate planning, Eugene Fama: efficient market hypothesis, financial innovation, financial intermediation, fixed income, Flash crash, Hyman Minsky, income inequality, index fund, interest rate swap, invention of the wheel, market bubble, market clearing, mortgage debt, new economy, Occupy movement, passive investing, Ponzi scheme, principal–agent problem, profit motive, random walk, rent-seeking, risk tolerance, risk-adjusted returns, Robert Shiller, Robert Shiller, shareholder value, short selling, South Sea Bubble, statistical arbitrage, The Wealth of Nations by Adam Smith, transaction costs, Vanguard fund, William of Occam

Resisting this new dominance of speculation over investment might seem to fly in the face of our ever more scientific and technological world. After all, innovation, information, instant communications, and competition have brought great benefits to our society. But I see our financial system as somehow separate and distinct from the other business and commercial systems that permeate our world. “Value-Creating” and “Rent-Seeking” There is a difference—a difference in kind—between what economists describe as “value-creating” activities that add value to society and “rent-seeking” activities that subtract value from society on balance. One provides new and improved products and services, delivered through ever more efficient channels and at prices that are more competitive, and the other simply shifts economic claims from one set of participants to another. Think of the law: one side wins, the other loses, but the lawyers and the legal system profit, and diminish the amount of money that changes hands between the actual litigants.

Creating Value versus Subtracting Value In yet another distortion aided and abetted by our financial system, too many of the best and brightest young people in our land, instead of becoming scientists, physicians, educators, or public servants, are attracted by the staggering financial incentives offered in the investment industry. These massive rewards serve to divert vital human resources from other, often more productive and socially useful, pursuits. Even in the field of engineering, “financial” engineering, which is essentially rent-seeking in nature, holds sway over “real” engineering—civil, electrical, mechanical, aeronautical, and so on—which is essentially value-creating. The long-term consequences of these trends simply cannot be favorable to our nation’s wealth, growth, productivity, and global competitiveness. Finally, the dominance of speculation in our financial affairs shifts our society’s focus from the enduring reality of corporate value creation, on which our nation ultimately depends, to the momentary illusion of stock prices.

Develop Limits on Leverage, Transparency for Derivatives, and Stricter Punishments for Financial Crimes We need stronger, smarter, and wiser regulation that is principles-based where possible, and rules-based in all other cases. No, I do not believe that our government should run our financial sector. But I would be willing to accept the cost of its inevitable bureaucratic drag on the system since, after all, most government activity itself is also rent-seeking rather than value-adding. Regulation is needed in order to: Establish and enforce sterner limits, as appropriate, on leverage and portfolio quality. Bring the opacity of today’s derivatives trading into the bright sunlight of transparency and openness, with public reporting of all transactions. Develop much stronger rules that would preclude—or at least minimize—obvious malfeasance such as insider trading, conflicts of interest, and the remarkably widespread Ponzi schemes that we’ve recently witnessed.

 

pages: 261 words: 86,905

How to Speak Money: What the Money People Say--And What It Really Means by John Lanchester

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asset allocation, Basel III, Bernie Madoff, Big bang: deregulation of the City of London, bitcoin, Black Swan, blood diamonds, Bretton Woods, BRICs, Capital in the Twenty-First Century by Thomas Piketty, Celtic Tiger, central bank independence, collapse of Lehman Brothers, collective bargaining, credit crunch, Credit Default Swap, crony capitalism, Dava Sobel, David Graeber, disintermediation, double entry bookkeeping, en.wikipedia.org, estate planning, financial innovation, Flash crash, forward guidance, Gini coefficient, global reserve currency, high net worth, High speed trading, hindsight bias, income inequality, inflation targeting, interest rate swap, Isaac Newton, Jaron Lanier, joint-stock company, joint-stock limited liability company, Kodak vs Instagram, liquidity trap, London Interbank Offered Rate, London Whale, loss aversion, margin call, McJob, means of production, microcredit, money: store of value / unit of account / medium of exchange, moral hazard, neoliberal agenda, New Urbanism, Nick Leeson, Nikolai Kondratiev, Nixon shock, Northern Rock, offshore financial centre, oil shock, open economy, paradox of thrift, Plutocrats, plutocrats, Ponzi scheme, purchasing power parity, pushing on a string, quantitative easing, random walk, rent-seeking, reserve currency, Richard Feynman, Richard Feynman, road to serfdom, Ronald Reagan, Satoshi Nakamoto, security theater, shareholder value, Silicon Valley, six sigma, South Sea Bubble, sovereign wealth fund, Steve Jobs, The Chicago School, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, trickle-down economics, Washington Consensus, working poor, yield curve

This is true for big companies engaged in takeovers and mergers and share offerings and other large-scale financial engineering, which have to deal with the big investment banks; it’s also true for the rest of us, who have nowhere else to go except the banks when it comes to taking our deposits, lending us money for mortgages, and so on. In the opinion of some observers, one of the reasons why the current growing gap between the rich and the poor is especially dangerous is that it is being accompanied by a growth in “rent seeking” behavior. A typical feature of such behavior is the attempt to take a bigger piece of the existing pie, rather than to make the pie bigger. A useful definition of rent seeking was given by Matthew Taylor of the RSA: “using market position to make money without adding value.” When the rich lobby for tax breaks at a time of no economic growth, they are indulging in rent seeking. All corruption is a form of rent seeking. repo A repurchase agreement, in which A sells B something, while simultaneously promising to buy it back at a specified future date. It’s a bit like selling something to a pawnshop.

 

pages: 462 words: 150,129

The Rational Optimist: How Prosperity Evolves by Matt Ridley

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23andMe, agricultural Revolution, air freight, back-to-the-land, banking crisis, barriers to entry, Bernie Madoff, British Empire, call centre, carbon footprint, charter city, clean water, cloud computing, cognitive dissonance, collateralized debt obligation, colonial exploitation, colonial rule, Corn Laws, credit crunch, David Ricardo: comparative advantage, decarbonisation, dematerialisation, demographic dividend, demographic transition, double entry bookkeeping, Edward Glaeser, en.wikipedia.org, everywhere but in the productivity statistics, falling living standards, feminist movement, financial innovation, Flynn Effect, food miles, Gordon Gekko, greed is good, Hans Rosling, happiness index / gross national happiness, haute cuisine, Hernando de Soto, income inequality, income per capita, Indoor air pollution, informal economy, invention of agriculture, invisible hand, James Hargreaves, James Watt: steam engine, Jane Jacobs, John Nash: game theory, joint-stock limited liability company, Joseph Schumpeter, Kevin Kelly, knowledge worker, Kula ring, Mark Zuckerberg, meta analysis, meta-analysis, mutually assured destruction, Naomi Klein, Northern Rock, nuclear winter, oil shale / tar sands, out of africa, packet switching, patent troll, Pax Mongolica, Peter Thiel, phenotype, Plutocrats, plutocrats, Ponzi scheme, Productivity paradox, profit motive, purchasing power parity, race to the bottom, Ray Kurzweil, rent-seeking, rising living standards, Silicon Valley, spice trade, spinning jenny, stem cell, Steve Jobs, Steven Pinker, Stewart Brand, supervolcano, technological singularity, The Wealth of Nations by Adam Smith, Thorstein Veblen, trade route, transaction costs, ultimatum game, upwardly mobile, urban sprawl, Vernor Vinge, wage slave, working poor, working-age population, Y2K, Yogi Berra

Had I only known it, experiments in laboratories by the economist Vernon Smith and his colleagues have long confirmed that markets in goods and services for immediate consumption – haircuts and hamburgers – work so well that it is hard to design them so they fail to deliver efficiency and innovation; while markets in assets are so automatically prone to bubbles and crashes that it is hard to design them so they work at all. Speculation, herd exuberance, irrational optimism, rent-seeking and the temptation of fraud drive asset markets to overshoot and plunge – which is why they need careful regulation, something I always supported. (Markets in goods and services need less regulation.) But what made the bubble of the 2000s so much worse than most was government housing and monetary policy, especially in the United States, which sluiced artificially cheap money towards bad risks as a matter of policy and thus also towards the middlemen of the capital markets.

Most past bursts of human prosperity have come to naught because they allocated too little money to innovation and too much to asset price inflation or to war, corruption, luxury and theft. In the Spain of Charles V and Philip II, the gigantic wealth of the Peruvian silver mines was wasted. The same ‘curse of resources’ has afflicted countries with windfalls ever since, especially those with oil (Russia, Venezuela, Iraq, Nigeria) that end up run by rent-seeking autocrats. Despite their windfalls, such countries experience lower economic growth than countries that entirely lack resources but get busy trading and selling – Holland, Japan, Hong Kong, Singapore, Taiwan, South Korea. Even the Dutch, those epitomes of seventeenth-century enterprise, fell under the curse of resources in the late twentieth century when they found too much natural gas: the Dutch disease, they called it, as their inflated currency hurt their exporters.

Like all the best entrepreneurs, they thrived despite, rather than because of their government. And it was they who began to trade with the ports of Italy. Italian peasants started to discover that instead of dividing their land among impoverished heirs they could send sons to town to trade with Maghribi Jews. Northern Italy, because of a stand-off between the Holy Roman emperor and the pope, was temporarily favoured by an absence of greedy rent-seeking kings. When Arab piracy and papal plunder paused under the influence of the first Otto, the towns of Lombardy and Tuscany found themselves free to set up their own governments, and since towns were there because of trade, these governments became dominated by the interests of merchants. Amalfi, Pisa, and above all Genoa began to flourish on the back of the Maghribi trade. It was a Pisan trader living in north Africa, Fibonacci, who brought Indian–Arabic decimals, fractions and the calculation of interest to Europe’s notice in his book Liber Abaci, published in 1202.

 

Falling Behind: Explaining the Development Gap Between Latin America and the United States by Francis Fukuyama

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Andrei Shleifer, Atahualpa, barriers to entry, Berlin Wall, British Empire, business climate, Cass Sunstein, central bank independence, collective bargaining, colonial rule, conceptual framework, crony capitalism, European colonialism, Fall of the Berlin Wall, first-past-the-post, Francis Fukuyama: the end of history, Francisco Pizarro, Hernando de Soto, income inequality, income per capita, labour market flexibility, land reform, land tenure, Monroe Doctrine, moral hazard, New Urbanism, oil shock, open economy, purchasing power parity, rent-seeking, Ronald Reagan, The Wealth of Nations by Adam Smith, total factor productivity, trade liberalization, transaction costs, upwardly mobile, Washington Consensus

The rise of industrial Asia suggests that the key to uninterrupted growth was, as Campos and Root argue, the states’ success in convincing their constituents that a sacrifice in the present would yield gains in the future; in their own words: “Making the promise of shared growth credible allowed East Asian leaders to alter the risk-reward calculations that motivate economic behavior, so that the compensation for taking smaller benefits in the present was greater gains over time.”43 To establish this partnership between civil society and the regime required trust. It also needed sustained public sector policies to reduce asset inequality through carefully planned investments in health, education, and public housing. As Campos and Root note, “Wealth sharing insured broad social support, thereby reducing the threat that the regime would fall to destructive rent seeking or insurgency. It encouraged the belief that the government was acting on behalf of citizens’ interests.”44 All too often, it is the “destructive rent seeking” among Latin America’s economic and political elites that preclude confidencebuilding strategies and set citizens against political authority. Creating a consensus about growth and development requires mutual trust and shared goals. These are in short supply in most of the countries of Latin America and the Caribbean.

From this perspective, and as we explained in the previous section, even though there has been dramatic institutional change in Latin America since 1982, characterized by transitions from authoritarian to democratic rule and from relatively closed, state-led economies to open, market-driven economies, weak states whose jurisdiction and enforcement capacities have remained weak and open to traditional capacity-draining activities, such as rent seeking and moral hazard, have helped to reproduce the conditions that allow the survival and growth of high-stakes politics. To this element, we have to add others, namely, the persistence of dramatic socioeconomic inequality and widespread poverty, which have nurtured the zero-sum conditions that allow high-stakes politics to thrive and dominate in Latin America at the beginning of the twenty-first century.

Uncompetitive protected industries were made even more uncompetitive by overvalued exchange rates; this, combined with unconstrained fiscal spending, led to currency crises, devaluation, rising real interest rates, and a reversal of economic growth in a seemingly endless cycle. The package of liberal economic policies recommended by the International Monetary Fund and other multilateral lenders sought to break several links in this cycle by encouraging competition and openness, improving fiscal discipline, reducing opportunities for rent seeking, and eliminating the discretionary use of monetary policy to resolve fiscal problems via inflation. 272 Conclusion This medicine by and large worked: the runaway inflation that characterized Bolivia, Peru, Argentina, Brazil, and other countries during the 1980s was tamed by the 1990s.6 Elimination of the regressive tax represented by inflation then encouraged the return of flight capital and, indeed, increasing levels of foreign investment.

 

pages: 222 words: 75,561

The Bottom Billion: Why the Poorest Countries Are Failing and What Can Be Done About It by Paul Collier

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air freight, Asian financial crisis, British Empire, Doha Development Round, failed state, falling living standards, income inequality, out of africa, rent-seeking, Ronald Reagan, structural adjustment programs, trade liberalization

Reformers do not have it easy. When Charles Soludo became governor of the Central Bank of Nigeria, his priority was to reform the banking sector, a notorious epicenter of rent seeking. Unsurprisingly, this was not popular with the rent seekers among the banks. They organized a fighting fund of around $2 million to campaign against him. Among other tactics, this enabled them to buy allies in the media. Charles did not have $2 million to oppose them; he just had guts and intelligence and the right arguments. As I write, he seems to have won, closing and merging sixty-four banks. Reform is tough, but it can triumph. The day after President Mwai Kibaki replaced the rent-seeking Daniel arap Moi in Kenya in 2002, ordinary Kenyan citizens frog-marched police officers who demanded the usual bribes to their own police stations to be arrested.

There is now a huge amount of money being directed by the Nigerian federal government to the delta region, and the oil companies are desperately spreading protection money—paying ransoms to free kidnapped workers is pretty well a daily occurrence. Within the region local politicians are fighting it out for control of all this money, and violent protest has become an orchestrated part of this political rent seeking. Grievance has evolved, over the course of a decade, into greed. Let us get back to the costs of conflict. Many of the costs are borne by neighboring countries. Diseases don’t respect frontiers, and the economic collapse also spreads. Since most countries are bordered by several others, the overall cost to neighbors can easily exceed the cost to the country itself. And the costs are not limited to the immediate geographic region.

 

pages: 700 words: 201,953

The Social Life of Money by Nigel Dodd

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accounting loophole / creative accounting, bank run, banking crisis, banks create money, Bernie Madoff, bitcoin, blockchain, borderless world, Bretton Woods, BRICs, capital controls, cashless society, central bank independence, collapse of Lehman Brothers, collateralized debt obligation, computer age, conceptual framework, credit crunch, cross-subsidies, David Graeber, debt deflation, dematerialisation, disintermediation, eurozone crisis, fiat currency, financial innovation, Financial Instability Hypothesis, financial repression, floating exchange rates, Fractional reserve banking, German hyperinflation, Goldman Sachs: Vampire Squid, Hyman Minsky, illegal immigration, informal economy, interest rate swap, Isaac Newton, John Maynard Keynes: Economic Possibilities for our Grandchildren, joint-stock company, Joseph Schumpeter, Kula ring, laissez-faire capitalism, land reform, late capitalism, liquidity trap, litecoin, London Interbank Offered Rate, M-Pesa, Marshall McLuhan, means of production, mental accounting, microcredit, mobile money, money: store of value / unit of account / medium of exchange, mortgage debt, new economy, Nixon shock, Occupy movement, offshore financial centre, paradox of thrift, payday loans, Peace of Westphalia, peer-to-peer lending, Ponzi scheme, post scarcity, postnationalism / post nation state, predatory finance, price mechanism, price stability, quantitative easing, quantitative trading / quantitative finance, remote working, rent-seeking, reserve currency, Richard Thaler, Robert Shiller, Robert Shiller, Satoshi Nakamoto, Scientific racism, seigniorage, Skype, Slavoj Žižek, South Sea Bubble, sovereign wealth fund, special drawing rights, The Wealth of Nations by Adam Smith, too big to fail, trade liberalization, transaction costs, Wave and Pay, WikiLeaks, Wolfgang Streeck, yield curve, zero-coupon bond

Meanwhile, the Fed faces an interest rate quandary: if it keeps rates low, the financial sector will be forced to gamble to achieve the growth in asset values it needs; if rates rise, real estate values will fall and the banks and pension funds will be forced even further into negative equity. If Hudson is right, we ought to be witnessing the end of two myths. The first is about free markets. We cannot continue to believe that they are free when they support rent seeking rather than real GDP, reward banks for pushing junk mortgages, and use credit rating agencies to make predatory finance look like sound wealth creation. Free markets need to be protected from fraud and rent seeking. The second myth is that central banks cause inflation by monetizing public spending. They do not cause inflation if the spending in question goes toward new production and employment. Instead, such spending is being diverted to support inflated asset prices and continued financial speculation.

Second, Marx’s remarks on the significance of primitive accumulation for gold suggest that the hard cash that underwrites money in his theory is endowed with is own sociopolitical history: even “real” money is not a mere thing. Moreover, the state played a crucial role in that history—just as it continues doing so today.27 Third, Marx’s analysis of the role of the “modern bankocracy” opens up an analytical space in which finance can be understood in relation to a particular kind of accumulation, more akin to mercantilism and rent seeking than more conventional forms of capitalist production.28 Financial derivatives did not exist in Marx’s day. Nor did hedge funds or sovereign wealth funds. Nonetheless, his analysis of primitive accumulation provides a powerfully suggestive means of framing these forms of financial capitalism (McNally 2009; Ekman 2012). Although Marx’s arguments soon became outdated empirically, in theoretical terms his analysis of money and finance, and especially the distinction between them, are as resonant today as they ever were.

Of greatest interest to us here is Harvey’s attempt to produce a full-fledged Marxist theory of money and credit that can be applied to the present day, taking account of developing connections between finance and the state, the near-disappearance of gold from the world’s monetary system, and the recent huge expansion of financial services as a major force in the dynamics of contemporary capitalism. In light of our discussion so far, Harvey’s approach is particularly interesting because he draws out the theme of primitive accumulation in Marx and applies it to key aspects of financial capitalism, such as rent seeking and debt. Harvey’s analysis is underpinned by the crucial assumption that capitalism needs to sustain an average compound growth rate of around 3 percent in order for most capitalists to make a reasonable profit (Harvey 2010b: 27). Anything less is problematic, and zero or negative growth defines a depression. The problem for capital is to find a way to achieve such growth in perpetuity. This achievement is becoming increasingly difficult.

 

pages: 484 words: 136,735

Capitalism 4.0: The Birth of a New Economy in the Aftermath of Crisis by Anatole Kaletsky

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bank run, banking crisis, Benoit Mandelbrot, Berlin Wall, Black Swan, bonus culture, Bretton Woods, BRICs, Carmen Reinhart, cognitive dissonance, collapse of Lehman Brothers, Corn Laws, correlation does not imply causation, credit crunch, currency manipulation / currency intervention, David Ricardo: comparative advantage, deglobalization, Deng Xiaoping, Edward Glaeser, Eugene Fama: efficient market hypothesis, eurozone crisis, experimental economics, F. W. de Klerk, failed state, Fall of the Berlin Wall, financial deregulation, financial innovation, Financial Instability Hypothesis, floating exchange rates, full employment, George Akerlof, global rebalancing, Hyman Minsky, income inequality, invisible hand, Isaac Newton, Joseph Schumpeter, Kenneth Rogoff, laissez-faire capitalism, Long Term Capital Management, mandelbrot fractal, market design, market fundamentalism, Martin Wolf, moral hazard, mortgage debt, new economy, Northern Rock, offshore financial centre, oil shock, paradox of thrift, peak oil, pets.com, Ponzi scheme, post-industrial society, price stability, profit maximization, profit motive, quantitative easing, Ralph Waldo Emerson, random walk, rent-seeking, reserve currency, rising living standards, Robert Shiller, Robert Shiller, Ronald Reagan, shareholder value, short selling, South Sea Bubble, sovereign wealth fund, special drawing rights, statistical model, The Chicago School, The Great Moderation, The Wealth of Nations by Adam Smith, Thomas Kuhn: the structure of scientific revolutions, too big to fail, Washington Consensus

Rather than abandoning hope in regulation and simply giving free rein to markets, Capitalism 4.0 will seek more intelligent policies that take account of known dysfunctions of government such as regulatory capture, rent-seeking,6 the political influence of special interests, and single-issue lobbies. It would be overoptimistic to imagine that such effort will be entirely successful. No one is likely to discover perfect answers to some of the deepest questions of social organization that have troubled political theorists since Plato and Aristotle,7 but an important part of any new approach will be to increase the flexibility of public policy and try to weaken the hold of the special interests that regulations create, some of which are found in the government itself. One small way to soften the rigidities of regulation and limit the unproductive rent-seeking that tends to be created by government is to use sunset clauses on government rules of all kinds.8 Suppose, for example, that bank solvency regulations, employment laws, and even health and safety rules lapsed automatically and had to be redrawn every ten years.

The reversal or modification of many of the Bush administration’s unilateral foreign, social, and environmental policies will send the signal that Americans no longer live in a different mental universe from the rest of the world. Third, for Europe, an intellectual convergence with America will require policymakers and electorates to acknowledge some of the dysfunctional features of the European socio-economic system that have allowed special interests, such as agricultural lobbies and trade unions, to disguise what is essentially exploitative rent-seeking economic behavior, as culturally unique characteristics of the European model. The aftermath of the financial crisis will force Europe to adopt more market-oriented policies for trade, labor, and agriculture, and these policies will make its economic interactions with emerging economies more mutually beneficial and economically constructive. The EU will thus become an even more effective motor for the expansion of democratic capitalism, especially in Africa and the Middle East.

Arthur Laffer on CNN Newsroom, August 4, 2009. Clip available from Media Matters at http://mediamatters.org/mmtv/200908040014. 3 James Buchanan, Public Choice: The Origins and Development of a Research Program. 4 See, for example Kenneth Arrow, Social Choice and Individual Values, and Mancur Olson, The Logic of Collective Action: Public Goods and the Theory of Groups. 5 Buchanan, Public Choice, 8-9. 6 Rent seeking is the economic term used to describe behavior that extracts unearned value from other participants in the economy, without making any contribution to productivity, for example by gaining control of land and natural resources or by taking advantage of regulations that may affect consumers or businesses. 7 Such questions are prevalent throughout both Plato’s Republic and Aristotle’s Politics. 8 A sunset clause creates an expiration date, at which point a law will go off the books unless it is renewed.

 

pages: 420 words: 124,202

The Most Powerful Idea in the World: A Story of Steam, Industry, and Invention by William Rosen

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Albert Einstein, All science is either physics or stamp collecting, barriers to entry, collective bargaining, computer age, Copley Medal, David Ricardo: comparative advantage, decarbonisation, delayed gratification, Fellow of the Royal Society, Flynn Effect, fudge factor, full employment, invisible hand, Isaac Newton, Islamic Golden Age, iterative process, Jacquard loom, James Hargreaves, James Watt: steam engine, John Harrison: Longitude, Joseph Schumpeter, Joseph-Marie Jacquard, knowledge economy, moral hazard, Network effects, Peace of Westphalia, Peter Singer: altruism, QWERTY keyboard, Ralph Waldo Emerson, rent-seeking, Ronald Coase, Simon Kuznets, spinning jenny, the scientific method, The Wealth of Nations by Adam Smith, Thomas Malthus, transaction costs, transcontinental railway, éminence grise

Economists have studied the human predilection for shutting out competitors once they have achieved a position of prosperity, and they refer to the behavior that follows as “rent seeking.” Rent-seeking behavior is simply the practice of earning income from an asset without currently working at it. Landlords are rent seekers, particularly to the degree that the land in question is unimproved, and inherited. So are monopolists. And so, indeed, are owners of copyrights and patents, so much so that one of the head-spinning challenges faced by Enlightenment thinkers like Adam Smith was to reconcile their antipathy to all forms of rent seeking, particularly in the form of state-chartered monopolies, with their enthusiasm for inventors and technological innovation. The British Society of Arts,11 whose mission was “to embolden enterprise, to enlarge science, to refine art, to improve manufacture, and to extend our commerce,” granted more than six thousand prizes to successful inventors between 1754 and 1784—but still refused to consider patent-holders for prizes until 1845.

In the first spinning machines, the operator had to simultaneously shape the winding and turn the spindles at precisely the same rate, so as to wind up the yarn—the term of art is “winding the cop”—without either stretching the yarn or allowing it to go slack. The craft was difficult enough that spinners became not only indispensable to the process, but highly protective of their place in it, exhibiting all the rent-seeking mania of a medieval guild. Along the way they transformed themselves from independent contractors into the nation’s most powerful and highly organized craft union. At one union meeting, a spinner argued violently against allowing “piecers” (the subordinates on the spinning line, who tie together threads when they break) to actually put up a cop of cotton yarn unless he was “a son, brother, or orphan nephew.”51 In the industry’s Lancashire heartland,52 mule spinners developed work rules in 1780 that remained in force until the 1960s, and partly in consequence, the new and improved ring-spinning machines, invented by the American John Thorp in 1828, which operated continuously and twisted fibers into yarn by attaching them to a rotating ring, didn’t catch on in Britain53 until the end of the nineteenth century.

 

pages: 457 words: 128,838

The Age of Cryptocurrency: How Bitcoin and Digital Money Are Challenging the Global Economic Order by Paul Vigna, Michael J. Casey

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3D printing, Airbnb, altcoin, bank run, banking crisis, bitcoin, blockchain, Bretton Woods, California gold rush, capital controls, carbon footprint, clean water, collaborative economy, collapse of Lehman Brothers, Columbine, Credit Default Swap, cryptocurrency, David Graeber, disintermediation, Edward Snowden, Elon Musk, ethereum blockchain, fiat currency, financial innovation, Firefox, Flash crash, Fractional reserve banking, hacker house, Hernando de Soto, high net worth, informal economy, Internet of things, inventory management, Julian Assange, Kickstarter, Kuwabatake Sanjuro: assassination market, litecoin, Long Term Capital Management, Lyft, M-Pesa, Mark Zuckerberg, McMansion, means of production, Menlo Park, mobile money, money: store of value / unit of account / medium of exchange, Network effects, new economy, new new economy, Nixon shock, offshore financial centre, payday loans, peer-to-peer lending, pets.com, Ponzi scheme, prediction markets, price stability, profit motive, RAND corporation, regulatory arbitrage, rent-seeking, reserve currency, Robert Shiller, Robert Shiller, Satoshi Nakamoto, seigniorage, shareholder value, sharing economy, short selling, Silicon Valley, Silicon Valley startup, Skype, smart contracts, special drawing rights, Spread Networks laid a new fibre optics cable between New York and Chicago, Steve Jobs, supply-chain management, Ted Nelson, The Great Moderation, the market place, the payments system, The Wealth of Nations by Adam Smith, too big to fail, transaction costs, tulip mania, Turing complete, Tyler Cowen: Great Stagnation, Uber and Lyft, underbanked, WikiLeaks, Y Combinator, Y2K, Zimmermann PGP

Since strangers could not do business with each other without the banks, the world’s increasingly complex and interconnected economies became utterly dependent on the bankers’ intermediation. The ledgers they kept inside their institutions became the vital means through which societies kept track of the debts and payments that arose among their citizens. Thus the banks created the ultimate rent-seeking business, positioning themselves as fee-charging gatekeepers, managers of the financial traffic that made economies tick. Anyone sitting at the sending or receiving end of that traffic had no choice but to deal with a bank—much as Parisa Ahmadi did before the Film Annex changed its payment policy. As this new finance business grew and became more complex, other rent-seeking middlemen installed themselves as specialized providers of intermediated trust—from early bond and securities brokers, to insurance agents, to financial lawyers, to the payment processors and credit-card companies of our modern day.

Members of Rosen’s team describe the decision to shutter the Electronic Monetary System project as mostly bureaucratic, a way to save money on a project that simply didn’t interest Weill. But it also reflected a philosophical difference between believers in innovative projects who seek to profit by being first to market with new, cost-cutting business models, and believers in the prevailing ethos of Wall Street that Sandy Weill embodied. Wall Street banking is, if nothing else, a rent-seeking exercise. It would be inclined to preserve and strengthen centralized revenue streams such as credit-card transaction fees rather than expunge them. With the repeal of Glass-Steagall, and the waves of commercial-and-investment-bank mergers that followed Citigroup’s lead—Chase Manhattan with JP Morgan, Bank Boston with Fleet Bank and later with Bank of America—this ethos was now seizing control of the American financial system.

* * * On the Wednesday after the September 15 collapse of Lehman Brothers in 2008, Mohamed El-Erian, then co-CEO of the massive asset manager Pacific Investment Management Co. and at that time working around the clock to try to extract his firm from the swirling financial maelstrom, took the time to call his wife from PIMCO’s headquarters in Newport Beach, California. She should go to an ATM and withdraw as much money as she could. She didn’t understand why. Because, he told her, there was a chance U.S. banks wouldn’t open the next day. That frightening prospect—complete paralysis of the most important financial system in the world—was the price we paid for letting Wall Street deepen its model of centralized, rent-seeking power. The final social tab is still being tallied, but its costs go beyond what any bookkeeper can put into dollars and cents. One place it is felt is in the bitter taste that’s left in the mouths of citizens forced to prop up these banks. That has translated into a loss of trust in institutions generally, those of both Wall Street and Washington. Into this world of broken trust Satoshi Nakamoto placed his bitcoin project, just one month after the Lehman collapse.

 

pages: 868 words: 147,152

How Asia Works by Joe Studwell

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affirmative action, anti-communist, Asian financial crisis, bank run, banking crisis, barriers to entry, borderless world, Bretton Woods, British Empire, call centre, capital controls, central bank independence, collective bargaining, crony capitalism, cross-subsidies, currency manipulation / currency intervention, David Ricardo: comparative advantage, deindustrialization, demographic dividend, Deng Xiaoping, failed state, financial deregulation, financial repression, Gini coefficient, glass ceiling, income inequality, income per capita, industrial robot, Joseph Schumpeter, land reform, land tenure, large denomination, market fragmentation, non-tariff barriers, offshore financial centre, oil shock, open economy, passive investing, purchasing power parity, rent control, rent-seeking, Ronald Coase, South China Sea, The Wealth of Nations by Adam Smith, urban sprawl, Washington Consensus, working-age population

The challenge to policymakers is therefore to direct entrepreneurial talent towards manufacturing rather than services, and in particular towards large-scale manufacturing with the heft to compete globally. Manufacturing firms are nurtured by the state in two ways: through protection and through subsidy. These interventions create breathing space for entrepreneurs while they learn to manufacture competitively. Unfortunately, protection and subsidy also bring with them a well-known risk – one which economists call ‘rent seeking’. In a developing country, rent seeking refers to the propensity of entrepreneurs to concentrate their efforts on obtaining protection and subsidies (rents) from the state without delivering the technological progress and competitiveness that economic development requires. The problem is a very real one and has undermined industrial development efforts in many poor countries. The solution to the problem is to find mechanisms that force manufacturing entrepreneurs to become globally competitive at the same time as they are allowed to make profits for themselves.

What created the Canons, the Samsungs, the Acers and so on in Japan, Korea and Taiwan was the marriage of infant industry protection and market forces, involving (initially) subsidised exports and competition between manufacturers that vied for state support. The north-east Asian states found ways to overcome the problems that afflicted the ISI policies that were promoted in the 1950s (including by the World Bank in its early, ‘left-wing’ incarnation). Contrary to the claims of many economists, rent-seeking and crony capitalism did not inevitably undermine industrial policy so long as sufficient discipline could be wrapped around infant industry promotion. The mix of plan and market recalls the British development economist Ronald Dore’s contemporary observation about foreign perceptions of Japan at the height of its industrialisation: ‘Left-wing … observers come back from Japan convinced they have seen a shining example of state planning,’ he wrote.

Pierpont 171 Multimedia Super Corridor (MSC) 134, 306n157 MV Agusta 149, 150 Myanmar xx, 246 Nadzmi Mohd Salleh 149, 311n203 Nasser, Gamal Abdel 93 National Development and Reform Commission (NDRC) 97, 240, 255 National Resources Commission (NRC) 96–7 Naughton, Barry 255 Negros Occidental 34, 40–7 neo-classical economists 101–2, 103, 267 Netherlands 290n10 New People’s Army (NPA) 36–7, 38, 41, 45 New Zealand 61, 81 nihonjinron 179 Niigata 14 Nippon Kangyo 176 Nippon Steel 117, 142, 300n108 Nishiyama Kōichi 63, 178, 230 Nissan 8, 160, 276n8 Nolan, Peter 316n248 non-bank financial institutions (NBFIs) Korea 184–5, 319n27 Thailand 200, 201 non-government organisations (NGOs) 44–6 North Korea xviii agriculture 4 land reform xvi, 21, 22, 28 Nursalim 326n92 Ohkawa, Kazushi 100 Ohmae, Kenichi 131, 133 oil palm 68, 141 oligopolies, China 235, 236–7 Pakistan 66, 242 Papua New Guinea xx, 113 Park Chung Hee xxv, 65 agriculture 28–9, 66, 296n75 assassination 108, 122 Blue House 109–11 books 93, 129, 131 car industry 114, 121 and Chung Ju Yung 112, 137 coup 93, 298–9n96 finance 102, 179–82, 195, 327n96 HCI drive 95 and Japan 94, 101, 127 liberation aristocrats 111, 132 and Mahathir 304n142 manufacturing 92–5, 104 POSCO 95, 115, 116, 118 Seodaemun 111 and US 294–5n57 Park Tae Joon 116, 119 Paron Issarasena 314n230 Pasuk Phongpaichit 58 Perodua 146, 150, 313n216, 314n227 Perwaja 140, 141–5, 147, 308n183, 309n187, 309–10n191–2, 310n196 PetroChina 234, 235 Petronas 139, 141 Petronas Twin Towers 139 Pheng Yin Huah 144 Pheng family 144 Philippines 270 agriculture 6, 8 crony capitalism 108 democracy xxiv education xxii finance 169, 183, 188–93, 217, 218, 317n7 land reform xvii, 33–47, 56, 281n56, 281n61, 282n68, 283n74 manufacturing 106, 154–5, 163 rule of law xxv and US 69, 297n83 photovoltaic cells 252–3 Pitt, William 290n18 plantations 7, 52–5, 67–8, 284n87 population xxi China 264–5 POSCO (Pohang Iron and Steel Company) 95, 115–18, 119, 141, 145, 300n108 power equipment 242 Prawiro, Radius 211 Preston, Lewis T. 273n2 pribumi 207 Princip, Gavrilo 3 private sector 108, 157 China 235–6, 249–53 Korea 94 Malaysia 131, 132, 141, 152 Taiwan 186 protectionism 79–81, 82–3, 130, 134, 290–1n19, 20, 315n234 Proton 134, 143–49, 306n159, 310n198, 311n203, 312n204–5, 312n212 Prussia 79, 83, 85, 86, 101, 290n17, 291n25 Pusan 113 Pyle, Kenneth 85 Quek Leng Chan 138 Rahardja, Hendra 215, 328n108 railways 248, 260 Razak, Abdul 128, 141 Razak, Najib 307n163, 312n213 Razaleigh Hamzah 307n169, 308n172 Reden, Graf von 291n25 rediscounting 218 Indonesia 214 Japan 177, 178 Korea 179 Malaysia 195 Philippines 192, 193, 322n50 Thailand 199 Ren Zhengfei 246 Renault-Nissan 127, 302n127 rent seeking 75, 108, 156 Rhee, Syngman 22, 27, 28, 69, 99, 105, 110, 136 Riady, Mochtar 205, 325n85, 86 Ricardo, David 83, 101 rice China 226 Indonesia 50 Japan 62 Korea 63 Philippines 48–9 Thailand 57–8 Rin Kei Mei 311n203 Rizhao Steel 237 Roh Tae Woo 302n126 Rosovsky, Henry 100 Rostow, W.W. xv, 102, 172, 297n82, 316n6 rubber 6, 52–3, 55, 57, 67, 68, 141, 285n97 rule of law xxv Russia agriculture 4 banks xix, 317n8 and China 96 education xxiii financial deregulation 172 land reform 21, 24 manufacturing 81, 232 see also Soviet Union Sahashi Shigeru 78 Salim, Emil 214, 313n225, 328n105 Samsung 100, 105, 155, 246, 296n71, 300n110 car industry 126, 302n127 finance 93, 183 sangyō gōrika 90 Sany 244, 255, 333n38 Saudi Arabia 300–1n115 savings 317n7 Korea 182, 319n30 Malaysia 197 Philippines 188 Taiwan 319–20n30 Thailand 201 Schumpeter, Joseph 328n114 Sen, Amartya xxvi Seoul 108–9, 110 service sector 74, 288–9n3 India 164 Japan 161 shadow banking 258–9 Shanghai Automotive Industry Corp (SAIC) 127 Shanghai Electric 242 Shenhua Energy 234 Shibusawa Eiichi 87 Shih, Stan 251 Shin, Jang-Sup 162–3 Shinjin 126, 302n125 shipbuilding China 243 Korea 122 Singapore xiv, xix–xxi, 79, 270 casino resort 137, 307n164 and Malaysia 195 manufacturing xviii, 289n3 stock exchange 198 Sinopec 234 Smith, Adam 83, 95, 101, 290n18 social mobility 66, 288n125 Soedradjad Djiwandono 153, 213, 214, 326n95 Soeryadjaya, Edward 214, 215 Soeryadjaya, Edwin 153, 314n227 sogo shosha 130 solar power 240 Sony 78 South Korea see Korea Soviet Union xix economic development 75 education xxii, xxiii manufacturing 158 see also Russia soybeans 227 Spain 171, 316n4 Sri Lanka 53 SsangYong 126, 302n127 State Asset Supervision and Administration Commission (SASAC) 234, 240 state enterprises 158 China 82, 233–4, 239–50, 254, 264 Taiwan 82, 96, 97, 98–100, 102, 153, 239 steel 106–7, 300n108 Japan 159, 294n43 Korea 95, 116–17, 141–2, 145 Malaysia 140, 141–5, 149, 151, 308n183, 187, 309–10n191–2, 310n196 Stevenson, Sir James 53 Stevenson Restriction Scheme 53 stock markets 174, 218 China 254 Indonesia 212 Japan 177–8 Korea 184, 319n27 Malaysia 196, 197 Taiwan 187 Thailand 202 Sudirman Central Business District (SCBD) 212 Suehiro Akira 154 sugar 6, 67 China 227 Indonesia 51 Philippines 35, 43, 44–5, 46, 47 Taiwan 32, 276n5, 280n52 Suharto 56, 325n84 agriculture 51 finance 103, 203, 209–11, 313n225, 326n96 and Liem 204, 205 manufacturing 153 Suharto, Tommy 210, 215, 270, 326n96 Suji Kōji 81 Sukarno xxv, 69, 203, 326n89 agriculture 49 finance 203, 208 Sumarlin, Johannes 211, 212 Sumatra 51 Sumitomo 88 Sun Yat-sen 82, 93, 96, 290n16 Suntech 252–3 Sutowo, Ibnu 213, 327n101 Suzuki, Kazumasa 130, 304n140 Sweden 164 Syed Mokhtar al-Bukhary 138 Taipei 196 Taiwan xiii–xvi, xx, xxvii agriculture 3–4, 6–7, 8, 12, 47, 48, 62, 63 authoritarianism xxiv bureaucracy 97–8, 101, 290n10 capital controls 173 car ownership 310n197 economic development 69 education xxii–xxiii exchange rate 262–3 finance xvii–xviii, 157, 169, 170, 174, 185–8, 218–19 and Japan 82, 87 land reform xvi, xxvi, 3, 7–8, 9, 22, 26, 28, 30–3, 61, 68, 280n52 manufacturing xvi–xvii, 33, 69, 77, 78, 98–101, 103–4, 153, 158, 249, 251, 295n66 social mobility 65 state enterprises 83, 96, 97, 98–9, 239 steel 106, 107 and US 165, 297n83 Tan, Vincent 140, 308n176 Tan Tat Wai 142 Tanin 154 Tansil, Eddy 215 Task Force Mapalad 47 Tata Consultancy Services (TCS) 163 Tawney, R.H. 17 tea-housing 110 technological learning xiii, 74, 156, 223 China 223–4, 249 Korea 123, 126–7, 151, 181 Malaysia 129, 134, 136, 143, 144, 147 Philippines 155 Thailand 154 telecommunications 99, 244–5, 246 textile industry Japan 86, 87 Korea 94, 294n48 Thailand xiv, xv, 174, 270, 317n7 agriculture xvi, 56–60 finance 169, 188, 194, 198–201, 218 Hyundai 113 manufacturing xvii, 154, 157, 163, 302n131, 314n230 and US 69, 297n83 Thaksin Shinawatra 60, 287n114 Thieu, Nguyen Van 37, 281n62 Tokyo 14 Toyoda, Sakichi 292n27 Toyota 8, 127, 146, 153, 276n8, 288n125, 292n27, 302n129, 314n227 trade 84, 214 and agriculture 7–8 China 224 and manufacturing 74, 75–6, 77–8 and services 74 surpluses 158–9 Trebilcock, Clive 89 Tunku 128–9, 137, 303n134 Turkey 93 Turnbull, George 124 Ulsan 108–9, 114, 115, 120, 146 United Kingdom agriculture 9 and Malaysia 52–5, 105, 128 manufacturing 75, 84, 86 protectionism 80, 81, 83–4, 291n20 Proton 143 steel 106 and Thailand 200 trade surplus 158 United States agriculture 5, 61 banks 176, 177 and east Asian development 165–6, 316n249 finance 172, 173, 217 free market economics xiv, 268 grants and aid 297n83 Huawei 246–7 Hyundai 123, 124–5, 302n124 and Indonesia 69 interest rates 189 and Japan 90–1, 101–2, 291n22 and Korea 180, 181, 183, 318n22 and land reform 9, 22–5, 27, 30, 31, 32, 33, 34, 66–7, 68, 102, 165, 279n33, 279n38 manufacturing 101, 161, 170 and Philippines 33, 34, 48, 69, 190–1, 280n55, 322n46 protectionism 79, 80, 84, 291n19 Proton 142 rail network 247 steel 106, 117 and Taiwan 103–4 and Thailand 69, 201 trade surplus 158 Vajiravudh, King 57 Venezuela 242 Vietnam xix, xxvi, 166, 270 agriculture 4 Hyundai 113, 299n100, 101 land reform xvi, 4, 23, 36, 66, 281n62 Volvo 253 VW 302n129 Wada, Hiroo 69 Wade, Robert 85, 95, 103, 196 Wahaha 232 Wain, Barry 303n134 Wan Azmi Wan Hamzah 138, 308n170 Wang Chuanfu 252 Wang Yung-ching 66 Wanxiang 232 Washington Consensus xiv, 172–3, 174, 217, 274n3 Wealth of Nations, The (Smith) 290–1n19 West Germany 92, 152–3 Westinghouse 242, 333n37 wheat 226 Widjojo Nitisastro 209 Wilkinson, John 291n25 Williamson, John 274n3 Winata, Tomy 212, 327n98 wind turbines 240 Woo, Jung-en 103, 173, 186 World Bank xiv, 82, 104, 157, 271, 273n1–2 China 224, 329n3 deregulation 172, 217 Hong Kong and Singapore xiv, xix Indonesia 203, 212, 213 ISI policies 156 Korea 95, 96, 116, 118, 182, 184 macro-economic stability 156 microfinance 269 Philippines 191, 193, 322n52 private enterprise 157 Thailand 199, 200, 201 World is Flat, The (Friedman) 134 World Trade Organisation (WTO), China 228, 241 XCMG 244 Yahaya Ahmad 148 Yasuda 88 Year of Living Dangerously, The 203, 207 Yeoh, Francis 135 Yeoh family 135–6, 306n160–1 Yin, K.Y. 101, 102 Yingluck Shinawatra 287n114 Yokohama Specie 176 Yoshida Shigeru 91 Yoshihara Kunio xvi Yoshino Shinji 101 YTL 136, 306–7n160–1 zaibatsu 88, 90, 91, 94, 293n40 finance 170, 175, 177 Zhao Ziyang 232, 331n21 Zhou Yimin 248 Zhu Rongji 233, 235, 236–9, 249, 256, 331n21 Zimbabwe 7, 276n6 Zoomlion 244 ZTE 244–5, 246

 

pages: 430 words: 109,064

13 Bankers: The Wall Street Takeover and the Next Financial Meltdown by Simon Johnson, James Kwak

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Andrei Shleifer, Asian financial crisis, asset-backed security, bank run, banking crisis, Bernie Madoff, Bonfire of the Vanities, bonus culture, capital controls, Carmen Reinhart, central bank independence, collapse of Lehman Brothers, collateralized debt obligation, corporate governance, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, Edward Glaeser, Eugene Fama: efficient market hypothesis, financial deregulation, financial innovation, financial intermediation, financial repression, fixed income, George Akerlof, Gordon Gekko, greed is good, Home mortgage interest deduction, Hyman Minsky, income per capita, interest rate derivative, interest rate swap, Kenneth Rogoff, laissez-faire capitalism, late fees, Long Term Capital Management, market bubble, market fundamentalism, Martin Wolf, moral hazard, mortgage tax deduction, Ponzi scheme, price stability, profit maximization, race to the bottom, regulatory arbitrage, rent-seeking, Robert Shiller, Robert Shiller, Ronald Reagan, Saturday Night Live, sovereign wealth fund, The Myth of the Rational Market, too big to fail, transaction costs, value at risk, yield curve

On the nature and value of political connections in Indonesia, see Ray Fisman, “Estimating the Value of Political Connections,” American Economic Review 91 (2001): 1095–1102. See also Michael Backman, Asian Eclipse: Exposing the Dark Side of Business in Asia (Singapore: John Wiley & Sons [Asia], 2001); chapter 14 has details on how the Suharto regime interacted with the private sector. On how subsidies were provided, see Andrew McIntyre, “Funny Money: Fiscal Policy, Rent-Seeking and Economic Performance in Indonesia,” in Mustaq H. Khan and Jomo Kwame Sundaram, eds., Rents, Rent-Seeking and Economic Development (Cambridge: Cambridge University Press, 2000). See also Adam Schwarz, A Nation in Waiting: Indonesia in the 1990s (Boulder, CO: Westview, 1994), chapter 6. 30. Real GDP per capita (constant prices: chain series), from Alan Heston, Robert Summers, and Bettina Aten, Penn World Table Version 6.3, Center for International Comparisons of Production, Income and Prices at the University of Pennsylvania, August 2009.

Claudia Goldin and Lawrence Katz have examined data on Harvard undergraduates and found that while only 5 percent of men in classes around 1970 were in finance fifteen years after graduation, that figure tripled to 15 percent for classes around 1990.79 The share of each class entering banking and finance careers grew from under 4 percent in the 1960s to 23 percent in recent years.80 At Princeton’s School of Engineering and Applied Science, “Operations Research and Financial Engineering” became the most popular undergraduate major.81 The banks thus became major beneficiaries of the American educational system. Whether society benefited is another question. Kevin Murphy, Andrei Shleifer, and Robert Vishny have argued that society benefits more when talented people become entrepreneurs who start companies and create real innovations than when they go into rent-seeking activities that redistribute rather than increase wealth.82 If this is true, then this diversion of talent to Wall Street constituted a real tax on economic growth over the last two decades. Among the economic and intellectual elites, finance became a highly prestigious and desirable profession. Working on Wall Street became a widely acknowledged marker for educational pedigree, intelligence, ambition, and wealth.

 

pages: 214 words: 57,614

America at the Crossroads: Democracy, Power, and the Neoconservative Legacy by Francis Fukuyama

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affirmative action, Ayatollah Khomeini, Berlin Wall, Bretton Woods, cuban missile crisis, David Brooks, European colonialism, failed state, Francis Fukuyama: the end of history, Internet Archive, Mikhail Gorbachev, Monroe Doctrine, mutually assured destruction, New Journalism, race to the bottom, RAND corporation, rent-seeking, road to serfdom, Ronald Reagan, Ronald Reagan: Tear down this wall, transaction costs, uranium enrichment, War on Poverty, Washington Consensus

But it needs to be discriminating in the use of its money and should focus its efforts on building stronger institutions and governance in poor countries. Long-term attention to institutions and politics will have two benefits, given the convergence between the economic and political development agendas. The rule of law is extremely important for creating a climate in which investment and economic growth can take place; it also constitutes the "liberal" part of a liberal democracy. Controlling rent-seeking and clientelism, ensuring that public monies are spent on public goods and not on patronage, and reining in rapacious corruption simultaneously Social Engineering and Development promote development and help legitimate democratic political systems. Since the 1980s, international financial institutions like the IMF and World Bank have sought to use conditionality in structural adjustment loans as a means of artificially stimulating demand for reform in countries where it is low.

This reality has led Krasner and other observers to argue that we ought to move in the opposite direction, toward models of shared sovereignty in which states accept long-term help from the international community to provide certain basic governance services—importing good governance, in effect, from jurisdictions where it exists. 16 The most striking recent example of shared sovereignty is the Chad-Cameroon gas pipeline, in which the government of Chad agreed to put expected energy revenues from natural gas into a trust fund to be administered by the World Bank and other international trustees. Chad in effect agreed with Rethinking Institutions for World Order the international community that it could not be trusted to use its own energy revenues properly and needed external help to avoid being dragged into a morass of corruption and rent-seeking. The Chad-Cameroon pipeline was hugely controversial not only in Chad but in the rest of Africa, where many believed that it set a bad precedent for sovereignty. It is clear that if shared sovereignty is ever to become a more broadly accepted model, it will take place only under conditions where the external actor with M'hom governance functions are divided is regarded as legitimate. Those jurisdictions with good governance, in other words, will need to export governance to other jurisdictions that lack it.

 

pages: 172 words: 54,066

The End of Loser Liberalism: Making Markets Progressive by Dean Baker

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Asian financial crisis, banking crisis, Bernie Sanders, collateralized debt obligation, collective bargaining, corporate governance, currency manipulation / currency intervention, Doha Development Round, financial innovation, full employment, Home mortgage interest deduction, income inequality, inflation targeting, invisible hand, manufacturing employment, market clearing, market fundamentalism, medical residency, patent troll, pets.com, pirate software, price stability, quantitative easing, regulatory arbitrage, rent-seeking, Robert Shiller, Robert Shiller, Silicon Valley, too big to fail, transaction costs

The result is that the dead peasant policy is in effect another financial instrument that allows corporations to adjust earnings in ways that minimize their tax liability.[85] And of course some brilliant finance people thought this one up, making themselves and their employer large amounts of money as a result. This is the sort of activity that has quadrupled the financial sector’s share of the economy. It is not about allocating capital to its best uses or making savings more secure, it’s about finding clever ways to rip off taxpayers, productive businesses, and other actors. The economy will benefit from having less of this sort of inefficient rent-seeking behavior. While this may have seemed like a radical assessment a decade ago, even the IMF now recognizes that there are substantial rents in the financial sector and that governments should adopt policies to reduce the sector’s size.[86] Tremendous waste in the financial sector is not the only justification for reducing its size. The sector has also been a major cause of instability. It fueled both the stock and housing bubbles, and restructuring it to make it less bubble-prone would be a huge boost to the economy.

It is worth noting that a much higher share of doctors in the U.S. are specialists, who require more years of training, and therefore command higher salaries than family practitioners, than in most other wealthy countries. It is not clear that the greater number of specialists improves the quality of care, but it is likely that they are used in the United States in instances in which family practitioners would suffice. This sort of rent-seeking, with specialists inserting themselves into situations where their skills are not necessary, is exactly what would be expected when government interventions obstruct the normal workings of the market. [77] Once while on a panel discussing trade policy, I made a reference to the effort in the 1990s to tighten industry requirements in order to reduce the number of foreign-born doctors who could practice in this country.

 

pages: 283 words: 73,093

Social Democratic America by Lane Kenworthy

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affirmative action, Affordable Care Act / Obamacare, barriers to entry, Celtic Tiger, centre right, clean water, collective bargaining, corporate governance, David Brooks, desegregation, Edward Glaeser, full employment, Gini coefficient, hiring and firing, Home mortgage interest deduction, illegal immigration, income inequality, invisible hand, labor-force participation, manufacturing employment, market bubble, minimum wage unemployment, new economy, postindustrial economy, purchasing power parity, race to the bottom, rent-seeking, rising living standards, Robert Gordon, Robert Shiller, Robert Shiller, Ronald Reagan, school choice, shareholder value, sharing economy, Skype, Steve Jobs, too big to fail, Tyler Cowen: Great Stagnation, union organizing, universal basic income, War on Poverty, working poor, zero day

The hypothesis that higher government spending will lessen competition in product markets seems compelling. But in practice that’s not what we observe. An expansion of America’s public social programs is likely to have little or no impact on competition. Does Big Government Mean Bad Government? A related argument, made by Alberto Alesina and George-Marios Angeletos, is that “a large government increases corruption and rent-seeking.”62 The more a government taxes and spends, in this view, the more it invites lobbying by interest groups for favors, and the more opportunity and incentive it creates for policy makers and other public officials to dispense such favors. Do big governments perform worse than small ones? There are various ways to measure the quality of government.63 A common indicator is the World Bank’s government effectiveness measure, which attempts to gauge public and expert perceptions of the quality of public services, the quality of the civil service and the degree of its independence from political pressures, the quality of policy formulation and implementation, and the credibility of the government’s commitment to such policies.

This is essentially what the Nordic countries do: they let markets work, and government fills in the gaps. It isn’t in spite of their policies and institutions that the Nordic nations achieve economic security, equal opportunity, and shared prosperity together with strong economic performance. It’s because of them.159 America’s Path Growth of government spending is not, for the most part, a consequence of rent-seeking special interests or narrow-minded bureaucrats expanding their turf. It’s a product of affluence. As people and nations get richer, they are willing to allocate more money for insurance (protection against risks) and for fairness (extension of opportunity and security to those who are less fortunate). There are quite a few proposed private-sector remedies for economic insecurity, inadequate opportunity, and slow income growth.

 

pages: 304 words: 80,965

What They Do With Your Money: How the Financial System Fails Us, and How to Fix It by Stephen Davis, Jon Lukomnik, David Pitt-Watson

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Admiral Zheng, banking crisis, Basel III, Bernie Madoff, Black Swan, centralized clearinghouse, clean water, corporate governance, correlation does not imply causation, credit crunch, Credit Default Swap, crowdsourcing, David Brooks, Dissolution of the Soviet Union, diversification, diversified portfolio, en.wikipedia.org, financial innovation, financial intermediation, Flash crash, income inequality, index fund, invisible hand, London Whale, Long Term Capital Management, moral hazard, Northern Rock, passive investing, performance metric, Ponzi scheme, principal–agent problem, rent-seeking, Ronald Coase, shareholder value, Silicon Valley, South Sea Bubble, sovereign wealth fund, statistical model, Steve Jobs, the market place, The Wealth of Nations by Adam Smith, transaction costs, Upton Sinclair, value at risk, WikiLeaks

Instead of looking at how mutual funds vote their shares, Lauren Cohen and Breno Schmidt investigated these funds’ investment choices and discovered something disturbing: mutual funds buy much more stock in companies whose 401(k) plans they administer, even when these companies are troubled enough to prompt other funds to sell.11 Cohen and Schmidt concluded that there is “a potentially large benefit to the 401(k) sponsor firm of having its price propped up” by the contracted mutual fund. Moreover, “the resulting loss to mutual fund investors … can be large.” No economist would be surprised by that finding: it is well known that accountability decreases “rent seeking,” the actions an agent might take to extract a benefit from the system. So it stands to reason that a lack of accountability will tend to increase self-serving actions, even if it damaged the interests of ultimate savers. Two last studies complete our tour of the limited state of knowledge of fund governance and performance. In 2009, Martijn Cremers and three coauthors used still another measure to see if the way mutual funds are overseen could affect returns.

See Responsible Endowments Coalition (REC) Regulation: atomized, 128–31, 154 bank, 128–29, 175, 259n47 behavioral economics and, 143–45 contemporary approach to, 128–31 designing better, 145–51 financial crisis and, 124–25 fostering accountability and, 147–49 ossified behavior and, 131, 137 oversight and, 150–51 purpose of, 125–28 relation to financial institutions, 145 relevant and unbiased information and, 149–50 supporting fiduciary duty, 146–47, 152–53, 225–26 systemic (See Systemic regulation) transparency and, 146 Regulatory regimes, Basel rules, 152 Basel I, 125, 254n1 Basel II, 43 Basel III, 43, 125, 175, 254n1, 254n2 Rent seeking, 102–3 Research funding, for new economic thinking, 189 Reserves, bank, 213, 214–16 Responsibility: regulation and abdication of, 130–31 trust in government and, 141. See also Fiduciary duty Responsible Endowments Coalition (REC), 118, 122 Responsible Investing Academy, 140 Retirement Commission of South Carolina, 206 Retirement savings, 193–99, 201, 241n39 fees charged on, 1–3, 53 liability-driven investing and, 54–56 redirecting, 13–14 switch to defined contribution plans, 99–100, 197–99.

 

pages: 374 words: 114,660

The Great Escape: Health, Wealth, and the Origins of Inequality by Angus Deaton

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Admiral Zheng, agricultural Revolution, Branko Milanovic, BRICs, British Empire, call centre, clean water, colonial exploitation, Columbian Exchange, declining real wages, Downton Abbey, financial innovation, germ theory of disease, Gini coefficient, illegal immigration, income inequality, invention of agriculture, invisible hand, John Snow's cholera map, knowledge economy, Louis Pasteur, low skilled workers, new economy, purchasing power parity, randomized controlled trial, rent-seeking, rising living standards, Ronald Reagan, Simon Kuznets, Steve Jobs, Steven Pinker, structural adjustment programs, The Spirit Level, too big to fail, trade route, very high income, War on Poverty

Countries that were relatively wealthy and populous places in colonial times were particularly attractive targets for conquest, so much so that there has been a historical reversal of fortune. Among the countries that were conquered by European powers, the countries that were rich are now poor, and those that were poor are now rich. Such reversals of fortune should warn us against taking modern prosperity and modern economic growth for granted, as something that we have always known and that can never go away. Rent seeking can lead to economic growth being replaced by internecine warfare in which each group fights ever more viciously for shares of a declining total. Interest groups can feather the nests of a few at the expense of the many, each of whom loses so little that it is not worth organizing to prevent the plunder; the cumulative effects of many such groups can eat away an economy from within and stifle growth.42 Powerful and wealthy elites have choked off economic growth before, and they can do so again if they are allowed to undermine the institutions on which broad-based growth depends.

In the case of the United States, current extremes of income and wealth have not been seen for more than a hundred years. Great concentrations of wealth can undermine democracy and growth, stifling the creative destruction that makes growth possible. Such inequality encourages the previous escapees to block the escape routes behind them. Mancur Olson predicted that rich countries would decline like this, undermined by the rent seeking of an ever-growing number of focused interest groups pursuing their own self-interest at the expense of an uncoordinated majority.2 Slower growth makes distributional conflict inevitable, because the only way forward for me is at your expense. It is easy to imagine a world with little growth but endless distributional conflict between rich and poor, between old and young, between Wall Street and Main Street, between medical providers and their patients, and between the political parties that represent them.

Thomas Piketty, Emmanuel Saez, and Stefanie Stantcheva, 2011, “Optimal taxation of top labor incomes: A tale of three elasticities,” National Bureau of Economic Research Working Paper 17616. Note that these authors interpret the relationship differently than I do in the text. 35. Larry Bartels, 2010, Unequal democracy: The political economy of the new gilded age, Princeton University Press, and Martin Gilens, 2012, Affluence and influence: Economic inequality and political power in America, Princeton University Press. 36. Anne O. Krueger, 1974, “The political economy of the rent-seeking society,” American Economic Review 64(3): 291–303, and Jagdish N. Bhagwati, 1982, “Directly unproductive profit-seeking (DUP) activities,” Journal of Political Economy 90(5): 988–1002. 37. Gilens, Affluence and influence. 38. Joseph E. Stiglitz, 2012, The price of inequality: How today’s divided society endangers our future, Norton. 39. Eric Jones, 1981, The European miracle: Environments, economies, and geopolitics in the history of Europe and Asia, Cambridge University Press, and 1988, Growth recurring: Economic change in world history, Oxford University Press. 40.

 

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The Age of Em: Work, Love and Life When Robots Rule the Earth by Robin Hanson

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8-hour work day, artificial general intelligence, augmented reality, Berlin Wall, bitcoin, blockchain, brain emulation, business process, Clayton Christensen, cloud computing, correlation does not imply causation, demographic transition, Erik Brynjolfsson, ethereum blockchain, experimental subject, fault tolerance, financial intermediation, Flynn Effect, hindsight bias, job automation, job satisfaction, Just-in-time delivery, lone genius, Machinery of Freedom by David Friedman, market design, meta analysis, meta-analysis, Nash equilibrium, new economy, prediction markets, rent control, rent-seeking, reversible computing, risk tolerance, Silicon Valley, smart contracts, statistical model, stem cell, Thomas Malthus, trade route, Turing test, Vernor Vinge

Factions Changing coalitions and political competition among coalitions can be socially expensive because of coalition “rent-seeking.” This is the effort that people spend to lobby for their faction or coalition among their associates. For example, people can feel pressured to favor current coalition partners when choosing spouses, neighbors, suppliers, customers, and so on. Not only does this process reduce the quality of such partners on other criteria, it creates costs to change partners when political coalitions change. People can also feel pressured to lobby for their faction; those who don’t may be punished for disloyalty. Political systems have long tried many solutions to curb the costs resulting from excess coalition change and rent-seeking, with varying and usually insufficient success. For example, raising the costs to change policy can discourage policy change, although this can make societies less adaptable to changing conditions.

So em clans naturally have less inequality of the standard sort that is the focus of redistribution today. In contrast, em clans have enormous inequality in clan size, resources, and respect. However, history gives little reason to expect much redistribution to address this kind of inequality. This kind of inequality is not very analogous to those that induced forager sharing, it does not lend itself to profitable rent-seeking, and it is very sensitive to how subclans are defined. Ems might also redistribute on the basis of speed, taking from fast ems to give to slow ones. But history also offers little precedent for this, and slower ems do not seem to be suffering much more in any clear way. Thus the main kind of redistribution that we have reason to expect in the em era is between the clans of a city, based on differences of average within-clan individual consumption.

 

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The Wealth of Networks: How Social Production Transforms Markets and Freedom by Yochai Benkler

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affirmative action, barriers to entry, bioinformatics, Brownian motion, call centre, Cass Sunstein, centre right, clean water, dark matter, desegregation, East Village, fear of failure, Firefox, game design, George Gilder, hiring and firing, Howard Rheingold, informal economy, invention of radio, Isaac Newton, iterative process, Jean Tirole, jimmy wales, market bubble, market clearing, Marshall McLuhan, New Journalism, optical character recognition, pattern recognition, pre–internet, price discrimination, profit maximization, profit motive, random walk, recommendation engine, regulatory arbitrage, rent-seeking, RFID, Richard Stallman, Ronald Coase, Search for Extraterrestrial Intelligence, SETI@home, shareholder value, Silicon Valley, Skype, slashdot, social software, software patent, spectrum auction, technoutopianism, The Fortune at the Bottom of the Pyramid, The Nature of the Firm, transaction costs

Increasing patent protection, both in developing nations that are net importers of existing technology and science, and in developed nations that already have a degree of patent protection, and therefore some nontrivial protection for inventors, increases the costs that current innovators have to pay on existing knowledge more than it increases their ability to appropriate the value of their own contributions. When one cuts through the rent-seeking politics of intellectual property lobbies like the pharmaceutical companies or Hollywood and the recording industry; when one overcomes the honestly erroneous, but nonetheless conscience-soothing beliefs of lawyers who defend the copyright and patent-dependent industries and the judges they later become, the reality of both theory and empirics in the economics of intellectual property is that both in theory and as far as empirical evidence shows, there is remarkably little support in economics for regulating information, knowledge, and cultural production through the tools of intellectual property law. 84 Where does innovation and information production come from, then, if it does not come as much from intellectual-property-based market actors, as many generally believe?

At other layers of the communications environment, we see efforts to expand software patents, to control the architecture of personal computing devices, and to create ever-stronger property rights in physical infrastructure--be it the telephone lines, cable plant, or wireless frequencies. Together, these legislative and judicial [pg 381] acts have formed what many have been calling a second enclosure movement: A concerted effort to shape the institutional ecology in order to help proprietary models of information production at the expense of burdening nonmarket, nonproprietary production. 152 The new enclosure movement is not driven purely by avarice and rent seeking--though it has much of that too. Some of its components are based in well-meaning judicial and regulatory choices that represent a particular conception of innovation and its relationship to exclusive rights. That conception, focused on mass-mediatype content, movies, and music, and on pharmaceutical-style innovation systems, is highly solicitous of the exclusive rights that are the bread and butter of those culturally salient formats.

The evidence suggests that, in fact, exclusive rights are detrimental to various downstream industries that rely on access to data. Despite these fairly robust observations from a decade of experience, there continues to be a threat that such a law will pass in the U.S. Congress. This continued effort to pass such a law underscores two facts. First, much of the legislation in this area reflects rent seeking, rather than reasoned policy. Second, the deeply held belief that "more property-like [pg 451] rights will lead to more productivity" is hard to shake, even in the teeth of both theoretical analysis and empirical evidence to the contrary. 791 Linking and Trespass to Chattels: New Forms of Information Exclusivity 792 Some litigants have turned to state law remedies to protect their data indirectly, by developing a common-law, trespass-to-server form of action.

 

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A Culture of Growth: The Origins of the Modern Economy by Joel Mokyr

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Andrei Shleifer, barriers to entry, Berlin Wall, clockwork universe, cognitive dissonance, Copley Medal, David Ricardo: comparative advantage, delayed gratification, deliberate practice, Deng Xiaoping, Edmond Halley, epigenetics, Fellow of the Royal Society, financial independence, framing effect, germ theory of disease, Haber-Bosch Process, hindsight bias, income inequality, invention of movable type, invention of the printing press, invisible hand, Isaac Newton, Jacquard loom, Jacquard loom, Jacques de Vaucanson, James Watt: steam engine, John Harrison: Longitude, Joseph Schumpeter, knowledge economy, labor-force participation, land tenure, law of one price, Menlo Park, moveable type in China, new economy, phenotype, price stability, principal–agent problem, rent-seeking, Republic of Letters, Ronald Reagan, South Sea Bubble, statistical model, the market place, The Structural Transformation of the Public Sphere, The Wealth of Nations by Adam Smith, transaction costs, ultimatum game, World Values Survey, Wunderkammern

The importance of the Enlightenment for Europe’s subsequent economic development goes beyond its impact on the exploitation of useful knowledge for material progress, the essence of the Industrial Enlightenment. It also codified and formalized the kind of institutions any society needed to maintain its technological momentum: the rule of law, checks and balances on the executive, and severe sanctions on more blatant and harmful forms of rent-seeking through corruption and highly inefficient forms of redistribution, although the Enlightenment was never able to eradicate rent-seeking altogether. As Brandt, Ma, and Rawski (2014) make clear, such institutions were lacking in post-1750 China and prevented it from taking advantage of the opportunities created by technological progress in the West, the way Japan did. Qing China, as already noted, was above all a society in which the major players sought “stability and prosperity” (Brandt, Ma, and Rawski, 2014, p. 105).

The historical riddle is what might be called the great dilemma of the new institutional economic history: much of the literature in economic history that is trying to explain differences in economic performance and living standards, both by economists and historians, has accepted in one way or another Douglass North’s call for the integration of institutions into our narrative of economic growth (Acemoglu and Robinson, 2012; Sened and Galiani, 2014). An economy that grows as a result of favorable institutions requires a world of well-delineated and respected property rights, enforceable contracts, law and order, a low level of opportunism and rent-seeking, a high degree of inclusion in political decision making and the benefits of growth, and a political organization in which power and wealth are as separate as is humanly possible. Such institutions—whether part of the formal political structure (as embodied for example in a constitution) or based on private-order institutions—are credited with many positive economic developments in the past: the rise of more effective product and factor markets (and thus more efficient allocations), the growth of international and interregional trade, and the accumulation of capital, to name a few.

Cultural beliefs also help determine, for instance, whether preferences might be “other-regarding” (that is, whether the consumption of others affects one’s well-being) and whether they might be “process-regarding” (that is, whether the utility one derives from being in a particular state of the world depends on the way that state was reached rather than on the intrinsic quality of the state itself). Both of those types of preferences are not normally part of the analysis of economic preferences, but there is no inherent reason they should not be.16 A good example of process-regarding preferences is when an individual cares whether he or she earns income by creating wealth through entrepreneurial activity or by redistributing it from others through rent-seeking or corruption. Does one regard a dollar in the same way no matter how it was earned, or does one care whether it was made while providing a socially useful activity? Is a dollar earned the same as a dollar stolen? Such preferences could make a difference in the institutions that are critical to the emergence of a civil economy and economic growth (Bowles, 2004, pp. 109–11; Bowles and Gintis, 2011, pp. 10–11, 32–35).

 

pages: 304 words: 22,886

Nudge: Improving Decisions About Health, Wealth, and Happiness by Richard H. Thaler, Cass R. Sunstein

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Al Roth, Albert Einstein, asset allocation, availability heuristic, call centre, Cass Sunstein, choice architecture, continuous integration, Daniel Kahneman / Amos Tversky, desegregation, diversification, diversified portfolio, endowment effect, equity premium, feminist movement, framing effect, full employment, George Akerlof, index fund, invisible hand, late fees, libertarian paternalism, loss aversion, Mahatma Gandhi, Mason jar, medical malpractice, medical residency, mental accounting, meta analysis, meta-analysis, Milgram experiment, pension reform, presumed consent, profit maximization, rent-seeking, Richard Thaler, risk tolerance, Robert Shiller, Robert Shiller, Saturday Night Live, school choice, school vouchers, transaction costs, Vanguard fund, Zipcar

The answer is that the combination of loan guarantee and subsidy by the government makes these loans exceptionally profitable, so lenders compete hard to get the business. Presumably, it was the hope of such competition that led the government to design the program in this partially privatized manner, in which the federal government hands out subsidies but relies on the private sector to distribute the loans. However, the competition has not focused on price. Instead, the lenders have engaged in what economists call rent-seeking activities. The idea is that if there are high profits to be made, suppliers will be willing to spend a lot of time and money to get that business. Because excess profits are available to the lenders who snag the student loan business, there are temptations to do whatever it takes to get to the head of the line. As with mortgages, this example illustrates the problem with directing CREDIT MARKETS people to seek “expert” advice when they face difficult, high-stakes problems and are confused about what to do.

., and retirement plans, 129 Lay, Kenneth, 125–26 lemmings, 53–54 Leslie, Phillip, 190n Lewin, Kurt, 70 libertarian paternalism, 4–6; arguments against, see counterarguments; golden rule of, 72; of government, 13; in health care, 157–58; and marriage, 215; in politics, 13–14, 237; as Third Way, 252–53; why stop there? 248–51 life expectancy, 104 “lifestyle” funds, 124–25, 129 Lincoln, Abraham, 235 loans: direct-to-consumer, 140; federal, 139; fixed-rate, 133; and foreclosures, 136–37; “good-faith estimate” on, 136; home equity, 103; interest rates on, 135, 137–38; microfinance, 135; predatory, 134–38; private, 139–40; rent-seeking activities in, 140; research findings on, 134; risky, 135; Stafford, 139; student, 138–41; and Truth in Lending Act, 133, 136, 137; variable-rate, 133, 138 Loewenstein, George, 42, 123 Lollapalooza festival, Chicago, 243–44 London: bombing in World War II, 27– 28, 28, 29; pedestrians in, 90 Long, Bridget, 141 loss aversion, 33–34, 112, 120–21 INDEX lotteries, 33 low stakes, 74–75n Madrian, Brigitte, 109 magazine subscriptions, and inertia, 35, 85 Maine, “intelligent assignment” choice architecture in, 166, 172–73 mandated choice, 86 Manilow, Barry, 61 mappings, 91–94, 131 markets, 76–80; feedback in, 185; free, 97–100; incentives in, 185, 188; invisible hand in, 239–40; trading systems in, 187 Markowitz, Harry, 123 marriage: anachronistic state control of, 218–21, 222–23; and children, 219, 221–23, 224, 225; choice architecture for, 223–26; civil union vs., 215–16, 217, 220, 221–23; commitment in, 222– 23, 224; cost/benefit analysis of, 223; covenant, 220; default rules for, 221– 22, 223–26; discriminatory history of the institution of, 219; and divorce, 32, 219–20, 224–26; as domestic partnership agreement, 215–16, 223; expectations for, 225–26; factors to be considered in, 226; goals and intentions in, 224–25; legal aspects of, 216–18, 220, 224–26, 237; mandatory waiting periods for, 250–51; as precommitment strategy, 219–20; prenuptial agreeements, 224; recognition by religious organizations, 215, 218–19, 220, 222, 223; same-sex, 215, 220; single state vs., 220–21; status quo bias in, 217; use of term, 215–16, 218; variations on a theme, 221 McAllen, Texas, Medicare Part D in, 162– 63 McFadden, Daniel, 171 Medicaid, and Medicare Part D, 161, 164 Medicare Advantage, 165, 170 Medicare Part D, see prescription drug plan Medicare Web site, 162, 168–70, 173 mental accounting, 49–52 mere-measurement effect, 70 Merrell, Katie, 169 Métro, Le, Paris, 87 Meulbroek, Lisa, 127 microfinance loans, 135 mistakes, learning from, 241 MIT, Poverty Action Lab, 232 money: borrowing, 103; as fungible, 50; liquid assets of households, 51; personal savings, 103; for retirement, see retirement plans; Save More Tomorrow, 112– 17 money illusion, 112 money market accounts, 118, 126, 129 Montana, social influence in, 68 mortgage brokers, 134n, 135, 138 mortgages, 132–38; and the American dream, 135; annual percentage rate (APR), 133, 137; costs of, 93; fees, 133, 137, 138; fixed-rate, 133; and foreclosures, 136–37; “good-faith estimate” in, 136; interest-only, 133; online shopping for, 138; points, 133, 136; prepayment penalties, 133, 136; and RECAP, 137–38; research findings about, 134; in subprime market, 134–38; and teaser rates, 133, 138; and Truth in Lending Act, 133, 136, 137; variable-rate, 133, 138 motorcycle helmets, 232–33 music downloads, 62–63 mutual funds, 119, 120, 122, 127 MySpace, 182 nail polish, no-bite, 234 National Association of Chain Drug Stores, 172 National Community Pharmacists Association, 172 National Environmental Policy Act (1972), 189–90 Nazism, 59 negligence: defined, 213; right to sue for, 207–14 negotiations, opening offers in, 24 Nelson, Willie, 60 neutrality, 243, 246–48 New Deal, 252 289 290 INDEX No Child Left Behind Act, 85–86, 200– 201 noodge, meaning of term, 4n Norman, Don, The Design of Everyday Things, 83 nudge, use of term, 6, 8 nudges, evaluation of, 247 obesity, 7; and conformity, 64; and selfcontrol, 44; and social influence, 55 Occupational Safety and Health Administration (OSHA), 189, 251 One Size Fits All, 9 optical illusions, 17–19 optimism, 31–33 “opt-in” policy, 86, 109, 110 “opt-out” policy, 86, 109, 248–49, 251 Oreopoulos, Phil, 141 organ donations, 157–58, 175–82; “brain dead” sources of, 176; complexities in, 179–80; default rule in, 176, 179; explicit consent in, 176–77, 178, 179; inertia in, 176; mandated choice, 180; market in, 175n; presumed consent, 177–79, 180; rejection rate in, 179; routine removal, 177; social norms, 180–82 overconfidence, 31–33 ozone layer, 183 painting a ceiling, 91 paint store, 95–96 Parker, Tom, Rules of Thumb, 22 parking garages, 87–88 paternalism: asymmetric, 72n, 249–51; and coercion, 11, 236–38; of government, 47; “one-mouse-click,” 249; One Size Fits All, 9; rejection of, 9; stopping point for, 251; use of term, 5 pedestrians, 90 peer pressure, 54, 55, 71 Pension Protection Act (2006), 115–16 pensions, see retirement plans pesticides, warnings about, 189 Petrified Forest National Park, Arizona, 66–67 Planners, 42, 47 planning fallacy, 7 pluralistic ignorance, 59 politics: brand switching in, 65; libertarian paternalism in, 13–14, 237; predictions in, 20n; private-sector interests in, 240; probability of voting, 70; Third Way in, 252–53; voting patterns, 55, 246 pollution, 183, 184–85, 186, 188 popcorn, 43 portfolio theory, 123 postcompletion errors, 88 practice, 74–75; and feedback, 75 preferences, 75–76 Prelec, Drazen, 143 prescription drug plan, 157, 159–74; available alternative plans, 161; confusing choices in, 160, 162–65; coverage in, 162; defects of, 160; design of, 160–62; “doughnut hole” in, 162; and drug prices, 168; dual eligibles in, 166, 167; enrollment routes, 164–65; failure to serve, 160; flexible switching option in, 166, 167–68, 174; individuals with no coverage, 164, 165; intelligent assignment in, 171–73; key features of, 161; lessons to be learned from, 174; as Medicare Part D, 159–62; minimum coverage requirements for, 160; nonenrollment as default option, 160; and pharmacy networks, 260n16; poor choices made in, 170–71; price differences in, 170; random default, 160, 165–68, 171–73; RECAP proposal for, 173–74; restructuring of, 166; simplicity needed in, 174; Web site as tool for, 162, 168–70 Prestwood, Charlie, 125–26 presumed consent, and organ removal, 177–79, 180 prices, and incentives, 97–100 priming, 69–71 procrastination, 238n publicity principle, 243–46 public policy, and framing, 36–37 random processes: neutrality in, 246; patterns in, 27; “streak shooting,” 30 Rawls, John, 244 INDEX Read, Daniel, 123 RECAP (Record, Evaluate, Compare Alternative Prices), 93–94; and credit cards, 143–44; and Medicare Part D, 173–74; and mortgages, 137–38; and student loans, 141; and transparency, 240 recycling, 66n redistribution, 241–43 Reflective System, 19–22; and Planners, 42 Regulation Z (Truth in Lending Act), 133, 136, 137 representativeness, 26–31 required choice, 86–87 restaurant health inspection, 190n retirement plans: automatic enrollment in, 109, 130; automatic savings for, 108–9; choice architecture in, 129; choosing, 76; complex choices in, 130; conflicts of interest in, 131; contribution rates, 110– 11; default options in, 129–30; definedbenefit, 105, 108; defined-contribution, 105–6, 107, 123, 128, 129; discretionary contributions to, 127; diversification rule of, 128; education about, 111–12; enrollment decisions, 107–8; ERISA, 127–28, 131; errors expected in, 130; exclusive benefit rule of, 128; feedback in, 131; forced choice in, 109–10; “free money” in, 108; and government, 115– 17; incentives in, 131; investments for, see investments; and job switching, 105; mappings in, 131; matching contributions to, 108, 111, 127; and mindless choosing, 44; obstacles to saving for, 112; portable, 106; postretirement income needed in, 106–7; prudence rule of, 128; “safe harbor status” for, 129; Save More Tomorrow, 112–17, 130, 245; saving for, 103–7; simplicity in, 110; status quo bias in, 34–35, 112; synchronized to pay raises, 113; tax-favored savings accounts, 103 right to be wrong, 241 risk assessment, 25–26, 118 risk-related behavior, 7, 25, 32–33 risk tolerance, 124–25 Robur Aktiefond Contura, Sweden, 152– 53 Rogers, Kenny, “The Gambler,” 121 Romalis, John, 46–47 Roosevelt, Franklin D., 199, 206, 252 Roth, Al, 204 rules of thumb, 22–31; anchoring, 23–24; availability, 24–26; in investments, 122– 25; representativeness, 26–31; systematic biases in, 23 Rules of Thumb (Parker), 22 Rumsfeld, Donald, 86 saccharine, warnings about, 189 Saks, Michael, 176 Salganik, Matthew, 62–63 salience, 25, 98–99 same-sex relationships, 215, 220 Samuelson, William, 34 San Marcos, California, energy use in, 68–69 San Marcos, Texas, schools, 205–6 Santorum, Rick, 14 Save More Tomorrow, 112–17, 245; and automatic enrollment, 130; contributions synchronized to pay raises, 113; government role in, 115–17; obstacles to saving, 112–15; and Pension Protection Act, 115–16 scents, as cues, 71 Schiphol Airport, Amsterdam, men’s rooms in, 4 Sears, profit-sharing plan, 258n12 Seattle Windshield Pitting Epidemic, 63– 64 self-control: with credit cards, 143; and gambling, 233; market-driven, 48; and mindless choosing, 44; and Save More Tomorrow, 112; sinful goods, 73; strategies for, 44–49; and temptation, 42, 44–49; two-system conception of, 42 Sell More Tomorrow, 128 Shaikh, Altaf, 135 Shea, Dennis, 109 Shepard, Roger, 19 Sherif, Muzafer, 57–58 291 292 INDEX Shu, Suzanne, 133 Silverstein, Shel, “Smart,” 77–78 similarity heuristic, 26 Simister, Duncan, 143 simplifying strategies, 95–96 sinful goods, 73 slippery-slope argument, 236–38, 251 smoking: CARES, 232; intrusive paternalism vs., 236–37; quitting without a patch, 232; risks of, 189; and self-control, 44, 47; and social influence, 68 Snow, Tony, 103, 107 social influences, 53–71; as choice architecture, 65–69; conformity, 55–60; and cultural change, 62–65; in health care, 157; and information, 54, 71; in Jonestown, 53, 54; learning from others, 54; in peer pressure, 54, 71; power of, 55; priming, 69–71; spotlight effect, 60–62; and unpredictability, 62–65 “social norms” approach, 67–68, 180–82 Social Security, 52, 103, 105, 116–17, 145– 56, 251; and advertising, 153–56; default fund for, 146–49; lessons learned from the Swedish experience, 155–56; simplified choice process, 156; Swedish privatization of, 145–55; and timing, 153 Souleles, Nick, 51 Southern California Edison, 194 Spain, organ donations in, 179 spotlight effect, 60–62 Stafford loans, 139 status quo bias: and default option, 8, 12– 13, 35, 83; in education, 201–2; as inertia, 7–8, 34–35; and lack of attention, 35; and magazine subscriptions, 35, 85; in marriage, 217; in retirement savings, 34–35, 112 Stewart, Potter, 41 Stickk.com, 47, 231–32 Stigler, George, 208 stimulus response compatibility, 82 stocks and bonds, 118, 119–20; company stock, 125–28, 247; diversification of, 123, 127, 128; and environmental black- list, 191; market timing, 121–22; Sell More Tomorrow, 128 strategic misrepresentation, 203–4 Stroop test, 82 student loans, 138–41; avoiding, 141; college savings accounts (529 plans), 141; expected family contribution in, 139; FAFSA for, 139, 141; as opportunity to fleece confused consumers, 141; from private sector, 139–40; RECAP applied to, 141 subliminal advertising, 243–46 subprime mortgages, 134–38 sunlamps, 249–50 supply and demand, 97 Sweden, in world economy, 151 Swedish Social Security, 145–55; active choosers in, 149–53; advertising, 154– 55; asset allocation in, 149; availability bias in, 155; default fund of, 146–49, 150, 152, 155–56; inertia in, 155; Just Maximize Choices in, 145–46, 155; lessons learned from, 155–56 table test, 17–19 “target maturity funds,” 129–30 tax-favored savings accounts, 103 Tax Return, Automatic, 230–31 teenage pregnancy, 55, 234 television, default option in, 35 temptation, 40–52; and arousal, 42; cashew phenomenon, 40–41, 43; and “hot-cold empathy gap,” 42; and mental accounting, 49–52; and mindless choosing, 43–44; and packaging, 44; and self-control, 42, 44–49; sinful goods, 73; of Ulysses, 41–42, 48, 219– 20 terror alert system, 91 tetanus shots, 71 Texas, anti-littering campaign in, 60, 61 Thaler, Richard H., and Save More Tomorrow, 112–15 thinking, in Reflective System, 19–20 Third Way, 252–53 Thompson, Clive, 193–94 INDEX TIAA-CREF, 34–35, 123 Tierney, John, 232–33 Toxic Release Inventory, 190–92 tragedy of the commons, 185 transparency, 240, 244–46 Truth in Lending Act (Regulation Z), 133, 136, 137 Tversky, Amos, 23, 95 Ulysses, resisting temptation, 41–42, 48, 219–20 unpredictability, 62–65 user ratings, 96 U.S.

 

pages: 576 words: 105,655

Austerity: The History of a Dangerous Idea by Mark Blyth

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accounting loophole / creative accounting, balance sheet recession, bank run, banking crisis, Black Swan, Bretton Woods, capital controls, Carmen Reinhart, Celtic Tiger, central bank independence, centre right, collateralized debt obligation, correlation does not imply causation, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, currency peg, debt deflation, deindustrialization, disintermediation, diversification, en.wikipedia.org, ending welfare as we know it, Eugene Fama: efficient market hypothesis, eurozone crisis, financial repression, fixed income, floating exchange rates, Fractional reserve banking, full employment, German hyperinflation, Gini coefficient, global reserve currency, Growth in a Time of Debt, Hyman Minsky, income inequality, interest rate swap, invisible hand, Irish property bubble, Joseph Schumpeter, Kenneth Rogoff, liquidationism / Banker’s doctrine / the Treasury view, Long Term Capital Management, market bubble, market clearing, Martin Wolf, moral hazard, mortgage debt, mortgage tax deduction, Occupy movement, offshore financial centre, paradox of thrift, price stability, quantitative easing, rent-seeking, reserve currency, road to serfdom, savings glut, short selling, structural adjustment programs, The Great Moderation, The Myth of the Rational Market, The Wealth of Nations by Adam Smith, Tobin tax, too big to fail, unorthodox policies, value at risk, Washington Consensus

Public choice theory, like any universal gizmo, has not only helped revolutionize the institutional relationship between voters, politicians, and bankers in democratic societies, it has become, as Daniel Dennett said about evolution in Darwin’s Dangerous Idea, the “universal acid” that eats away everything it touches by turning everything into a principal-agent/rent-seeking problem.74 Think that countries in a currency union might actually come to each other’s aid out of a sense of solidarity? Don’t be so naïve. Moral hazard is ever present. Worried that you can’t tell what the future may hold? Don’t worry. Properly defined rules will make the future conform to your preferred vision. Terrified that profligate governments will not reform their economies when you compensate for their unemployment through transfers? You are right. They will not do so, they will “hide and rent seek” off your taxpayers; so their governments should be replaced with ones that you can trust. Welcome to Europe. The moral hazard logic embedded at the core of public choice arguments covers, and infects, all possible circumstances.

 

pages: 311 words: 94,732

The Rapture of the Nerds by Cory Doctorow, Charles Stross

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3D printing, Ayatollah Khomeini, butterfly effect, cognitive dissonance, combinatorial explosion, complexity theory, Credit Default Swap, dematerialisation, Drosophila, epigenetics, Extropian, gravity well, greed is good, haute couture, hive mind, margin call, phenotype, Plutocrats, plutocrats, rent-seeking, Richard Feynman, Richard Feynman, telepresence, Turing machine, Turing test, union organizing

Rather, it evolved over a period of centuries, from a tool of state censorship (you could prevent sedition by licensing big, heavy, old-fashioned metal-type printing presses) to a tool for revenue protection (Dickens and other Victorian writers were frequently on the edge of poverty because their works were copied without credit or royalty payment by any printer who could get their hands on them), and finally, recently, into a tool for rent-seeking by big corporations with paid lobbyists. Nobody in their right mind would have designed the current system—but we're stuck with it, largely because it's now a global mess, enshrined in law by international treaty: a many-headed hydra that would require broad international agreement in order to be replaced. I am a copyright criminal, and so (in all probability) are you. No, I'm not exaggerating.

You may think that's hair-splitting, but it's an important point; if I complied with the letter of the law I wouldn't be able to use those ebooks after the ereader they were licensed for died of old age (probably within a couple of years), but the mere fact of my having paid for those books doesn't entitle me (in the eyes of the law) to preserve them in a readable format. This is an example of what Cory means when he says that copyright will ultimately make criminals out of all of us if we don't re-draw the boundary between the public domain and the private interest of everyone involved in copyright—from actual content creators to rent-seeking owners of the rights to stuff they've somehow acquired the legal title to. I'm not encouraging you to make copies of stuff other people made and to sell them for a profit without giving payback to the original creators and the publishers who helped edit and produce the work. That's not cool, unless the creators explicitly said you could do that. But if your shoes pinch, it might be a sign that you need to try out a better-fitting pair, and we're trying to help with that

 

pages: 378 words: 110,518

Postcapitalism: A Guide to Our Future by Paul Mason

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Alfred Russel Wallace, bank run, banking crisis, banks create money, Basel III, Bernie Madoff, Bill Gates: Altair 8800, bitcoin, Branko Milanovic, Bretton Woods, BRICs, British Empire, business process, butterfly effect, call centre, capital controls, Claude Shannon: information theory, collaborative economy, collective bargaining, Corn Laws, corporate social responsibility, credit crunch, currency manipulation / currency intervention, currency peg, David Graeber, deglobalization, deindustrialization, deskilling, discovery of the americas, Downton Abbey, en.wikipedia.org, energy security, eurozone crisis, factory automation, financial repression, Firefox, Fractional reserve banking, Frederick Winslow Taylor, full employment, future of work, game design, income inequality, inflation targeting, informal economy, Internet of things, job automation, John Maynard Keynes: Economic Possibilities for our Grandchildren, Joseph Schumpeter, Kevin Kelly, knowledge economy, knowledge worker, late capitalism, low skilled workers, market clearing, means of production, Metcalfe's law, money: store of value / unit of account / medium of exchange, mortgage debt, Network effects, new economy, Norbert Wiener, Occupy movement, oil shale / tar sands, oil shock, payday loans, post-industrial society, precariat, price mechanism, profit motive, quantitative easing, race to the bottom, RAND corporation, rent-seeking, reserve currency, RFID, Richard Stallman, Robert Gordon, secular stagnation, sharing economy, Stewart Brand, structural adjustment programs, supply-chain management, the scientific method, The Wealth of Nations by Adam Smith, Transnistria, union organizing, universal basic income, urban decay, urban planning, wages for housework, women in the workforce

It created an argument about who gets what, which the factory owners immediately started to lose. Amid the candlelight of the pubs where the early trade unions met, David Ricardo suddenly had a whole new set of followers. The worker-intellectuals of the 1820s understood the revolutionary implication of the labour-theory: if the source of all wealth is work, then there’s a legitimate question about how that wealth should be distributed. Just as a rent-seeking aristocracy can be shown to be parasites on the productive economy, so too can capitalists be seen as parasites on the work of others. Their work is needed – but the factory system looks as if it is structured to deliver them excess rewards. ‘There is nothing more than the knowledge, skill and labour requisite [to set up a factory] on which the capitalist can found a claim to any share of the produce,’ wrote Thomas Hodgskin, a naval lieutenant turned socialist, in 1825.8 As illegal trade unions spread the doctrine of ‘Ricardian socialism’, the factory owners’ enthusiasm for the labour-theory waned.

The aim would be to ensure the global finance system could, in the short to medium term, return to its historic role: efficiently allocating capital between firms, sectors, savers and lenders, etc. The regulations could be a lot simpler than the Basel III Treaty, because they would be backed up by strict criminal enforcement and professional codes in banking, accountancy and law. The guiding principles would be to reward innovation and to penalize and discourage rent-seeking behaviour. For example, it would become a breach of professional ethics for a chartered accountant or qualified lawyer to propose a tax avoidance scheme, or for a hedge fund to store uranium in a warehouse to drive its spot price higher. In countries such as the UK, Singapore, Switzerland and the USA with globally oriented finance sectors, governments could offer a deal whereby, in return for coming clearly and transparently onshore, some limited lender of last resort facilities were made available to the remaining high-risk, profit-oriented finance firms.

 

pages: 484 words: 104,873

Rise of the Robots: Technology and the Threat of a Jobless Future by Martin Ford

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3D printing, additive manufacturing, Affordable Care Act / Obamacare, AI winter, algorithmic trading, Amazon Mechanical Turk, artificial general intelligence, autonomous vehicles, banking crisis, Baxter: Rethink Robotics, Bernie Madoff, Bill Joy: nanobots, call centre, Capital in the Twenty-First Century by Thomas Piketty, Chris Urmson, Clayton Christensen, clean water, cloud computing, collateralized debt obligation, computer age, debt deflation, deskilling, diversified portfolio, Erik Brynjolfsson, factory automation, financial innovation, Flash crash, Fractional reserve banking, Freestyle chess, full employment, Goldman Sachs: Vampire Squid, High speed trading, income inequality, indoor plumbing, industrial robot, informal economy, iterative process, Jaron Lanier, job automation, John Maynard Keynes: technological unemployment, John von Neumann, Khan Academy, knowledge worker, labor-force participation, labour mobility, liquidity trap, low skilled workers, low-wage service sector, Lyft, manufacturing employment, McJob, moral hazard, Narrative Science, Network effects, new economy, Nicholas Carr, Norbert Wiener, obamacare, optical character recognition, passive income, performance metric, Peter Thiel, Plutocrats, plutocrats, post scarcity, precision agriculture, price mechanism, Ray Kurzweil, rent control, rent-seeking, reshoring, RFID, Richard Feynman, Richard Feynman, Rodney Brooks, secular stagnation, self-driving car, Silicon Valley, Silicon Valley startup, single-payer health, software is eating the world, sovereign wealth fund, speech recognition, Spread Networks laid a new fibre optics cable between New York and Chicago, stealth mode startup, stem cell, Stephen Hawking, Steve Jobs, Steven Levy, Steven Pinker, strong AI, Stuxnet, technological singularity, telepresence, telepresence robot, The Bell Curve by Richard Herrnstein and Charles Murray, The Coming Technological Singularity, Thomas L Friedman, too big to fail, Tyler Cowen: Great Stagnation, union organizing, Vernor Vinge, very high income, Watson beat the top human players on Jeopardy!, women in the workforce

The compensation paid to workers in the financial sector has also exploded over the past three decades, and is now about 70 percent more than the average for other industries.52 The assets held by banks have ballooned from about 55 percent of GDP in 1980 to 95 percent in 2000, while the profits generated in the financial sector have more than doubled from an average of about 13 percent of all corporate profits in the 1978–1997 timeframe to 30 percent in the period between 1998 and 2007.53 No matter how you choose to measure it, finance has grown dramatically as a share of economic activity in the United States and, to a somewhat less spectacular degree, in nearly all industrialized countries. The primary complaint leveled against the financialization of the economy is that much of this activity is geared toward rent seeking. In other words, the financial sector is not creating real value or adding to the overall welfare of society; it is simply finding ever more creative ways to siphon profits and wealth from elsewhere in the economy. Perhaps the most colorful articulation of this accusation came from Rolling Stone’s Matt Taibbi in his July 2009 takedown of Goldman Sachs that famously labeled the Wall Street firm “a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money.”54 Economists who have studied financialization have found a strong correlation between the growth of the financial sector and inequality as well as the decline in labor’s share of national income.55 Since the financial sector is, in effect, imposing a kind of tax on the rest of the economy and then reallocating the proceeds to the top of the income distribution, it’s reasonable to conclude that it has played a role in a number of the trends we’ve looked at.

See personal consumption expenditure (PCE) Peltzman, Sam, 267 Peltzman effect, 267 Penn State, MOOCs and, 136 pensions, 222, 224 people analytics, 93 Perelman, Les, 130–131 per-employee valuations, technology sector and, 175 permanent income hypothesis, 210–211 personal consumption expenditure (PCE), 202n personal robots, 7 pharmacists, 172–173n pharmacy robotics, 153–155 Philippines, income inequality in, 46 Pierson, Paul, 57 Piketty, Thomas, 275 Pinker, Steven, 237 “Piquant” system, 99–100 plagiarism, MOOCs and, 136–137 Player Piano (Vonnegut), 32 PlayStation, 4 plutocracy, 219 plutonomy, 198 polarization, job-market, 50–51 politics advancing technology and, 57–58 financial elite’s influence over, 47–48, 59–60 guaranteed income concept and, 260–261, 278–279 post-scarcity economy, 247 Poterba, James, 222 poverty trap, 262 Prey (Crichton), 244 prices deflation and, 216–217 drug, 170–171 effect of automation on, 215–216 PrimeSense, 4 Princeton University, MOOCs and, 133 Principles of Economics (Frank & Bernanke), 37 Principles of Economics (Taylor & Weerapana), 37 productivity, 206–207 defined, 35n information technology and, 52 recessions and, 207–208 technological progress and, 33 wages and, xi, 33, 35–38, 38n product lifecycles, robots and, 11 professionals, erosion of employment for, xvi–xvi “Professionals Against Machine Scoring of Student Essays in High Stakes Assessment” (petition), 129, 130 progress, lack of broad-based, 64–65 proton beam facilities, 164 public universities, MOOCs and, 142 purchasing power distribution of, 197, 198 guaranteed income and, 265–266 jobs and, xvii “Quill” software, 84–86 Rabkin, Eric, 137 Race Against the Machine (Brynjolfsson & McAfee), 60 Radical Abundance (Drexler), 243, 246 radio-frequency identification (RFID), 154, 157 radiologists, artificial intelligence and, xv, 152 Rand, Ayn, 264 recessions investment and, 227 months for employment to recover, 45 productivity and, 207–208 stagnant income, rising costs, and, 217–218 See also Great Recession recursive improvement, Artificial General Intelligence and, 231–232 Redbox movie rental kiosks, 18–19 regulatory capture, 170 religious overtones of Singularity, 235 “Remaining Awake Through a Great Revolution” (King), 29–30 rent seeking, financialization and, 55–56 Republicans, income distribution preferred by, 47n reshoring, 8–12 resource depletion, technology and, xvii, 282–283 restocking, automated, 18–19 retail sector, 16–20, 87, 88. See also online retailing Rethink Robotics, 5, 7, 10 retirement income, 222 Reuther, Walter, 193 reverse engineering the brain, 237 RFID. See radio-frequency identification (RFID) Riegel v.

 

pages: 318 words: 85,824

A Brief History of Neoliberalism by David Harvey

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affirmative action, Asian financial crisis, Berlin Wall, Bretton Woods, business climate, capital controls, centre right, collective bargaining, crony capitalism, debt deflation, declining real wages, deglobalization, deindustrialization, Deng Xiaoping, Fall of the Berlin Wall, financial deregulation, financial intermediation, financial repression, full employment, George Gilder, Gini coefficient, global reserve currency, illegal immigration, income inequality, informal economy, labour market flexibility, land tenure, late capitalism, Long Term Capital Management, low-wage service sector, manufacturing employment, market fundamentalism, means of production, Mexican peso crisis / tequila crisis, Mont Pelerin Society, mortgage tax deduction, neoliberal agenda, new economy, phenotype, Ponzi scheme, price mechanism, race to the bottom, rent-seeking, reserve currency, Ronald Reagan, Silicon Valley, special economic zone, structural adjustment programs, the built environment, The Chicago School, transaction costs, union organizing, urban renewal, urban sprawl, Washington Consensus, Winter of Discontent

There are presumed to be no asymmetries of power or of information that interfere with the capacity of individuals to make rational economic decisions in their own interests. This condition is rarely, if ever, approximated in practice, and there are significant consequences.2 Better informed and more powerful players have an advantage that can all too easily be parlayed into procuring even better information and greater relative power. The establishment of intellectual property rights (patents), furthermore, encourages ‘rent seeking’. Those who hold the patent rights use their monopoly power to set monopoly prices and to prevent technology transfers except at a very high cost. Asymmetric power relations tend, therefore, to increase rather than diminish over time unless the state steps in to counteract them. The neoliberal presumption of perfect information and a level playing field for competition appears as either innocently utopian or a deliberate obfuscation of processes that will lead to the concentration of wealth and, therefore, the restoration of class power.

/Marxism 59, 148, 218 freedom concept 20, 21 freedom’s prospect 184–5, 189, 202 neoliberalism on trial 159, 180 media 40, 56, 80, 115, 156, 159 Megginson, W. 219 Mellon, A. 163 Menem, C. 104 Mercosur 79 Mertes, T. 221, 222 Mexico 138, 139, 150 consent, construction of 41, 53, 54 freedom concept 5, 15, 17, 29, 34, 36 freedom’s prospect 185, 186, 190, 199, 204 neoliberal state 73, 75, 76, 84–5 neoliberalism on trial 159, 162–5 uneven development 94, 95, 98–104, 115, 116, 118 see also PRI middle class 25, 61–2, 181 Middle East 12, 94, 109, 139 freedom’s prospect 197, 206 Islam 83, 186 neoliberal state 71, 83, 85 neoliberalism on trial 171, 173 see also Iraq; Islam migration 127, 129, 169–70 Miliband, R. 212 military consent, construction of 39, 40 -industrial complex 83 Keynesianism 88 militarization 82–3, 101, 107, 195 neoliberalism on trial 153, 179 see also war Millennium Summit 187 Mises, L. von 20 Mittelman, J. 215 Monbiot, G. 219 ‘Monday Club’ 8 monetarism 24–5 China 123–4 consent, construction of 51, 54, 59 Friedman 8, 20, 22, 44 uneven development 89, 93 monopoly 67, 80 Mont Pelerin Society 20, 21, 22, 36 Montreal Protocol 172 morality ‘moral majority’ 49–51 neoliberal state 82, 83–4, 211 see also religion Morrison, H. 55 Mosaddeq, M. 28 Mozambique 40, 116, 117, 118 multinationals 7, 35–6, 80 Muntaner, C. 220 Murdoch, R. 34, 35–6, 38, 166 Murphy, D. 220 Myers, N. 220 NAFTA 79, 93, 101, 103, 138 Nash, J. 213 nation/national ‘interest’ 66 monopoly on violence 180–1 nationalism 79, 85, 195–6, 197 and state separate 84–5 nationalization 55, 57–8, 99 NATO 56 natural resources see commons Navarro, V. 212, 220, 221 neoclassical economics 20 neocolonialism/imperialism 27–8, 56, 159, 181–2, 197 see also United States neoconservatism 50, 81–5, 166 return of 195–7, 201–2, 204–5 see also authoritarianism neoliberal state 2, 64–88, 161, 211–13 circumscribed see Sweden freedom concept 7–11, 20–1 intervention 20–1, 79 see also Keynes and nation separate 84–5 neoconservative answer 81–5 practice 70–81 redistributions 159, 160, 163–5 tensions and contradictions 67–70, 79–81 theoretical aims 64–7 see also welfare, public neoliberal theory and pragmatics distinct 21–2 rise of 19–31 state 64–7 turn, reasons for 9–19 neoliberalism 2 defined 2–3 see also China; consent; freedom; freedom’s prospect; neoliberal state; neoliberalism on trial; uneven development neoliberalism on trial 152–82 achievements 154–65 environment degraded 67–8, 172–5 see also accumulation by dispossession; commodification; rights Netherlands/Holland 27 Netter, J. 219 New York City 52, 63, 157 finance/banks 27, 28–9, 44–8, 73, 97–8, 100 New Zealand 3, 96, 140 NGOs (non-governmental organizations) 78, 177, 205 Nicaragua 27, 117 ‘9/11’ attack 5, 83, 195 Nixon, R. 13, 43, 45, 196 non-interference see deregulation non-intervention 69 Novacek, M. 220 Nozick, M. 211 OECD countries 17, 18, 110 Office of Management and Budget (US) 52 Ohmae, K. 212 oil 173 OPEC 12, 27, 197 oligarchy, Russian 32 oppositional culture 175–6 order, need for 82–3 PACs (political action committees) 49 Pahlavi, Shah M.R. 28 Panitch, L. 28, 208, 219 paranoia 82–3, 196 Park Chung Hee 107, 108 PATCO (US) 25, 59 Pearl River Delta 87, 131, 132 Peck, J. 207, 208, 213 Pelaez, E. 219 Perkins, J. 28 Perloff, J. 143 ‘personal responsibility’ 168–9 Peterson, I. 219 Petras, J. 106, 220 Philippines 31–2, 40, 206 uneven development 89, 94, 95, 96, 117 Piketty, T. 208 Pinochet, A. 7, 8 Piore, M. 212 planning and control 12, 75, 103, 156 as denial of freedom 37 see also central planning Podhoretz, N. 50 Poland 94, 95, 154 politics 69–70, 205 oppositional 78 see also Conservatives; Democrats; Republicans see also socialism/communism Pollin, R. 25 pollution 67–8, 100, 161, 172–5 Polyani, K. 183 freedom concept 36–7, 38 neoliberal state 70, 80–1 neoliberalism on trial 166–7, 168, 172, 219 Ponniah, T. 222 Popper, K. 20 pornography 165–6, 170 Portillo, L. 99 Portugal 12, 13, 15 Post, R. 212 postmodernism 4, 42, 47, 198 Poulantaz, N. 211 poverty, increasing 76, 96, 98 see also debt Powell, L. 43, 44 power international hegemon see United States regional hegemon see China see also class; coercion/force; corporations; elites; financial system pragmatics and neoliberalism distinct 21–2 Prasad, E. 128 pre-emptive action 296–7 against Iraq 6–7, 9, 35, 39, 153, 160, 184, 197 PRI (Partido Revolucionario Institucional) 84–5, 98–101, 150 see also Mexico prices, controlled 12 private property 7 see also commons privatization 3, 129 avoided in China 122 consent, construction of 60–1 freedom concept 6, 8, 17, 23 neoliberal state 65, 71, 76–7 neoliberalism on trial 154, 159–61, 163–4 uneven development 88, 99–101, 103, 104, 114 productivity and wages 25 propaganda 70, 80, 113 property rights 64 public assets taken over see privatization see also nationalization; neoliberal state; welfare public choice 54 public-private partnerships 76–8 Putin, V. 86 quality of life concept 156 Quirk, P. 219 Rapley, J. 210 rational expectations 54 Reagan, R. 1–2, 88, 172 consent, construction of 39, 40, 44, 48, 49, 51–2, 54, 59, 62–3 freedom concept 9, 24–6, 29 freedom’s prospect 190, 192 neoliberal state 73, 84 recession 23, 57, 152 Rees, G. 211 regulation see law Rehn-Meidner Plan 112 religion 81, 85, 171–2, 195 Christianity 49–51, 186 Islam 83, 186 see also morality ‘rent seeking’ 68 Republicans (US) consent, construction of 43, 45, 48–51 freedom concept 5–6, 13, 37–8, 39, 208 freedom’s prospect 184, 188, 190, 196, 197 neoliberal state 71, 77 neoliberalism on trial 152, 160, 164, 172, 173, 182 see also Bush; Nixon; Reagan research and development 134 see also technology resources, natural see commons retail trade 34, 38, 137, 190 Ricardo, D. 20 richest people 103–4 see also elites rights and abuse of 42, 196, 197–8, 204 neoliberal state 64, 68, 78, 84 neoliberalism on trial 160–5, 175–82 Robinson, W. 209 Rockefeller, J.D. 21 Roderick, J. 32 Rodrik, D. 220 Rohatyn, F. 46, 51 Roosevelt, F.

 

pages: 112 words: 30,160

The Gated City (Kindle Single) by Ryan Avent

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big-box store, carbon footprint, deindustrialization, edge city, Edward Glaeser, income inequality, labor-force participation, low skilled workers, manufacturing employment, offshore financial centre, profit maximization, rent-seeking, Silicon Valley, Thorstein Veblen, transit-oriented development, Tyler Cowen: Great Stagnation

But while there’s some truth to these narratives of urban success, they can't explain why most people opt to live in cities. About 80% of Americans live in metropolitan areas, despite the fact that land there is generally more expensive than in the surrounding rural areas. One in three Americans lives in the country’s 15 largest cities alone. There is too much of a metropolitan component to modern life to chalk metropolitan ubiquity up to showing off and rent-seeking and nothing else. And there is another matter to consider -- cities are full of firms that produce for other markets. Why is this an issue? People have the option to live most anywhere they want. A person isn't going to take a job in an expensive city unless that job compensates him for the higher cost of living. A worker thinking about taking a position that pays twice his current wage in a city that's three times as expensive will quickly realize that this means a reduction in his real earnings, and he'll think twice before accepting.

 

pages: 128 words: 38,187

The New Prophets of Capital by Nicole Aschoff

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3D printing, affirmative action, Affordable Care Act / Obamacare, Airbnb, Bretton Woods, clean water, collective bargaining, crony capitalism, feminist movement, follow your passion, Food sovereignty, glass ceiling, global supply chain, global value chain, helicopter parent, hiring and firing, income inequality, Khan Academy, late capitalism, Lyft, Mark Zuckerberg, means of production, performance metric, profit motive, rent-seeking, Ronald Reagan, Rosa Parks, school vouchers, shareholder value, sharing economy, Silicon Valley, Slavoj Žižek, structural adjustment programs, Thomas L Friedman, Tim Cook: Apple, urban renewal, women in the workforce, working poor

As Cambridge professor of economics Ha-Joon Chang argues, this is neither theoretical quibbling nor simply a quest for historical “truth.” Instead, getting the historical narrative right is important because the stories we tell “deeply affect the very way in which we understand the nature and the development of the market, as well as its interrelationship with the state and other institutions.”26 In the neoliberal narrative states are interlopers, under the thumb of rent-seeking politicians and bureaucrats, whose field of action should be restricted. The market, and the firm within it, is a natural thing following nature’s laws, and the state is an unnatural, potentially dangerous thing, following human laws. The implication of this historical narrative is that the state must always justify its actions—justify why it is messing with natural market processes that, according to neoliberals, don’t need its intervention.

 

pages: 872 words: 135,196

The Market for Force: The Consequences of Privatizing Security by Deborah D. Avant

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barriers to entry, corporate social responsibility, failed state, hiring and firing, interchangeable parts, Mikhail Gorbachev, Peace of Westphalia, private military company, profit motive, RAND corporation, rent-seeking, rolodex, the market place, The Nature of the Firm, trade route, transaction costs

Over the long term, though, functional control in strong states would be better served by encour- aging bureaucratic change than by relying on PSCs. Strong states nonetheless have superior monitoring and sanctioning capacity that should lead them to be in a better position to control PSCs than weaker states. Strong states have mechanisms to extract revenue in a central tax system, an established system of contracting, and a variety of mechanisms to inhibit rent seeking by either the state or private agents. Though contracting for security services may be less ideal than instance, argues for a distinction between strong and weak states on the bases of the state’s capacity, coherence, and legitimacy. Varying degrees of “stateness” are tied to the state’s ability to maintain firm control over the military and police; to influence members of society; to generate functionally complex organizations; and to have those agencies work together in a coherent fashion.

in Britain 170, 173, 175 commercial reputation and interest 85, in late Middle Ages 246 110 in South Africa 161 cowboy model 226–28 in US 149–51 in Garamba 209 reinforcing process of control 6, 7, 40–45, in Goma Camps 198–200 56–57, 61, 62, 63, 65, 72, 76, 82, in Iraq 21–22, 239–40 113, 120, 136–38, 139–40, 218, nationality of personnel 2 255, 256 services offered 16–22, 48 in Italian City States 250 South African PSCs 158–67 uncertainty of 251–52 “starched shirt” model 226, 228 Reno, Will 92, 185, 251 private security consultant to WWF rent seeking 58 211–12 rentier state 181 private security industry 3–7 Research Triangle Institute 2, 239 characteristics of 144 Resistancia Nacional Mocambicana consumer demand for 144–45 (RENAMO) 172 revenues 8 Revolutionary United Front (RUF) 84 privatization 22, 24–25, 32, 35–36, 38, 40, Robertson, Lord 222 47, 57, 58, 78, 80–81 Ron, James 201 privatization of security 39, 40, 49, 253, Rubicon, International 169 254, 256, 259, 263 and the control of force 3, 4–5, 6–7, 40, SAIC 18, 121, 122, 124 43 Saladin 169 financing of security 70–76, 78, sanctioning 43, 58, 71 178–218 Sandline 17, 18, 19, 169 see also market for force in Sierra Leone 92, 97, 98, 171, 172, professional military see military 174–75, 232, 237 professionalism Saracen 19, 159, 160, 166, 210–11, 213 public 23–24 Saro-Wiwa, Ken 184, 186, 236 public goods 27, 34, 62, 155 Saudi Arabia 152 public institutions 46–48, 61–62, 76, 81, Saudi Arabian forces 148 140, 146 Saxena, Rakesh 93, 95 in South Africa 167 Schakowsky, Jan 129 public sphere 3 screening and selection 56, 59, 133 public/private divide 23 Secrets 18 choice 24 September 11th 7, 34, 160 comparison between 4, 43 service industries 66 Seven Years War 28 Ramsbotham, General Sir David 9 Sewell, John 102 rational legal authority 45, 59, 63, 71 Shearer, David 5, 6, 52–53, 55–56, 238 rationalist 56 Shell, Royal Dutch 16, 77, 184–85, 187, rebel forces 70, 71 188–92, 236, 255 redistribution of power 60, 91–92, 145 Shell business principles 190 in Croatia 110 Shell police 184 in Sierra Leone 114–15 Shibata 160 in the US 146 Sierra Leone 7, 39, 68, 77, 139, 160, 170, Redlich, Fritz 246 171, 172, 174–75, 225–26, 232, 237, Refugees International 238 240, 255 regulation 65–70, 144, 145 and contracting for security services dilemmas of 144–45, 177 82–98 309 Index Sierra Leone Army (RSLMF) 85–98 Sudanese People’s Liberation Army Sierra Leone People’s Party (SLPP) 84 (SPLA) 205, 209 Silver Shadow 19 Sumairco 19 Silverstein, Ken 4, 5, 156 Susak, Gojko 101, 106 Singer, Peter 16, 155 Sky Air Cargo Service 171 Taliban 224 Sobel 84 Tallman, Gary 227 social norms and practices 3, 49, 51, 63, TASK International 21 75, 81, 134, 143, 145 Taylor, Charles 94 socialization 56 Terry, Fiona 196–97, 200, 201 sociological institutionalism 49–54, 71, 79 Thatcher, Margaret 35 soldiers of fortune see mercenaries Thirty Years War 245, 247, 250 Soruss 89 Thomson, Janice 30, 247 South Africa 39, 67, 77, 145, 220, 256, threat environment 21, 33–34, 62 260, 262 THULE Global Security International 20 and citizens working illegally in Iraq tip of the spear 16–22 163, 235 Titan 2, 235 human security 162, 158 Tito 98 Regulation of Foreign Military Total Security Services International 149 Assistance Act 161–63, 165 transaction cost economics 46–49 regulation of security service exports TransAfrica Logistics 159 157–67 transnational corporations (TNCs) 30, regulatory environment 161 38, 71, 72, 74, 76, 148, 180–192, South African Defense Force (SADF) 257 164, 211 transnational market see market for force South African National Defense Force transparency 60, 74, 82, 154 (SANDF) 211 Trojan Securities International 18, 21 Southern Cross Security (SCS) 19, 160, Tudjman, Franjo 99–108, 139, 153 166 sovereign transactions/services 47–49, 54, United Kingdom see Britain 58, 61, 81 United Nations 34, 37, 69, 170, 171, 198, sovereignty 43, 52, 59, 257–58, 264 199, 203 Soyster, Harry “Ed” 104 and private security 9, 198–200, Spicer, Tim 227–31 237–38 standards 56, 68, 71, 74 and South African PSCs 166 see also military professionalism: military United Nations Department of Peace professional norms and standards Keeping (DPKO) 195–200 state, the 18, 23–24, 27, 45, 46, United Nations Global Compact 187 257–58 United Nations High Commissioner for definition of 1 Refugees (UNHCR) 195–97, state building 63, 76 201–02 see also strong states, weak states United Nations peace missions 29, 37 Stevens, Siaka 83, 84 and DSL 9 Stirling, Sir David 169 and private security 7, 19, 149 Strasser, Valentine 89 UNAMSIL 95 Strategic Resources Corporation 160 United Nations Special Rapporteur on strong states 7, 59, 60, 71, 256, 259 the Use of Mercenaries 230–31 as distinguished from weak states in United States 1, 4, 7, 29, 31–32, 38, 39, contracting for security 81–82 77, 139, 145, 220–28, 256, 259–61, Sudan 160, 209 262 Index 310 United States (cont.)

 

Crisis and Leviathan: Critical Episodes in the Growth of American Government by Robert Higgs, Arthur A. Ekirch, Jr.

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Alistair Cooke, clean water, collective bargaining, credit crunch, declining real wages, endowment effect, fiat currency, full employment, hiring and firing, income per capita, Joseph Schumpeter, laissez-faire capitalism, manufacturing employment, means of production, minimum wage unemployment, Plutocrats, plutocrats, post-industrial society, price discrimination, profit motive, rent control, rent-seeking, Richard Thaler, road to serfdom, Ronald Reagan, Simon Kuznets, strikebreaker, The Wealth of Nations by Adam Smith, total factor productivity, transaction costs, transcontinental railway, union organizing, Upton Sinclair, War on Poverty, Works Progress Administration

Although one can conceive of a 300 Notes society's attaining such consensus, empirical examples do not come readily to mind. As Samuels and Mercuro have noted, "There are no correct rights, price, and rent structure and attendant distribution. There is, rather, a contest over rights.... [T]he process of determining the legal change of economic interests to be protected as legal rights is the critical legal-economic process." Warren J. Samuels and Nicholas Mercuro, "A Critique of Rent-Seeking Theory," in Neoclassical Political Economy, ed. David C. Colander (Cambridge, Mass.: Ballinger, 1984), pp. 59, 65, emphasis in original. 14. Quoted by Jerold Waltman, "Origins of the Federal Income Tax," MidAmerica 62 (Oct. 1980): 155. According to John F. Witte, Aldrich's proposals originated in the Taft administration, which sought to "defuse a potential constitutional crisis between Congress and the Supreme Court."

Public Choice 47 (1985). Rourke, Francis E. Bureaucracy, Politics, and Public Policy. 2nd ed. Boston: Little Brown, 1976. Samuels, WarrenJ. "A Critique of Capitalism, Socialism, and Democracy." In Capitalism and Democracy: Schumpeter Revisited, ed. Richard D. Coe and Charles K. Wilber. Notre Dame, Ind.: University of Notre Dame Press, 1985. Samuels, Warren J., and Nicholas Mercuro. "A Critique of Rent-Seeking Theory." In Neoclassical Political Economy, ed. David C. Colander. Cambridge, Mass.: Ballinger, 1984. Schumpeter, Joseph A. Capitalism, Socialism, and Democracy. 3rd ed. New York: Harper & Row, 1950. Sen, Amartya K. "Rational Fools: A Critique of the Behavioral Foundations of Economic Theory." Philosophy & Public Affairs 6 (Summer 1977). Siegel, Barry N., ed. Money in Crisis: The Federal Reserve, the Economy, and Monetary Reform.

 

pages: 497 words: 144,283

Connectography: Mapping the Future of Global Civilization by Parag Khanna

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1919 Motor Transport Corps convoy, 2013 Report for America's Infrastructure - American Society of Civil Engineers - 19 March 2013, 3D printing, 9 dash line, additive manufacturing, Admiral Zheng, affirmative action, agricultural Revolution, Airbnb, Albert Einstein, amateurs talk tactics, professionals talk logistics, Amazon Mechanical Turk, Asian financial crisis, asset allocation, autonomous vehicles, banking crisis, Basel III, Berlin Wall, bitcoin, Black Swan, blockchain, borderless world, Boycotts of Israel, Branko Milanovic, BRICs, British Empire, business intelligence, call centre, capital controls, charter city, clean water, cloud computing, collateralized debt obligation, complexity theory, corporate governance, corporate social responsibility, credit crunch, crony capitalism, crowdsourcing, cryptocurrency, cuban missile crisis, data is the new oil, David Ricardo: comparative advantage, deglobalization, deindustrialization, dematerialisation, Deng Xiaoping, Detroit bankruptcy, diversification, Doha Development Round, edge city, Edward Snowden, Elon Musk, energy security, ethereum blockchain, European colonialism, eurozone crisis, failed state, Fall of the Berlin Wall, family office, Ferguson, Missouri, financial innovation, financial repression, forward guidance, global supply chain, global value chain, global village, Google Earth, Hernando de Soto, high net worth, Hyperloop, ice-free Arctic, if you build it, they will come, illegal immigration, income inequality, income per capita, industrial robot, informal economy, Infrastructure as a Service, interest rate swap, Internet of things, Isaac Newton, Jane Jacobs, Jaron Lanier, John von Neumann, Julian Assange, Just-in-time delivery, Kevin Kelly, Khyber Pass, Kibera, Kickstarter, labour market flexibility, labour mobility, LNG terminal, low cost carrier, manufacturing employment, mass affluent, megacity, Mercator projection, microcredit, mittelstand, Monroe Doctrine, mutually assured destruction, New Economic Geography, new economy, New Urbanism, offshore financial centre, oil rush, oil shale / tar sands, oil shock, openstreetmap, out of africa, Panamax, Peace of Westphalia, peak oil, Peter Thiel, Plutocrats, plutocrats, post-oil, post-Panamax, private military company, purchasing power parity, QWERTY keyboard, race to the bottom, Rana Plaza, rent-seeking, reserve currency, Robert Gordon, Robert Shiller, Robert Shiller, Ronald Coase, Scramble for Africa, Second Machine Age, sharing economy, Shenzhen was a fishing village, Silicon Valley, Silicon Valley startup, six sigma, Skype, smart cities, Smart Cities: Big Data, Civic Hackers, and the Quest for a New Utopia, South China Sea, South Sea Bubble, sovereign wealth fund, special economic zone, spice trade, Stuxnet, supply-chain management, sustainable-tourism, TaskRabbit, telepresence, the built environment, Tim Cook: Apple, trade route, transaction costs, UNCLOS, uranium enrichment, urban planning, urban sprawl, WikiLeaks, young professional, zero day

Belgium scarcely exists as a united country but is rather dissolving into linguistic kinships as its Dutch-speaking provinces gravitate toward the Netherlands, French-speaking regions drift toward France, Flemish craft their own identity and diplomacy, and Brussels serves as the EU’s capital. The archetype of the modern Western multiethnic, liberal democratic nation-state is being chipped away as cities and provinces make concrete cost-benefit calculations in their engagements with rent-seeking capital cities. Nations are becoming federations of powerful local administrative centers. In recent years, the Catalans and the Scots have also moved decisively toward greater autonomy, gaining the substance of independence without (yet) the style. They have achieved “dev-max”—maximum devolution. The center cannot win. When federal governments give an inch—as Tony Blair did by granting Scotland its own parliament in 1997—the Scots continue to want a full yard.

., and Joseph S. Nye. Power and Interdependence. Longman, 1977. Keynes, John Maynard. The Economic Consequences of the Peace. Harcourt, Brace, and Howe, 1920. ———. The General Theory of Employment, Interest, and Money. CreateSpace, 2011. Khan, Mushtaq H. “Beyond Good Governance: An Agenda for Developmental Governance.” SOAS, University of London, 2012. Khan, Mushtaq H., and K. S. Jomo. Rents, Rent-Seeking, and Economic Development: Theory and Evidence in Asia. Cambridge University Press, 2000. Khanna, Parag. How to Run the World: Charting a Course to the Next Renaissance. Random House, 2011. ———. The Second World: How Emerging Powers Are Redefining Global Competition in the Twenty-First Century. Random House Trade Paperbacks, 2009. Khanna, Parag, and Ayesha Khanna. Hybrid Reality: Thriving in the Emerging Human-Technology Civilization.

 

pages: 515 words: 126,820

Blockchain Revolution: How the Technology Behind Bitcoin Is Changing Money, Business, and the World by Don Tapscott, Alex Tapscott

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Airbnb, altcoin, asset-backed security, autonomous vehicles, barriers to entry, bitcoin, blockchain, Bretton Woods, business process, Capital in the Twenty-First Century by Thomas Piketty, carbon footprint, clean water, cloud computing, cognitive dissonance, corporate governance, corporate social responsibility, Credit Default Swap, crowdsourcing, cryptocurrency, disintermediation, distributed ledger, Donald Trump, double entry bookkeeping, Edward Snowden, Elon Musk, Erik Brynjolfsson, ethereum blockchain, failed state, fiat currency, financial innovation, Firefox, first square of the chessboard, first square of the chessboard / second half of the chessboard, future of work, Galaxy Zoo, George Gilder, glass ceiling, Google bus, Hernando de Soto, income inequality, informal economy, interest rate swap, Internet of things, Jeff Bezos, jimmy wales, Kickstarter, knowledge worker, Kodak vs Instagram, Lean Startup, litecoin, Lyft, M-Pesa, Mark Zuckerberg, Marshall McLuhan, means of production, microcredit, mobile money, Network effects, new economy, Oculus Rift, pattern recognition, peer-to-peer lending, performance metric, Peter Thiel, planetary scale, Ponzi scheme, prediction markets, price mechanism, Productivity paradox, quantitative easing, ransomware, Ray Kurzweil, renewable energy credits, rent-seeking, ride hailing / ride sharing, Ronald Coase, Ronald Reagan, Satoshi Nakamoto, Second Machine Age, seigniorage, self-driving car, sharing economy, Silicon Valley, Skype, smart contracts, smart grid, social graph, social software, Stephen Hawking, Steve Jobs, Steve Wozniak, Stewart Brand, supply-chain management, TaskRabbit, The Fortune at the Bottom of the Pyramid, The Nature of the Firm, The Wisdom of Crowds, transaction costs, Turing complete, Turing test, Uber and Lyft, unbanked and underbanked, underbanked, unorthodox policies, X Prize, Y2K, Zipcar

It built only six.52 In its defense, the Red Cross argued that Haiti’s shoddy land title registry hindered its efforts: nobody could figure out who actually owned the land. As a result, the Red Cross improvised a less desirable solution. Could a blockchain-based land title registry improve this situation by providing clear title and perhaps prevent unlawful expropriation? Foreign aid is perhaps the clearest example of the ineptitude of many governments and the rent-seeking behavior of unethical intermediaries, and is thus excellent grounds to explore blockchain solutions. The 2010 Haiti earthquake was one of the most devastating humanitarian crises of the past hundred years.53 While the government was paralyzed and the crisis raged on, thousands of “digital humanitarians” converged on the Internet to help first responders collect, triage, and visualize pleas for help from mobile phones of devastated Haitians.

Interview with Eric Piscini, July 13, 2015. 45. http://corporate.westernunion.com/Corporate_Fact_Sheet.html. 46. At the time of writing, Abra had not opened its doors in Canada. However, we were able to test Abra’s technology with Analie and her mother successfully with Abra’s help. 47. Interview with Bill Barhydt, August 25, 2015. 48. Ibid. 49. Ibid. 50. “Foreign Aid and Rent-Seeking, The Journal of International Economics, 2000, 438; http://conferences.wcfia.harvard.edu/sites/projects.iq.harvard.edu/files/gov2126/files/1632.pdf. 51. Ibid. 52. www.propublica.org/article/how-the-red-cross-raised-half-a-billion-dollars-for-haiti-and-built-6-homes. 53. “Mortality, Crime and Access to Basic Needs Before and After the Haiti Earthquake,” Medicine, Conflict and Survival 26(4) (2010). 54. http://unicoins.org/. 55.

 

pages: 170 words: 51,205

Information Doesn't Want to Be Free: Laws for the Internet Age by Cory Doctorow, Amanda Palmer, Neil Gaiman

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Airbnb, barriers to entry, Brewster Kahle, cloud computing, Dean Kamen, Edward Snowden, game design, Internet Archive, John von Neumann, Kickstarter, optical character recognition, Plutocrats, plutocrats, pre–internet, profit maximization, recommendation engine, rent-seeking, Saturday Night Live, Skype, Steve Jobs, Steve Wozniak, Stewart Brand, transfer pricing, Whole Earth Catalog, winner-take-all economy

We get it only if we give up on the Hollywood-versus-Google narrative, and stop letting our creative output be hijacked in the service of censorship, surveillance, and control. I’m not anti-regulation. But we need to decide what kind of regulation we want. The Internet can have rules that encourage centralization—rules permitting network discrimination, rules protecting digital rights management, rules providing for easy takedown—and, with them, rent-seeking, abusive sharecropping, spying, and censorship. Or it can have rules that promote an open, pluralistic, networked public space where anyone can communicate; rules that encourage disclosure of security vulnerabilities; rules that encourage competition by allowing interoperable products and technologies. It has never been cheaper to make art, and it’s never been cheaper to reach an audience. There’s never been such broad and deep access to the creative output of our artistic forebears.

 

pages: 226 words: 59,080

Economics Rules: The Rights and Wrongs of the Dismal Science by Dani Rodrik

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airline deregulation, Albert Einstein, bank run, barriers to entry, Bretton Woods, butterfly effect, capital controls, Carmen Reinhart, central bank independence, collective bargaining, Daniel Kahneman / Amos Tversky, David Ricardo: comparative advantage, distributed generation, Edward Glaeser, Eugene Fama: efficient market hypothesis, Fellow of the Royal Society, financial deregulation, financial innovation, floating exchange rates, fudge factor, full employment, George Akerlof, Gini coefficient, Growth in a Time of Debt, income inequality, inflation targeting, informal economy, invisible hand, Jean Tirole, Joseph Schumpeter, Kenneth Rogoff, labor-force participation, liquidity trap, loss aversion, low skilled workers, market design, market fundamentalism, minimum wage unemployment, oil shock, open economy, price stability, prisoner's dilemma, profit maximization, quantitative easing, randomized controlled trial, rent control, rent-seeking, Richard Thaler, risk/return, Robert Shiller, Robert Shiller, school vouchers, South Sea Bubble, spectrum auction, The Market for Lemons, the scientific method, The Wealth of Nations by Adam Smith, Thomas Kuhn: the structure of scientific revolutions, Thomas Malthus, trade liberalization, trade route, ultimatum game, University of East Anglia, unorthodox policies, Washington Consensus, white flight

Among colleagues, the shortcomings of markets and the ways in which policy intervention can make things better are fair game. Academic reputations are built on new and imaginative demonstrations of market failure. But in public, the tendency is to close ranks and support free markets and free trade. This dynamic produces what I call the “barbarians are only on one side” syndrome. Those who want restrictions on markets are organized lobbyists, rent-seeking cronies, and their ilk, while those who want freer markets, even when they’re wrong, have their hearts in the right place and are therefore much less dangerous. Taking up the cause of the former gives ammunition to the barbarians, while siding with the latter is, at worst, an honest mistake with no huge consequences. Forced to take a stand, most economists are likely to cast their vote in favor of the more market-oriented alternative.

 

pages: 267 words: 71,123

End This Depression Now! by Paul Krugman

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airline deregulation, Asian financial crisis, asset-backed security, bank run, banking crisis, Bretton Woods, capital asset pricing model, Carmen Reinhart, centre right, correlation does not imply causation, credit crunch, Credit Default Swap, currency manipulation / currency intervention, debt deflation, Eugene Fama: efficient market hypothesis, financial deregulation, financial innovation, Financial Instability Hypothesis, full employment, German hyperinflation, Gordon Gekko, Hyman Minsky, income inequality, inflation targeting, invisible hand, Joseph Schumpeter, Kenneth Rogoff, labour market flexibility, labour mobility, liquidationism / Banker’s doctrine / the Treasury view, liquidity trap, Long Term Capital Management, low skilled workers, Mark Zuckerberg, moral hazard, mortgage debt, paradox of thrift, price stability, quantitative easing, rent-seeking, Robert Gordon, Ronald Reagan, Upton Sinclair, We are the 99%, working poor, Works Progress Administration

Such arguments suggest that changes in the political climate after 1980 may have cleared the way for what amounts to the raw exercise of power to claim high incomes, in a way that wasn’t considered doable earlier. It’s surely relevant here to note the sharp decline in unionization during the 1980s, which removed one major player that might have protested huge paychecks for executives. Recently Piketty and Saez have added a further argument: sharp cuts in taxes on high incomes, they suggest, have actually encouraged executives to push the envelope further, to engage in “rent-seeking” at the expense of the rest of the workforce. Why? Because the personal payoff to a higher pretax income has risen, making executives more willing to risk condemnation and/or hurt morale by pursuing personal gain. As Piketty and Saez note, there is a fairly close negative correlation between top tax rates and the top 1 percent’s share of income, both over time and across countries. What I take from all this is that we should probably think of rapidly rising incomes at the top as reflecting the same social and political factors that promoted lax financial regulation.

 

pages: 283 words: 81,163

How Capitalism Saved America: The Untold History of Our Country, From the Pilgrims to the Present by Thomas J. Dilorenzo

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banking crisis, British Empire, collective bargaining, corporate governance, corporate social responsibility, financial deregulation, Fractional reserve banking, Hernando de Soto, income inequality, invisible hand, Joseph Schumpeter, laissez-faire capitalism, means of production, medical malpractice, Menlo Park, minimum wage unemployment, Plutocrats, plutocrats, price stability, profit maximization, profit motive, Ralph Nader, rent control, rent-seeking, Ronald Coase, Ronald Reagan, Silicon Valley, statistical model, The Wealth of Nations by Adam Smith, transcontinental railway, union organizing, Upton Sinclair, working poor, Works Progress Administration

He also believed in rewarding his most innovative managers with bonuses and paid time off if they came up with good ideas for productivity improvements, a simple lesson that many modern corporations seem to have never learned. Of course, in every industry the less efficient competitors can be expected to snipe at their superior rivals, and in many instances sniping turns into an organized political crusade to get the government to enact laws or regulations that harm the superior competitor. Economists call this process “rent seeking”; in the language of economics, “rent” means a financial return on an investment or activity in excess of what the activity would normally bring in a competitive market. This sort of political crusade by less successful rivals is precisely what crippled the great Rockefeller organization. The governmental vehicle that was chosen to cripple Standard Oil was antitrust regulation. Standard Oil’s competitors succeeded in getting the federal government to bring an antitrust or antimonopoly suit against the company in 1906, after they had persuaded a number of states to file similar suits in the previous two or three years.

 

pages: 255 words: 75,172

Sleeping Giant: How the New Working Class Will Transform America by Tamara Draut

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affirmative action, Affordable Care Act / Obamacare, battle of ideas, big-box store, blue-collar work, collective bargaining, David Brooks, declining real wages, deindustrialization, desegregation, Detroit bankruptcy, Donald Trump, Edward Glaeser, ending welfare as we know it, Ferguson, Missouri, financial deregulation, full employment, immigration reform, income inequality, invisible hand, job satisfaction, knowledge economy, knowledge worker, low skilled workers, minimum wage unemployment, mortgage tax deduction, new economy, obamacare, occupational segregation, payday loans, pink-collar, Plutocrats, plutocrats, profit motive, race to the bottom, Ralph Nader, rent-seeking, rising living standards, Ronald Reagan, The Bell Curve by Richard Herrnstein and Charles Murray, The Wealth of Nations by Adam Smith, trickle-down economics, union organizing, upwardly mobile, War on Poverty, white flight, women in the workforce, young professional

About half of CWA’s 700,000 members are white, so bridging differences across race and ethnicity is his bread-and-butter. As Návar sees it, one of the chief obstacles to building that kind of solidarity is a deep class analysis about why workers, including the white working class, have lost so much ground. Without a shared understanding of how capitalism has been reengineered by elites in the past three decades to encourage financial and capital rent-seeking behavior, the working class (and the middle class as well) can be easily steered toward scapegoating a group of people as the source of their problems. Without an understanding of how the rules have been rewritten, the lack of good jobs gets blamed on undocumented immigrants by both the white and the black working class. Meanwhile, the white working class can view its inability to move up the income ladder as the fault of affirmative action, with blacks supposedly taking the best jobs that would have otherwise gone to white people.

 

pages: 556 words: 46,885

The World's First Railway System: Enterprise, Competition, and Regulation on the Railway Network in Victorian Britain by Mark Casson

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banking crisis, barriers to entry, Beeching cuts, British Empire, combinatorial explosion, Corn Laws, corporate social responsibility, David Ricardo: comparative advantage, intermodal, iterative process, joint-stock company, joint-stock limited liability company, knowledge economy, linear programming, Network effects, New Urbanism, performance metric, railway mania, rent-seeking, strikebreaker, the market place, transaction costs

He argues for the institutionalization of collusion as a general cause of economic decline in nations, and he uses Britain as an exemplary case. His focus is on two types of horizontal combination: combinations of workers—namely trades unions—and combinations of firms—namely trade associations and cartels. These combinations are designed to raise wages and prices by eliminating competition; in other words, they are generated by ‘rent seeking’ rather than ‘efficiency-seeking’ behaviour (Baumol 1994). According to Olson, lengthy apprenticeship schemes and restrictive practices reduced occupational mobility. The labour market became segmented into Railways in the Victorian Economy 41 distinctive crafts, with particular types of job reserved for members of particular unions. A social hierarchy of crafts developed, analogous to an Indian caste system.

A social hierarchy of crafts developed, analogous to an Indian caste system. So far as firms were concerned, government became increasingly willing to listen to demands for the protection of domestic and colonial markets. As the international competitiveness of British labour declined, so trade associations became increasingly vociferous. Government failed to take a tough line with firms in mature manufacturing industries that had switched from efficiency-seeking to rent-seeking activities. 2 . 6 . C U LT U R A L E X P L A NAT I O N S O F E N T R E P R E N E U R I A L D EC L I N E Decline in late Victorian Britain is popularly attributed to premature gentrification. In the second half of the nineteenth century, it is claimed, the social gulf between artisans and aristocrats widened. Self-employed artisans and the owners of small family firms could no longer aspire to the ‘fame and fortune’ which had motivated earlier generations.

 

pages: 662 words: 180,546

Never Let a Serious Crisis Go to Waste: How Neoliberalism Survived the Financial Meltdown by Philip Mirowski

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Andrei Shleifer, asset-backed security, bank run, barriers to entry, Basel III, Berlin Wall, Bernie Madoff, Bernie Sanders, Black Swan, blue-collar work, Bretton Woods, Brownian motion, capital controls, Carmen Reinhart, Cass Sunstein, central bank independence, cognitive dissonance, collapse of Lehman Brothers, collateralized debt obligation, complexity theory, constrained optimization, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, dark matter, David Brooks, David Graeber, debt deflation, deindustrialization, Edward Glaeser, Eugene Fama: efficient market hypothesis, experimental economics, facts on the ground, Fall of the Berlin Wall, financial deregulation, financial innovation, Flash crash, full employment, George Akerlof, Goldman Sachs: Vampire Squid, Hernando de Soto, housing crisis, Hyman Minsky, illegal immigration, income inequality, incomplete markets, invisible hand, Jean Tirole, joint-stock company, Kenneth Rogoff, knowledge economy, l'esprit de l'escalier, labor-force participation, liquidity trap, loose coupling, manufacturing employment, market clearing, market design, market fundamentalism, Martin Wolf, Mont Pelerin Society, moral hazard, mortgage debt, Naomi Klein, Nash equilibrium, night-watchman state, Northern Rock, Occupy movement, offshore financial centre, oil shock, payday loans, Ponzi scheme, precariat, prediction markets, price mechanism, profit motive, quantitative easing, race to the bottom, random walk, rent-seeking, Richard Thaler, road to serfdom, Robert Shiller, Robert Shiller, Ronald Coase, Ronald Reagan, savings glut, school choice, sealed-bid auction, Silicon Valley, South Sea Bubble, Steven Levy, technoutopianism, The Chicago School, The Great Moderation, the map is not the territory, The Myth of the Rational Market, the scientific method, The Wisdom of Crowds, theory of mind, Thomas Kuhn: the structure of scientific revolutions, Thorstein Veblen, Tobin tax, too big to fail, transaction costs, War on Poverty, Washington Consensus, We are the 99%, working poor

As a consequence, the neoliberals were often tone-deaf when it came to the transcendental, conflating it with their epistemic doctrines concerning human frailty: “we must preserve that indispensable matrix of the uncontrolled and non-rational which is the only environment wherein reason can grow and operate effectively.”111 The more sophisticated neoliberals understood this was rather thin gruel for many of their allies on the right; so from time to time, they sought to link neoliberalism to a specific religion, although they only ventured to do this sotto voce in their in-house publications: All that we can say is that the values we hold are the product of freedom, that in particular the Christian values had to assert themselves through men who successfully resisted coercion by government, and that it is to the desire to be able to follow one’s own moral convictions that we owe the modern safeguards of individual freedom. Perhaps we can add to this that only societies which hold moral values essentially similar to our own have survived as free societies, while in others freedom has perished.112 Other MPS figures such as Buchanan entertained the notion that a certain specific type of moral order would support a neoliberal state, or that morals could reduce the costs of rent-seeking losers throwing monkey wrenches into government.113 It took a lot of effort, and a fair bit of pussyfooting around the danger of alienating the partisans of one denomination (often in some other part of the world) by coquetting with different denominations or versions of religion, but the project of intellectual accommodation with the religious right and the theocons within the neoliberal framework has been an ongoing project at the MPS, although one fraught with contradictions that have dogged the liberal project since the Enlightenment.114 These thirteen more or less echt-commandments gathered here characterize the rough shape of the program eventually arrived at by the Neoliberal Thought Collective.

Even if adoption of these theories leads to substantial public costs, these costs will not be shouldered by the economist personally. Second, by developing such theories an economist can open the door to future wealth as a lobbyist or consultant. Third, the support of economists is critical to creating and maintaining special privileges for the financial services industry and for top corporate officers. By threatening to withdraw this support, economists can engage in rent-seeking. I call this last practice academic entrepreneurship. Is it really plausible that economists threaten top banks that in the absence of some kind of payoff, they will change the theories they teach in a direction that is less favorable to the banks? There are certainly cases in history of the following sequence: a. Economist E espouses views that are less favorable to certain special interest groups S.

 

pages: 237 words: 72,716

The Inequality Puzzle: European and US Leaders Discuss Rising Income Inequality by Roland Berger, David Grusky, Tobias Raffel, Geoffrey Samuels, Chris Wimer

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Branko Milanovic, Celtic Tiger, collective bargaining, corporate governance, corporate social responsibility, double entry bookkeeping, equal pay for equal work, fear of failure, financial innovation, full employment, Gini coefficient, hiring and firing, illegal immigration, income inequality, invisible hand, labour market flexibility, labour mobility, Long Term Capital Management, microcredit, offshore financial centre, principal–agent problem, profit maximization, rent-seeking, shareholder value, Silicon Valley, Silicon Valley startup, time value of money, very high income

No country exhibits perfect egalitarianism where each percentile of the population commands an equal share of national income. Not only is this contrary to human nature, it does not promote a vibrant economy where a portion of the population using competitive skills and higher productivity creates a more active, innovative economy, as well as greater inequality. Skewed income distribution is not necessarily a sign of cronyism, rent seeking, or predatory practices. Indeed, some scholars suggest that an “efficient inequality range,” between a Gini of .25 and .40, creates economic efficiency, in which case almost all OECD countries fit within an efficient range.1 Again, the point is not to contest the need to reduce exces- 1 Giovanni Andrea Cornia, and Julius Court, Inequality, Growth and Poverty in the Era of Liberalization and Globalization, UNU World Institute for Development Economics Research, 2001.

 

pages: 297 words: 103,910

Free culture: how big media uses technology and the law to lock down culture and control creativity by Lawrence Lessig

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Brewster Kahle, Cass Sunstein, future of journalism, George Akerlof, Innovator's Dilemma, Internet Archive, invention of the printing press, Kevin Kelly, knowledge economy, Louis Daguerre, new economy, prediction markets, prisoner's dilemma, profit motive, rent-seeking, Richard Florida, Richard Stallman, Ronald Coase, Ronald Reagan, Saturday Night Live, Silicon Valley, software patent, transaction costs

This economists' brief was signed by seventeen economists, including five Nobel Prize winners, including Ronald Coase, James Buchanan, Milton Friedman, Kenneth Arrow, and George Akerlof. The economists, as the list of Nobel winners demonstrates, spanned the political spectrum. Their conclusions were powerful: There was no plausible claim that extending the terms of existing copyrights would do anything to increase incentives to create. Such extensions were nothing more than "rent-seeking"—the fancy term economists use to describe special-interest legislation gone wild. The same effort at balance was reflected in the legal team we gathered to write our briefs in the case. The Jones Day lawyers had been with us from the start. But when the case got to the Supreme Court, we added three lawyers to help us frame this argument to this Court: Alan Morrison, a lawyer from Public Citizen, a Washington group that had made constitutional history with a series of seminal victories in the Supreme Court defending individual rights; my colleague and dean, Kathleen Sullivan, who had argued many cases in the Court, and who had advised us early on about a First Amendment strategy; and finally, former solicitor general Charles Fried.

 

pages: 389 words: 98,487

The Undercover Economist: Exposing Why the Rich Are Rich, the Poor Are Poor, and Why You Can Never Buy a Decent Used Car by Tim Harford

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Albert Einstein, barriers to entry, Berlin Wall, collective bargaining, congestion charging, Corn Laws, David Ricardo: comparative advantage, decarbonisation, Deng Xiaoping, Fall of the Berlin Wall, George Akerlof, invention of movable type, John Nash: game theory, John von Neumann, market design, Martin Wolf, moral hazard, new economy, price discrimination, Productivity paradox, race to the bottom, random walk, rent-seeking, Robert Gordon, Robert Shiller, Robert Shiller, Ronald Reagan, sealed-bid auction, second-price auction, second-price sealed-bid, Shenzhen was a fishing village, special economic zone, spectrum auction, The Market for Lemons, Thomas Malthus, trade liberalization, Vickrey auction

Resource “rents” Landlords and executives are not the only people who like to avoid competition and who like to enjoy monopoly rents. Trade • 21 • T H E U N D E R C O V E R E C O N O M I S T unions, lobby groups, people studying for a professional qualification, and even national governments like them too. Every day people all around us are trying to avoid competition or reap the rewards of others who have succeeded in doing so. Economists call this type of behavior “creating rents” and “rent-seeking.” It’s not easy to do this. It turns out that the world is a naturally competitive place, and it is no simple matter to steer clear of competition. This is fortunate, because although competition is uncomfortable if you are on the wrong end of it, it is pleasant to be on the right end, as the customer. We all benefit when we are interacting with people who are competing to offer us jobs, newspapers, or vacations in the sun, just as our mythical landlords benefited from competition between Bob and Axel.

 

pages: 397 words: 112,034

What's Next?: Unconventional Wisdom on the Future of the World Economy by David Hale, Lyric Hughes Hale

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affirmative action, Asian financial crisis, asset-backed security, bank run, banking crisis, Basel III, Berlin Wall, Black Swan, Bretton Woods, capital controls, Cass Sunstein, central bank independence, cognitive bias, collapse of Lehman Brothers, collateralized debt obligation, corporate governance, corporate social responsibility, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, currency manipulation / currency intervention, currency peg, Daniel Kahneman / Amos Tversky, debt deflation, declining real wages, deindustrialization, diversification, energy security, Erik Brynjolfsson, Fall of the Berlin Wall, financial innovation, floating exchange rates, full employment, Gini coefficient, global reserve currency, global village, high net worth, Home mortgage interest deduction, housing crisis, index fund, inflation targeting, invisible hand, Just-in-time delivery, Kenneth Rogoff, labour market flexibility, labour mobility, Long Term Capital Management, Mahatma Gandhi, Martin Wolf, Mexican peso crisis / tequila crisis, Mikhail Gorbachev, money: store of value / unit of account / medium of exchange, mortgage tax deduction, Network effects, new economy, Nicholas Carr, oil shale / tar sands, oil shock, open economy, passive investing, payday loans, peak oil, Ponzi scheme, post-oil, price stability, private sector deleveraging, purchasing power parity, quantitative easing, race to the bottom, regulatory arbitrage, rent-seeking, reserve currency, Richard Thaler, risk/return, Robert Shiller, Robert Shiller, Ronald Reagan, sovereign wealth fund, special drawing rights, technology bubble, The Great Moderation, Thomas Kuhn: the structure of scientific revolutions, Tobin tax, too big to fail, total factor productivity, trade liberalization, Washington Consensus, women in the workforce, yield curve

This will hold back recovery in partner countries in the Southern African Customs Union (Botswana, Lesotho, Namibia, and Swaziland). As for Zimbabwe, prospects for 2011 are uncertain. According to the trilateral agreement signed in 2008, a new constitution should be established in 2011 and would then be followed by fresh elections. Most observers agree that the ruling ZANU-PF party would be routed in anything resembling a free and fair election in Zimbabwe. This, along with a fear of losing control of patronage and rent-seeking activities, explains ZANU-PF’s reluctance to abide by the spirit of the unity agreement. Unless the Southern African Development Community (SADC) in general, and South African president Jacob Zuma in particular, are willing to apply real pressure to ZANU, there may be a prolonged period of political impasse. The economy has recovered somewhat since the abolition of the Zimbabwean dollar and the reining-in of the central bank’s power to print money (which is another reason for ZANU’s reluctance to face an election–the central bank printed money to finance ZANU-PF’s previous election campaign and various related patronage schemes, which was one reason for the dramatic money supply growth that caused hyperinflation; now that the economy is [US] dollarized, the central bank can no longer do this).

 

pages: 353 words: 98,267

The Price of Everything: And the Hidden Logic of Value by Eduardo Porter

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Asian financial crisis, Ayatollah Khomeini, banking crisis, barriers to entry, Berlin Wall, British Empire, capital controls, Carmen Reinhart, Cass Sunstein, clean water, Credit Default Swap, Deng Xiaoping, Edward Glaeser, European colonialism, Fall of the Berlin Wall, financial deregulation, Ford paid five dollars a day, full employment, George Akerlof, Gordon Gekko, guest worker program, happiness index / gross national happiness, housing crisis, illegal immigration, immigration reform, income inequality, income per capita, informal economy, invisible hand, Jean Tirole, John Maynard Keynes: technological unemployment, Kenneth Rogoff, labor-force participation, laissez-faire capitalism, loss aversion, low skilled workers, Martin Wolf, means of production, Menlo Park, Mexican peso crisis / tequila crisis, new economy, New Urbanism, pension reform, Peter Singer: altruism, pets.com, placebo effect, price discrimination, price stability, rent-seeking, Richard Thaler, rising living standards, risk tolerance, Robert Shiller, Robert Shiller, Ronald Reagan, Silicon Valley, stem cell, Steve Jobs, Stewart Brand, superstar cities, The Spirit Level, The Wealth of Nations by Adam Smith, Thomas Malthus, Thorstein Veblen, trade route, transatlantic slave trade, transatlantic slave trade, ultimatum game, unpaid internship, urban planning, women in the workforce, World Values Survey, Yom Kippur War, young professional

It eliminated the rents and recovered the traditional link between costly sacrifice and religious rewards that had characterized faith since its earliest times. This approach proved particularly fitting for the emergent capitalist economies that were beginning to develop in Northern European cities, where wealth was inherently less stable than among the landed feudal aristocracy. The Church never established the same alliances with entrepreneurs that it had developed with European nobility. Rather, entrepreneurs resisted its rent seeking and opposed its meddling in economic enterprise. So they chose the competing product. SIN VS. THE SECULAR WORLD Belief in a divine origin of the world has suffered a battering over the past few centuries. In the West, science has gradually replaced God in the schema of the physical world since Nicolaus Copernicus proved the earth was not at the center of everything in the sixteenth century, raising the question of why an omnipresent, omniscient God of everything would care so much about events on a little planet in some corner of the universe.

 

pages: 349 words: 114,038

Culture & Empire: Digital Revolution by Pieter Hintjens

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4chan, airport security, anti-communist, anti-pattern, barriers to entry, Bill Duvall, bitcoin, blockchain, business climate, business intelligence, business process, Chelsea Manning, clean water, congestion charging, Corn Laws, correlation does not imply causation, cryptocurrency, Debian, Edward Snowden, failed state, financial independence, Firefox, full text search, German hyperinflation, global village, GnuPG, Google Chrome, greed is good, Hernando de Soto, hiring and firing, informal economy, invisible hand, James Watt: steam engine, Jeff Rulifson, Julian Assange, Kickstarter, M-Pesa, mutually assured destruction, Naomi Klein, national security letter, new economy, New Urbanism, Occupy movement, offshore financial centre, packet switching, patent troll, peak oil, pre–internet, private military company, race to the bottom, rent-seeking, reserve currency, RFC: Request For Comment, Richard Feynman, Richard Feynman, Richard Stallman, Satoshi Nakamoto, security theater, Skype, slashdot, software patent, spectrum auction, Steve Crocker, Steve Jobs, Steven Pinker, Stuxnet, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, trade route, transaction costs, union organizing, web application, WikiLeaks, Y2K, zero day, Zipf's Law

It drives wealth from the many to the few, and creates concentrations of power that corrupt. Michele Boldrin and David K. Levine, in "Against Intellectual Monopoly", write acidly: A realistic view of intellectual monopoly is that it is a disease rather than a cure. It arises not from a principled effort to increase innovation, but from an evil combination of medieval institutions -- guilds, royal licenses, trade restrictions -- and the rent-seeking behavior of would be monopolists seeking to fatten their purse at the expense of public prosperity. This cancer is attacking the most vital centers of our economy: metastasis is near and so it is time to face the intellectual monopoly threat squarely, and to take action. CSIRO's patents (Thank you, US Patent and Trademark Office!) turned it from a place to stick semi-retired academics into a gangster outfit.

 

pages: 382 words: 92,138

The Entrepreneurial State: Debunking Public vs. Private Sector Myths by Mariana Mazzucato

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Apple II, banking crisis, barriers to entry, Bretton Woods, California gold rush, call centre, carbon footprint, Carmen Reinhart, cleantech, computer age, credit crunch, David Ricardo: comparative advantage, demand response, deskilling, energy security, energy transition, eurozone crisis, everywhere but in the productivity statistics, Financial Instability Hypothesis, full employment, Growth in a Time of Debt, Hyman Minsky, incomplete markets, information retrieval, invisible hand, Joseph Schumpeter, Kenneth Rogoff, knowledge economy, knowledge worker, natural language processing, new economy, offshore financial centre, popular electronics, profit maximization, Ralph Nader, renewable energy credits, rent-seeking, ride hailing / ride sharing, risk tolerance, shareholder value, Silicon Valley, Silicon Valley ideology, smart grid, Steve Jobs, Steve Wozniak, The Wealth of Nations by Adam Smith, Tim Cook: Apple, too big to fail, total factor productivity, trickle-down economics, Washington Consensus, William Shockley: the traitorous eight

Burlamaqui (2012) argues that this problem cannot be solved through fixing market failures, but must be thought about more broadly in terms of market shaping – through the concept of ‘knowledge governance’. He states: ‘From a knowledge-governance perspective, the critical question that should be asked here is: when does extended protection cease to work for generating Schumpeterian profits and become a base for rent-seeking and rent extraction?’ (Burlamaqui 2012, 5). He argues that a tool for governing publicly funded knowledge would be for the government to retain a golden share of patents that emerge from publicly funded research, making sure that the owner of the patent behaves cooperatively, e.g. licensing the patent broadly and fairly after an initial period of protection. The first mover should be able to recover their costs but not exclude others from drawing on the innovation.

 

pages: 355 words: 63

The Elusive Quest for Growth: Economists' Adventures and Misadventures in the Tropics by William R. Easterly

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Andrei Shleifer, business climate, Carmen Reinhart, central bank independence, clean water, colonial rule, correlation does not imply causation, financial repression, Gini coefficient, Hernando de Soto, income inequality, income per capita, inflation targeting, interchangeable parts, inventory management, invisible hand, Isaac Newton, Joseph Schumpeter, Kenneth Rogoff, large denomination, manufacturing employment, Network effects, New Urbanism, open economy, Productivity paradox, purchasing power parity, rent-seeking, Ronald Reagan, Silicon Valley, Simon Kuznets, The Wealth of Nations by Adam Smith, Thomas Malthus, total factor productivity, trade liberalization, urban sprawl, Watson beat the top human players on Jeopardy!, Yogi Berra, Yom Kippur War

Summers, Robert, and Alan Heston. 1991. ”The Penn World Table (Mark 5): An Expanded Set of International Comparisons, 1950-1988.” Quarterly Journalof Economics 106, no. 2 (May):327-368. Svensson, Jakob. 1997. ”When Is Foreign Aid Policy Credible? Aid Dependence and Conditionality.” World Bank working paper 1740, March. Svensson, Jakob. 1998. ”Reforming Donor Institutions: Aid Tournaments.” Mimeo. World Bank, April. Svensson, Jakob. 2000. “Foreign Aid and Rent-Seeking.” Journal of International Economics 51,no. 2 (August): 437-461. Talbot, Ian. 1998. Pakistan: A Modern History. New York: St. Martin’s Press. Theobald, Robin. 1990. Corruption, Development, and Underdevelopmen. Durham, N.C.: Duke University Press. Thorp, Willard. 1956. ”American Policy and the Soviet Economic Offensive.” Foreign Afairs (October). Todaro, Michael P. 2000. Economic Development. 7th ed.

 

pages: 209 words: 89,619

The Precariat: The New Dangerous Class by Guy Standing

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8-hour work day, banking crisis, barriers to entry, Bertrand Russell: In Praise of Idleness, call centre, Cass Sunstein, centre right, collective bargaining, corporate governance, crony capitalism, deindustrialization, deskilling, fear of failure, full employment, hiring and firing, Honoré de Balzac, housing crisis, illegal immigration, immigration reform, income inequality, labour market flexibility, labour mobility, land reform, libertarian paternalism, low skilled workers, lump of labour, marginal employment, Mark Zuckerberg, means of production, mini-job, moral hazard, Naomi Klein, nudge unit, pensions crisis, placebo effect, post-industrial society, precariat, presumed consent, quantitative easing, remote working, rent-seeking, Richard Thaler, rising living standards, Ronald Coase, Ronald Reagan, science of happiness, shareholder value, Silicon Valley, The Market for Lemons, The Nature of the Firm, The Spirit Level, Tobin tax, transaction costs, universal basic income, unpaid internship, winner-take-all economy, working poor, working-age population, young professional

Governments have accordingly competed with one another in weakening employment protection and have made it easier to employ workers with no such protection. The dominant image of the precariat stems from numerical flexibility, through what were long called ‘atypical’ or ‘non-standard’ forms of labour. Mainstream companies are contracting out much of their labour, while preserving a small salariat (corporate citizens) whose loyalty they value and with whom they share a key asset – knowledge, the rent-seeking capacity of tertiary firms. If knowledge is shared too widely, companies lose control of the asset. The salariat are citizens with voting rights in their firms, consulted or taken into account in a range of decisions. These rights are implicitly accepted by the owners or major shareholders, who have voting rights on the strategic decisions of the enterprise or organisation. A feature of flexibility is the growing use of temporary labour, which allows firms to change employment quickly, so that they can adapt and alter their division of labour.

 

Crisis and Dollarization in Ecuador: Stability, Growth, and Social Equity by Paul Ely Beckerman, Andrés Solimano

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banking crisis, banks create money, barriers to entry, capital controls, Carmen Reinhart, carried interest, central bank independence, centre right, clean water, currency peg, declining real wages, disintermediation, financial intermediation, floating exchange rates, Gini coefficient, income inequality, income per capita, labor-force participation, land reform, London Interbank Offered Rate, Mexican peso crisis / tequila crisis, microcredit, money: store of value / unit of account / medium of exchange, offshore financial centre, open economy, pension reform, price stability, rent-seeking, school vouchers, seigniorage, trade liberalization, women in the workforce

Regional disputes have been an important source of social and political instability in Ecuador throughout the 19th and 20th centuries. Ecuador’s main political parties are formed along regional lines, weakening central authority and forcing a style of policymaking that allocates resources, taxes, and quotas of political power in an effort to maintain regional balance.6 Economy-wide objectives such as economic growth and monetary stability are often displaced by the needs of regional balancing, redistribution, and rent-seeking. In turn, Ecuador, like most Latin American countries, is a highly socially stratified country. Wealthy people, elite landowners, and financial and industrial entrepreneurs coexist with a population that is mostly poor (see chapter 4) and with a large (at times politically active) indigenous population. This social structure superimposed on the regional divide often hampers the capacity of governments to undertake national policies that garner wide social consensus.

 

pages: 518 words: 107,836

How Not to Network a Nation: The Uneasy History of the Soviet Internet (Information Policy) by Benjamin Peters

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Albert Einstein, Andrei Shleifer, Benoit Mandelbrot, bitcoin, Brownian motion, Claude Shannon: information theory, cloud computing, cognitive dissonance, computer age, conceptual framework, crony capitalism, crowdsourcing, cuban missile crisis, Daniel Kahneman / Amos Tversky, David Graeber, Dissolution of the Soviet Union, double helix, Drosophila, Francis Fukuyama: the end of history, From Mathematics to the Technologies of Life and Death, hive mind, index card, informal economy, invisible hand, Jacquard loom, Jacquard loom, John von Neumann, Kevin Kelly, knowledge economy, knowledge worker, linear programming, mandelbrot fractal, Marshall McLuhan, means of production, Menlo Park, Mikhail Gorbachev, mutually assured destruction, Network effects, Norbert Wiener, packet switching, pattern recognition, Paul Erdős, Peter Thiel, RAND corporation, rent-seeking, road to serfdom, Ronald Coase, scientific mainstream, Steve Jobs, Stewart Brand, stochastic process, technoutopianism, The Structural Transformation of the Public Sphere, transaction costs, Turing machine

“But what will you do if the Bolsheviks come back?”66 These anecdotes constitute what we might call revolts in miniature. They are an expression of private unrest—of local resistance to a society whose public institutions did not have to serve the public. A liberal economic analysis to these problems might describe the informal networks of competing private interest as variously productive or rent-seeking, depending on whether the activity at hand created or depleted economic resources. Varied critics of the Soviet economy have interpreted the collapse of the public interests of the state and the private interests of the market into the command economy to be a hallowing out of means for Soviet citizens to seek their own self-interest through formal mechanisms.67 Consequently, informal means, whether creating islands of penny capitalism or engaging in systematic corruption, are all that is available.68 The liberal economic critique accuses the public state of systematically smothering and driving underground private self-interest.

 

pages: 323 words: 90,868

The Wealth of Humans: Work, Power, and Status in the Twenty-First Century by Ryan Avent

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3D printing, Airbnb, American energy revolution, autonomous vehicles, Bakken shale, barriers to entry, Bernie Sanders, BRICs, call centre, Capital in the Twenty-First Century by Thomas Piketty, Clayton Christensen, cloud computing, collective bargaining, computer age, dark matter, David Ricardo: comparative advantage, deindustrialization, dematerialisation, Deng Xiaoping, deskilling, Dissolution of the Soviet Union, Donald Trump, Downton Abbey, Edward Glaeser, Erik Brynjolfsson, eurozone crisis, everywhere but in the productivity statistics, falling living standards, first square of the chessboard, first square of the chessboard / second half of the chessboard, Ford paid five dollars a day, Francis Fukuyama: the end of history, future of work, gig economy, global supply chain, global value chain, hydraulic fracturing, income inequality, indoor plumbing, industrial robot, interchangeable parts, Internet of things, inventory management, invisible hand, Jacquard loom, James Watt: steam engine, Jeff Bezos, John Maynard Keynes: Economic Possibilities for our Grandchildren, Joseph-Marie Jacquard, knowledge economy, low skilled workers, lump of labour, Lyft, manufacturing employment, means of production, new economy, performance metric, pets.com, price mechanism, quantitative easing, Ray Kurzweil, rent-seeking, reshoring, rising living standards, Robert Gordon, Ronald Coase, savings glut, Second Machine Age, secular stagnation, self-driving car, sharing economy, Silicon Valley, single-payer health, software is eating the world, supply-chain management, supply-chain management software, TaskRabbit, The Nature of the Firm, The Spirit Level, The Wealth of Nations by Adam Smith, Thomas Malthus, trade liberalization, transaction costs, Tyler Cowen: Great Stagnation, Uber and Lyft, Uber for X, very high income, working-age population

Expensive, exclusive cities are the furnace in which a very rich, persistent class of elite professionals is forged Social capital thrives where it is in the individual interest of those contributing to it to continue their contributions. But while social capital is rewarding in its own right to those who are a part of the community, and further boosts the economic potential of those communities, it also creates a powerful rent-seeking institution: a community that sees its mission, in part, as protecting the wealth of the community by excluding others. 8 Hyperglobalization and the Never-Developing World So far, this book has dwelt primarily on rich countries. The rich world is a small club, home to about one billion people, or 15 per cent of the global population, but which accounts for about half of global GDP. The future of humanity mostly depends on what happens in the rest of the world’s countries, which are home to six billion people, or 85 per cent of global population, and which will account for most (97 per cent) of projected population growth through 2100.

 

pages: 417 words: 109,367

The End of Doom: Environmental Renewal in the Twenty-First Century by Ronald Bailey

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3D printing, additive manufacturing, agricultural Revolution, Albert Einstein, autonomous vehicles, Cass Sunstein, Climatic Research Unit, Commodity Super-Cycle, conceptual framework, corporate governance, credit crunch, David Attenborough, decarbonisation, dematerialisation, demographic transition, diversified portfolio, double helix, energy security, failed state, financial independence, Gary Taubes, hydraulic fracturing, income inequality, invisible hand, knowledge economy, meta analysis, meta-analysis, Naomi Klein, oil shale / tar sands, oil shock, pattern recognition, peak oil, phenotype, planetary scale, price stability, profit motive, purchasing power parity, race to the bottom, RAND corporation, rent-seeking, Stewart Brand, Tesla Model S, trade liberalization, University of East Anglia, uranium enrichment, women in the workforce, yield curve

“Sooner or later in any society the progress of technology will grind to a halt because the forces that used to support innovation become vested interests,” he explains. “In a purely dialectical fashion, technological progress creates the very forces that eventually destroy it.” As Jonathan Adler notes, “Economic interests also have reason to adopt precautionary appeals insofar as such appeals enable these groups to erect barriers to competing technologies or firms, close markets, or otherwise use environmental regulations as a tool for rent-seeking.” Candlemakers, after all, cannot be expected to hail the invention of the electric lightbulb, nor hostlers the advent of automobiles, nor canal-boat owners the building of railways, nor coal miners the development of nuclear power. Applying the precautionary approach, candlemakers will urge rejection of the competing technology, citing the dangers of electric shock; hostlers, of car crashes; canal-boat owners, of train engine smoke; and miners, of the risks of radiation.

 

When the Money Runs Out: The End of Western Affluence by Stephen D. King

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Albert Einstein, Asian financial crisis, asset-backed security, banking crisis, Basel III, Berlin Wall, Bernie Madoff, British Empire, capital controls, central bank independence, collapse of Lehman Brothers, collateralized debt obligation, congestion charging, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, cross-subsidies, debt deflation, Deng Xiaoping, Diane Coyle, endowment effect, eurozone crisis, Fall of the Berlin Wall, financial innovation, financial repression, floating exchange rates, full employment, George Akerlof, German hyperinflation, Hyman Minsky, income inequality, income per capita, inflation targeting, invisible hand, John Maynard Keynes: Economic Possibilities for our Grandchildren, joint-stock company, liquidationism / Banker’s doctrine / the Treasury view, liquidity trap, London Interbank Offered Rate, loss aversion, market clearing, moral hazard, mortgage debt, new economy, New Urbanism, Nick Leeson, Northern Rock, Occupy movement, oil shale / tar sands, oil shock, price mechanism, price stability, quantitative easing, railway mania, rent-seeking, reserve currency, rising living standards, South Sea Bubble, sovereign wealth fund, technology bubble, The Market for Lemons, The Spirit Level, The Wealth of Nations by Adam Smith, Thomas Malthus, Tobin tax, too big to fail, trade route, trickle-down economics, Washington Consensus, women in the workforce, working-age population

How should output within the financial sector be measured, particularly if private affluence is eventually followed by public collapse? One way to measure output is by totting up the cost of all the inputs: the wage bill, reflecting the cost of labour, the level of profits, reflecting the cost of capital, and the like. Yet there are two problems with this approach. First, in an insufficiently competitive market, wages and profits may overstate the output being produced: those involved may instead simply be engaged in rent-­seeking behaviour. Second, whereas input costs are known today, the ultimate ‘output’ of the financial sector won’t be known for many years, if ever. If the 168 4099.indd 168 29/03/13 2:23 PM Three Schisms financial sector’s role is to allocate resources efficiently over time – to meet the interests of savers and investors – we can only know tomorrow whether today’s financial decisions will pay off.

 

pages: 606 words: 87,358

The Great Convergence: Information Technology and the New Globalization by Richard Baldwin

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3D printing, additive manufacturing, Admiral Zheng, agricultural Revolution, air freight, Amazon Mechanical Turk, Berlin Wall, bilateral investment treaty, Branko Milanovic, buy low sell high, call centre, Columbian Exchange, Commodity Super-Cycle, David Ricardo: comparative advantage, deindustrialization, domestication of the camel, Edward Glaeser, Erik Brynjolfsson, financial intermediation, George Gilder, global supply chain, global value chain, Henri Poincaré, imperial preference, industrial robot, invention of agriculture, invention of the telegraph, investor state dispute settlement, Isaac Newton, Islamic Golden Age, James Dyson, knowledge economy, knowledge worker, Lao Tzu, low skilled workers, market fragmentation, New Economic Geography, out of africa, paper trading, Pax Mongolica, profit motive, rent-seeking, reshoring, Richard Florida, rising living standards, Second Machine Age, Simon Kuznets, Skype, Snapchat, Stephen Hawking, telepresence, telerobotics, The Wealth of Nations by Adam Smith, trade liberalization, trade route, Washington Consensus

Since the local king wanted to be paid for the wood, the priest sent back to Egypt for more trade goods to seal the deal. The trade goods were eventually delivered almost a year later. The papyrus lists them as consisting of jars of gold and silver, royal linen, veils, 500 ox-hides, and 500 ropes. Some adherents to the doctrine condemned trade and traders on moral grounds—accusing them of what we would call rent-seeking behavior. Buying low and selling high was immoral since the trader’s own labor was not engaged in the making of the goods. Others praised trade as part of the divine plan to induce economic intercourse across the universal fellowship of humanity. As the Middle Ages progressed, the European conceptualization of trade shifted from the divine to the bottom line. The mental model that accompanied this shift was called “mercantilism.”

 

pages: 935 words: 267,358

Capital in the Twenty-First Century by Thomas Piketty

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accounting loophole / creative accounting, Asian financial crisis, banking crisis, banks create money, Berlin Wall, Branko Milanovic, British Empire, capital controls, Capital in the Twenty-First Century by Thomas Piketty, carbon footprint, central bank independence, collapse of Lehman Brothers, conceptual framework, corporate governance, correlation coefficient, David Ricardo: comparative advantage, demographic transition, distributed generation, diversification, diversified portfolio, European colonialism, eurozone crisis, Fall of the Berlin Wall, financial intermediation, full employment, German hyperinflation, Gini coefficient, high net worth, Honoré de Balzac, immigration reform, income inequality, income per capita, index card, inflation targeting, informal economy, invention of the steam engine, invisible hand, joint-stock company, Joseph Schumpeter, market bubble, means of production, mortgage debt, mortgage tax deduction, new economy, New Urbanism, offshore financial centre, open economy, pension reform, purchasing power parity, race to the bottom, randomized controlled trial, refrigerator car, regulatory arbitrage, rent control, rent-seeking, Robert Gordon, Ronald Reagan, Simon Kuznets, sovereign wealth fund, Steve Jobs, The Nature of the Firm, the payments system, The Wealth of Nations by Adam Smith, Thomas Malthus, Thorstein Veblen, trade liberalization, very high income, We are the 99%

Capital is never quiet: it is always risk-oriented and entrepreneurial, at least at its inception, yet it always tends to transform itself into rents as it accumulates in large enough amounts—that is its vocation, its logical destination. What, then, gives us the vague sense that social inequality today is very different from social inequality in the age of Balzac and Austen? Is this just empty talk with no purchase on reality, or can we identify objective factors to explain why some people think that modern capital has become more “dynamic” and less “rent-seeking?” FIGURE 3.1. Capital in Britain, 1700–2010 National capital is worth about seven years of national income in Britain in 1700 (including four in agricultural land). Sources and series: see piketty.pse.ens.fr/capital21c. The Metamorphoses of Capital in Britain and France I will begin by looking at changes in the capital structure of Britain and France since the eighteenth century.

., 606n32, 608n12, 639n48, 640n53 Rancière, Jacques, 655n59 Rancière, Romain, 606n32 Rastignac’s dilemma, 238–­242, 379, 407–­409, 412, 497 Rate of interest, 52–­53, 210, 584n15, 598n10 Rate of profit, 52, 227–­230, 584n14 Rate of return on capital: in­e­qual­ity and, 1, 23, 25–­27, 84; first fundamental law of capitalism and, 52–­55; average long-­run, 53; determination of, 199–­212; pure, 201, 205–­206, 208–­209, 353–­355; historical perspective on, 206–­208; in twenty-­first century, 208–­209, 375; uses of capital and, 212–­213; marginal productivity of capital and, 213–­215; too much capital and, 215–­217, 223, 227–­230; capital’s comeback and, 232–­233; growth rate and, 232–­233, 351, 353–­361, 364–­366, 431, 571–­572; time preference and stability of, 258–­361; inheritance and, 377–­378; inflation and, 452–­455; pensions and, 488–­489 Rate of return on land, 53–­54 Rauh, Joshua, 607n41 Rawls, John, 480, 630n21, 631n22, 652n45 Reagan, Ronald, 42, 98, 309 Real estate: urban, 6, 197–­198; as capital/assets, 48, 55, 122, 164, 179, 210, 598n11; return on, 53–­54, 626n28; pricing of, 57–­58, 144–­145, 149–­150, 171–­173, 176, 187–­188, 191; rental value of, 209; own­ership of by centile, 260; size effects and, 454; taxes, 501, 517 Recession (2008–­2009), 472–­474, 553–­554 “Reconstruction capitalism,” 397 Redemption fund proposal, 544, 559, 647n9, 649n27 Redistribution: inflation and, 133–­134, 544–­547; social state and, 479–­481; of petroleum rents, 537–­538; through immigration, 538–­539; central banks and, 547–­553; United States and, 638n33 Regional blocs, 61–­64 Regressive taxation, 255, 355, 374, 495–­497 Regulation: transparency and, 519; global tax on capital and, 534–­536; of central banks, 548, 552–­553, 557–­558 Renault, Louis, 137 Renault Company, 137, 139 Rent control, 149, 153 Rentiers: society of, 264, 276–­278, 293, 370, 372–­373; fall of, 274, 369; basic arithmetic of, 410–­411; petits, 418–­421; as enemy of democracy, 422–­424 Rent(s): land, 5–­6, 39, 53–­54, 56; capital and, 113, 115–­116; meaning of, 422–­424; on natural resources, 459, 537–­539, 627n44 Rent-­seeking, 115–­116 Replacement incomes, 477–­479, 602n9 Residence and taxation, 562 Residential capital, 48, 51–­52 Retail ser­vice sector, 91 Retained earnings, 176–­178 Retirement: pension funds and, 391–­392, 478, 627n47; future of, 487–­490, 633n47 Retirement, life-­cycle theory and, 384, 391–­392 Return on capital. See Rate of return on capital; Rate of return on land Revell, J., 591n19 Rey, Hélène, 597n31 “Rhenish capitalism,” 140–­146 Ricardo, David, 5–­6, 9, 579n1, 580n8, 591n15; Ricardian equivalence and, 134–­135 Rights-­based approach, 479–­481 Rignano, Eugenio, 637n29 “Rising human capital hypothesis,” 21–­22 Risk, 115–­116, 431 Ritschl, Albrecht, 647n10 Robinson, James A., 624n20, 639nn45,48 Robinson, Joan, 231 Rodrik, Dani, 651n35 Roemer, John, 631n23 Roine, Jesper, 18, 344, 614n27, 628n58 Romer, Paul M., 586n35 Roo­se­velt, Franklin D., 153, 286, 472–­473, 506–­507 Rosanvallon, Pierre, 588n8, 614n24, 635n13 Rosen, Harvey S., 632n31 Rosenthal, Jean-­Laurent, 18, 599n14, 612nn4,5, 646n44 Roy, René, 591n19 Rus­sia, 186–­187, 554 Rus­sia-­Ukraine bloc, 62–­63, 585n22 Saez, Emmanuel, 17, 511, 581nn22,23, 606nn33,36, 607nn38,39, 613n32, 634n4, 638n38, 642n19, 643n21 Samuelson, Paul, 137, 218, 231–­232 Sandström, Susanna, 623n8 Sartre, Jean-­Paul, 655n2 Saudi Arabia, 538 Saudi Arabia sovereign wealth fund, 457–­458 Savings, private: rate of, 26, 174–­175, 177, 186; components of, 176–­178; durable goods and, 179–­180; middle class and, 260; concentration of wealth and, 351–­353, 377–­378, 617n18; retirement and, 384, 391–­392; in twenty-­first century, 400–­401.

 

pages: 488 words: 144,145

Inflated: How Money and Debt Built the American Dream by R. Christopher Whalen

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Albert Einstein, bank run, banking crisis, Black Swan, Bretton Woods, British Empire, California gold rush, Carmen Reinhart, central bank independence, conceptual framework, corporate governance, cuban missile crisis, currency peg, debt deflation, falling living standards, fiat currency, financial deregulation, financial innovation, financial intermediation, floating exchange rates, Fractional reserve banking, full employment, global reserve currency, housing crisis, interchangeable parts, invention of radio, Kenneth Rogoff, laissez-faire capitalism, liquidity trap, means of production, money: store of value / unit of account / medium of exchange, moral hazard, mutually assured destruction, non-tariff barriers, oil shock, payday loans, Plutocrats, plutocrats, price stability, pushing on a string, quantitative easing, rent-seeking, reserve currency, Ronald Reagan, special drawing rights, The Chicago School, The Great Moderation, too big to fail, trade liberalization, transcontinental railway, Upton Sinclair, women in the workforce

Here I would like to develop a point that is only half fleshed out in Chris’s analysis of U.S. households and governments living beyond their means and piling public debt on top of private debts; it is the role of rising income and wealth inequality in these financial crises. Indeed, in the last 30 years there has been a large increase in income and wealth inequality in advanced economies. This rise is due to many factors: winner-take-all effects of an information society; trade integration of China, India, and other emerging markets in the global economy; knowledge and skill-biased technological innovation; rise in finance and increased rent-seeking and oligopoly in financial markets. This increase in inequality led to a “keeping up with the Joneses effect”: households in the United States and Europe could not maintain their living standards and spending and lifestyle goals as wages and labor incomes rose less than productivity, with the share of income going to capital and to the wealthy rising. This rising inequality is the root cause of the American household tendency to spend beyond its means that Chris correctly bemoans in this book.

 

pages: 423 words: 149,033

The fortune at the bottom of the pyramid by C. K. Prahalad

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barriers to entry, business process, call centre, cashless society, clean water, collective bargaining, corporate social responsibility, deskilling, disintermediation, farmers can use mobile phones to check market prices, financial intermediation, Hernando de Soto, hiring and firing, income inequality, late fees, Mahatma Gandhi, market fragmentation, microcredit, new economy, profit motive, purchasing power parity, rent-seeking, shareholder value, The Fortune at the Bottom of the Pyramid, time value of money, transaction costs, working poor

Farmers mentioned simple touches such as a shaded area with chairs to await their paperwork as indicators of ITC’s respect for them and their produce. Even though intangible in the short term, the self-confidence created by the professional treatment is changing the way farmers conduct themselves. Sanchalaks and even a commission agent noted this change in farmer attitudes. ITC Gains ■ Disintermediation savings. The commissions paid to the agents were not excessive, but the true cost of intermediation, including the rent seeking, was between 2.5 percent and 3 percent of procurement costs. A 0.5 percent commission to the sanchalak has replaced this. ■ Freight costs. Direct reimbursement of transport costs to the farmer is estimated to be half of what ITC used to pay the commission agents for transport to their factory. ■ Quality control. Removal of intermediary manipulation of quality and the ability to directly educate and reward quality in the customer base results in higher levels of quality in e-Choupal procurement.

 

pages: 371 words: 36,271

Libertarian Idea by Jan Narveson

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centre right, invisible hand, means of production, Menlo Park, night-watchman state, Peter Singer: altruism, prisoner's dilemma, psychological pricing, rent-seeking

Speaking of the “pre-market bargain,” he argues, “it is hard to believe that individuals will reach a meaningful agreement, even on the savings made possible by taking advantage of economies of scale in the provision of protection. Because of what the future holds, once the property rights scheme is in place, 193 the pre-market bargain is likely to be superseded almost immediately by strategic manipulation and rent-seeking behavior. Let me be blunt. The point of the bargain is to distribute and make possible gains associated with an efficient provision of protection. The net effect, however, of the dynamic mechanism and incentives put in place is to promote inefficiency and to undermine the terms of the original agreement.”8 Moreover, “To say that the terms of rational political association are specified as the outcome of rational bargaining is not to say that all political decisions are to be resolved by bargaining.

 

pages: 790 words: 150,875

Civilization: The West and the Rest by Niall Ferguson

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Admiral Zheng, agricultural Revolution, Albert Einstein, Andrei Shleifer, Atahualpa, Ayatollah Khomeini, Berlin Wall, BRICs, British Empire, clean water, collective bargaining, colonial rule, conceptual framework, Copley Medal, corporate governance, credit crunch, David Ricardo: comparative advantage, Dean Kamen, delayed gratification, Deng Xiaoping, discovery of the americas, Dissolution of the Soviet Union, European colonialism, Fall of the Berlin Wall, Francisco Pizarro, full employment, Hans Lippershey, haute couture, Hernando de Soto, income inequality, invention of movable type, invisible hand, Isaac Newton, James Hargreaves, James Watt: steam engine, John Harrison: Longitude, joint-stock company, Joseph Schumpeter, land reform, land tenure, Louis Pasteur, Mahatma Gandhi, market bubble, Martin Wolf, means of production, megacity, Mikhail Gorbachev, new economy, probability theory / Blaise Pascal / Pierre de Fermat, profit maximization, purchasing power parity, quantitative easing, rent-seeking, reserve currency, road to serfdom, Ronald Reagan, savings glut, Scramble for Africa, Silicon Valley, South China Sea, sovereign wealth fund, special economic zone, spice trade, spinning jenny, Steve Jobs, Steven Pinker, The Great Moderation, the market place, the scientific method, The Wealth of Nations by Adam Smith, Thomas Kuhn: the structure of scientific revolutions, Thomas Malthus, Thorstein Veblen, total factor productivity, trade route, transaction costs, transatlantic slave trade, transatlantic slave trade, upwardly mobile, uranium enrichment, wage slave, Washington Consensus, women in the workforce, World Values Survey

Austria, Prussia and latterly even Russia became more effective administratively and militarily because the network that produced the Scientific Revolution arose in the Christian but not in the Muslim world. The reason North America’s ex-colonies did so much better than South America’s was because British settlers established a completely different system of property rights and political representation in the North from those built by Spaniards and Portuguese in the South. (The North was an ‘open access order’, rather than a closed one run in the interests of rent-seeking, exclusive elites.)31 European empires were able to penetrate Africa not just because they had the Maxim gun; they also devised vaccines against tropical diseases to which Africans were just as vulnerable. In the same way, the earlier industrialization of the West reflected institutional advantages: the possibility of a mass consumer society existed in the British Isles well before the advent and spread of steam power or the factory system.

 

pages: 471 words: 124,585

The Ascent of Money: A Financial History of the World by Niall Ferguson

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Admiral Zheng, Andrei Shleifer, Asian financial crisis, asset allocation, asset-backed security, Atahualpa, bank run, banking crisis, banks create money, Black Swan, Black-Scholes formula, Bonfire of the Vanities, Bretton Woods, BRICs, British Empire, capital asset pricing model, capital controls, Carmen Reinhart, Cass Sunstein, central bank independence, collateralized debt obligation, colonial exploitation, Corn Laws, corporate governance, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, currency manipulation / currency intervention, currency peg, Daniel Kahneman / Amos Tversky, deglobalization, diversification, diversified portfolio, double entry bookkeeping, Edmond Halley, Edward Glaeser, Edward Lloyd's coffeehouse, financial innovation, financial intermediation, fixed income, floating exchange rates, Fractional reserve banking, Francisco Pizarro, full employment, German hyperinflation, Hernando de Soto, high net worth, hindsight bias, Home mortgage interest deduction, Hyman Minsky, income inequality, interest rate swap, Isaac Newton, iterative process, joint-stock company, joint-stock limited liability company, Joseph Schumpeter, Kenneth Rogoff, knowledge economy, labour mobility, London Interbank Offered Rate, Long Term Capital Management, market bubble, market fundamentalism, means of production, Mikhail Gorbachev, money: store of value / unit of account / medium of exchange, moral hazard, mortgage debt, mortgage tax deduction, Naomi Klein, Nick Leeson, Northern Rock, pension reform, price anchoring, price stability, principal–agent problem, probability theory / Blaise Pascal / Pierre de Fermat, profit motive, quantitative hedge fund, RAND corporation, random walk, rent control, rent-seeking, reserve currency, Richard Thaler, Robert Shiller, Robert Shiller, Ronald Reagan, savings glut, seigniorage, short selling, Silicon Valley, South Sea Bubble, sovereign wealth fund, spice trade, structural adjustment programs, technology bubble, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, Thomas Malthus, Thorstein Veblen, too big to fail, transaction costs, value at risk, Washington Consensus, Yom Kippur War

In England (the country for which we have the best price data) the cost of living increased by a factor of seven in the same period; not a high rate of inflation these days (on average around 2 per cent per year), but a revolutionary increase in the price of bread by medieval standards. Within Spain, the abundance of silver also acted as a ‘resource curse’, like the abundant oil of Arabia, Nigeria, Persia, Russia and Venezuela in our own time, removing the incentives for more productive economic activity, while at the same time strengthening rent-seeking autocrats at the expense of representative assemblies (in Spain’s case the Cortes).17 What the Spaniards had failed to understand is that the value of precious metal is not absolute. Money is worth only what someone else is willing to give you for it. An increase in its supply will not make a society richer, though it may enrich the government that monopolizes the production of money. Other things being equal, monetary expansion will merely make prices higher.

 

pages: 503 words: 131,064

Liars and Outliers: How Security Holds Society Together by Bruce Schneier

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airport security, barriers to entry, Berlin Wall, Bernie Madoff, Bernie Sanders, Brian Krebs, Broken windows theory, carried interest, Cass Sunstein, Chelsea Manning, corporate governance, crack epidemic, credit crunch, crowdsourcing, cuban missile crisis, Daniel Kahneman / Amos Tversky, David Graeber, desegregation, don't be evil, Double Irish / Dutch Sandwich, Douglas Hofstadter, experimental economics, Fall of the Berlin Wall, financial deregulation, George Akerlof, hydraulic fracturing, impulse control, income inequality, invention of agriculture, invention of gunpowder, iterative process, Jean Tirole, John Nash: game theory, joint-stock company, Julian Assange, meta analysis, meta-analysis, microcredit, moral hazard, mutually assured destruction, Nate Silver, Network effects, Nick Leeson, offshore financial centre, patent troll, phenotype, pre–internet, principal–agent problem, prisoner's dilemma, profit maximization, profit motive, race to the bottom, Ralph Waldo Emerson, RAND corporation, rent-seeking, RFID, Richard Thaler, risk tolerance, Ronald Coase, security theater, shareholder value, slashdot, statistical model, Steven Pinker, Stuxnet, technological singularity, The Market for Lemons, The Nature of the Firm, The Spirit Level, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, theory of mind, too big to fail, traffic fines, transaction costs, ultimatum game, UNCLOS, union organizing, Vernor Vinge, WikiLeaks, World Values Survey, Y2K

So, for example, companies that make car seats, airbags, full-body scanners, compact fluorescent bulbs, car insurance, surveillance cameras, vaccines, radon detectors, and Internet filters for schools have had laws passed mandating—or at least encouraging—their use. And the healthcare industry got a law passed limiting its liability for care improperly delayed or denied. In a sense, what corporations are doing here is reversing the principal–agent relationship. They're deliberately manipulating institutional pressures so they can directly benefit from them. In economics, changing laws to suit your desires without adding any value is known as rent-seeking. One way to manipulate laws is through licensing requirements. Over the past several years, there have been debates in several states about licensing interior designers. It's either a necessary measure to keep charlatans out of the busi-ness, or an onerous, pro-cartel, anti-competitive system. Another way is through public opinion. The political decision not to regulate the derivatives markets is a good example: not only did it involve lobbyists and campaign contributions to get laws changed, but also public relations to convince journalists and the public that keeping the markets unregulated was a good idea.

 

pages: 494 words: 116,739

Geek Heresy: Rescuing Social Change From the Cult of Technology by Kentaro Toyama

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Albert Einstein, Berlin Wall, Bernie Madoff, blood diamonds, Capital in the Twenty-First Century by Thomas Piketty, Cass Sunstein, cognitive dissonance, computer vision, conceptual framework, delayed gratification, Edward Glaeser, en.wikipedia.org, epigenetics, Erik Brynjolfsson, Francis Fukuyama: the end of history, fundamental attribution error, germ theory of disease, global village, Hans Rosling, happiness index / gross national happiness, income inequality, invention of the printing press, invisible hand, Isaac Newton, Khan Academy, Kibera, knowledge worker, libertarian paternalism, M-Pesa, Mahatma Gandhi, Mark Zuckerberg, means of production, microcredit, mobile money, Nicholas Carr, North Sea oil, pattern recognition, Peter Singer: altruism, Peter Thiel, post-industrial society, randomized controlled trial, rent-seeking, RFID, Richard Florida, Richard Thaler, school vouchers, self-driving car, Silicon Valley, Simon Kuznets, Steve Jobs, Steven Pinker, technoutopianism, The Fortune at the Bottom of the Pyramid, Upton Sinclair, Walter Mischel, War on Poverty, winner-take-all economy, World Values Survey, Y2K

And on September 24, 2014, the Indian Space Research Organisation announced that it had put a spacecraft, the Mangalyaan, into orbit around Mars. National newspapers quoted the prime minister proclaiming, “This is [the] first time in the world. History has been created today.”9 Evolving Mass Values India’s changes recapitulate elements of developed-world history. Like India today, the United States was buoyed by an entrepreneurial spirit. A battle against America’s rent-seeking political corruption was fought effectively in the nineteenth century.10 Consumer culture, now burgeoning in India, was all but invented in the United States circa 1920. And Indian pride in their Mars orbiter echoes American sentiment toward Apollo 11, the world’s first moon landing. Despite huge differences in culture and history, there is no denying the commonalities among societies that experience socioeconomic growth.

 

pages: 494 words: 142,285

The Future of Ideas: The Fate of the Commons in a Connected World by Lawrence Lessig

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AltaVista, Andy Kessler, barriers to entry, business process, Cass Sunstein, computer age, dark matter, disintermediation, Erik Brynjolfsson, George Gilder, Hacker Ethic, Hedy Lamarr / George Antheil, Howard Rheingold, Hush-A-Phone, HyperCard, hypertext link, Innovator's Dilemma, invention of hypertext, inventory management, invisible hand, Jean Tirole, Jeff Bezos, Joseph Schumpeter, linked data, Menlo Park, Network effects, new economy, packet switching, price mechanism, profit maximization, RAND corporation, rent control, rent-seeking, RFC: Request For Comment, Richard Stallman, Richard Thaler, Ronald Coase, Search for Extraterrestrial Intelligence, SETI@home, Silicon Valley, smart grid, software patent, spectrum auction, Steve Crocker, Steven Levy, Stewart Brand, Ted Nelson, Telecommunications Act of 1996, The Chicago School, transaction costs

But the way this is usually done in the American economic system is to employ the price mechanism, and this allocates resources to users without the need for government regulation.” R. H. Coase, “The Federal Communications Commission,” Journal of Law & Economics 2 (1959): 1, 14. 16 Hazlett has been prolific in advancing this argument. See, e.g., Hazlett and Sosa, “Chilling the Internet? Lessons from FCC Regulation of Radio Broadcasting,” Michigan Telecommunications & Technology Law Review 4 (1997-98): 35; Hazlett, “Physical Scarcity, Rent Seeking, and the First Amendment,” Columbia Law Review 97 (1997): 905; Hazlett, “Assigning Property Rights to Radio Spectrum Users: Why Did FCC License Auctions Take 67 Years?,” Journal of Law & Economics 41 (1998): 529; Hazlett, “Spectrum Flash Dance: Eli Noam's Proposal for 'Open Access' to Radio Waves,” Journal of Law & Economics 41 (1998): 805; Hazlett and Sosa, “Was the Fairness Doctrine a 'Chilling Effect'?

 

pages: 452 words: 134,502

Hacking Politics: How Geeks, Progressives, the Tea Party, Gamers, Anarchists and Suits Teamed Up to Defeat SOPA and Save the Internet by David Moon, Patrick Ruffini, David Segal, Aaron Swartz, Lawrence Lessig, Cory Doctorow, Zoe Lofgren, Jamie Laurie, Ron Paul, Mike Masnick, Kim Dotcom, Tiffiniy Cheng, Alexis Ohanian, Nicole Powers, Josh Levy

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4chan, Affordable Care Act / Obamacare, Airbnb, Bernie Sanders, Burning Man, call centre, Cass Sunstein, collective bargaining, crony capitalism, crowdsourcing, don't be evil, facts on the ground, Firefox, hive mind, immigration reform, informal economy, jimmy wales, Kickstarter, liquidity trap, Mark Zuckerberg, obamacare, Occupy movement, offshore financial centre, Plutocrats, plutocrats, prisoner's dilemma, rent-seeking, Silicon Valley, Skype, technoutopianism, WikiLeaks, Y Combinator

The ideological left and the right came together to win this fight, and that sort of cross-partisan coalition is likely to form with increasing frequency: power structures in Washington have become so stagnant and corrupt that the relevant political divide is less and less so that between the two major parties—whose leaders are fairly consistent advocates for bailouts for the wealthy, perpetual warfare, diminished civil liberties—but between those who have institutional power and all of the rest of us. There are sharp, important, ideological divides about the role of the state in the economy, the need for a social safety net, and the like. But there are important points of solidarity that should not be obscured by party stripe or reductionist ideological labels: nobody likes corporate welfare (as the left would call it) or rent-seeking (as it’s named by the right) unless one is among those insiders directly benefitting from said largess. The left and right came together to fight against the bank bailouts and to audit the Federal Reserve. There’s a substantial antiwar, pro-civil liberties flank that identifies as conservative/libertarian. There’s solidarity in support of ending the war on drugs and instituting other criminal justice reforms.

 

pages: 510 words: 120,048

Who Owns the Future? by Jaron Lanier

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3D printing, 4chan, Affordable Care Act / Obamacare, Airbnb, augmented reality, automated trading system, barriers to entry, bitcoin, book scanning, Burning Man, call centre, carbon footprint, cloud computing, computer age, crowdsourcing, David Brooks, David Graeber, delayed gratification, digital Maoism, en.wikipedia.org, facts on the ground, Filter Bubble, financial deregulation, Fractional reserve banking, Francis Fukuyama: the end of history, George Akerlof, global supply chain, global village, Haight Ashbury, hive mind, if you build it, they will come, income inequality, informal economy, invisible hand, Jacquard loom, Jaron Lanier, Jeff Bezos, job automation, Kevin Kelly, Khan Academy, Kickstarter, Kodak vs Instagram, life extension, Long Term Capital Management, Mark Zuckerberg, meta analysis, meta-analysis, moral hazard, mutually assured destruction, Network effects, new economy, Norbert Wiener, obamacare, packet switching, Peter Thiel, place-making, Plutocrats, plutocrats, Ponzi scheme, post-oil, pre–internet, race to the bottom, Ray Kurzweil, rent-seeking, reversible computing, Richard Feynman, Richard Feynman, Ronald Reagan, self-driving car, side project, Silicon Valley, Silicon Valley ideology, Silicon Valley startup, Skype, smart meter, stem cell, Steve Jobs, Steve Wozniak, Stewart Brand, Ted Nelson, The Market for Lemons, Thomas Malthus, too big to fail, trickle-down economics, Turing test, Vannevar Bush, WikiLeaks

This problem is related to historic problems that motivated antitrust regulation but it is also distinct. There doesn’t have to be direct manipulation, but instead an automated, sterile “unintentional manipulation” that seems external to human agency and therefore is above the law. Owning a top server on a network is like collecting rent from the network, but that doesn’t mean one gets there through “rent seeking.” Traditionally, market positions are set to compete in a pseudo-Darwinian way. Society benefits precisely from the fact that more possibilities will be tested and explored than could ever have been considered from the perspective of a single player, even one with a dominant information perspective. The rise of top servers as businesses amounts to an ironic intellectual turnaround that gets a pass when it shouldn’t.

 

pages: 422 words: 131,666

Life Inc.: How the World Became a Corporation and How to Take It Back by Douglas Rushkoff

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affirmative action, Amazon Mechanical Turk, banks create money, big-box store, Bretton Woods, car-free, colonial exploitation, Community Supported Agriculture, complexity theory, computer age, corporate governance, credit crunch, currency manipulation / currency intervention, David Ricardo: comparative advantage, death of newspapers, don't be evil, Donald Trump, double entry bookkeeping, easy for humans, difficult for computers, financial innovation, Firefox, full employment, global village, Google Earth, greed is good, Howard Rheingold, income per capita, invention of the printing press, invisible hand, Jane Jacobs, John Nash: game theory, joint-stock company, Kevin Kelly, laissez-faire capitalism, loss aversion, market bubble, market design, Marshall McLuhan, Milgram experiment, moral hazard, mutually assured destruction, Naomi Klein, new economy, New Urbanism, Norbert Wiener, peak oil, place-making, placebo effect, Ponzi scheme, price mechanism, price stability, principal–agent problem, private military company, profit maximization, profit motive, race to the bottom, RAND corporation, rent-seeking, RFID, road to serfdom, Ronald Reagan, short selling, Silicon Valley, Simon Kuznets, social software, Steve Jobs, Telecommunications Act of 1996, telemarketer, The Wealth of Nations by Adam Smith, Thomas L Friedman, too big to fail, trade route, trickle-down economics, union organizing, urban decay, urban planning, urban renewal, Vannevar Bush, Victor Gruen, white flight, working poor, Works Progress Administration, Y2K, young professional

Carlos and Stephen Nicholas, “Agency Problems in Early Chartered Companies: The Case of the Hudson’s Bay Company,” The Journal of Economic History 50.4 (1990): 853-75. Ann M. Carlos and Stephen Nicholas, “Theory and History: Seventeeth Century Joint-Stock Chartered Trading Companies,” The Journal of Economic History 56.4 (1996): 916-24. S.R.H. Jones and Simon P. Ville, “Theory and Evidence: Understanding Chartered Trading Companies,” The Journal of Economic History 56.4 (1996): 925-26. S.R.H. Jones and Simon P. Ville, “Efficient Transactors or Rent-Seeking Monopolists? The Rationale for Early Chartered Trading Companies,” The Journal of Economic History 56.4 (1996): 898-915. Shaw Livermore, “Unlimited Liability in Early American Companies,” The Journal of Political Economy 43.5 (1935): 674-87. Janice E. Thomson, Mercenaries, Pirates, and Sovereigns: State-Building and Extraterritorial Violence in Early Modern Europe (Princeton, N.J.: Princeton University Press, 1994). 8 “The state ought to rejoice” John Brathwaite and Peter Drahos, Global Business Regulation (New York: Cambridge University Press, 2000), 445. 12 “The class of citizens who provide” James Madison, Letters and Other Writings of James Madison (Philadelphia: J.

 

pages: 433 words: 125,031

Brazillionaires: The Godfathers of Modern Brazil by Alex Cuadros

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affirmative action, Asian financial crisis, big-box store, BRICs, cognitive dissonance, crony capitalism, Deng Xiaoping, Donald Trump, Elon Musk, facts on the ground, family office, high net worth, index fund, invisible hand, Jeff Bezos, Mark Zuckerberg, NetJets, offshore financial centre, profit motive, rent-seeking, risk/return, savings glut, short selling, Silicon Valley, sovereign wealth fund, stem cell, The Wealth of Nations by Adam Smith, too big to fail, transatlantic slave trade, transatlantic slave trade, We are the 99%

A recent Heinz investor presentation touted innovations that included yellow mustard and hot sauces. It’s like creative destruction without the creative part. Lemann said once that he hopes to build companies of “lasting greatness.” He said he wants his model of corporate management to outlive him. To put this another way, he wants to build an empire and to leave his mark on history. But in the end, his corporate alchemy struck me as a sophisticated form of rent seeking: claiming a piece of the economic pie rather than making the pie larger. In the long run, this may prove counterproductive even for him. Take Lemann’s efficiency to its logical end, and few consumers will be able to afford his beer. Henry Ford had a similar insight in 1914, when he doubled wages so that his workers could afford a Model T. Higher profits don’t always translate into more investment or more jobs.

 

pages: 437 words: 113,173

Age of Discovery: Navigating the Risks and Rewards of Our New Renaissance by Ian Goldin, Chris Kutarna

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2013 Report for America's Infrastructure - American Society of Civil Engineers - 19 March 2013, 3D printing, Airbnb, Albert Einstein, AltaVista, Asian financial crisis, asset-backed security, autonomous vehicles, banking crisis, barriers to entry, battle of ideas, Berlin Wall, bioinformatics, bitcoin, Bonfire of the Vanities, clean water, collective bargaining, Colonization of Mars, Credit Default Swap, crowdsourcing, cryptocurrency, Dava Sobel, demographic dividend, Deng Xiaoping, Doha Development Round, double helix, Edward Snowden, Elon Musk, en.wikipedia.org, epigenetics, experimental economics, failed state, Fall of the Berlin Wall, financial innovation, full employment, Galaxy Zoo, global supply chain, Hyperloop, immigration reform, income inequality, indoor plumbing, industrial robot, information retrieval, intermodal, Internet of things, invention of the printing press, Isaac Newton, Islamic Golden Age, Khan Academy, Kickstarter, labour market flexibility, low cost carrier, low skilled workers, Lyft, Malacca Straits, megacity, Mikhail Gorbachev, moral hazard, Network effects, New Urbanism, non-tariff barriers, Occupy movement, On the Revolutions of the Heavenly Spheres, open economy, Panamax, personalized medicine, Peter Thiel, post-Panamax, profit motive, rent-seeking, reshoring, Robert Gordon, Search for Extraterrestrial Intelligence, Second Machine Age, self-driving car, Shenzhen was a fishing village, Silicon Valley, Silicon Valley startup, Skype, smart grid, Snapchat, special economic zone, spice trade, statistical model, Stephen Hawking, Steve Jobs, Stuxnet, TaskRabbit, too big to fail, trade liberalization, trade route, transaction costs, transatlantic slave trade, uranium enrichment, We are the 99%, We wanted flying cars, instead we got 140 characters, working poor, working-age population, zero day

In China, more than one-third of all wealth is in the hands of the 1 percent.70 Corrupt officials, many now disgraced, have amassed private fortunes through their control of state assets and their authority to award licenses and contracts without independent oversight. Angola, blessed with vast natural resources, is essentially a kleptocracy whose leaders “live in an African version of St. Tropez,” as The Economist put it, while 90 percent of residents in the capital, Luanda, have no running water.71 The above are all examples of what economists call “rent seeking”—making money by taking wealth from others in society instead of creating it anew. But democratic institutions can also be captured and corrupted by influential elites, and made to serve their interests in ways that harm the broad economy. In the US, too, the top 1 percent hold more than one-third of all wealth.72 Legislatures have enormous power to transfer wealth up or down the social ladder: by expanding or shrinking welfare programs; by shifting the tax burden between rich and poor, between investors and wage earners, or between corporations and private citizens; through the pricing and sale of state assets and public goods like railroads, postal systems, oil patches and wireless spectrum; by deregulating or re-regulating industries; by making it harder or easier for persons or corporations to clear their debts through bankruptcy; by deciding whether monetary policy should target low inflation or full employment.

 

pages: 424 words: 121,425

How the Other Half Banks: Exclusion, Exploitation, and the Threat to Democracy by Mehrsa Baradaran

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access to a mobile phone, affirmative action, asset-backed security, bank run, banking crisis, banks create money, barriers to entry, British Empire, call centre, Capital in the Twenty-First Century by Thomas Piketty, cashless society, credit crunch, David Graeber, disintermediation, diversification, failed state, fiat currency, financial innovation, financial intermediation, Goldman Sachs: Vampire Squid, housing crisis, income inequality, Internet Archive, invisible hand, Kickstarter, M-Pesa, McMansion, microcredit, mobile money, moral hazard, mortgage debt, new economy, Own Your Own Home, payday loans, peer-to-peer lending, price discrimination, profit maximization, profit motive, quantitative easing, race to the bottom, rent-seeking, Ronald Reagan, Ronald Reagan: Tear down this wall, savings glut, the built environment, the payments system, too big to fail, trade route, transaction costs, unbanked and underbanked, underbanked, union organizing, white flight, working poor

Eighteen states banned branch banking within the state, nine allowed it, and fourteen allowed it with certain restrictions. Ibid., 215–216. A majority of states in 1895 had no mention of branches in their laws. In some states, silence has been taken as permitting and in others, as forbidding branches. 42. Richard S. Carnell, Jonathan R. Macey, and Geoffrey P. Miller, The Law of Financial Institutions, 5th ed. (New York: Aspen, 2013), 13. 43. Calomiris and Haber see this as Populist rent-seeking. They claim that because Populists controlled the legislatures, they created a banking system that was fragile by design but that served their needs. Calomiris and Haber, Fragile by Design, 459. 44. Starting in the deregulatory era in the United States, some revisionist scholars claimed that the era was not as bad as previously thought, but these claims have been largely rebutted. Lawrence H.

 

pages: 331 words: 60,536

The Sovereign Individual: How to Survive and Thrive During the Collapse of the Welfare State by James Dale Davidson, Rees Mogg

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affirmative action, agricultural Revolution, bank run, barriers to entry, Berlin Wall, borderless world, British Empire, California gold rush, clean water, colonial rule, Columbine, compound rate of return, Danny Hillis, debt deflation, ending welfare as we know it, epigenetics, Fall of the Berlin Wall, falling living standards, feminist movement, financial independence, Francis Fukuyama: the end of history, full employment, George Gilder, Hernando de Soto, illegal immigration, income inequality, informal economy, information retrieval, Isaac Newton, Kevin Kelly, market clearing, Martin Wolf, Menlo Park, money: store of value / unit of account / medium of exchange, new economy, New Urbanism, offshore financial centre, Parkinson's law, pattern recognition, phenotype, price mechanism, profit maximization, rent-seeking, reserve currency, road to serfdom, Ronald Coase, school vouchers, seigniorage, Silicon Valley, spice trade, statistical model, telepresence, The Nature of the Firm, the scientific method, The Wealth of Nations by Adam Smith, Thomas L Friedman, Thomas Malthus, trade route, transaction costs, Turing machine, union organizing, very high income

Nationalism, Reaction, and the New Luddites 1. William Pfaf{ The Wrath ofNations: Civilization and the Furies ofNationalism (New York: Simon & Schuster, ~993), p.17. 2. William H. McNeill, "Reasserting the Polyethnic Norm," in John Hutchinson and Anthony D. Smith, eds., Nationalism (Oxford: Oxford University Press, 1994), p.300. 3. Michael Billig, Banal Nationalism (London: Sage Publications, 1995), p.16. 4. See Gordon Tullock, Rent-Seeking (Aldersehot Harts, England: E. Elgar, 1993). 5. John B. Morrall, Political Thought in Medieval Times (New York: Harper, 1958), p. 48. 6. For example, see the facade of the cathedral at Angoul&me, France. 7. See Karen A. Rasler and William R. Thompson, War and State Making: The Shaping of the Global Powers. Studies in International Conflict, vol.2 (Boston: Unwin Hyman, 1989), p.13. 8. Julian Large, "Bishop Died for Standing Firm Against Henry VIII," Daily Telegraph, June 16, 1996, p.2. 9.

 

The Future of Technology by Tom Standage

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air freight, barriers to entry, business process, business process outsourcing, call centre, Clayton Christensen, computer vision, connected car, corporate governance, disintermediation, distributed generation, double helix, experimental economics, full employment, hydrogen economy, industrial robot, informal economy, interchangeable parts, job satisfaction, labour market flexibility, market design, Menlo Park, millennium bug, moral hazard, natural language processing, Network effects, new economy, Nicholas Carr, optical character recognition, railway mania, rent-seeking, RFID, Silicon Valley, Silicon Valley ideology, Silicon Valley startup, six sigma, Skype, smart grid, software as a service, spectrum auction, speech recognition, stem cell, Steve Ballmer, technology bubble, telemarketer, transcontinental railway, Y2K

Some in Silicon Valley now liken the climate to that of the late 1970s, when government and military contractors employed more than 20% of the region’s workforce. Will the it industry ever become as intertwined with government as, say, the car or media sectors? Nobody knows; but if it does, says Google’s Eric Schmidt, high-tech will lose its innovative spark and, just like other sectors, turn to rent-seeking. 35 THE FUTURE OF TECHNOLOGY Déjà vu all over again If history is any guide, the IT industry’s future will be about services and customer power ou would expect eric schmidt, one of Silicon Valley’s leading lights, to have an oversized inner geek. But these days, he sounds more like a closet historian. He enjoys talking, for instance, about how America’s transcontinental railroad in the 1860s was built on debt, a bubble and scandals.

 

pages: 741 words: 179,454

Extreme Money: Masters of the Universe and the Cult of Risk by Satyajit Das

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affirmative action, Albert Einstein, algorithmic trading, Andy Kessler, Asian financial crisis, asset allocation, asset-backed security, bank run, banking crisis, banks create money, Basel III, Benoit Mandelbrot, Berlin Wall, Bernie Madoff, Big bang: deregulation of the City of London, Black Swan, Bonfire of the Vanities, bonus culture, Bretton Woods, BRICs, British Empire, capital asset pricing model, Carmen Reinhart, carried interest, Celtic Tiger, clean water, cognitive dissonance, collapse of Lehman Brothers, collateralized debt obligation, corporate governance, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, Daniel Kahneman / Amos Tversky, debt deflation, Deng Xiaoping, deskilling, discrete time, diversification, diversified portfolio, Doomsday Clock, Emanuel Derman, en.wikipedia.org, Eugene Fama: efficient market hypothesis, eurozone crisis, Fall of the Berlin Wall, financial independence, financial innovation, fixed income, full employment, global reserve currency, Goldman Sachs: Vampire Squid, Gordon Gekko, greed is good, happiness index / gross national happiness, haute cuisine, high net worth, Hyman Minsky, index fund, interest rate swap, invention of the wheel, invisible hand, Isaac Newton, job automation, Johann Wolfgang von Goethe, joint-stock company, Joseph Schumpeter, Kenneth Rogoff, Kevin Kelly, labour market flexibility, laissez-faire capitalism, load shedding, locking in a profit, Long Term Capital Management, Louis Bachelier, margin call, market bubble, market fundamentalism, Marshall McLuhan, Martin Wolf, merger arbitrage, Mikhail Gorbachev, Milgram experiment, Mont Pelerin Society, moral hazard, mortgage debt, mortgage tax deduction, mutually assured destruction, Naomi Klein, Network effects, new economy, Nick Leeson, Nixon shock, Northern Rock, nuclear winter, oil shock, Own Your Own Home, pets.com, Plutocrats, plutocrats, Ponzi scheme, price anchoring, price stability, profit maximization, quantitative easing, quantitative trading / quantitative finance, Ralph Nader, RAND corporation, random walk, Ray Kurzweil, regulatory arbitrage, rent control, rent-seeking, reserve currency, Richard Feynman, Richard Feynman, Richard Thaler, risk-adjusted returns, risk/return, road to serfdom, Robert Shiller, Robert Shiller, Rod Stewart played at Stephen Schwarzman birthday party, rolodex, Ronald Reagan, Ronald Reagan: Tear down this wall, savings glut, shareholder value, Sharpe ratio, short selling, Silicon Valley, six sigma, Slavoj Žižek, South Sea Bubble, special economic zone, statistical model, Stephen Hawking, Steve Jobs, The Chicago School, The Great Moderation, the market place, the medium is the message, The Myth of the Rational Market, The Nature of the Firm, The Predators' Ball, The Wealth of Nations by Adam Smith, Thorstein Veblen, too big to fail, trickle-down economics, Turing test, Upton Sinclair, value at risk, Yogi Berra, zero-coupon bond

Investors hired advisers, who hired consultants, who hired fund managers, who hired other fund managers, who bought products from banks, who laid off the risk with other banks or investors. Everybody along the chain earned a share of the action. There is no “try before you buy” with financial products. Marketed on the basis of past returns, complex and long-term in nature, financial products lend themselves to economic rent seeking. When fund management fees were reduced by migration to low-cost index tracking funds, investment managers tempted investors into new higher margin products, structured investments, private equity and hedge funds, with the promise of high returns. Simple derivatives were repackaged into complicated and opaque exotic structures to increase profit margins. High rewards encouraged the best and brightest to sign up, helping create newer more complex products.

 

pages: 669 words: 210,153

Tools of Titans: The Tactics, Routines, and Habits of Billionaires, Icons, and World-Class Performers by Timothy Ferriss

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Airbnb, artificial general intelligence, asset allocation, Atul Gawande, augmented reality, back-to-the-land, Bernie Madoff, Bertrand Russell: In Praise of Idleness, Black Swan, blue-collar work, Buckminster Fuller, business process, Cal Newport, call centre, Checklist Manifesto, cognitive bias, cognitive dissonance, Colonization of Mars, Columbine, correlation does not imply causation, David Brooks, David Graeber, diversification, diversified portfolio, Donald Trump, effective altruism, Elon Musk, fault tolerance, fear of failure, Firefox, follow your passion, future of work, Google X / Alphabet X, Howard Zinn, Hugh Fearnley-Whittingstall, Jeff Bezos, job satisfaction, Johann Wolfgang von Goethe, Kevin Kelly, Kickstarter, Lao Tzu, life extension, Mahatma Gandhi, Mark Zuckerberg, Mason jar, Menlo Park, Mikhail Gorbachev, Nicholas Carr, optical character recognition, PageRank, passive income, pattern recognition, Paul Graham, Peter H. Diamandis: Planetary Resources, Peter Singer: altruism, Peter Thiel, phenotype, post scarcity, premature optimization, QWERTY keyboard, Ralph Waldo Emerson, Ray Kurzweil, recommendation engine, rent-seeking, Richard Feynman, Richard Feynman, risk tolerance, Ronald Reagan, sharing economy, side project, Silicon Valley, skunkworks, Skype, Snapchat, social graph, software as a service, software is eating the world, stem cell, Stephen Hawking, Steve Jobs, Stewart Brand, superintelligent machines, Tesla Model S, The Wisdom of Crowds, Thomas L Friedman, Wall-E, Washington Consensus, Whole Earth Catalog, Y Combinator

., tenured positions] had already been found in the ’60s, and they had occupants. . . . I think what I needed to do was decamp and realize that technology was going to be a boom area. And even though I wanted to do science rather than technology, it’s better to be in an expanding world and not quite in exactly the right field, than to be in a contracting world where peoples’ worst behavior comes out. [In the latter,] your mind is grooved in defensive and rent-seeking types of ways. Life is too short to be petty and defensive and cruel to other people who are seeking to innovate alongside you.” PARTING ADVICE? “What I would really like is for those of you who have been told that you’re learning disabled, or you’re not good at math, or that you’re terrible at music, or something like that, to seek out unconventional ways of proving that wrong. Believe not only in yourselves, but that there are [ways, tools, methods] powerful enough to make things that look very difficult much easier than you ever imagined.”

 

pages: 585 words: 165,304

Trust: The Social Virtue and the Creation of Prosperity by Francis Fukuyama

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barriers to entry, Berlin Wall, blue-collar work, business climate, capital controls, collective bargaining, corporate governance, deindustrialization, Deng Xiaoping, deskilling, double entry bookkeeping, equal pay for equal work, European colonialism, Francis Fukuyama: the end of history, Frederick Winslow Taylor, full employment, George Gilder, glass ceiling, global village, hiring and firing, industrial robot, Jane Jacobs, job satisfaction, joint-stock company, joint-stock limited liability company, Joseph Schumpeter, labour market flexibility, labour mobility, land reform, low skilled workers, manufacturing employment, mittelstand, price mechanism, profit maximization, RAND corporation, rent-seeking, Ronald Coase, Silicon Valley, Steve Jobs, Steve Wozniak, The Death and Life of Great American Cities, The Nature of the Firm, the scientific method, The Wealth of Nations by Adam Smith, transaction costs, transfer pricing, traveling salesman, union organizing

Contemporary cartels include not just oil producers and suppliers of gold and diamonds but professional associations like the American Medical Association or the National Educational Association, which set standards for entry into the medical and teaching professions, respectively, or labor unions that regulate the entry of new workers into the labor market.11 In a developed democracy like the United States, virtually all significant sectors of society are represented in the political process through well-organized interest groups. The latter seek to advance or protect their positions not merely through economic activity but through rent seeking or by exercising influence over the political process. The countries of medieval and early modern Europe were in many respects highly communitarian societies, with a large number of overlapping sources of communal authority—princely, ecclesiastical, seigneurial, and local—constraining the behavior of individuals. Economic life in the towns was strictly regulated by traditional craft guilds that established qualifications for membership and limited both the number of new entrants into the craft and the types of work they could engage in.

 

pages: 851 words: 247,711

The Atlantic and Its Enemies: A History of the Cold War by Norman Stone

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affirmative action, anti-communist, Ayatollah Khomeini, bank run, banking crisis, Berlin Wall, Bernie Madoff, Big bang: deregulation of the City of London, Bonfire of the Vanities, Bretton Woods, British Empire, central bank independence, Deng Xiaoping, desegregation, Dissolution of the Soviet Union, European colonialism, facts on the ground, Fall of the Berlin Wall, financial deregulation, Francis Fukuyama: the end of history, Frederick Winslow Taylor, full employment, Henry Ford's grandson gave labor union leader Walter Reuther a tour of the company’s new, automated factory…, illegal immigration, income per capita, interchangeable parts, Jane Jacobs, Joseph Schumpeter, labour mobility, land reform, means of production, Mikhail Gorbachev, new economy, North Sea oil, oil shock, Ponzi scheme, price mechanism, price stability, RAND corporation, rent-seeking, Ronald Reagan, Silicon Valley, special drawing rights, Steve Jobs, strikebreaker, The Death and Life of Great American Cities, trade liberalization, trickle-down economics, V2 rocket, War on Poverty, Washington Consensus, Yom Kippur War, éminence grise

It was not a miracle cure, though it could certainly deal with symptoms, and this was noted by political commentators who had made their training in Marxism. One such, Alfred Sherman, dismissed economics as jumped-up accountancy: paper-money inflation just reflected the power of labour and the trade unions to impose transfer payments; he also saw the interest of the Keynesians themselves in the power of the State in organizing the transfers, the productive parts of the economy having to pay for it all. It was described in the United States as ‘rent-seeking’, as political economists tried to find a theory to fit what had been happening. A bureaucracy, complete with its own wooden language, was established to effect the transfers, and it taxed the middle: as Sherman said, the State turns everybody into a proletarian or a functionary. This was again a very old argument. It was levelled at the Counter-Reformation Catholic Church. In the later nineteenth century, Protestant countries were overwhelmingly richer and better organized than Catholic ones.

 

pages: 1,445 words: 469,426

The Prize: The Epic Quest for Oil, Money & Power by Daniel Yergin

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anti-communist, Ayatollah Khomeini, bank run, Berlin Wall, British Empire, colonial exploitation, Columbine, cuban missile crisis, energy security, European colonialism, Exxon Valdez, financial independence, fudge factor, informal economy, joint-stock company, land reform, megacity, Mikhail Gorbachev, Monroe Doctrine, new economy, North Sea oil, oil rush, oil shale / tar sands, oil shock, postnationalism / post nation state, price stability, RAND corporation, rent-seeking, Ronald Reagan, shareholder value, Thomas Malthus, Yom Kippur War

[3] Abraham Gesner, A Practical Treatise on Coal, Petroleum, and Other Distilled Oils, ed. George W. Gesner, 2d ed. (New York: Bailliere Bros., 1865), chap. 1; Henry, Early and Later History of Petroleum, p. 53; Kendall Beaton, "Dr. Gesner's Kerosene: The Start of American Oil Refining," Business History Review 29 (March 1955), pp. 35-41 ("new liquid hydrocarbon"); Gregory Patrick Nowell, "Realpolitik vs. Transnational Rent-Seeking: French Mercantilism and the Development of the World Oil Cartel, 1860-1939" (Ph.D., Massachusetts Institute of Technology 1988), pp. 104-08; Business History Review, ed., Oil's First Century (Boston: Harvard Business School, 1960), pp. 8 ("coal oils"), 19 ("impetuous energy"). [4] R. J. Forbes, Bitumen and Petroleum in Antiquity (Leiden: E. J. Brill, 1936), pp. 11-21, 57 ("incredible miracles"), 92 ("eyelashes"), 95-99; R.

New York: Schocken Books, 1989. Noggle, Burl. Teapot Dome: Oil and Politics in the 1920s. Baton Rouge: Louisiana State University Press, 1962. Nomura, Kichisaburo. "Stepping Stones to War." United States Naval Institute Proceedings 77 (September 1951): 927-31. Nordhauser, Norman. The Quest for Stability: Domestic Oil Regulation, 1917-1935. New York: Garland, 1979. Nowell, Gregory Patrick. "Realpolitik vs. Transnational Rent-seeking: French Mercantilism and the Development of the World Oil Cartel, 18601939." Ph.D. dissertation, Massachusetts Institute of Technology, 1988. Nutting, Anthony. Nasser. New York: E. P. Dutton, 1972. ---------. No End of a Lesson: The Story of Suez. London: Constable, 1967. O'Brien, Dennis J. "The Oil Crisis and the Foreign Policy of the Wilson Administration, 1917-1921." Ph.D. dissertation, University of Missouri, 1974.

 

pages: 1,157 words: 379,558

Ashes to Ashes: America's Hundred-Year Cigarette War, the Public Health, and the Unabashed Triumph of Philip Morris by Richard Kluger

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air freight, Albert Einstein, California gold rush, cognitive dissonance, desegregation, double entry bookkeeping, family office, feminist movement, full employment, ghettoisation, Indoor air pollution, medical malpractice, Mikhail Gorbachev, Plutocrats, plutocrats, Ralph Nader, Ralph Waldo Emerson, RAND corporation, rent-seeking, risk tolerance, Ronald Reagan, The Chicago School, the scientific method, Torches of Freedom, trade route, transaction costs, traveling salesman, union organizing, upwardly mobile, urban planning, urban renewal, War on Poverty

University of North Carolina Press, 1948. ———. The R. J. Reynolds Tobacco Company. University of North Carolina Press, 1948. Tollison, Robert D., ed. Clearing the Air: Perspectives on Environmental Tobacco Smoke. D. C. Heath/Lexington Books, 1988. ———, ed. Smoking and Society: Toward a More Balanced Assessment. D. C. Heath/Lexington Books, 1986. ———, and Richard E. Wagner. Smoking and the State: Social Costs, Rent Seeking, and Public Policy. D. C. Heath/Lexington Books, 1988. Troyer, Ronald J., and Gerald E. Markle. Cigarettes: The Battle over Smoking. Rutgers University Press, 1983. U.S. Surgeon General. Smoking and Health: Report of the Advisory Committee to the Surgeon General. U.S. Public Health Service, 1964. ———. The Health Consequences of Smoking. U.S. PHS, 1971. ———. The Health Consequences of Smoking.