It is time to stop quivering in our boots in pointless fear of the future and just roll up our sleeves and build it.
- Ray Pierrehumbert

Thursday, July 7, 2011

Rent Seeking, Corruption and Madness

I think that anyone defending climate science occasionally runs into an economist type who accuses those of us who would like to limit CO2 emissions of "rent seeking". There is more than a whiff of contempt usually associated, which is peculiar, because the contempt tends to come from someone who (like most people) would not hesitate to rent out surplus space at the highest rate they could get.

Wikipedia to the rescue:
"rent-seeking is an attempt to derive economic rent by manipulating the social or political environment in which economic activities occur, rather than by adding value. An example of rent-seeking is the limitation of access to skilled occupations imposed by medieval guilds."
And here is a case in point:
Washington, D.C. is considering a bill that would require every cab driver in the city to own a special permit called a medallion. The total number of medallions would be capped at 4,000, which would reduce the current number of cabs by more than one-third and put thousands of drivers out of business. (The city government has no idea how many licensed cabs are in the district, though estimates range from 6,500 to 10,000.)

If that weren't bad enough, most drivers wouldn't have the option of buying a medallion. The first set of medallions would be offered for sale to the minority of cabbies who have been driving for at least five years and who live in Washington D.C. (Again the city government has no idea how many current drivers meet this criteria, but rising real estate prices and weak city services have led many drivers to leave the district.)

Who will be offered the next set of medallions, according to the bill? That would be cab companies, who could then rent medallions to drivers. This system would destroy the relatively open-access taxi industry in D.C., in which the majority of drivers are owner-operators free to make their own schedules and keep whatever money they earn on the job. In cities such as New York and Boston, drivers pay upwards of $800 a week to rent their medallions.




A libertarian blog comments:
You can think of two theories of government. One theory is that government exists to correct externalities and provide public goods. The other is that government uses the language of helping people to justify giving stuff to the politically powerful out of the pockets of the rest of us. Here’s some evidence for the second theory.
My sympathies are entirely with the small-timers who choose their own hours and can scale their efforts informally to match available demand. Here is a case where the diseconomy of scale is absolutely obvious.

The video implies that the governmental process is corrupt and that there is no legitimate reason for medallions. I don't know about that, though to be honest I can't really think of one. But I know this is another example of pressure to increase the minimum amount of work people have to do to participate in the economy. As such, it is clearly retrograde to the world of leisure that has been stolen from us for no good reason and replaced by a frantic false scarcity.

And the video, amidst the innuendo, does at least sketch the case for how the process might be corrupt.

So when people for whom limits to growth and limits to carbon emission treat us with suspicion and hostility, and bandy this "rent seeking" term around, it's important to remember that such a thing can conceivably happen. That is, we are making business more difficult for them, and the first question on their mind is "follow the money". How they get to us is perfectly silly, though Dick Lindzen is happy to spin crazed fantasies about it.

But this is the kind of thing they are worried about.

In this particular case, I have nothing to say about the corruption angle.

I very strongly think cutting people off from part time and informal income is just generally anti-resilience. Some will see it as abuse of the public by government, others as abuse of government by big business. But in any case, it concentrates wealth and increases stress, exactly the opposite of what ought to be happening. I wonder if there isn't some common ground to be found here with libertarian types.

Taking 10,000 people working half time, turning them into 5,000 people working full time and splitting their take with the people who have the capital to snap up all the medallions, is just the sort of lunacy that the anti-leisure economy foists upon us. This, as Shrek would say, is the opposite of helping.




8 comments:

Dan Olner said...

A google for "regulating taxi numbers" came up with this interesting list of some of the economic quirks of taxi supply and demand, and makes very good points about it having the appearance of a good market, but none of the actual essential features of one - something I'm surprised libertarian commeneters wouldn't have picked up on.

"... to the world of leisure that has been stolen from us for no good reason and replaced by a frantic false scarcity."

Is that your position now, and you're sticking with it? Twould be good, perhaps, if you could go through your recent series and condense into a bunch of clear statements that support this argument. It was in there somewhere, but was hard to follow, for me at least.

p.s. reading that paper, here's a million dollar plan for you: help turn taxi-buying into a proper market with an app - you google the route, request a taxi, the one offering the lowest price (and says the time they can get to you) gets accepted. Could even do it through street furniture. The paper's right: at the moment, search costs completely rule out anything like proper price signals, especially for people not familiar with an area.

ScruffyDan said...

"One theory is that government exists to correct externalities and provide public goods."


If that is a position genuinely held by libertarians (and it should be, especially the first bit about externalities). Then we should have a lot of common ground with them, since GHG emissions represent one of the biggest externalities the mostly-free market has ever faced.

Also I must confess that I see much to like about many aspects of libertarianism.

Dan Olner said...

"Also I must confess that I see much to like about many aspects of libertarianism."

I understand the term libertarianism to mean anarcho-capitalism. So it's a branch of anarchism, but built on a Hayekian/Austrian ideal of the catallaxy.

For me, it just mystery-fies the price system, raising it up to some mythical social backbone that people like Hayek tell us we must never interfere with, for we know not what we do. Hence his whole argument against social justice: moral ideals held by people who have failed to understand that any action other than through the price system will damage, not mend.

Any good points in libertarianism for me already exist in other anarchist ideas... p.s. you read the Dispossessed?

Making distinctions within anarchism can quickly lead to a sorceror's apprentice / broom multiplication scenario, so I apologise in advance!

TheTracker said...

"I understand the term libertarianism to mean anarcho-capitalism. So it's a branch of anarchism, but built on a Hayekian/Austrian ideal of the catallaxy."

That is what the recent internet crop of anarcho-capitalists like to think, but there is no reason we should participate in their hallucination.

A real libertarian believes in a strong state which is limited, because weak states cannot protect their citizens from other sources of coercion, external or internal. The anarcho-capitalist waves this concern away, and thinks he can somehow privatize the rule of law.

Libertarian philosophy has many things to recommend it and should be taken seriously; but the libertarians you find at Mises.org or commenting on climate blogs, where anything and everything they don't agree with is labelled "socialist" and "totalitarian" are not libertarians. Nor are they really anarchists.

The philosophy they most resemble is Leninism -- they have an economic theory, it holds all the secrets of the universe, the vanguard are going to impose it on everyone, because after all people are stupid and this is what they would want if they knew what they wanted, and then the state is going to wither away and everything will be wonderful.

Anarcho-capitalists are best referred to as crypto-Leninists. Although they are not fond of the comparison, for some reason. ;)

ScruffyDan said...

libertarianism, like most things, is best enjoyed in moderation.

Lars said...

Thanks for the reference, Dan. Up until now, I had the vague idea that "Catallaxy" was the name of a discontinued make of car, or perhaps a river running southeast off the southern Piedmont.

guthrie said...

A little late to this, but, Dan, in my many years online, the number of libertarian people who show some understanding of what good markets look like and what happens when there aren't any is extremely low. Especially when compared with the number of shrill I got mine people with who label everything they don't like socialist. There are some economically knowledgeable libertarian people but they tend to get lost in the noise.

Also, the term liberatarian in Europe actually refers to left win anarchist types who are against capitalism. It got nicked by Americans decades ago and so everyone thinks a libertarian is a capitalist when that was not the case in the early 20th century.

Dan Olner said...

Guthrie, cheers for that. Overlaps with TheTracker's spot-on way of putting it: for some, `the market'

"... holds all the secrets of the universe, the vanguard are going to impose it on everyone, because after all people are stupid and this is what they would want if they knew what they wanted, and then the state is going to wither away and everything will be wonderful."

I'm reminded of Krugman's `confidence fairy', coming from the same place: cutting spending will release the market genie from the bottle and economic output will magically ensue.

Hayek and others' market mysticism is just that. Hayek thought humans had happened upon this perfect self-organisation structure, as important to human society as the evolution of the backbone, and that it was completely unique. It isn't of course: humans make all sorts of self-organisation structures, and we can even - gasp - design some aspects of them...