I’m intrigued by the increasing references to rent-seeking as a way of making sense of the grotesquely unequal distribution of income in the United States. What explains this trend?
We now have Joseph Stiglitz, Josh Bivens and Lawrence Mishel, and Paul Krugman all referring to rents or rent-seeking in order to analyze how the 1 percent has managed to capture a larger and larger share of the income generated within the U.S. economy. It seems that, within “polite company” (or at least what passes for polite company within mainstream economics), it’s now permissible to invoke and describe the rent-seeking behavior of the economic elite (in a manner analogous to the way rent was originally used, to describe what landlords received for the use of their land, as the return obtained by virtue of ownership, not because of anything they actually did or produced).
Here’s my sense: the obscene amounts of income going into the pockets of the top 1 percent and the fact that much of that income is associated with what are increasingly seen as economically useless activities (such as returns to stock ownership, serving as Chief Executive Officers of large corporations, and the financial sector) have put the final nail in the coffin of neoclassical marginal productivity theory. It’s simply become increasingly difficult to square the concentration of income among those at the very top (and the stagnation of incomes for pretty much everyone else) with the idea that everybody gets what they deserve, according to their marginal contributions to production.
So, what’s the alternative? Well, clearly the idea of surplus extraction and distribution is one way of making sense of the problem. But such a theory of income distribution brings with it notions of class and exploitation—and, of course, a critique of capitalism. The idea of rent-seeking is thus a way out. It represents a critique of the marginal-productivity theory of distribution but it refuses the idea that the incomes of the those at the top can be explained by their capturing a larger and larger share of the surplus produced by those who labor at the bottom.
As for me, I’m curious to see in which directions this debate will go in the coming months and years, as the top 1 percent continue to grab the money and run.