More evidence that “rent-seeking” is economist-speak for “something I don’t like”

That said, it’s an interesting discussion.

P.S. Yes, I know the phrase has a technical meaning, but my impression is that it’s more used as a generalized put-down.

14 thoughts on “More evidence that “rent-seeking” is economist-speak for “something I don’t like”

  1. But it is a putdown. Rent-seeking is, from a social point of view, pure waste, and if there's anything an economist hates, it's waste. And as someone who ended up marrying someone who used Yale's TPO, as it was known, I can testify first hand that the failure of some to pay their obligations put an immense burden on others.

  2. Jonathan:

    I don't know about this particular situation, but if people didn't pay their obligations, couldn't Yale have sued them for it? At least as Alex describes it in his blog, the issue isn't that the graduates couldn't afford to pay, but the opposite.

    Beyond this, sure, I have no problem with putdowns. I just don't see what is added by calling this particular behavior "rent-seeking" rather than, say, "people not paying what they owe."

  3. P.S. Reading more of the comments at Alex's blog, it seems that the problem was not just nonpayment but a system in which people's required loan repayments were not limited ahead of time. So maybe poor design as much as anything else. Still does not seem to me particularly like "rent seeking."

  4. Robert Shiller proposed this idea in his 2003 book The New Financial Order, viewing it as a form of livelihood risk management. Other examples include the so-called Bowie Bonds whereby David Bowie swapped the value of his future music royalties for $55MM cash in 1997. The Thrust Fund is a pretty clever approach in my view, and not "rent-seeking" at all…

  5. You are correct, strictly speaking this isn't an example of rent-seeking unless you want to use a very, very broad definition of "rent-seeking." Frankly, I think it's quite confusing when people use technical terms with fairly specific definitions in very broad, mostly incorrect, ways. I think it just diminishes discourse.

  6. I have to agree with you. It does have a technical meaning, but in general it's just used as a put-down as you say.

    Similarly, "public good" has a technical meaning in economics, but the term is used broadly to mean "something I want to be provided by the state."

  7. I don't think Tabarrok uses the term correctly here, but even if he did, I don't think he's using it as a put down. He's just saying why the Yale program failed. And the post is pretty much neutral on the idea of contingent loans. Why do you think he's using "rent seeking" to mean he doesn't like this idea?

    In general, I don't get your criticism. Is this part of a series of "more evidence that economists…" posts that I've missed?

  8. As an economist, I disagree that it is generally used outside it's specific technical meaning. I think this is an unusual case where it was misused.

  9. I agree that rent-seeking isn't the big problem here, and I told Alex so in the comments (in 3 places). But finding ways out of contracts is pretty much squarely in the realm of "rent-seeking behavior." Now we can quibble at the margins about what the contract anticipated, since anticipated breach is not rent-seeking behavior, nor is accidental breach, as when for example the contract defaults because the borrower dies. But Alex seems to think (wrongly, IMO) that strategic unexpected breach was the problem, and that's rent-seeking behavior.

  10. As a non-economist, I assert that the specific technical meaning of rent-seeking IS the generalized putdown. Rent-seeking can be defined as income-producing activities that certain economists find socially undesirable. They use it as an epithet to denigrate certain groups and activities. If that were not the case, then they would have realized long ago that everything they themselves do is as easily classifiable as rent-seeking as any other human activity.

  11. I didn't imply that it did. I was trying to clarify the notion for Professor Gelman (and softly parodying Dan, the economist). Conservative economists typically use government programs or perhaps labor unions as examples of rent-seeking while more liberal economist will talk about corporate managers or financial traders as rent-seekers. The point I was trying to make is that rent-seeking is defined as a bad thing in economics, unlike profit-seeking which is always a good thing. Ultimately, the distinction between rent-seeking and profit-seeking comes down to a judgment about whether or not the activity provides value. That, of course, is a value judgment (yes, I'm playing off two different meanings of value on purpose). By saying that the practice of economics is rent-seeking, I'm insulting economists by saying that they don't produce anything of value. I don't really believe that, but I'm hoping someday an economist might wake up to the notion that their terminology has an enormous amount of bias and value judgments hidden in pseudo-technical jargon.

  12. Loosely speaking rent seeking is a costly activity used to divide the pie rather than grow the pie. The Yale program ended when some students defaulted and others complained and lobbied Yale to end the program. Of course, ending the program simply shifted the costs from one group of people to another group of people. To the extent that the complaining and lobbying used up resources that is certainly rent seeking in the technical sense.

    In a model, rent seeking is a purely neutral term but Ockhman is correct that identifying rent seeking in the world involves a judgment as to whether the pie is primarily being divided or grown. In this case, it's pretty clear it was all about dividing the pie.

  13. "In a model, rent seeking is a purely neutral term"

    Really? I don't think so. In the economics world-view, costs associated with dividing the pie are the opposite of public goods (do you folks call them public bads?). At best, economists think of rent seeking as a cost to be minimized. In the real world, this view is stupid and short-sighted. Ignoring the social (non-economic) costs of various policies or activities is the core reason that the economics profession misunderstands the world. Real people have multitudinous motivations beyond simple greed. The failure to accurately model that makes economic models less true and less useful.

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