Renters

     One of the long-time controversies in economics concerns the behavior called rent-seeking. Crudely put, the rent-seeker seeks to amass wealth without doing anything to get it. This does not describe a conventional landlord, who accepts the responsibility for maintaining his property in acceptable condition, in exchange for regular payments of rent by its occupant. Rather, it pertains to one who seizes control of something – for example, a fordable spot in a river – that he’s done nothing to produce or maintain and for which he accepts no responsibility, and then charging others for its use.

     Rent-seeking is usually a sociopolitical phenomenon. The guilds of pre-Industrial Revolution Europe engaged in rent-seeking by limiting their memberships and forbidding the practice of their trades by non-members, thus elevating the market price of their services by restricting competition. Today, labor unions and professional licensing organizations do much the same, in this case with the collaboration of various levels of government.

     A subtler case of rent-seeking, which can be more difficult to detect, concerns the corruption of public officials and bureaucrats. These discreetly let it be known that their favor is for sale. This attracts purchasers, who use the access they buy to acquire privileges for themselves or to impose burdens on their competitors. Occupational licensing agencies within government are prone to this disease.

     Of course, a governmental rent-seeker needs renters to provide his unhallowed gains. Someone must pay him. Though the official or bureaucrat is corrupt by the fact of offering his “services” to the renter, the renter makes his corruption profitable. Which brings us to this intriguing graphic:

     Now, the doctors notionally depicted above might not be getting direct payments from the companies on their jackets. Their rent could be of a different kind: for example, a pharmaceutical company might restrict access to its products to a particular specialist, who thus becomes a monopolist of sorts. Or a company might promote the services of certain specialists who’ve agreed to use only that company’s drugs. Other arrangements are conceivable.

     The possibility of bring treated with inferior drugs or therapies is one that should worry the American layman. The federal government heavily regulates the production and distribution of many drugs and other medical products. This gives pharmaceutical companies favored by the Food and Drug Agency (FDA) great power. While it would seem that they pay for it in several ways, the consumers of medical products and services must ultimately foot the bill. The FDA bureaucrats and the pharmacorps both practice rent-seeking in their turn, while the patient, obedient to the recommendations of his physicians, pays the rent.

     When a regulatory bureaucracy is allowed discretion in its decisions – and this is inevitably the case when such a regime is imposed on an occupation of any kind – rent-seeking is practically inevitable. For where would the bureaucracy find knowledgeable people in whose hands to put such decisions? Plainly the first place to look is at the leading companies in the relevant field. Some companies will perforce be unrepresented in the bureaucracy. Those that are represented are very likely to favor their former employers over competitors. They might even ask those employers to write the regulations to be imposed on their industry; it’s been known to happen.

     Nobel laureate George Stigler called this regulatory capture.

     Allegations are rife about the emergency authorizations granted Pfizer, Moderna, AstraZeneca, and others to release their hastily developed COVID-19 vaccines for general use. The aggressive promotion of those vaccines by various levels of government suggest that those companies are paying rent to persons in government. However, the vaccines are being administered free of charge. This raises the question: What are those companies getting for their rent?

     But that’s not all. Those in government who are promoting the vaccines have also indemnified the vaccine makers against any legal liability for what the vaccines do or don’t do. This is a form of rent paid by government to the pharmacorps. This raises the question: What are the involved governments getting for their rent?

     Answers are lacking. There are highly credentialed persons on opposite sides of the “get the vaccine / don’t get the vaccine” debate. Laymen are unable to talk to one another without acrimony. Tensions are high. Yet there are persons who want to know why our trust the proclamations of “experts,” and in our governments, has largely evaporated. It is to laugh.