Rent Seeking…

What is “rent seeking”?  Rent seeking is using the power of government to establish some sort of economic situation where the government acts to restrict competition from others.  Rent seeking allows you to earn a higher income than what you could earn in a truly competitive free market economy.  And while your income is increased because of government laws and regulations prohibiting or reducing the number of people who can “compete” with you, the result is always higher prices for the consumer than what the consumer would have to pay in a truly competitive free market economy.  The way this is done is usually by having the government pass laws or regulations that serve to restrict competition.  The licensed professions are a good example of “rent seeking” in that they use the force of government to create for them a “monopolistic” situation where they are free to charge you more than what they would be able to charge you in a truly openly competitive free market economy.  A good example is that of prescription laws where in order to purchase medicine, you have to first obtain a doctor’s prescription.  Otherwise you have no legal access to medicine.  Naturally this is of considerable economic benefit to the doctor, who thus can earn a higher income than he or she would earn if they were forced to do business in a truly competitive free market situation.  The same thing also applies to licensed professionals everywhere, not just here in the USA, although in other “developed countries” their freedom to charge what they want for their services is now considerably reduced by their national government.  This is why the Japanese people for example pay only 9% of their GNP for health care whereas in the case of the USA, we pay close to 18% of our GNP for health care.  The difference is due to “who” is being allowed to benefit from the power of government.  In the case of Japan, the people benefit, whereas here in the USA the medical profession is the one who benefits instead.

Other groups besides the licensed professions have obtained the ability to do “rent seeking” through having the government use its regulatory and legal powers to create a “niche” for their own field of business.  Again, the result is that the consumer pays a higher price.  It will of course be claimed that this is for the consumer’s own benefit and protection.  You should believe this about as much you believe what a used car dealer tells you…  As a general rule, the “truth” is something much different than what you’ve been told.  The old saying, “Let the customer be aware…” generally holds true here too.  As Adam Smith pointed out back in 1776, whenever businessmen get together, their first action is to attempt to create a condition where the consumer will be the “loser” while the businessman is the “winner”.  The consumer ends up paying “more” for his goods or services, while the businessman earns a higher profit than what he or she could earn otherwise.  The same is true wherever government “licensing” is in common practice.

It is for this reason that you should never accept these sort of claims of “consumer protection” as being anything more than an attempt by those trying to sell you some good or service to earn a higher profit as a general rule.  After all, the primary purpose of anyone running a business is to earn as good a profit as they can.  And if they can use the power of government to “improve” their “position”, they will do so without hesitation…  The term “honest businessman” is like the term “honest politician”.  Both are logical impossibilities just as the term “a square circle” is a logical impossibility.  Nor does it seem to matter what field of business they are in, they will always seek their own profit over your welfare.  And the “state” will usually be “upon the side” of those who seek the highest possible profit.  This is “why” we have things like prescription laws, which were a great benefit to the medical profession when they were passed by the federal government back in 1938, some 74 years ago during The Great Depression.  This same idea underlies the actions of all of the professional organizations, the skilled trades, and labor unions.  They all are “looking out for #1”.  Yes, in some cases there may be some social benefit to their actions, but most of the time the ultimate result is that the “consumer” of these services will be the “loser” in that your choice will be reduced, and you will end up paying more than what you’d have to pay in a true free market system where the actual role of government was limited to what was really necessary.  Which is a far smaller government than what we have now!  A whole lot smaller than the bloated monster we now have!  This is also “why” we have 36,000 registered lobbyists there in Washington, D.C. too.  These lobbyists serve those who pay them, and if you will check, you will find that they generally serve large corporations, professional organizations, and so forth.  Not the American people.  This is also “why” we have the laws that we do, and why as a general rule us private citizens end up getting “the short end of the stick”.  Nor does it do much good to switch political parties.  Both the Democratic Party and the Republican Party when you get down to it serve the same “masters”.  The same “masters” who pay these 36,000 registered lobbyists to help “guide” our Representatives and Senators and for that matter, the President of the United States to pass the laws and regulations that are desired by those who have massive amounts of wealth and get the legislation they want!

There is only one “fix” for all this.  Vote Libertarian!  If you are a Libertarian, run for public office.  Explain to the voters why they’ll be better off with a much smaller government than the one that we have now there in Washington, D.C.  We Libertarians also need to be paying attention to the actions of state and local government.  It’s often far easier to make our voices heard if we operate on a local and state level than it is to try to do the same thing on the federal level.  Be sure you are registered to vote, then whenever possible, vote “Libertarian”.  You’ll feel much better afterwards…


About muskegonlibertarian

77 year old retired owner of a security guard agency. Member of the Libertarian Party.
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