Sovereign Elite Rent Seekers

“At that point society has three choices: simplification, conquest or collapse” – Jim Rickards

I’ve found that when you have three young children, you tend to read books “gradually” – a chapter here and a chapter there, usually after everyone is asleep and long after you should have been asleep yourself. So it has been with my meandering through Currency Wars by Jim Rickards. On the whole I’d say it’s a very good book. Rickards gives some excellent history on the fiat currency systems and past currency wars. I’m toward the end of the book now (again, “gradually”) and thought I’d pass on a flourish of rhetorical questions which Rickards poses:

Is Washington the New Rome? Have Washington and other sovereigns gone so far down the road of higher taxes, more regulation, more bureaucracy and self-interested behavior that social inputs produce negative returns? Are certain business, financial and institutional elites so linked to government that they are aligned in the receipt of outsized tribute for negative social utility? Are so-called markets now so distorted by manipulation, intervention and bailouts that they no longer offer reliable price signals for the allocation of resources? Are the parties most responsible for distorting the price signals also those receiving the misallocated resources? When the barbarians arrive next time, in whatever form, what is the payoff for resistance by the average citizens compared to allowing the collapse to proceed and letting the elites fend for themselves?

That last bit about barbarians is a reference to the fall of Rome and its presentation in another book by Joseph Tainter, The Collapse of Complex Societies, which is “on my list” – as are so many others. Tainter’s point is that the Roman empire fended off barbarians many times before, but this time the barbarians found little resistance in the outer regions. The average farmer, the common man, found the barbarians no less oppressive than the Romans, and saw no reason to resist them … perhaps even preferring to aid the barbarians.

The description is spot on, of course. Both in politics and economics, people are far less concerned with actual productivity and far more concerned with catching some of the largess being thrown about by the government (a term that economists apparently dub “rent seeking” – finding new and inventive ways to garner riches through unproductive means).

We’ve touched on rent seeking in the past, though never using that term (e.g., “Republicorruption). The storyline is very simple. The people throw off the chains of an oppressive kingdom to establish a republic. Over time, individual liberties become passe and are replaced by “the greater good” as a mode of operation. The people then elect leaders who promise the greatest good, and submit themselves (and their former freedoms) to the elected rulers, who sell the new-found authority to the highest bidder: sometimes political movements, sometimes corporations. The corporations then profit more from an exercise of indirect authority over the “free” people than they do from innovation and development (e.g., “Occupy Yourself, Barriers to Free Market Entry (and Who Benefits)“).

In this setup, the corporate rent-seekers have not acted irrationally. They have appropriately recognized that the easiest (and therefore the best) way to profitability is through bribery and corruption instead of hard work. (Honestly, what basketball team wants to spend all their time practicing to get better, only to find that they can’t possibly win because the opposition has already bought the officials? Better to buy the officials first, as long as they’re for sale.)

For that matter, the government officials haven’t behaved irrationally. Sure, they’ve behaved immorally, of this there is no question, but not irrationally. Their behavior is completely consistent with the human condition, and should not come as a surprise to any of us (certainly not the Christians, who understand that the human condition is one of self-interest and depravity).

The elites have behaved completely rationally; the politicians have behaved exactly as one would expect; it is only the people who have acted foolishly.

I have more to say on the subject, but for now I have to run off to work. Somebody has to actually produce something to be consumed by all those elites and hangers-on.

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