pen-l masochism revisited

["Devine, James" <jdevine@xxxxxxx>]

Title: pen-l masochism revisited

[was RE: [PEN-L] Public/Private]

Ian wrote:
> >> Free trade, too, is a form of protectionism and rent seeking...........

Dave "the Masochism Tango" Shemano writes:
> I am curious-- what is the definition of protectionism and
> rent seeking that treats free trade as protectionism and rent
> seeking? 

Part of the problem is that the phrase "free trade" has been highly abused by those who push "it." The North American "Free Trade" Agreement and similar agreements, don't just lower tariffs and quotas (the usual, strict, meaning of "free trade" in economics). They also _impose_ all sorts of restrictions on how trading partners treated direct foreign investment and international portfolio investment. They also _impose_ all sorts of restrictions on "intellectual property rights," creating new property rights -- new monopolies -- where none existed before. The last is a clear case of rent-seeking, as normally defined, since it allows drug companies (etc.) to get and to continue getting super-profits.

Also, those businesses on the inside of the political process of creating "free trade" have an advantage over outsiders. They know of openings for profit-making that can give them special advantages (and rents) vis-a-vis the outsiders.

Of course, one of the points of "free trade" agreements is to undermine the bargaining power of workers in the richer countries. This promotes profits (all else equal) and protects businesses from workers being paid decently, but I wouldn't call this "rent seeking." The latter term seems a bit over-used on pen-l.

I would define "rent seeking" as involving individual seeking of special advantages in competition, in order to get a larger share of the profit pie. This does NOT just involve lobbying, contrary to the Chicago/Virginia school of economics. For example, my grocery store (Safeway) gave me a special card that, when I use it, automatically gives me a discount on some products. This is an effort to bind me to the company -- since I can't use the card at other stores -- to seek special competitive advantages. This is pretty harmless, but there are lots of other examples.

Cutting wages (getting rid of unions, etc.) might be seen as a form of rent-seeking, since it can give special advantages. But when generalized, as by a "free trade" agreement, it doesn't involve capitalists fighting over the distribution of the pie. Instead, it raises the over-all volume of profits (all else equal, of course). It's more of a matter of a one-sided class war by capitalists.

and:
>However, even if everything in the previous paragraph is true, there are types of behavior that are analytically distinct.  If Boeing goes to the legislature and says that it will move unless it receives the benefit of a state expenditure, that is a different behavior than if it does NOT go to the legislature, right?  So why would you call both behaviors the same thing?<

Property rights are not given by Nature or God. They are defined in practice by the accumulated lobbying and bribing of politicians and the legal system by those who are trying to create property rights for themselves.

Individual property rights are almost never "private" in impact. The state (under the property-owners' influence) grants the right to individuals to control property and to appropriate (some of) the income that results from such control. But it can also allow the property-owner to dictate to other individuals, as with the pollution of the air in the latters' lungs. Individual property owners lobby the state to get these kinds of right.

Jim Devine