We still see the value the robber barons created from both their commercial efforts and their charitable/social efforts. It remains to be seen whether we will see value from the social justice movement. One thing is for sure, the corrosive effects of rent seeking eat away at the rule of law, which is a foundation of American prosperity.
https://mises.org/wire/social-justice-progressive-equivalent-rent-seeking-behavior
The term “rent seeking” is a derogatory term that implies companies and people seek to take more than they earn. It hearkens to some Marxist ideology as well. However, especially when combined with regulatory capture and bureaucratic corruption, rent seeking is a valid concept. What happens when the shoe is on the other foot and people and organizations engage in rent seeking from a social justice perspective? Is it rent seeking or corruption for actions to secure social justice? Does the end justify the means?
Investopedia defines rent seeking as follows: “Rent seeking (or rent-seeking) is an economic concept that occurs when an entity seeks to gain added wealth without any reciprocal contribution of productivity. Typically, it revolves around government-funded social services and social service programs.”
Political scientists and economists traditionally apply the term “rent seeking” to capitalists, especially the so-called robber barons from the Gilded Age. However, what the definition does not seem to consider is value creation. Value creation could be a subset of the “contribution of productivity,” but productivity does not mean value creation. We can be highly productive in activities that produce little value or may even destroy value. While the robber barons could be cruel and demanding by virtually any measure, they created the economy and infrastructure that saw the United States through two world wars. The robber barons also provided tremendous social value with the libraries, universities, and museums they funded along with their other charitable activities. These benefits do not excuse their predatory actions, but they created extensive value, which mitigates the amount of rent-seeking behavior.
The term “rent seeking” and its definition hearken back to Karl Marx’s terminology and critique of capitalism. He was most decidedly against any form of rent seeking. Perhaps it is no accident that unions grew and perhaps reached their high point during the Gilded Age. After the Russian Revolution in 1917, the West, particularly the US, turned away from anything resembling communism. The term “rent seeking” is still a charged term and concept however.
The definition of rent seeking says it is often a function of government programs. I have covered this in several blog entries (“Defending the Republic: Scenario 1 Regulatory Capture,” “Defending the Republic: Scenario 2 Policy Domination,” “Regulatory Capture and other Bureaucratic Problems,” “DIE Hydra,” and “Critical Thinking and Policy Development and Analysis”). Organizations use regulatory capture to engage in rent seeking from government programs.
A good example of rent seeking among government programs is a homeowner that builds a house in an area with frequent floods, fires, or hurricanes, yet he does not purchase the appropriate hazard insurance. When disaster strikes, the homeowner expects, if not demands, the Federal Emergency Management Agency (FEMA) to pay the costs to rebuild. FEMA does—why? Is there some deep regulatory capture going on by the home lenders and insurance companies? More study is required, but I suspect so.
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