As in his book, The Price of Inequality, Stiglitz makes use of a concept called "rent-seeking," i.e.,
some of the most iniquitous aspects of inequality creation within our economic system are a result of “rent-seeking”: profits, and inequality, generated by manipulating social or political conditions to get a larger share of the economic pie, rather than increasing the size of that pie.We should first note that "rent-seeking" requires one to reject supply-side economics, at least in some circumstances. Namely, that rents "extracted" from one pie can be added to another, re-invested, and used productively to make something even better (this, in fact, is the view of the patent-holders and, might I add, Schumpeter). The reasons I reject this supply-side view include:
(1) losses resulting from the anticompetitive behavior (using not free competition but market/political power to distribute resources) often outweigh the gains from any renewed investment. For example, Stiglitz points out that patents in genomes actually hampered continued research and innovation while making life-saving healthcare unaffordable to many. There's a good argument that whatever "new" investment enabled by the patents (extraction of rents) is small beans compared to these losses;
(2) to the extent that the profits are not reinvested into new technology/industry, but instead used to play the speculation game on wall street, it's a dead weight loss;
(3) I've not seen evidence that the significant size of the rents extracted is absolutely necessary to encourage an optimal level of re-investment. Maybe we can give investors a bit of a boost - but I have a feeling what they're getting is mostly icing on the cake.But the larger point that I want to make is the extent to which "rent-seeking" resembles the capital/labor struggle for power so well articulated by many economists. To illustrate using the "m" word: entrepreneurs can leverage workers' inferior bargaining position and capital-friendly laws to extract "surplus" value from the product of wage labor. In other words, the exertion of power to usurp value from one party to give it to another. This sure sounds a lot like Stiglitz is talking about, and it reveals to us that power can manifest through economic coercion, the manipulation of laws and regulations, or the exploitation of social convention.
(In fact, I wonder to what extent "rent-seeking" may serve as a euphemism for....ideas that McCarthy wanted to send us to jail for talking about. Of course, Adam Smith talks about it too. And also has a rudimentary labor theory of value. So.)
At any rate, I'd argue that any manipulation of the "rules of the game," whether we call those rules in our every day conversations "economic," "political," or "social," is an exercise of power over people. And, at the end of the day, *all* behavior is either enabled, encouraged, or prohibited by law - and therefore, at some point, by our social conventions. For example, we can make contracts because the law enforces them and permits them. To call the terms of a contract a simple manifestation of private "market actors" acting freely, divorced from the talk of power, is a canard.
In other words, to divide "power" into three different concepts takes off the table real issues worthy of political attention.
This is not to say there isn't a "sliding scale." Not every contract is the product of exploitation - sometimes parties come to the table standing on equal ground.
But more and more today, the cards are stacked. To camouflage the inequalities by calling it a "market" phenomenon is to pass the buck on our civic responsibilities.
