07.16.13
Rent-seeking and inequality
Economics Nobel laureate Joseph Stiglitz neatly explains corporate American rent-seeking behavior in a New York Times piece examining the Supreme Court’s ruling that an American company cannot patent existing human genes.
It involved a company called Myriad and patents on two genes thought to be at the root of breast cancer. With the establishment of its patents, the company established a monopoly on potential early breast cancer diagnosis, pricing a very basic need in such a way that only the privileged could afford it.
Stiglitz defines and explains:
[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. And the most iniquitous aspect of this wealth appropriation arises when the wealth that goes to the top comes at the expense of the bottom. Myriad’s efforts satisfied both these conditions: the profits the company gained from charging for its test added nothing to the size and dynamism of the economy, and simultaneously decreased the welfare of those who could not afford it …
Myriad’s effort to patent human DNA was one of the worst manifestations of the inequality in access to health, which in turn is one of the worst manifestations of the country’s economic inequality. That the court decision has upheld our cherished rights and values is a cause for a sigh of relief. But it is only one victory in the bigger struggle for a more egalitarian society and economy.
This fits nicely with a larger discussion I’ve been attempting here over the past months.
Yesterday, I briefly touched upon how the tools of technology (in a specific case involving YouTube, those made by Google) allow the establishment of rent-seeking behavior by mega-corporations as massive owners of intellectual property.
Google/YouTube’s arrangements do not increase the size of the economic pie available to all. But by enabling corporations to take entire control of content created by others that may use only a part of their intellectual property in the artistic endeavor, simply by flicking a software switch to scan for IP property signatures within uploaded files, it has enabled easy rent-seeking on the backs of others.
Individuals at the user level on Google properties have no access to such power. And, in fact, find that for practical matters their content is almost impossible to monetize from their end.
On the other hand, corporate tech software has enabled the global control of the aggregate pie so that it can be squeezed of whatever is available. Yes, Google is now evil.
Rent-seeking — from the archives.
Systemic rent-seeking strikes at the very heart of democratic institutions in 2013 America. And that is because, fundamentally, it is about disenfranchising the many for the monetary benefit of those with all the capital.
Because it is quickly producing a less stable society, and in the case discussed by Joseph Stiglitz shows an easily provable damaging effect on women’s health, it can kill people. In the long run, it is an obvious security threat.