A
common cause of socioeconomic inequality is rent-seeking.
Optimistically, we might expect that rent seeking can be curtailed
through social activism. This works if the progress of activism
matches or outpaces the rate of increase in rent-seeking behavior. Apart
from the usual tactics to stymie social activism, companies escape this
activism by superficially "innovating" in ways that allow them to
escape public regulation. This strategy is reminiscent of planned
obsolescence.
The rent-seeking treadmill
Four
friends and I were discussing "rent seeking", wherein entities
monopolize critical resources and charge "rent" far in excess of the
upkeep costs. One friend commented that a general form of this is simply
"Life will afford some individuals lucrative opportunities". This is
true, no doubt, and I wish to be clear: I do not intend to deprive
individuals of the fruits of their labor, nor do I advocate for
confiscating wealth gained by good luck. I do however, wish to prevent
corporations, governments, and individuals from extracting wealth from
others simply because they have a power advantage.
There
are numerous forms of rent seeking that should be familiar, but I
suppose the most familiar lies in the origin of the term itself: rent.
People need jobs to survive. Therefore, where people live is often
limited by what job they can get. Where housing demand is high,
landlords may charge exorbitant rents for even unsafe housing, reaping
profits far in excess of their upkeep costs. Renters and homeowners can
conspire to limit new, high-density development that might bring rent
down. This is generally viewed as a bad thing, as the renters have no
choice in the matter, and the landlords are able to extract large sums
of money from a vulnerable population without adding any real value.
Rent-seeking
emerges whenever there is a power imbalance in society. Socialized
services may fall to corruption, diverting public resources into private
accounts. Corporations may form global or local monopolies, and thus
escape the market pressures that normally keep costs "fair". Even unions
may abuse a strong bargaining position and hamstring an industry or
public service by acting as a labor monopoly. The important thing in
these examples is that socialized governments, corporations, and unions
are not evil, but they can all act antisocially if they acquire a
disproportionate amount of power, and wield this power without regard
for the common good. However, at present most rent-seeking in society is
perpetuated by corporations and landlords, and these are the actors I
have in mind.
A
more insidious form of rent-seeking occurs at the grey boundary of
"essential" services. For now, let's define an essential service as a
service the lack of which creates a serious barriers to economic
mobility (leaving the meaning of the term "serious" is open to debate).
Most agree that clean water, electricity, food, housing, and education
are essential services and human rights. Then there are the services
that are essential in practice, but not considered human rights. It is
hotly debated whether people have a right to transportation, internet
access, cell phones, competent legal council, health care, affordable
prescription drugs, higher education, and internet access. Nevertheless,
most people reading this communication would agree that denial of any
of the above would present a barrier to economic mobility and lead to
reduced quality of life. Such services are de-facto essential.
For
example, having a job is mandatory, so then is having a permanent
address and a bank account (jobs typically require both). Most people
must travel to work, and therefore transit is also essential. Cellular
phones or even smartphones have become the primary way to access
services like employment, bank accounts, public transit, and public
support infrastructure. I cannot log in to my bank website, or log in to
my university account, without using a phone as a second factor. In
practice, phone (and increasingly: smartphone) services are not
optional; yet they are managed by de-facto monopolies in many places.
For example, as of 2016, debit and credit cards cannot be used as a
means of payment for many stations in the Massachusetts transportation
network—but payment by app is supported. I have seen many distressed
foreign travelers pondering anxiously in their native language just how
the heck they are supposed to pay the train fair. Wouldn't life be so
much easier if you just bought a smartphone!
Now, perhaps it is simple. As my friend said, perhaps "the best thing we can do is identify instances of rent seeking as they emerge and move against them".
At first glance, this looks like a solution. Sure, there will be some
latency between when a new service becomes de-facto essential, and when
it has been tamed for social good, but we will progress. I am not so certain.
There
are some areas well outside what we would consider "essential" or even
"marginally essential", that will always be vulnerable to exploitation.
These sectors seem at first glance to be luxury goods, but in practice
have a large and guaranteed captive market. That enables practices
resembling rent-seeking without overt negative moral implications. There
are four instances which I address below: monopolization via standards,
DRM and DRM-like lock out of competition, monopolization of
communication, and monopolization of culture.
Monopolization via standards
Instances
where a private entity can establish a standard, and then de-facto
monopolize e.g. a subset of business or social services because
individuals must interoperate.
For
example, many government and private companies require that documents
be sent in Microsoft Word, the file format of which is so arcane that no
one has been able to fully support it—not even Microsoft itself. At
work we use Dropbox to communicate, forcing others onto the same
platform whether they want to or not. Various subsets of my social
network use either Venmo or Square to handle financial transactions,
forcing one network or the other on their peers. Apple computer changes
its cables frequently enough that Apple itself enjoys a monopoly on the
production of compatible peripherals. And even in the case that suitable
peripherals are eventually produced by a third party, the fact that
such peripherals do not interoperate with other industry standards force
people to maintain two sets of equipment. Standardized testing and
textbook services are another example, being a gatekeeper to higher
education, which has itself become essential in today's economy.
DRM and DRM-like lock out of competition
Then
there is the classic give-away-the-razor-and-overcharge-on-the-blades
revenue model that printer manufactures love so much. In addition to
deliberately eschewing standards in order to prevent third parties from
repairing or producing accessories for a product, companies can actively
invest in anti-features that create unnatural incompatibilities.
Digital Rights Management (DRM) features on camera batteries and coffee
pods come to mind. Locking out consumers from the error codes needed to
remain their cars is another example. Note that the uses of DRM here are
very different for DRM used to protect cultural output like music and
video. In this case, DRM is being used to stymie competition and enable
over-charging. These business models are abusive and antisocial, but are
typically employed on "luxury" goods and so perhaps relative benign.
Monopolization of communication
After
basic needs like air, water, etc, it is commonly accepted that humans
need to communicate with each-other to survive. A strong social network
is vital for our species. This can be exploited.
Communication
has shifted from in-person and post, to phones, to email, to facebook
messages, to snapchats and god knows what else by the time you read
this. If a social network wishes to mutually communicate, it is
beneficial to use a common medium. We long ago recognized that a postal
service was essential to society. Eventually, we also recognize that the
telephone networks were essential, and enacted the common carrier
laws.
Today,
we are fighting over whether the internet has become similarly
essential. Private entities should take note, as developing a new mode
of communication that becomes culturally accepted all but guarantees
several lucrative decades of rent extraction, or more if you can bribe
the right congress-folk.
While
we fight the large telecom monopolies over net neutrality, the cultural
real-estate of the Old Internet is being cannibalized by the less
regulated, and more expensive, mobile computing platforms of tablets and
smartphones. By the time we establish the Internet as a common carrier,
smartphones will have become essential not just for social
communication but for all other aspects of life.
This
is no accident. The telecoms understand this business model well, and
diverted the money taxpayers gave them to upgrade internet
infrastructure into their mobile networks for good reason. Once a
platform becomes sufficiently regulated that antisocial behavior is
prevented, telecoms move on to another, first promoting it as a luxury,
then gradually making it a necessity. This is, in effect, a rent-seeking
treadmill, and it will remain endlessly profitable.
Monopolization of culture
Similar
to the monopoly treadmill of communication platforms, it is possible to
monopolize culture. Culture defines who we are. It bonds us together,
makes us human. While communications platforms provide the
infrastructure for social networking, culture defines the content
carried on such platforms, and both are needed for a healthy society. We
outlined how a large corporation might extract rent from communications
infrastructure, but what about the content of that infrastructure?
It
would be ridiculous to argue that music and video are essential.
Nevertheless, many people will feel social ostracization if they cannot
communicate or relate to shared cultural experiences of those around
them. Thus, if you can convince a large group to use your product, be it
arts, entertainment, or fashion, you force members of the out group to
also buy into said product.
By
manipulating culture so that what is "in" changes constantly,
corporations can ensure themselves an endless stream of profit. If one
believes fashion and entertainment to be the be-all and end-all of human
existence, this may not be a bad thing. I would be hard-pressed to say
that anyone was ever deprived for not having seen the latest movie,
heard the latest record, or carrying the latest handbag. Thus, cultural
capture is not so much an antisocial barrier to economic mobility, as it
is a tried-and-true way for those with money to continue to make money
by taking advantage of human nature.
This
is not a radical proposition. For example, it is long-recognized that
the revenue models of many clothing manufacturers depend on
fast-fashion. This culture is promoted through advertising, and it is
one of the things killing the planet.
Planned obsolesce
The
latter two concepts: communications monopolies and cultural capture,
are conceptually related to planned obsolesce. Planned obsolesce
typically refers to companies that make products built to break, or
computer manufacturers who render new models incompatible with older
software and peripherals. Likewise,
if a communications platform or
cultural product has ceased to be lucrative, companies can dismantle it
to move demand to a new sector of the market that they control.
Allowing
the internet infrastructure in the USA to age while pouring investments
into mobile is a good example of how this might be accomplished in
practice. Planned obsolescence of infrastructure and culture become and
additional revenue source to add to the toolkit.
Conclude
The
problem with rent-seeking is not so much that it makes a few people
rich without doing work. It is that those resources are shunted from
other pro-social products. To the extent that overcharged services are
mandatory, they act as a regressive tax that most affects those lease
able to pay.
We
have made great strides in stamping out abuses when they emerge, but it
seems that new ways to abuse emerge faster than we can regulate against
them. Sadly, it may not be the case that this struggle reaches a
conclusion. Powerful individuals and organizations can manipulate
society and continually escape attempts to regulate against them.
What is the significance of allowing
escape-from-regulation to drive private sector innovation? Are there ways
to redirect innovation into more prosocial efforts? Is this innovation,
though superficially selfish and antisocial, somehow valuable?
Update: Dropbox no longer serves live pages from their public folders, so hosting has moved to Github. Basic WebGL example have moved to the "webgpgpu" repository, including the psychedelic example pictured to the left. Additional neural field models are hosted at the "neuralfield" repository. 
