One of the oddities of my back trouble is that when I am lying flat on my back, I am pain free. In that position, I can hear, but not see, the television set mounted on the wall opposite my bed, which is fine for listening to cable talk shows but not for watching basketball games [the commentary is not brilliant!] Not able to take my morning walks, I have been idling away the time thinking, and something, I do not recall what, got me thinking about rent. Suddenly, I saw a way to connect up themes in classical Political Economy with my shtick about the Burt Reynolds movie Stick and its significance for the theory of socialism. So, here goes. I apologize if some of this seems old hat. It is hard to be smashingly original when you hurt.
A striking theme in Adam Smith’s foundational work An Inquiry into the Nature and Causes of the Wealth of Nations is Smith’s contempt for the landed aristocracy, who live off the rents paid to them by go-gettem entrepreneurs for the use of their otherwise unused land. Smith characterizes the labor performed by the aristocrats’ clouds of servants as unproductive, in contrast with the virtuous productive labor performed by the men and women employed by the entrepreneurs to grow crops for market. The theorists following in Smith’s wake worried a good deal about what they called the “steady state,” a condition in which the rise in population would drive up land rents until nothing was left over for profit, thereby bringing economic growth to a halt. Malthus’ writings on population contributed to this theoretical anxiety, which bothered Smith’s greatest successor, David Ricardo. Smith’s message, were it reduced to a bumper sticker on a horse-drawn cart, would read “Profit good, Rent bad.”
Neoclassical economists, despite their mathematical sophistication and scientific pretensions, have retained this good old moralistic attitude toward rent, which they have generalized to include such things as patents, labor unions, and other restraints on the morally admirable and socially valuable capitalistic pursuit of profit. In order to overcome the unpleasant and potentially disruptive suggestion that the interests of the capitalists are opposed to the interests of the workers, an idea central to the classical Political Economy of Smith and Ricardo and taken over with dangerous effect by Marx, the neo-classicals reached back to eighteenth century mathematics and converted an elegant theorem proved by Euler about functions of real variables into the happy news that in a capitalist economy, capital and labor are each paid their marginal product, which is to say a fair share determined by their respective contribution to the wealth of the society. Rent seekers do not appear in the equation, and thus are relegated to the status of leeches on the body politic.
Three and a half years ago, on June 1, 2015, I wrote a post designed to debunk this moral justification of profit, in the course of which I quoted some lines from the Burt Reynolds movie. I argued that the profits of modern capitalists, like the rents of the bad old landed aristocrats, are nothing more than a ransom collected by those who hold the capital of a society hostage until they are paid to release it so that it can be put to productive use.
In short, capitalists are rent seekers, backed by the law and the force of the state, just like the eighteenth century aristocrats.
Now, where did I put that Tylenol.