Establishing Economic Power without Seeking Economic Rents

[ygolo]

This is somewhat in-line with this other thread on the forum:

"Entrepreneur" or "Profiteer"?

I came across this teenager that's made a lot of money peddling goods that became hard to get because of the pandemic: A 16-year-old entrepreneur reportedly brought in $1.7 million reselling video games, outdoor heaters, and above-ground swimming pools at sky-high prices during the pandemic...

www.typologycentral.com

But like with the thread on housing prices, my aim is to collectively imagine something better.

How do we conceive of good economic actors that establish economic power without seeking economic rents?

Some early-stage start-up come to mind. Even currently derided FAANG+ companies seem like they were at one time good economic actors. But let's start discussing what that looks like.

There are two concepts that I am trying to create into a synthesis.

1. One is that of Economic Rent-Seeking...and of course with the aim of avoiding that behavior.
   
   Rent-seeking - Wikipedia

   en.wikipedia.org

   Rent-seeking is the effort to increase one's share of existing wealth without creating new wealth.

   
   The UN has complained that the rentiers are here:
   
   The rentiers are here

   In the past few decades, the world's largest corporations have increasingly been extracting profits from the economy instead of generating them through innovation. Reversing this trend is essential for future growth and social cohesion; but it won't be easy.

   unctad.org
   
   This is a thorny concept, because on the surface, we don't like people just claiming ownership of something and demanding payment--like a gangster who demands "protection" money from businesses on their turf. Similarly the profiteer in the other thread who bought scarce goods and charged double prices during the pandemic is frowned upon.
   
   I have myself as a college student scalped Sugar Bowl Tickets when I couldn't go, and in order to get into buying a home during the previous housing bubble, rented out an unused room when it was going to waste. The scalping may have been questionable, but I don't believe taking a boarder should be considered with such derision. The boarder and I both got access to amenities both of us would have had a hard time affording (him a lot more than me).
   
   Things get especially murky when we try to figure out what economic rents are.
   
   
   Economic rent - Wikipedia

   en.wikipedia.org

   In economics, economic rent is any payment (in the context of a market transaction) to an owner of a factor of production in excess of the costs needed to bring that factor into production.

   When economic rent is privatized, the recipient of economic rent is referred to as a rentier.

   Many distinctions need to be made, otherwise I'd be inviting communists and Marxists to have a field-day by just erroneously equating a lot of differing concepts.
   

   In the moral economy of the economics tradition broadly, economic rent is opposed to producer surplus, or normal profit, both of which are theorized to involve productive human action. Economic rent is also independent of opportunity cost, unlike economic profit, where opportunity cost is an essential component. Economic rent is viewed as unearned revenue [1] while economic profit is a narrower term describing surplus income earned by choosing between risk-adjusted alternatives.

   

   Economic surplus - Wikipedia

   en.wikipedia.org
   

   Profit (economics) - Wikipedia

   en.wikipedia.org
   One major clarification needed here (and I believe it is a source of confusion that erroneously leads people towards communist/Marxist thinking) is that costs here include implicit costs (opportunity costs) for a particular factor of production.
   

   In economics, an implicit cost, also called an imputed cost, implied cost, or notional cost, is the opportunity cost equal to what a firm must give up in order to use a factor of production for which it already owns and thus does not pay rent.

2. The other is Economic Power (Specifically as conceived of in 7 Powers) with the aim of participating in behavior that creates economic power.
   There is a decent summary here:
   
   

   Book Notes: 7 Powers

   Review: 7 Powers is a business strategy book about accumulating advantage.

   kaler.io

   Power is defined as the set of conditions creating the potential for persistent differential returns.

   
   
   
   

 

[Doctor Cringelord]

LVT now

 

[ygolo]

LVT now

I actually didn't know about land value tax until you let me know.

Land value tax - Wikipedia

en.wikipedia.org

It seems like a fairly sound idea and tried in a bunch of nations. I am assuming this tax system is not considered economic rent because public infrastructure is provided for the taxes paid. For the businesses using the land I suppose the strategic power is generally gained through the cornered resource of the land.

Why is it not more commonly applied? It really does seem like the perfect tax for land, like it says.

Would the same system be given to Intellectual Property holders as well?

The wikipedia link is the first I have learned of Georgism.

Georgism - Wikipedia

en.wikipedia.org

In your mind is Geolibertarianism better?

Geolibertarianism - Wikipedia

en.wikipedia.org

I'm posting links for easy access to think about these things myself.

 

[Doctor Cringelord]

I actually didn't know about land value tax until you let me know.

Land value tax - Wikipedia

en.wikipedia.org

It seems like a fairly sound idea and tried in a bunch of nations. I am assuming this tax system is not considered economic rent because public infrastructure is provided for the taxes paid. For the businesses using the land I suppose the strategic power is generally gained through the cornered resource of the land.

Why is it not more commonly applied? It really does seem like the perfect tax for land, like it says.

Would the same system be given to Intellectual Property holders as well?

The wikipedia link is the first I have learned of Georgism.

Georgism - Wikipedia

en.wikipedia.org

In your mind is Geolibertarianism better?

Geolibertarianism - Wikipedia

en.wikipedia.org

I'm posting links for easy access to think about these things myself.

I'm a newb about economics so I couldn't say which is better, but I believe geolibertarianism is more or less a modern progression from the basic ideas of Henry George. The idea of LVT really clicked for me. If I recall correctly, it has been tried in Taiwan (an island with very limited space) and Pennsylvania.

 

[ygolo]

I guess a less technical way to ask the same question in the first post is:
What human activity creates value is a sustainable way for both the person doing the act, and the public?

 

[ygolo]

I'm adding additional food for thought:

Questions to ask about your startup idea

docs.google.com

Why Communities Must Break Out of the Resource Trap

Resource-based communities rarely experience the prosperity their labor makes possible for others. It doesn’t have to be this way.

www.strongtowns.org

Home page - National Center for Economic Gardening

economicgardening.org

 

[ygolo]

Along this same line, I have been wondering if any principles guide weather or not specific consumer goods are good for society or not?

By consumer good, I mean final goods:

Consumer Goods: Definition, Types and Examples — Penpoin.

What’s it: Consumer goods are goods for end-use by consumers without further commercial process. They range from durable products such as furniture

penpoin.com

I think things that save human lives, meet human needs, and fulfill human rights are definite positive examples, but what principles govern this more generally?

 

[ygolo]

Some more food for thought.

https://eig.org/

https://eig.org/dynamism/

Case for Dynamism - Economic Innovation Group

eig.org

Economic Dynamism - Economic Innovation Group

How can we restore American dynamism and build an economy in which workers can truly thrive?

eig.org

 

[ygolo]

When I think about the ridiculous inflation of prices in things that many would consider human rights, I am also thinking that the first people to execute true economies of scale providing things like housing, healthcare, and education at exponentially shrinking prices would be ridiculously powerful economic entities.

It seems to me, this is a way for dynamic capitalism to actually help society.

 

[ygolo]

Breaks down business models into 9 categories and gives the KPIs to track them:

Startup School Reference Guide for Lecture #7 — Nine Business Models and the Metrics Investors…

While working to create the Snapchat for voice — wavechat.me — and attending Startup School 2019, I was inspired to create these “Cliffs…

medium.com

The video it was taken from:

 

[ygolo]

Interesting resources on creating value:

A Playbook for Achieving Product-Market Fit the Lean Way

It’s hard to know how to actually achieve product-market fit, but Dan Olsen’s pyramid framework will help you define and build your product.

leanstartup.co

I am thinking about these as well:

Value Creation Through Innovation

Offered by EIT Digital . Capture the Value of Technology. Understand, predict and leverage on technology driven transformations. Enroll for free.

www.coursera.org

Startup Entrepreneurship

Offered by Technion - Israel Institute of Technology. Creating a Startup from an Idea. Learn proven tools for startup entrepreneurs from the ... Enroll for free.

www.coursera.org

 

[ygolo]

As someone who wants to see good done in the world, and as someone who has had a long streak of liking entrepreneurship as a concept, I struggle with the following:

1) Data being open and widely available will democratize access to everything.
2) In our economy, having some sort of "secret sauce" is needed in the early days to get investment and keep customers. More and more frequently, that is data.

Is there a way to make this seeming contradiction work out in some business model? We have the economy we have. Independent actors/entrepreneurs/firms have to do what they must to keep theirs and their employees families fed and housed.

 

[ygolo]

I had a little moment of clarity. What I am about to say seems obvious in retrospect, but I figured I will say it and see if it is or isn't obvious to people.

I think ultimately it is about if our activity leads to more prosperity for humanity as a whole or not. There are still questions about who gets to "capture" the more prosperity and how things are divided (and this is where all the -isms in economics comes into play--and for right now I won't get too far into that).

So I know there are productive assets and non-productive assets in investment terminology. What this distinction would be the difference between globally productive assets vs globally non-productive assets. Ultimately, using this "Sustainable Business Model Canvas", it would be about the revenue outweighing the costs (so that the entity is not a "martyr") while also making sure that the Eco-social benefits outweigh the Eco-social costs.

Edit: Perhaps a bit more controversial is when we try to operationalize this concept with things like:

Common Good Matrix - Economy for the common good

The Common Good Matrix is a model for the organizational development and evaluation of entrepreneurial as well as charitable activities. It assesses and scores the contribution to the common good. The values shown in the columns are those which promote successful relationships and a good life...

www.ecogood.org

https://www.ecogood.org/wp-content/uploads/2020/04/quicktest_ecg_matrix_50_version_012019.pdf

Social Reporting Standard - Wikipedia

en.wikipedia.org

https://mail.ecochain.com/hubfs/Whitepapers/Ecochain_QuickGuidetoLCA.pdf