We—we, economists and supporters of individual liberty—owe it to Mr. Trump to have reminded us how a powerful state and crony capitalism are dangerous. In fact, state power and cronyism are the two faces of the same Janus. A powerful state has a lot to give and much power to take, so that “capitalists” come to it for privileges (for example, subsidies or tariffs) or to avoid restrictions.
Speaking of Mark Zuckerberg and other tech executives, Trump just declared on Fox News (watch the video) in his usual way of speaking:
People are sick. You know, Zuckerberg … used to come to the White House to kiss my ass.
(The rare politician who is also a Latinist will no doubt recall what Livius, in Ab Urbe Condita (2, 32), said of the way Menenius Agrippa addressed the revolted Plebeians: “prisco illo dicendi et horrido modo,” that is, “in the quaint and uncouth style of that age.” See also my blurb on that story in a recent Independent Review article. But let’s move on.)
The last sentence quoted from Trump above is an approximate characterization of rent-seeking, which is, more exactly, the hunt for government privileges. In this case, however, the two-way bargain between the privilege giver and the crony-capitalist hopeful was not consummated, presumably because the expected price for the favor was not enough. On Fox News, Trump seemed to explain as much:
And then you see what they do about me and about Republicans, and it’s just sort of crazy.
The goal should be that governments have little power to grant privileges and that, therefore, rent-seekers have little incentive to chase benefits through politics (as opposed to gaining benefits through free market interactions).
READER COMMENTS
Thomas Lee Hutcheson
Sep 13 2021 at 10:57am
“Little power” I agree, but at least enough to prevent us from injuring each other whether by crimes or externalities and a bit of downward redistribution. Granted, that much power can also be used to empower us to injure each other and used to redistribute income upward.
The constant struggle of liberal governance is to find that constantly changing “enough” point.
Pierre Lemieux
Sep 13 2021 at 11:40am
Thomas: This is what classical liberals would have said, and it had some apparent justification. The problem, I think, is that we have tried it for more than two centuries with the result that the “enough point” has nearly always moved towards more state power and more restriction of individual liberty. (The concept of “externalities” illustrates that: see my article in the forthcoming issue of Regulation.) At least, this has been the general trend, with a few exceptions such as the abolition of slavery. So should we now accept the Trump-Biden move of the enough-point further towards tyranny? Obviously, the recipe was not quite sufficient.
Jose Pablo
Sep 13 2021 at 7:58pm
Thomas, why “a bit”? If “downward distribution” is a good thing, why not having a lot of it?. If it is not a good thing, why keep “a bit” of it.
It is certainly possible that the wellbeing of a society (expressed as a function of the amount of redistribution) has a maximum around “a bit” of distribution but very unlikely.
Regarding the practical impossibility of “containing” redistribution around “a bit”, John F. Cogan’s “The High Cost of Good Intentions” is very illustrative.
Thomas Lee Hutcheson
Sep 14 2021 at 8:09am
The “bit” just reflects my marginal bias. I’m also only in favor of a “bit” less Nimbyism, a bit more immigration, a bit more free trade, a bit more use of cost benefit analysis in regulations, a bit of net taxation of CO2. and a bit lower deficit (and my baseline is roughly 2000, so my actual preferences are pretty radical by today’s standards). After we make these marginal changes we re-estimate the marginal costs and benefits and see if less or even more downward redistribution, Nimbyism, immigration, free trade, cost benefit analysis, net CO2 taxation, and lower deficit is warranted.
BTW, at least from the (1 )review of Cagan I read, it only presumed but did not show a very “high cost” and what cost there was seems to come mainly from funding “social insurance” with a tax on wages rather than a VAT.
Pierre Lemieux
Sep 14 2021 at 2:22pm
Thomas: Marginalism does not imply that any system is dynamically stable at any point.
Thomas Lee Hutcheson
Sep 14 2021 at 3:29pm
Pardon my economist’s bias. ANY change could in principle, send the economy/society into some strange chaotic death spiral.
Craig
Sep 13 2021 at 6:40pm
The problem of course is that Big Tech pissed off the Republican Party enough that they don’t support Section 230 anymore.
Interestingly Zuckerberg supports:
“Zuckerberg said internet companies should only be shielded from that liability if they are able to demonstrate that they have systems in place “for identifying unlawful content and removing it.”
https://www.forbes.com/sites/ginaheeb/2021/03/24/zuckerberg-says-he-backs-changes-to-controversial-section-230-law-attacked-by-trump-that-protects-internet-companies/?sh=5912386b13a2
Of course Facebook is large and savvy enough to have AI driven systems in place for identifying ‘unlawful content’ so we can see that his mindset there is to provide a statutory moat to potential entrants initially incapable of the administrative censorship Facebook engages in.
The article then goes on to say: “But he added that platforms should not be held liable if a particular piece of content evades its detection, saying “that would be impractical for platforms with billions of posts per day.”
The old expression comes to mind that, “I might disagree with what you say but I will die for your right to say it” — I used to believe in that. I still do believe in the absolute full protection of the First Amendment including the right not to associate which embraces Facebook’s right to censor.
But if you censor me I am going to be opposed to your statutory right to immunity from your tortious conduct. And if that makes your business impractical, that’s not my problem.
Repeal 230 now! Section 230 IS crony capitalism.
Pierre Lemieux
Sep 13 2021 at 10:33pm
Craig: On your penultimate paragraph, Michael Huemer (and, I think, most philosophers) argue that a necessary condition of ethics is that one tries to ignore his own special situation when evaluating a general moral rule. Perhaps we can relate this to the “impartial spectator” in Adam Smith’s Theory of Moral Sentiments?
Craig
Sep 14 2021 at 9:39am
You have a right to free speech, you do not have a right to consequence-free speech.
Pierre Lemieux
Sep 14 2021 at 11:21am
Craig: It’s not sure how your reply is related to my objection. At any rate, is it true that one has the right of free enterprise but not a right of consequence-free free enterprise? Suppose your low prices push a competitor to bankruptcy and suicide? (I have changed your positive-liberty, socialist-looking “to” to a negative-liberty “of” but my question is also valid if one keeps a more socialist viewpoint.)
Craig
Sep 16 2021 at 1:45pm
These are many of the same people who of course support net neutrality, right?
Don’t get me wrong, the I Amendment is great, but in the grand scheme of things the government has never tried to censor me. The only censors are on private property and that’s where my speech ‘happens’ — Basically all I have is a right to wade out into the Everglades and have a conversation with the alligators and pythons lurking around out there.
But I digress a bit of course, at some point the same principles that apply to certain ‘common carriers’ are going to need to start being applied to large tech companies that take on the aspects of the public square. So, twitter, not sure, facebook, maybe, but when Amazon then cuts AWS off to Parler, all while lobbying for net neutrality so the likes of Verizon can’t provide ‘walled gardens’ to its customers (Trump FCC killed net neutrality but the politics are such nobody can build a business in reliance that will be the actual law in perpetuity).
They were starting to come to this conclusion in cases Prunewald Shopping Center v Robbins. That of course is a CA state case, but ultimately once you’ve made yourself a sufficiently important artery of commerce and take on aspects of being the virtual town square, all while supporting limits on the rights of others to censor THEIR website, but they want to censor your consent and they don’t just want their cake and eat it too, they want their cake, your cake and they want to eat both.
Thomas Lee Hutcheson
Sep 13 2021 at 6:46pm
I see no alternative but to keep trying, issue by issue.
Warren Platts
Sep 15 2021 at 4:31pm
There are two sides to this coin. The sovereign can bestow favors for a price, yes. That was the problem with Trump — he’s already made his billions, has his gold-plated toilets, and his private jets. An extra billion on the margin isn’t going to make a huge difference in his life — unlike a guy like Biden, where an extra billion would make a huge difference in his life.
Thus, while it is the case that the sovereign can bestow favors for a price, it is also the case that the “capitalists” can threaten or blackmail the sovereign into bestowing favors. That is what happened to Trump: since he could not be bought off, the capitalists got their revenge by literally changing their algorithms and suppressing stories like the Hunter Biden laptop scandal that demonstrated how crony capitalism works in real time; thus, the capitalists were able to flip the election results in favor the more pliable candidate.
Pierre Lemieux
Sep 16 2021 at 9:24am
Warren: As is often in rent-seeking, the price Trump wanted for giving privileges or withholding attacks was political support. (That’s what his second quote implies.)
Pierre Lemieux
Sep 16 2021 at 9:25am
PS: That Trump was not able to bargain that is not surprising. After all, he was one of the rare would-be dictators in the history of banana republics to have an election stolen from him while he was in power.
Craig
Sep 16 2021 at 2:26pm
See: Milley.
Jon Murphy
Sep 16 2021 at 1:20pm
I think you’re missing a crucial point Warren. Rent-seeking (at least in the Tullockian/Krueger sense) is not about bribing officials to get what you want. It’s far more benign: it’s about convincing them that what you want is in the common good.
Trump’s trade war is a perfect example. Once Trump opened the door for tariffs, all sorts of firms began arguing that they needed special protection. Many commentators were carrying water for them, too. This was especially true of the “national defense” justification for tariffs, which I discuss here.
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