[EL] Charles Koch “Flabbergasted” by Obama Criticism, Wants to Educate Him About “Rent Seeking”
Sean Parnell
sean at impactpolicymanagement.com
Wed Aug 26 11:58:12 PDT 2015
This seems odd, at least in reference to the current discussion:
Such power can be gained or maintained by lobbying to keep others out of their market by raising barriers to entry….
I’m not sure how this applies to the Koch brothers, or anyone actually in the power industry for that matter regarding subsidies for renewable energy. What keeps (or would keep) renewable energy out of their market, what serves as a barrier to entry, is/would be the market itself, in which consumers broadly prefer their electricity delivered at 8 cents per kw/hr as opposed to 20 cents per kw/hr (not sure what the exact numbers are these days, but you get the point I assume). It seems that the definition being offered is that failure to subsidize an economically uncompetitive rival to an economically competitive industry is, in fact, a granting of a rent/oligopoly status to the economically competitive industry. If that’s the argument being offered, it’s probably time for me to exit this conversation as we have apparently entered the realm of Bizarro-world economics.
Best,
Sean Parnell
President, Impact Policy Management, LLC
571-289-1374 (c)
sean at impactpolicymanagement.com
Alexandria, Virginia
From: Chambers, Hank [mailto:hchamber at richmond.edu]
Sent: Wednesday, August 26, 2015 1:32 PM
To: Sean Parnell; 'Rick Hasen'; 'Jonathan Adler'; law-election at uci.edu
Subject: RE: [EL] Charles Koch “Flabbergasted” by Obama Criticism, Wants to Educate Him About “Rent Seeking”
Of course, economic rents have been around since well before Tullock and relate to money gained by those exercising some form of oligopoly power above what they would gain through perfectly competitive markets. Such power can be gained or maintained by lobbying to keep others out of their market by raising barriers to entry or in many other ways. Folks can debate the accuracy of President Obama’s assertions, but the claim that he is not talking about rent-seeking or does not understand what it is is not convincing.
-Hank
Henry L. Chambers, Jr.
Professor of Law
University of Richmond School of Law
28 Westhampton Way
Richmond, Va. 23173
(804) 289-8199
hchamber at richmond.edu
From: Sean Parnell [mailto:sean at impactpolicymanagement.com]
Sent: Wednesday, August 26, 2015 1:08 PM
To: Chambers, Hank; 'Rick Hasen'; 'Jonathan Adler'; law-election at uci.edu
Subject: RE: [EL] Charles Koch “Flabbergasted” by Obama Criticism, Wants to Educate Him About “Rent Seeking”
Sigh. Of course I know Tullock developed the theory, but there is a pretty standard definition of “economic rents” that is generally accepted by most people who managed to stay awake through their college economics classes. And Obama’s isn’t even close to it, again judging by his comments in Vegas.
Sean
From: Chambers, Hank [mailto:hchamber at richmond.edu]
Sent: Wednesday, August 26, 2015 12:59 PM
To: Sean Parnell; 'Rick Hasen'; 'Jonathan Adler'; law-election at uci.edu
Subject: RE: [EL] Charles Koch “Flabbergasted” by Obama Criticism, Wants to Educate Him About “Rent Seeking”
Tullock essentially invented the theory behind what is now called “rent-seeking.” Any claim that President Obama is using the term completely inappropriately would seem to depend on how the term was defined at its inception.
-Hank
Henry L. Chambers, Jr.
Professor of Law
University of Richmond School of Law
28 Westhampton Way
Richmond, Va. 23173
(804) 289-8199
hchamber at richmond.edu
From: Sean Parnell [mailto:sean at impactpolicymanagement.com]
Sent: Wednesday, August 26, 2015 12:44 PM
To: Chambers, Hank; 'Rick Hasen'; 'Jonathan Adler'; law-election at uci.edu
Subject: RE: [EL] Charles Koch “Flabbergasted” by Obama Criticism, Wants to Educate Him About “Rent Seeking”
Can’t say I know much about how Tullock used the term, but I’m fascinated to know which rents Koch industries currently receives. They’re refiners, so perhaps the domestic manufacturing tax credit? But I’ve seen no indication that Obama or any of his political allies are interested in undoing this little bit of corporate welfare. What rents to they receive?
This is far afield from the subject of this listserve (although given the frequent allegations that campaign donations purchase rents, perhaps not), but it’s plainly obvious that the entire renewable energy market is propped up with massive rents, while the fossil fuel industry has relatively few. If you took away those handful of subsidies from the oil, natural gas and coal industries (about $4 billion a year by most estimates), the industry would continue to function pretty much the way it does today, with perhaps a few marginal operations shuttering their doors. Take away the solar and wind subsidies, the loans to renewable energy companies (loans which the private sector wouldn’t make, hence Solyndra), the tax credits for purchasing electric cars, and everything else, and the industry would cease to exist in about 2 days. The fact that all of these rents MAY, at some point down the road, lead to a “more competitive energy market” does not change that they are rents, and massive in scale.
So, let’s assume for a moment that you and Rick are correct, that the President does have a good grasp of what an economic rent is. Isn’t he then simply arguing, not against economic rents, but that they’re going to the wrong people? Shouldn’t he have said something more along the lines of “The Koch brothers are protecting their own economic rents by opposing the economic rents of the renewable energy industry?”
But then that would probably entail some discussion of just how massively the renewable energy industry is subsidized, which in turn might demonstrate the falsity of claims the industry is becoming economically competitive.
Oh well. The president is either ignorant of what an economic rent is, or deceitful. What a terrific set of options.
Sean Parnell
President, Impact Policy Management, LLC
571-289-1374 (c)
<mailto:sean at impactpolicymanagement.com> sean at impactpolicymanagement.com
Alexandria, Virginia
From: Chambers, Hank [ <mailto:hchamber at richmond.edu> mailto:hchamber at richmond.edu]
Sent: Wednesday, August 26, 2015 12:27 PM
To: Sean Parnell; 'Rick Hasen'; 'Jonathan Adler'; <mailto:law-election at uci.edu> law-election at uci.edu
Subject: RE: [EL] Charles Koch “Flabbergasted” by Obama Criticism, Wants to Educate Him About “Rent Seeking”
I suspect President Obama meant that the Koch brothers were seeking to maintain their own economic rents by lobbying to oppose various industries that would help bring a fuller and more competitive energy market. That seems to fit comfortably within how the term is currently used, and even with how Gordon Tullock used it.
-Hank
Henry L. Chambers, Jr.
Professor of Law
University of Richmond School of Law
28 Westhampton Way
Richmond, Va. 23173
(804) 289-8199
<mailto:hchamber at richmond.edu> hchamber at richmond.edu
From: <mailto:law-election-bounces at department-lists.uci.edu> law-election-bounces at department-lists.uci.edu [ <mailto:law-election-bounces at department-lists.uci.edu> mailto:law-election-bounces at department-lists.uci.edu] On Behalf Of Sean Parnell
Sent: Wednesday, August 26, 2015 11:25 AM
To: 'Rick Hasen'; 'Jonathan Adler'; <mailto:law-election at uci.edu> law-election at uci.edu
Subject: Re: [EL] Charles Koch “Flabbergasted” by Obama Criticism, Wants to Educate Him About “Rent Seeking”
I’d like to see some evidence of that then, because his comments in Vegas point in the other direction (although Professor Adler does provide a reasonable explanation of what happened as well).
Sean Parnell
President, Impact Policy Management, LLC
571-289-1374 (c)
<mailto:sean at impactpolicymanagement.com> sean at impactpolicymanagement.com
Alexandria, Virginia
From: Rick Hasen [ <mailto:rhasen at law.uci.edu> mailto:rhasen at law.uci.edu]
Sent: Wednesday, August 26, 2015 11:21 AM
To: Jonathan Adler; Sean Parnell; <mailto:law-election at uci.edu> law-election at uci.edu
Subject: Re: [EL] Charles Koch “Flabbergasted” by Obama Criticism, Wants to Educate Him About “Rent Seeking”
Of course the president knows what rent seeking is.
On 8/26/15 8:15 AM, Jonathan Adler wrote:
There is an alternative explanation: The President is fully aware of what “rent-seeking” means, and just chose to use the term improperly or dishonestly. Is that what Rick is suggesting? I think the suggestion that Obama (or his speechwriter) does not fully understand the meaning of the term (and what it means to seek economic rents) is the more charitable of the two, but YMMV.
------
Jonathan H. Adler
Johan Verheij Memorial Professor of Law
Director, Center for Business Law & Regulation
Case Western Reserve University School of Law
11075 East Boulevard
Cleveland, OH 44106
ph) 216-368-2535
fax) 216-368-2086
cell) 202-255-3012
<mailto:jha5 at case.edu> jha5 at case.edu
SSRN: <http://ssrn.com/author=183995> http://ssrn.com/author=183995
<http://www.washingtonpost.com/news/volokh-conspiracy/wp/author/adlerj/> http://www.washingtonpost.com/news/volokh-conspiracy/wp/author/adlerj/
From: <mailto:law-election-bounces at department-lists.uci.edu> law-election-bounces at department-lists.uci.edu [mailto: <mailto:law-election-bounces at department-lists.uci.edu> law-election-bounces at department-lists.uci.edu] On Behalf Of Sean Parnell
Sent: Wednesday, August 26, 2015 10:56 AM
To: 'Rick Hasen'; <mailto:law-election at uci.edu> law-election at uci.edu
Subject: [EL] Charles Koch “Flabbergasted” by Obama Criticism, Wants to Educate Him About “Rent Seeking”
Rick, based on his comments in Vegas, I can assure you that Obama has no clue what “rent seeking” is. There are cases to be made (mostly bad cases IMHO, but cases nonetheless) for giving subsidies, guaranteed market share, protection from foreign competition, and other goodies to the renewable energy industry. But there’s no case at all, at least from an economic perspective, for arguing that opposing those policies amounts to rent seeking. None.
Sean Parnell
President, Impact Policy Management, LLC
571-289-1374 (c)
<mailto:sean at impactpolicymanagement.com> sean at impactpolicymanagement.com
Alexandria, Virginia
Posted in <http://electionlawblog.org/?cat=10> campaign finance, <http://electionlawblog.org/?cat=59> campaigns
<http://electionlawblog.org/?p=75594> Charles Koch “Flabbergasted” by Obama Criticism, Wants to Educate Him About “Rent Seeking”
Posted on <http://electionlawblog.org/?p=75594> August 25, 2015 7:58 pm by <http://electionlawblog.org/?author=3> Rick Hasen
<http://www.politico.com/story/2015/08/charles-koch-blasts-obama-121746.html> Mike Allen:
Charles Koch hit back at criticism of “the Koch brothers” during President Barack Obama’s energy speech in Las Vegas earlier this week, saying he was “flabbergasted” by the attack and charging that Obama made the dig as a favor to Senate Minority Leader Harry Reid (D-Nev.), who appeared with him.
“It’s beneath the president, the dignity of the president, to be doing that,” Koch said during a phone interview Tuesday…
That’s not the American way. That’s not progress. That’s not innovation. That’s rent seeking, and trying to protect old ways of doing business and standing in the way of the future.”
Obama continued: “I mean, think about this. Ordinarily, these are groups that tout themselves as champions of the free market. If you start talking to them about providing health care for folks who don’t have health insurance, they’re going crazy: ‘This is socialism, this is going to destroy America.’ But in this situation, they’re trying to undermine competition in the marketplace, and choke off consumer choice, and threaten an industry that’s churning out new jobs at a fast pace.”
Koch shot back: “I don’t know whether he knows what that phrase means, but ‘rent seeking,’ of course, is, in economic terms, is getting the government to rig the system in your favor. And that’s exactly what these so-called ‘renewable energy’ proponents are doing.”
I’m guessing that Obama, who taught at the University of Chicago, is familiar with the term “rent-seeking.”
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Rick Hasen
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UC Irvine School of Law
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