View source for Template:M intro systems rent-seeking

{{qd|Rent-seeking|/rɛnt ˈsiːkɪŋ/|n|The extraction of payment from those who pass by for the simple privilege of crossing one’s land.}}
{{drop|W|e all know}} about ''rent''. Who has not, at a formative stage in life, rented a dingy room while studying Petrarch by guttering candle? Some rent for their whole lives — in Europe it is the rule and not the exception: even north of ''la Manche'' we are given to understand that in the coming decades, it will become commonplace.

But when economists talk about extraction of ''economic'' rent they have a darker purpose.  Here one, by dint of her contractual relations, market position, legal rights, or psychological conjury creates a special space in the cultural landscape that others feel compelled — by force of law or lack gumption — to occupy.

In these pages we call such a person a “[[rentsmith]]”, whether she charges you land, property or services. She is only really problematic where there is no alternative but to cross, or stay on, her land. These we call ''monopoly'' rents. We used to be a lot better about policing them than we are now.

Since few landlords or rental companies have monopoly positions, it doesn’t tend to present a problem here. But since [[intellectual property]] is more or less a state-sanctioned form of monopoly, and the economics of the network are such that it tends to monopoly, we should not be surprised if here we find rent-seekers galore. And so we do. 

For such an important concept — it is really hard to understand our piebald world without it — it is very hard to pin down.

It comes in many guises:
{{gb|'''Physical property''': you know, ''literal'' rent-seeking <li>
'''[[Intellectual property]]''': Rather than using the fruits of your blood, toil, tears and sweat you use antediluvian<ref>{{author|Lawrence Lessig}}’s {{Br|Code: Version 2.0}} is a compulsory read.</ref> [[intellectual property]] rules to gouge everyone else. In this way [[Mick Jagger]] and [[Keith Richards]] can extract tens of millions over 60 years from [[15 minutes]] of work — in Richards’ case, while, on his own account, he was ''asleep'' — composing ''[[Satisfaction]]''.<li>
'''Franchising''': Taking an idea or a business model someone else has invented — McDonald’s is the best example — and paying them a franchise fee to operate it. Here is ''double'' rent-seeking: the franchisee pays the franchisor, and the customer pays the ''franchisee''.<li>
'''[[Software as a service]]:''' The simple answer to the question [[why is reg tech so disappointing?]] — is that tech businesses can’t make money if all they get paid for is writing software. This would be like Mick Jagger only getting paid for fifteen minutes’ work — where is the logic, or the justice in that?<ref>Irony alert.</ref><li>
'''[[Regulatory rent-seeking]]''': A regulatory fine for some impermissible behaviour which, while significant, pales into insignificance with the value accrued to the miscreant who carries out the behaviour, such that it suits both of them to carry on with the activity. Where the time doesn’t match the crime.}}

====Legal eagles as rent-seekers====
Rent-seeking is at the heart of the [[agency problem]]. An [[agent]] seeks to advance her [[principal]]’s interests but, above all, she wants to ''remain'' an agent, so she can be ''paid''. If her principal’s best interests are served by ''doing away with her agency'', you can be sure she will struggle to voice this proposition to her client.

Take the [[contract negotiation]] process: it features a bunch of [[Stakeholder|stakeholders]] who ''like'' being involved in it, who want to ''stay'' involved in it, even though, by the lights of the new model, they don’t add any value.  ''Their primary purpose is to extract rent''. They have structured themselves into the architecture of their organisations and the market. They don’t ''want'' any “solution” which prevents them from continuing to extract rent. It is the agency problem, ''par excellence''.

This is what is so interesting about [[OneNDA]]. It may be small and seemingly insignificant in its subject matter, but it strikes the [[rent extraction]] problem at its root. Rather than changing the mode of “service delivery” (for which, read, “''mode of rent extraction''”) or automating, accelerating ''or otherwise making more efficient'' the process of extracting rent, [[OneNDA]] banishes rent altogether. Business owners can fill out a form, and sign it, by themselves. ''No agents required''.

There has been much [[thought leader]]ship on the subject of reforming contracting processes, but all of it takes as read that some rent extraction must take place. The OneNDA is different. The forces of rent extraction are deep, and persistent, and powerful, and do not expect them to lay down in front of a shepherd-boy with a sling the way Goliath did.

====Legaltech as a rent-extraction machine====
We talk about this elsewhere, but herein is the fundamental ''problem'' with [[legaltech]].  {{legaltech as rent-seeking}}