rent seeking

CEI Podcast for September 15, 2011: Solyndra

by Ryan Young on September 15, 2011

in Energy, Environment, Podcast

Post image for CEI Podcast for September 15, 2011: Solyndra

Have a listen here.

Myron Ebell, Director of CEI’s Center for Energy and Environment, takes a look at the brewing Solyndra scandal. Solyndra is a company that makes solar panels and recently declared bankruptcy. In 2009, the federal government gave Solyndra a $535 million loan even though its own analysts predicted the company would go bankrupt in 2011. The company’s cozy relationship with political figures, including a major political donor with an investment stake, make the loan — and its low interest rate — look rather suspicious.

Police Shut Down Renegade Lemonade Stand

by Ryan Young on July 18, 2011 · 2 comments

in Regulation

Appleton, Wisconsin, police taught some children a lesson about regulation’s true purpose by shutting down their lemonade and cookie stands. The children live about a block from an annual Old Car Show, and have been selling lemonade and cookies near the event for six years.

Vendors inside the car show didn’t appreciate the competition. So they talked the city government into passing a new ordinance that put the girls out of business.

After a round of bad publicity, city officials are thinking of re-writing the ordinance.

CEI Podcast for July 14, 2011: The Incandescent Light Bulb Ban

by Ryan Young on July 14, 2011

in Energy, Nanny State, Personal Liberty, Podcast

Have a listen here.

Earlier this week, General Electric (GE) CEO Jeffrey Immelt gave a speech at a conference on free enterprise. Energy Policy Analyst William Yeatman points out the irony of a career rent-seeker extolling free markets. GE spent $47 million in 2007 lobbying for an incandescent light bulb ban, cap-and-trade carbon regulations, and other government policies that would tilt the playing field in GE’s favor. Its compact fluorescent and LED bulbs offer a higher profit margin.Yeatman also discusses a bill currently winding through Congress that would repeal the lightbulb ban.

Tim Carney Knows How Washington Works

by Ryan Young on January 21, 2011

in Deregulate to Stimulate, Economy, Politics as Usual, Regulation

Former Warren Brookes Fellow Tim Carney’s latest Washington Examiner column, “Bail them out, regulate them, then work for them,” is a must-read.

Amy Friend, a former staffer for Sen. Chris Dodd, played a large role in writing the Dodd-Frank financial regulation bill. And she just got a new job at a lobbying firm. Tim explains:

There are two types of people on K Street: access people, who can get you in the door; and policy people, who know what’s on every page of every relevant bill and regulation. Friend is the latter. While business will dry up for other Dodd alumni on K Street, Friend is valuable because — to quote one Republican lobbyist — “she knows what’s on page twenty-three-[bleep]ing-hundred of that bill,” and every other page, too.

In other words, Friend didn’t just write a landmark piece of legislation — she wrote her meal ticket.

Tim doubts that Friend is corrupt. But her story is very common in Washington. Lobbying wouldn’t be such a booming business if regulation wasn’t too. And the revolving door between the Hill and K Street can be very profitable, even when no corruption is involved. Most people forget that regulators act just as self-interestedly as the people they regulate.

Chris Horner on the Politics of Cap and Trade

by Richard Morrison on July 27, 2010

in Video, Zeitgeist

[youtube:http://www.youtube.com/watch?v=ABhWORsUq1Q 285 234]

Antitrust as Corporate Welfare for Aggrieved Competitors

by Ryan Young on December 9, 2009

in Economy, Legal, Politics as Usual, Regulation, Regulation of the Day

Wayne Crews and I have an article in today’s American Spectator about the antitrust crusade against Intel. Our key points:

-An FTC picking winners and losers is not capitalism. It is crony capitalism.

-Chips in “Wintel” desktop computers increasingly constitute just one subset of a vast semiconductor market. Only a small fraction of the chips in non-PC devices are Intel’s — and these devices are where the future lies.

-Regulators’ charges against Intel have changed over the years, but their verdict always remains the same: guilty. Suspicious.

-We’d be better off prosecuting the DOJ and the FTC for colluding against free enterprise.

In-Flight Rent-Seeking

by Ryan Young on December 8, 2009

in Economy, Stimulus to Nowhere

An article in this month’s Info Tech & Telecom News quotes me about proposed stimulus funding for an in-flight broadband provider.

My take: it’s corporate welfare.

Regulation of the Day 68: Ironing Tables

by Ryan Young on November 3, 2009

in Economy, International, Regulation, Regulation of the Day, Trade

Regulation begets rent-seeking. When government assumes the power to regulate imports, domestic firms will lobby to use that fact to their advantage.

Case in point: Home Products International (HPI), an American company, makes ironing tables. So does Hardware, a Chinese company. I personally have no idea which firm makes the better ironing table. That’s for consumers to decide.

Or at least it should be for consumers to decide. But it doesn’t always work that way in practice. HPI seems to have already made that decision for us.

At HPI’s request, the International Trade Administration will continue to add anti-dumping duties to the price of the Chinese-made ironing tables. That way HPI doesn’t have to worry as much about competing. Sorry, consumers.

Is this fair? Of course not. But all too often, it is how regulation works.

Net Neutrality and Rent-Seeking

by Ryan Young on October 5, 2009 · 1 comment

in Deregulate to Stimulate, Economy, Regulation, Tech & Telecom

Here is a letter I sent recently to The Wall Street Journal:

September 22, 2009

Editor, The Wall Street Journal
200 Liberty Street
New York, NY 10281

To the Editor:

Your article “Bad News for Broadband” (editorial, Sept. 22) hints at, but does not make, a key point: net neutrality proposals are driving a wedge between service providers like AT&T and content providers like Google.

Strange, is it not? Their interests are actually closely aligned. If AT&T upgrades its network, Google benefits from the increased bandwidth. If Google improves its products, AT&T benefits from increased demand for broadband.

Net neutrality proposals give companies the incentive to seek rents at each other’s expense when they could be benefitting from each other’s innovations instead. This must be music to the ears of lobbyists, but how sad for consumers.

Ryan Young
Fellow in Regulatory Studies
Competitive Enterprise Institute
Washington, D.C.

PG&E, Exelon, Duke — progressive companies or energy-rationing profiteers?

by Marlo Lewis on September 29, 2009

in Global Warming

Divide et Impera — divide and conquer — is perhaps the oldest strategic maxim of war, politics, and diplomacy. Businesses succumb to it time and time again. Why?

It is in the general interest of business to preserve an open and competitive marketplace, and to limit tax and regulatory burdens. However, it is often in the special interest of particular firms to expand the size and scope of government in order to collect political “rents” – windfall profits created by market-rigging subsidies, preferences, or mandates. 

When only a few firms engage in rent-seeking, the rent seeker’s concentrated benefits will far outweigh his portion of the diffuse costs imposed on the economy as a whole. But each rent seeker’s success encourages others to get in the game. In time, the costs of government adversely affect millions of bottom lines. Worse, interventionist policies (for example, subsidized lending via Freddie Mac and Fannie May) can create systemic risk and crash entire economies.

V.I. Lenin basically viewed all capitalists as rent seekers. Capitalists are so fixated on short-term gain, he mused, that they will “sell the rope” by which their enemies will hang them. This much is clear — there is no honor among thieves. The more businesses depend on political predation, the easier it is for anti-market interventionists to divide and conquer.

This brings us to the topic of cap-and-trade, a form of energy rationing. There’s money to be made in energy rationing — OPEC proves it! The emission permits in a cap-and-trade program are like the oil production quota in OPEC, the only difference being that they’re tradable. The cap makes the permits a valuable commodity, and Waxman-Markey in the early years would distribute about 85% of all permits free of charge to various industries and interest groups.

So it should come as no surprise that some corporations love Waxman-Markey. Indeed, the corporate coalition known as the United States Climate Action Partnership (US CAP) outlined the main features of the Waxman-Markey bill months before it was introduced in a January 2009 report titled A Blueprint for Legislative Action. US CAP members don’t worry that Waxman-Markey might destroy millions of jobs and trillions of dollars in cumulative GDP. They expect to get a bigger piece of a smaller pie.

US CAP member PG&E pulled out of the U.S. Chamber of Commerce last week citing “irreconcilable differences” over climate change policy. Today’s Bloomberg.Com reports that US CAP member Exelon has announced it will not renew its membership in the Chamber, and that US CAP member Duke Energy will not renew its membership in the National Association of Manufacturers (NAM). 

PG&E, Exelon, and Duke preen themselves as progressive companies who put principle (planetary rescue) ahead of profit. In reality, they seek political rents at the expense of the public interest in limited government, economic growth, and affordable energy. Waxman-Markey sets aside the biggest chunk of free emission permits — 35% — for electric utilities. And their industry representative, the Edison Electric Institute (EEI), is lobbying the Senate to increase the booty to 40%.

How much boodle can a rent seeker make these days? A recently leaked non-public report reveals that Exelon expects Waxman-Markey to generate hundreds of millions of dollars annually for the company.

On June 9, 2009, four days after Waxman-Markey was marked up in the House Energy and Commerce Committee, Hugh Wynne, a senior analyst with BernsteinResearch, led a group of investors to meet with Exelon’s senior management at the company’s headquarters in Chicago. Wynne summarized Exelon’s thinking in a non-public report prepared for Bernstein’s clients:

If passed, [Exelon Chairman] John Rowe calculates the Waxman-Markey bill will add $700 to $750 million to Exelon’s annual revenues for every $10 per metric ton (Mt) increase in the price of CO2 allowances. Such a revenue increase would contribute $0.67-0.72 to earnings per share. Exelon estimates that the price of CO2 allowances, when the law takes effect in 2012, will range from $15 to $18/Mt, implying a positive earnings impact of $1.00 to $1.30 per share.

The Chamber and NAM oppose Waxman-Markey because they promote the general interest of business in a free and healthy economy. Green groups are putting pressure on other companies to leave Chamber and NAM, my colleague Christopher Horner notes. Divide and conquer is, alas, a pathetically easy game to play in an era of big government and climate hysteria. 

The real story is that so many Chamber and NAM members are standing firm, and that most observers do not expect the Senate to pass a cap-and-trade bill this year.

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