But conflating them together and redefining Smith's "economic rent" as either is good--esp. when we then claim that Smith condemned the practice.

Odd. Redefining a term in the late 20th century and then arguing that Smith, who specifically separated the two ideas, did precisely what he scrupulously avoided doing.

The problem with lumping all economic rent into one basket is that the people with land and money, in this day and age (and in Smith's, but he was able to generalize away from it), do risk both land and money. It does little good to rent land if it's converted into a brownfield; the risk is quantifiable. Similarly, you don't risk nothing if you invest in a firm that goes belly up. Just ask the DOE and the Solyndra loan: Presumably the government, if any, was engaged in risk-free rent-seeking and lost an entirely risk free $500 million. Thank you, if that's "risk-free" I've suddenly taken a liking to risk.

Now, the stock market looks like rent-seeking because money dumped into it is several steps away from money given to businesses. However, look at GM--the "rent seekers" who contributed nothing to the enterprise and shared none of the production costs got a good shaving. They lost a bundle--entirely risk free, money that the OP claims contributes nothing. Well, if it contributed nothing then there was no need to replace it. Yet Obama put billions into replacing it. In other words, the money did contribute something.

The small business I worked for years ago had a problem. It needed cash. The investor--who contributed primarly money--stopped putting money into it. It quickly went belly up. She wasn't rent-seeking: She was also the owner. Without the money, there was no way to pay labor, there was no way to procure raw materials. Smith looks at materials, not money, as what goes into production. This gets to the OP's problem.

The neoclassical economists conflated land and capital. But since money is easily converted into materials for production, money is also equivalent to the clay and fuel used for making bricks (in the OP's example). Moreover, in a market flush with excess labor, money's also equivalent to labor. The amount of land the small business that employed me needed was miniscule; had it been a different kind of start-up it could even have run out half the space. But it would still have required money--capital, cash, outside investment--for materials and for labor. That money would have been indicated on the books of the investor as stock; the investor could have transferred ownership in profit and risk by selling the stock. She should have, but didn't want to sell when a buyer offered. The result was that when it failed she owned the risk fully, just as she'd have owned the profit.

The OP wouldn't like the same kind of intellectual shenanigans to be played with government. Strictly speaking, the government holds a monopoly in many ways and doles out favors based on political power--rent seeking in exchange for political patronage. The government also holds a monopoly on land: It contributes little to production (in Smith's terms) and yet consumes a large portion of the income.

With the derivatives market, it is certainly possible to invest money in a company, have it fail, and lose nothing.

Much of the stock market is rent-seeking. One is gaining money, not by expanding the economic pie, but in a zero-sum game. I agree that the intent of wall-street is that people do their due diligence and wisely invest in a company that is expanding - and in exchange one can get dividends. Arguably, that has value and is the ideal.

However, we have to compare it to what wall street actually does today. What actually goes on is people betting on whether other people will bet on, what other people bet on, to see if the stock goes up. The average time stocks are held is measured in minutes and seconds. If it was TRUE investing, it should be measured in years and months. We've allowed wall street to get away from it's original purpose.

So is the derivatives market and its control fraud scammers, more popularly known as speculators.

The big banks are the epitome of rent seekers; the less they produce, the more they cause economies to crash, and the more money they fleece from investors, homeowners, and workers, the more money they make. In other words, they're not only rent seekers, they're common criminals acting above the law.

And it's interesting to speculate on the progression of thought. But I don't think it's worth dwelling on it. I also think it's misleading to overemphasize risk when discussing rent seeking. (Risk can't be eliminated and everyone carries some.)

The scenarios you mention aren't examples of rent seeking (Solyndra, GM, random small business). Regulatory arbitrage, such as selling off and leasing back assets for tax advantage, or the infamous "dead peasant" insurance policies are examples.

On the other hand, I think you are correct to call attention to government's role. (Although your contention that the state contributes little to production is false - government makes substantial investments in the form of education, research, and infrastructure.) Rent-seeking is possible because of the nature of the law. But "the government" is not the principle beneficiary - i.e. rent seeking rarely benefits the public as a whole. It usually increases private wealth.

How does modern rental not have a cost of production? The land as a value which is not very liquid especially in this market. There are taxes on the property which must be covered before any profit can be had and there is upkeep and liability. Given the fact that the value of the real estate is probably still going down, I don't know why most landlords continue in the business.

What you describe is not "rent seeking."

You need to read the whole article.

Confusing the terms. "rent" used in everyday speech with that used by classic political economists. They used rent just to describe renting out a piece of land with no buildings on it. Think of something like a 99 year lease on land, and the rent builds a house on it. The value paid to use the land is the "rent". If the lease builds on the property an apartment complex and maintains it, he is (in classic political economy terms) a capitalist. He collects the rent of the apartment for everyone who stays there. But the capitalist must always turn around and pay the owner of the land for using his bare piece of land. In this case the capitalist is doing the work, and the land owner(Renteir) is doing nothing but collecting money. Do you understand the difference?


Oh, and before you ask. Yes, if the capitalist owns the land itself, then he is both Renteir and Capitalist.

Socializing the losses and privatizing the profits.

Credit to Wikipedia: http://en.wikipedia.org/wiki/Economic_rent