Thread by @Peoples_Pundit

Thread: Let's talk a bit about "rent-seeking." It's a term you rarely if ever hear used by corporate big media.

We do bring it up a lot, and many have asked me to explain what rent-seeking is and why it matters, particularly in respect to the 17th Amendment.

Here we go...

Put simply, rent-seeking is when an individual or entity uses company, organizational or individual resources to obtain an economic gain, typically a competitive advantage. But there's a second aspect to rent-seeking, which is equally important...

Rent-seeking doesn't require reciprocity, meaning wealth created from the gain (e.g. competitive advantage) benefits only the rent-seeker, not society as a whole. In fact, their interests often hurt avg. citizens.

An example is a company lobbying lawmakers for loan subsidies.

Rent-seekers have the resources to lobby for their interests, which often hurt average citizens, who do not have the resources to rent-seek.

But there's a catch. It is very expensive to rent-seek, especially if average tenure is low.

Which brings us to the really good stuff...

Pretend you are a rent-seeker attempting to lobby a Senator for your special interest/competitive advantage.

Consider this...

Wouldn't you rather buy a senator once, or would you rather be forced to buy one every time your hack incumbent loses or is termed out?

I'm going to draw on some work here, including my own. I'll cite them all so you can read them. But this is the problem of "trustworthiness" rent-seekers ran into pre-17th.

It's a real pain in the ass to have a state legislature remove your corrupt hack from Washington, D.C.

This is where we get into the fraud of the Progressive Era. It's not partisan, it's true.

"The problem of 'trustworthiness" -- for both lawmakers and rent-seekers -- is easily alleviated through increased seniority. Senior legislators can be "trusted" to scratch backs."

Why?

Because they do not want to sabotage legislation they inevitably will sponsor in the future. If they want a majority, then they need a reputation that they can be "trusted" to follow the quid pro quo.

Quote via me in Our Virtuous Republic. But let's see if historians agree.

"In the extreme situation, if all legislators could serve only one term, all bills would have to be passed simultaneously or not at all. This would substantially raise transaction cost (lobbying, bribery, and other perks] of passing legislation."

(Zywicki: Senators & Spec Int)

So, what to do? Obviously, the best thing for rent-seekers to do is to protect incumbency in order to protect their bought and paid-for legislation from reconsideration.

That's where the Progressive Movement proved quite useful. It did not have the desired effect. Let's look...

David Graham Phillips, who argued for reform in "Treason in the Senate," may or may not have been genuine.

But it's irrelevant to the evidence, which shows the value of the 17th Amendment as a tool to stop rampant corruption, is a complete historical myth.

It got much worse.

"Empirical tests have demonstrated support for the proposition" the 17th Amendment "was an attempt to change the institutional structure in which rent-seeking behavior took place."

The 17th increased avg. tenure, thus increasing rent-seeking bills, "their durability and value."

Here is a chart we like to call the "Evolution of Citizen Legislators to Career Politicians in the U.S. Senate," also known as, "Thanks for nothing, 17th Amendment."

Avg. tenure exploded. The House did not immediately follow. And let me tell you why...
cloud.highcharts.com/show/ivyhico

First, alternative explanations for increased avg. tenure have included increased life expectancy, an ease in traveling, incumbency etc.

Empirical evidence does not support the validity of these explanations. There is one, and only one, explanation supported by data.

That's...

The value of holding a legislative seat, especially in U.S. Senate, increased as the authority of the gov't increased over the economy. The ability to regulate, or to interfere with the market economy, allows gov't to transfer wealth to rent-seekers.

Judges gave them that power.

More specifically, activists judges on the cusp of the Gilds and later the Progressive Era, ironically, and it started with Munn v. Illinois (1877).

Case surrounded legislative authority, or lack thereof, to regulate & set grain storage rates.

Court shifted away from precedent.

High Court rulings favored indy property rights over "public" interest arguments. Chief Justice Waite exemplifies how progressive populism was used as a little guy argument, but it had a complete opposite result.

"When, therefor, one devotes his property to a use..."

"... in which the public has an interest, he, in effect, grants to the public an interest in that use, and must submit to be controlled by the public for the common good, to the extent of the interest he has thus created."

What? Power to the People, right?

Wrong. It was BS.

Justice Fields authored the dissent in Munn v. Illinois and it is well worth reading. He prophetically warned it was too broad an interpretation, essentially anything could be "in the public interest" and regulated.

He was so damn right. And rent-seekers are now in hog heaven.

With their newly granted authority nowhere in the U.S. Constitution to sell favored legislation, Congress established the Interstate Commerce Commission, which became the template for future agencies.

BUT ALL OF THAT WOULD'VE BEEN USELESS WITHOUT SENIORITY AND INCREASED TENURE.

"If the effectiveness of a legislative act can be guaranteed only until the next electoral session, the value of legislation to interest groups will decline. As a result, these groups will be unwilling to make substantial investments in purchasing legislation that may be..."

"... obsolete within a few months or years, or which may require investment of further resources at a later date."

In other words, the increase in tenure had nothing to do with fair democracy, and everything to do with rent-seeking and special interest.

Intention is irrelevant.

And as a cap off, the entire logrolling deal for the 16th (direct "progressive" income taxation) and 17th Amendment was all about "trustworthiness" and increasing the value of their legislation, so that they may line their pockets deeper. Midwest wealth was indeed siphoned.

Pre-logrolling deal, wealth was geographically diverse. Self-made Gilds and titans of business invested their wealth in Midwest, Mid-Atlantic. It's now concentrated in & around power centers, i.e. NoVA & D.C., NYC & Silicon Valley.

That's rent-seeking concentrating wealth.

Finally, let's look at the role the Progressive Movement played.

For average citizens, this was an extension of "one person, one vote," and made us a democratic republic, rather than a true republic. It's important to keep context here. Party platforms weren't as rigid.

Majority parties in legislatures frequently disagreed over whom to send to the Senate.

Challenge for Progressives: North & South cancelled each other ideologically. They needed the West to tip the scales. But they couldn't obtain senior delegations and...

In D.C., influence is relative to seniority. As an institution, the U.S. Senate provides senior members w/ seniority in the form of chairs, preference on committee appointments, and other means to table or advance legislation. The 17th allowed the West to overcome this obstacle.

From 1870-1913, the disparity between avg. senate tenure in West & non-West states is VERY significant. It was largely either flat or down each year during the period. That's very bad news for progressive rent-seekers, who were at a significant disadvantage to secure rents.

That trend reversed after the deal. They got movement support & equal footing in the bidding market pols made out of our legislative process. In lawmaking markets, currency payments come as political support for pols, who then broker bills by pairing supply & demand (Tollison).

Our founders protected us from the tyranny of the majority. In our infinite unwisdom, we got duped by rent-seekers who claimed reform was for our own benefit.

It was a total fraud.

I would freely give up my vote in direct senatorial elections to return to a superior design.

Citation time... Should read as many of these works as you can, even if you decide to skip mine, where we discuss many of their works. 😉

1. Zywicky, Todd J., "Senators and Special Interest: A Public Choice Analysis of the Seventeenth Amendment." Oregon Law Review Vol. 73 (1994)

Citations continued...

2. Hibbing, John R. "The Modern Congressional Career." The American Political Science Review, Vol. 85 (June 1991)

3. Price, Douglas H. "Congress and the Evolution of Legislative Professionalism." Edited by Ornstein, Congress in Change, NY Praeger (1995)

Citations continued...

4. Anderson, Terry L. and Hill, Peter J. R. "The Birth of Transfer Society." Stanford: Hoover Inst. Press (1980)

5. Posner, Richard A. "Economic Analysis of Law. 4th Edition Boston, Little Brown (1992)

Citations continued...

6. Mueller, Dennis. "Public Choice II: A Revised Edition." Cambridge U Press (1989)

7. Olsen, Mancur. "The Logic of Collective Action: Public Goods and the Theory of Groups." Harvard U Press (1965)

And last but not least.
amazon.com/Our-Virtuous-R…

One more thing for this thread, re: the citations, for those who intend to read them.

If you're more of a data person like me -- just give me the numbers, shut up & let me check the work -- then go with Todd Zywicki of George Mason. His work in Oregon Law Review was brilliant.

Q&A: Great thread question asking why the North & South supported the logrolling deal if it disproportionately benefited the West.

Answer is💰, more specifically 💰 coming from direct federal taxation. They tried before. SCOTUS struck it down.

Amending the Constitution is hard.