And stagflation Japan is doing great?
I think SoftBank/Masayoshi Son is enough of an outlier that you can't make any extrapolations from this investment. This is the guy who was crazy enough to buy Sprint
http://www.tradingeconomics.com/japan/inflation-cpi
Japan's inflation has been hovering around 0% for a decade. Unemployment is low too. The problem is a shrinking working population and low productivity growth.
Rent-seeking involves seeking out regulatory or other non-market protection for a stream of revenues. Taxi medallion companies lobbying city governments to restrict the supply of medallions is a textbook example.
That said, a real estate investor certainly could engage in rent-seeking behavior. For example, they could lobby a city to restrict new development, thereby reducing competition and protecting or increasing their revenue. In practice, companies that invest in stable real estate assets (e.g. REITs) typically don't do this. The incentive structures in the industry don't really support it. I'm sure it does happen in some cases though.
Now, to be fair to the GP comment about the "English Upper Class" it's not entirely unreasonable to accuse them of rent-seeking for their land holdings. With very broad brush strokes, there are a lot of "Upper Class" English people who own a lot of incoming-producing real estate who also push very hard for historic preservation laws that restrict new construction - e.g. Prince Charles and his friends.
You don't have to be the one to create a rent-seeking opportunity to be the one who benefits from it.
The fact that many desirable locales have strict zoning regulations to restrict development absolutely turns homeowners there into rent-seekers. They're exploiting a stream of income which only exists due to government intervention.
I took the question in the thread to be more about real estate investment firms than individual homeowners.
Real estate is scarce, inherently exclusive by location, and limited in supply by planning law. The amount of money returned by real estate is totally out of proportion to the work involved in its maintenance.
And what is the work involved in building a housing unit? If you build one in most of the EU capitals today you can expect to get your investment back after 30-40 years if you rent it out. (that's why most just sell the housing unit)
Would you make an investment in a company expecting to get your investment back after 30 years? I certainly wouldn't because I want to make profit while I'm still alive.
If housing units would grow like trees without human interaction then you'd be right, but each one of them had to be built in the first place.
In general capital gains in an otherwise depreciating asset are tied to outsized increases in the revenue stream that asset produces. To put it another way, the increase in value is fundamentally driven by an increase in the number of people who want to use the building or the neighborhood - it's driven by a real utilitarian value that the asset does provide, or has the potential to provide for people.
If you think that real estate always goes up in value (above inflation) I would wager you've spent most of your life in the big cities where an increasing number of people want to live. I also have some lovely properties in Buffalo and Detroit that you might be interested in.
Of course, sometimes, in a frothy market, both professional firms and random individuals speculate on real estate, looking for capital gains disconnected from any underlying fundamental increase in utilitarian value. There are plenty of half-finished subdivisions in rural Florida that show how real this phenomenon is. However, it's an aberration, and it's fundamentally unstable so it doesn't tend to last for long.
Drawing conclusions about real estate markets in general from speculative bubble conditions is similar to drawing conclusions about technology companies from day trading on the Nasdaq in 1999.
Sorry, but this can't possibly be true. Since the 2008 crash the Dow Jones for example tripled in value while the San Francisco housing market gained 40%.
It is very rare that the real estate market outperforms the stock market.
(This is a trick question. Before you answer, please make sure you actually know what 'rent-seeking' means, because it's obvious that most other commenters don't.)
The more efficient T-shirt machine produces more with less, therefore the overall resources available go up. Not rent-seeking.
Having a patent on the machine, and/or attempting to sabotage the creation of similar machines? Rent-seeking.
For houses this is not the case. You actually have to produce houses and you have to constantly work on them so they don't collapse after some time.
Investing in a company to help fuel its growth, like VCs do, is analogous to investing in a new development project. There are lots of firms that provide equity investment to developers for new construction. Much like VCs these firms are interested in helping to create something new to meet market demands. Also like VCs they are typically looking for an exit event, where they benefit from the sale of the recently developed property.
The tech analogue for being a landlord - holding on to a stable asset and maintaining it - is holding on to an already profitable business and just maintaining it. For example, there are lots of SaaS businesses that have a decent number of customers and the owners are happy to just do the minimum needed to maintain the code and handle customer service requests. You can buy and sell these businesses as an investor much like income-oriented real estate investors buy and sell fully-leased apartment and office buildings. These investors are not helping to create something new in a direct way.
However, those income-oriented investors do create a market for stable assets, be it a Midtown Manhattan office building or shares of GE. They aren't directly investing in growth, but they are providing the incentive for growth. After all, while an early stage growth investor might be happy to know that they can sell their stake to another growth investor, as a company gets bigger and bigger its room for growth tends to diminish, and growth investors become less interested in buying it. But the market for its shares doesn't disappear. That's because there are investors looking for stable cash flow, even if it's from a static asset - be it an apartment building from the 1970s or Oracle.
Rent-seeking is everything where you extract value by not being productive in the sense of creating new wealth.
Building a house is damn expensive and creates a lot of new wealth, while maintaining a house preserves the wealth you created before.
In the same vein I could just purchase a property and rent it out, in doing so I have not created it - it already existed - but now I am just extracting value from it. Same as the bank will do to me with the mortgage.
Because then you'd know that housing is not rent-seeking by this definition as there clearly is a contribution to productivity.
Houses have to be built, maintained, developed and advertised on the market. And there are a lot of risks in this business.
For example, home-owners in San Francisco who actively prohibit new construction are rent-seekers.
Something to do with the southern side of the Mediterranean being ... uh ... in worse shape safety-wise than the northern. So far.
In a modern economy "savings" equals investment. Even using a bank deposit account transforms one persons savings into another's business loan or mortgage.
This seems to be a widely held misconception - that savings are economically inert - a bit like a squirrel's nut hoard.
Businesses don't need loans when they don't have customers with money to spend.
This, is a widely held misconception. A bank is no longer allowed to re-invest more than a small proportion of it's customers' savings.
https://en.wikipedia.org/wiki/Fractional-reserve_banking#Res...