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The Land Grabbers — the review

by David Zetland from Aguanomics

The Land Grabbers — the review

Fred Pearce sent me a review copy of his new book, The Land Grabbers: The New Fight over Who Owns the Earth, which I enjoyed very much for its detailed description of the pros and cons resulting from foreigners investing in land in developing countries.

In the book, Pearce appears to see more cons with land deals than I do. Perhaps that’s because he saw only bad land deals, or perhaps he associates ALL large-scale agriculture with exploitation, inefficiency and environmental degradation. Any of you who read my paper (“The Political Economy of Land and Water Grabs”)* will know that I am annoyed that we do not have a good definition of when a land deal is a “bad” grab or “good” foreign direct investment (FDI). Pearce appears to call ALL deals grabs, but I think there are many well-run, sustainable farming operations that produce profits for the farmer, good jobs for locals, and quality food for markets.

Anyway, here are my notes on the 300pp+ book, which has six parts and 27 chapters covering “grabs” from buy-side and sell-side locations in Europe, N and S America, Africa and SE Asia.

  • Many grabs convert “fallow” land to industrial-scale agriculture, but local communities often “cultivate” this land in long rotations of crops, grazing and recovery. Their methods are not just sustainable; they are cheaper and more productive for meeting a diverse range of local needs. Nomadic herders have practiced sustainable land management for centuries.
  • Such methods are also egalitarian. Poor farmers can eat, but poor urban residents will suffer from political corruption and/or favoritism.
  • That said, Pearce seems over-suspicious of markets (and financial instruments) that can improve food security and supply, views that I recently called shortsighted and misleading.
  • Food security, for example, is often used as an excuse for protectionism that favors local food growers over consumers. Grabs directed at security also fuel “countervailing” grabs in which market supplies are replaced by managed supplies that will waste calories, inputs and environmental flows. Yes, the Saudis are engaging in grabs, but that was only after their failure to grow wheat at home (a bad idea that wasted water) and their exposure to volatile food markets. The trouble with their “grab” strategy is that they will not be able to export food if large-scale shortages arise and their “indigenous” farms are wasting water now that they will need in the future. It’s far more efficient, for example, to rely on markets for supplies, store a year’s supply of grain in case of market failure, and save water for cultivation should market interruptions last longer than a year.
  • Land grabs are also often water grabs. The weak property rights that allow land grabs (by definition, a grab takes land from other users) are almost surely accompanied by even weaker rights over water and even greater misuse of that water.
  • Grabs, as a business strategy, often depend on corrupt dictators who will not be around as long as the 50-99 year contracts may promise, making it difficult to invest over the long term or care about sustainability.
  • Even worse, most grabs are arranged in distant bureaus, where “buyers” and “sellers” may not have a clear idea of what they’ve agreed, let alone who else may be interested/affected by their agreement.
  • It seems that Pearce considers deals involving foreigners to be “bad” while deals with locals are “good,” but local thieves are not just more common, but more thorough, since they know the maximum local tolerance for greed.
  • That said, it’s great to improve local productivity. It just takes a lot longer because locals do not just “copy/paste” good ideas from other areas. The upside is that locals who develop “organically” will have diversified, robust systems that will contribute to market stability. Pearce would agree with this assessment, I am sure, but local is not the ONLY way to go…
  • Remember remember remember that foreigners cannot just show up and exploit (at least not in these post-colonial days) — they need corrupt local partners, and THOSE people are the ones with power to make or break a deal (as I discussed in my paper).
  • Unsustainable operations are a bigger problem than grabs. They are fueled by a combination of short-term thinking (high discount rate) that may be fed by over-capitalization (need to generate cash to pay off debt), poor property rights (get money before land is gone), tragedies of the commons (get water before neighbors take it), etc. These problems occur in ALL countries, but they can be minimized by stable, sensible policies.
  • Land grabbers may be taking “marginal” land (often conservation areas, etc.) but only because domestic farmers have already taken prime land, often before environmental perspectives had any weight.
  • Pearce appears to laud reverse grabs, e.g., when Chavez or Mugabe break large farms into smaller holdings, but those “fair” actions are often driven by corruption or revenge. Even worse, the land often ends up with cronies who cannot farm instead of poor farmers who can.
  • Remember that there would be NO land grabs if individuals or communities had title to their land! That’s why many grabs are occurring in Africa — about 80 percent of the land there is “managed” using informal, communal methods.
  • Pearce also covers the interesting case of “green grabs” — where environmentalists take land out of production (or protect it), to keep it pristine. These grabs sometimes exclude locals from their traditional lands; they can also be sustainable (e.g., locals live in the lands under traditional conditions, while earning money from fees paid by foreign tourists who want to hunt beasts with cameras or guns).
  • Pearce loses his way when discussing “grabs” in Australia that are really FDI. That’s not the case in Cambodia, where corruption underpins land seizures, but it’s not good to mix up fair deals (even if they upset nationalists who prefer to avoid competing with foreigners for land) with theft.
  • There’s an interesting discussion of grabs in Malaysia and Indonesia, in which rainforests are cut down for timber and palm oil plantations. It’s not just that these grabs impoverish locals of their traditional lands, or that the biofuels produced on the land may actually be “carbon positive” but that the wood products produced from them are certified “good” by the FSC when they really are not. The main point is that eco-labels are meaningless unless there’s a 100 percent accurate way to prevent counterfeits — and that’s hard in corrupt countries.
  • Take this last point with my point on property rights and long term views above, and you will see how real sustainability results from accurate pricing of resources that belong to a community over the long term (50+ years).
  • The world’s largest sugar farm in Sudan uses 2.4mafy (~3,000 GL), or 4 percent of the Nile’s flow!
  • Water grabs, no surprise, reduce environmental flows that nourish wetlands that traditional users depend on for food, fiber and fish. No rights = hunger.
  • Mega farms may be unsustainable, but subsistence farms cannot generate enough production. Perhaps the middle way — small-scale, mixed-use farms managed by owner/entrepreneurs who innovate and adapt to local conditions — are the best way to feed the world over the long run. Oh, and don’t forget that these guys need to trade and benefit from trade.

Bottom Line: I give this book FOUR STARS for its vivid description of the problems related to land grabs that benefit outsiders at a cost to locals whose land is taken from them. Read it to understand the choices between hunger and food, rebellion and stability but don’t forget that property rights (legal, traditional or communal) would stop unfair grabs while allowing local people to benefit from their resources, locally and globally.


* The working paper is no longer online, due to spurious copyright claim by the publisher of the book where it eventually appeared. Email me if you want to see it.

reposted from Aguanomics

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Did Romney speak blasphemously?

Of all the things being deconstructed regarding the debate last night, this is the one that stood out for me:
QUESTION: The outsourcing of American jobs overseas has taken a toll on our economy. What plans do you have to put back and keep jobs here in the United States?
Romney:…which will allow me as president to be able to put in place, if necessary, tariffs where I believe that they are taking unfair advantage of our manufacturers.
So, who is it on Romney’s team that has decided this is a viable tool regarding the position labor is in? Is this what would be expected of a Republican presidential candidate? It just floored me to hear Romney speak the word “tariff” when presenting his solution to the question.  What would Uncle Milton think of his school’s chosen one?

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World Trade Turning Down

by Rebecca Wilder

World Trade Turning Down

Something different for today: world trade. Recently, South Korea and Taiwan released July 2012 trade statistics, where annual export growth was seen contracting at a 8.8% and 11.6% rate, respectively. The annual pace of export growth in Taiwan contracted for the fifth consecutive month, where that in South Korea turned negative following a 1.1% annual rate in June 2012.

On balance, exports in key Asian markets, such as South Korea, Taiwan, and China, are seen as leading indicators for world demand due to their intermediate nature of production in the supply chain. And the signal there is not good for global demand.

The Netherlands Bureau for Economic Policy Analysis and JP Morgan make available world trade statistics and a global PMI, respectively.

The correlation between the 3-month percentage annual rate of change of world trade and the global PMI have a 77% correlation dating back to 1998. Although the world trade statistics are current as of May 2012, the June and July global PMI, 49.1 and 48.4, respectively, do confirm the weakness seen in the Asian country export data and portend deterioration in this measure of world trade.

A simple bivariate regression of the 3-month growth trend in world trade on the global PMI implies a 3-month annualized contraction of 0.66% in July. This is far from the pace of contraction in 2009 – according to this statistic, World trade declined at its fastest 3-month trend rate in January 2009 of 50.5%. Furthermore, there’s no precipitous downtrend in the PMI that would suggest a sharp contraction in world trade.

I can only conclude that it’s too early to call stabilization in World trade, rather the opposite. However, the pace of contraction could be quite mild if policy makers ease globally.

Rebecca Wilder

cross posted with  The Wilder View…Economonitors

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Germany the Euro winner?

Update: This post from 6/28 has been re-posted today 7/04 as I believe it was lost in last Thursday’s reaction to the Supreme Court’s ruling on the health care ACA. Robert Waldmann has also subsequently expressed an opinion on how Germany should proceed.

Re-posted:
The NYT carries a data filled op-ed by Gunnar Beck, and takes a stance not widely discussed in media (at least from a quick survey). Assuming the figures are reasonably accurate,   and knowing there are ins and outs to the idea not in the article,  what about it?

…Those who think that Germany has been a winner with the euro almost always rest their case on Germany’s export surpluses. The euro created stability; it eliminated exchange rate risks; appreciated less than the Deutsch mark would have, and thus aided German exports.

But has the euro benefited Germany more than other countries?

According to my calculations, based upon the federal statistics, German exports rose most — by 154 percent — to the rest of the world; by 116 percent to non-euro E.U. members; and least of all, 89 percent, to other euro zone members. In 1998 the euro zone still accounted for 45 percent of all German exports; in 2011 that share had declined to 39 percent.

Between 1995 and 2008, Germany saved more than most, yet it exhibited the lowest net investment rate of all O.E.C.D. countries. On average, from 1995 to 2008, 76 percent of aggregate German savings (private, governmental and corporate) were invested abroad.

There is more of course, so it is worth a visit to see his complete reasoning.

Certainly worth a discussion, and has implications for domestic economic reform in Germany.  Does it have implications for Germany’s needs in the Eurozone?

Update 2: Also see The euro without Germany by Anatole Kaletsky (Inside the Markets, Business section, June 29.

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Why the World Should Care About America’s Middle Class

by Kenneth Thomas

Guest post: Why the World Should Care About America’s Middle Class

Tim Worstall, in his Forbes blog, attacks my series (here and here) on whether globalization is good for America’s middle class. Not on the basis that he disagrees with my conclusion (though he does), but because, he argues, there are much more important facts about globalization than a decline in the economic well-being of the middle class in America and Europe. In particular, he points to the great decline in poverty among developing nations that have embraced globalization:

This growth in incomes, in wealth, has been uneven, this is true. Largely speaking those places which have been taking part in globalisation, Indonesia, China, India, have been getting richer. Those that have not been, Somalia perhaps as an example, have not been.

Let’s leave aside the fact that these successful countries are hardly poster children for the kinds of so-called “free-market” policies that Worstall espouses, a point made particularly well by Dani Rodrik. And in the spirit in which Worstall granted my claims for the sake of argument, let’s grant his as well. (But if you want to get down into the weeds on the extent to which poverty reduction claims may be overstated, take a look at Robert Wade’s work.)

Here is the crux of Worstall’s argument:

So I would actually posit that whether the American, or European, or rich world, middle class benefits from globalisation is actually an incomplete question. Incomplete enough to be the wrong question. Almost to the point that the answer is “who cares?”.

The correct question is what is the distribution of all of the costs and all of the benefits of globalisation? To which my answer would be that a generation, perhaps even two generations, of stagnating lifestyles for the already rich, those middle classes, looks like a reasonable enough cost to pay for the other thing that is happening: the abolition of absolute human poverty in the rest of the world.

First, I think we should certainly care when hundreds of millions of people are suffering unnecessarily. Yes, unnecessarily, because contrary to Worstall’s claim, we are not trading off reduced economic well-being for hundreds of millions of middle class people for the lessened poverty of billions of other people. Indeed, the two are happening simultaneously, but as Ronald Rogowki pointed out in Commerce and Coalitions, it is perfectly feasible to have rich country winners compensate rich-country losers and still have all of them be better off from trade.

Politically, it is a hard row to how, as Rogowki pointed out: the winners from expanding trade increase their political power as a result of their increased income, making compensatory policies less likely. But ending globalization’s harm to the middle class in rich nations does not require us to take anything away from poorer people, not if you accept the theory of comparative advantage and the Stolper-Samuelson Theorem. It does require us to figure out a political solution to the problems faced by the losers, which as we can see in the United States is made more difficult by the decline of unions and by the Citizens United Supreme Court decision.

And second, we should care about the U.S. middle class (and Europe’s, for that matter) because how they react to their situation politically will have enormous consequences for the world economy and world politics. If the U.S. comes up with a “Smoot-Hawley” response to its economic problems, that would undo a lot of the gains Worstall sees as flowing from globalization, a point made recently by Dani Rodrik (via Mark Thoma). Even more ominously, in both the U.S. and Europe, we see increasing political polarization and the rise of nationalist political parties and movements, as noted by Paul Krugman. Economic decline is a scary thing, and people’s reactions to it can get downright ugly, to put it mildly.

For both of these reasons, then, what happens to the middle class in the U.S. and Europe will have repercussions far beyond those acknowledged by Worstall.

crossposted with Middle Class Political Economist

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Is Globalization Good for America’s Middle Class? Part 1

by Kenneth Thomas

Is Globalization Good for America’s Middle Class? Part 1

In this blog, I have frequently documented economic trends that have been bad for the middle class: Declining real wages, steadily falling bang for the healthcare buck, stagnant educational attainment, the gigantic cost of tax havens, etc. With this post, I want to begin exploring one possible reason for the economic insecurity of the middle class, namely globalization. Today, we will look at who wins and who loses from international trade, one of the key elements of globalization.
 
In some circles, one is likely to see a variant of the claim that “everybody” is better off because of freer trade. Even according to the most mainstream economic theory, this is simply false. The workhorse theory for determining the distributional effects of trade (i.e., who wins and who loses) is called the Stolper-Samuelson Theorem, first enunciated in an article by Wolfgang Stolper and Paul Samuelson in 1941.

To understand this theory, you need to know that economists think about national economies in terms of the amount of land, labor, and capital they have compared to all other countries in the world. These “factors of production” can be in relatively high supply compared to the rest of the world, in which case they are referred to as “abundant,” or in relatively low supply compared to the rest of the world, in which case we call them “scarce.”

The theorem can be stated in quite simple terms, but its consequences are not at all simple: As trade expands, owners of abundant factors of production benefit, and owners of scarce factors of production are harmed. Here, “benefit” means their real income increases, while “harmed” means their real income decreases.

Remember, trade can expand for two main reasons. First technological innovations can reduce the cost of transportation, making it first possible, then cheaper, to send goods long distances. For example, political scientist Ronald Rogowski, in his great book Commerce and Coalitions shows how the introduction of the steamboat made it possible to export North American wheat to Western Europe, displacing wheat from Eastern Europe. Second, policy changes like the North American Free Trade Agreement (NAFTA) or the trade agreements embodying the World Trade Organization (WTO) reduce or eliminate costly barriers to trade and lead to its expansion.
 
The grain example helps show why trade creates winners and losers. The Midwest U.S. and Canadian Prairie provinces are a gigantic breadbasket made possible by low population density, which implies abundant land and scarce labor. Expanding trade gave these farmers new markets and higher incomes. In much more densely populated Europe, the reverse is true: labor is abundant and land is scarce. As a result, expanding trade in grains meant more import competition and lower income for European farmers..
Fast forward to today and we can ask what U.S. factor endowments are currently. As a rich country internationally, the United States is necessarily a capital abundant country. As a comparatively low population density country, it is land abundant but labor scarce. The answer is to our initial question is then quite clear: expanding trade is harmful to U.S. workers because imports of labor-intensive products and services from abroad create competition for American workers, reducing their real wages. As I have discussed before, U.S. real wages have remained below their peak for 39 straight years, just as the Stolper-Samuelson Theorem would predict.
 
What about all the cheap goods we now buy at Wal-Mart? It doesn’t change this story at all, because the lower price of imported goods is already reflected in the inflation rate we use to calculate real wages.
Rogowski’s book also argues that we can expect certain pattens of political coalitions to form, with the winners from trade on one side and the losers on the other. NAFTA illustrated this well, with capital and agriculture generally in favor of the agreement (minus a few small specialty agricultural products like oranges), while labor was strongly opposed. And of course, this only helps us understand economic reasons for support or opposition to trade agreements; for non-economic reasons such as the environment, we have to look elsewhere. Although beyond the scope of this post, Rogowski’s analysis of the entire world through phases of rising and falling trade (i.e., the Great Depression) lends strong credence to his claims. You should definitely read his book sometime.
 
Economists are divided over how big this effect is. In the 1990s, when I first started teaching, the most common view of economists was that technological change was the driver increasing the premium for high skilled labor while reducing wages for low-skilled labor. Adrian Wood’s 1994 book, North-South Trade, Employment, and Inequality, argued that trade was in fact the main culprit, (a good, ungated analysis is Richard Freeman’s “Are Your Wages Set in Beijing?”). Although this met with a lot of resistance at the time, Wood’s view has gained a lot of traction among economists based on developments over the last 15 or so years. Paul Krugman, a particularly noteworthy example due to his Nobel prize, has gone from being a fanatic adherent of free trade to someone who sees trade as a big problem, though even today he is not quite willing to pull the plug on free trade.
 
One important point Rogowski makes (and Stolper and Samuelson did before him) is that the theory of comparative advantage tells us that the winners from trade gain more than the losers lose, which makes it possible in principle to compensate the losers and have everyone be better off. But he also argued that those who benefit economically from trade will see their political power increase, something that has certainly been borne out in the United States in the more than 20 years since his book was published. This makes it less likely that such compensation will occur, and we certainly haven’t seen any policy in the U.S. that comes close to making everyone better off as a result of trade.
 
One small bit of comfort comes from Paul Krugman’s book The Conscience of a Liberal (pp. 262-3). He provides us some reason to think that the Stolper-Samuelson Theorem isn’t necessarily destiny, as he shows that the United State and Canada, two countries with the same factor endowments as each other, have distinctive differences in political outcomes, particularly with regard to unionization rates.
Overall, unfortunately, it looks like the answer to today’s question is clear: freer trade has harmed, and is harming, the American middle class. But globalization is more than trade, and I will continue to analyze other elements of globalization in my next few posts.

crosposted with

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Panel Discussion with: Krugman, Sachs, Phelps, Soros

Just wanted to let everyone know about a presentation that aired on Cspan’s Book TV.  It is a 2 hour panel discussion titles: Global Economy: Crisis Without End.  It was held 2/17/12.   Click hereto bring up the show.
 
What I found most interesting was the different perspectives between Krugman and Sachs. I’m not sure, but I don’t think either realized they were talking about the “crisis” from 2 different perspectives which leads to 2 different answers to what needs to be done. Thus, they come across as if the other is wrong, when in my opinion, they are both correct. Krugman says we need to do more now. Yes we do. Sach’s says we need to take the long view and start changing the direction we are going, namely calling for higher revenue raising by the government to be spent on the nation’s infrastructure, and he did not just mean physical infrastructure. I guess you would say he was calling for the government folks to get real about raising capital and then doing capital expenditures. Not exactly the thinking I would have expected from Sach’s considering his start in economic life: Shock Therapy.
 
Maybe I was just seeing the difference in Keynes vs Neoclassic Econ meets Bono?  So as much as Sach’s appears to be calling for the correct long term solution, I don’t trust him as the one to lead the charge.
 
It was a very good discussion and there is more there than what I have keyed on.

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More on Markets and Neoliberalism from Crooked Timber

Actual markets in the American economy are extremely rare and unusual beasts. An economics of markets ought to be regarded as generally useful as a biology of cephalopods, amid the living world of bones and shells. But, somehow the idealized, metaphoric market is substituted as an analytic mask, laid across a vast variety of economic relations and relationships, obscuring every important feature of what actually is. And, then we wonder why the “thinking” and policy debates that result are stupid and corrupt.
—  Bruce Wilder

Emphasis added.   This is in the context of a critique of neoloberalism, here described by Henry Farrell:

In fact, it is not free markets with vigorous competition among producers, but instead, a mixture of big firm oligopoly and cosy and frequently corrupt relationships between state officials, who have been told to subcontract out parts of government, and the businesses which supply these new services, in what is at best a murky approximation to a real marketplace. You can read this as a statement that classical liberalism has some good points as well as some bad ones. You can equally well read it as saying (and this is the more fundamental point), that regardless of whether or not classical realism had some good arguments, these don’t have anything much to do with actually-existing-neoliberalism which is a crony capitalist fantasy.

This lays bare the greed, dishonesty, corruption and manipulation inherent to neoliberalism, and simultaneously exposes the concept of “the market” as an absurd quirk of the typical economist’s imagination.

Each of these meaty comments is highly worthy of recognition.  The cephalopod reference made the first one utterly irresistible, and prompted this post.

The bad news is that there doesn’t seem to be any way out.


Here, John Quiggin provides a good functional definition of neolibealism – the first I’ve ever seen – and a very thoughtful critique of neoliberalism as a political cum economic ideology.

The core of the neoliberal program is
(i) to remove the state altogether from ‘non-core’ functions such as the provision of infrastructure services
(ii) to minimise the state role in core functions (health, education, income security) through contracting out, voucher schemes and so on
(iii) to reject redistribution of income except insofar as it is implied by the provision of a basic ‘safety net’.

Quiggin judges neoliberaism to be a failure, for different reasons in different places.  I’m going to quibble with his definition of failure, type iii, though: a failure to deliver the promised outcomes.  With a focus in the inherent dishonesty and corruption inherent to neoliberalism, I can only view it as highly successful in the U.S.  This is because there is a real hidden agenda lurking behind the false public agenda.
 
Wilder describes how it works in a follow-up comment: (Be sure to read the whole thing.)

Neoliberalism, it seems to me, uses the myth of the market, to rationalize rule-making, which serves the rentiers (is dynamically inefficient) and which promotes authoritarian, and therefore unfair, resolution of conflict.

Quiggin describes the type iii failure in the U.S:  “The basic problem is that, given high levels of inequality, very strong economic performance is required to match the levels of economic security and social services delivered under social democracy even with mediocre growth outcomes.”  Of course, no such strong economic performance is forthcoming.

However, the real agenda is not general economic security.  Quite to the contrary, it is to maximize and maintain a high level of inequality, such that the small, elite minority has absolute control over the impoverished majority, precisely because their economic security is severely limited.  I cite as evidence the extreme form of 21st Century Republican party neoliberalism, which even attacks the existence of a basic safety net.  Note also their ongoing attacks against labor unions, health care reform, and education at all levels.

The job is not yet complete, but I have to view the record of neoliberalism in the U.S., to date, as a smashing success.

I posted this on my blog in slightly different form as a Quote of the Day entry. But it makes such a fitting companion piece to Dan’s from earlier today that I decided to put it up here, as well.

 H/T to Unlearningecon

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Discussion at Crooked Timber on ‘what are markets’

Well, sort of on markets.
There is an interesting conversation going on at Crooked Timber our public debate in the econosphere and political rhetoric . Henry posts on the use of arguments over the term neo-liberalism and finishes with:

For what it’s worth, I think that the open information agenda, and the political inequality agenda have a lot more in common than most people think (I have been planning for some time to do more writing on this over the next year). I think it would be a lot more useful to frame the argument as one between different ways of restructuring markets so as to tackle problems of inequality at their source than as one between neo-liberalism and its critics

Lifted from comments,  Bruce Wilder offers this observation:

To a large extent, we are all intellectual victims of economists, dead and otherwise, who really do not know what they are talking about. The main problem with the standard analysis of the “market economy”, as well as many variants, is that we do not live in a “market economy”. Except for financial markets and a few related commodity markets, markets are rare beasts in the modern economy. The actual economy is dominated by formal, hierarchical, administrative organization and transactions are governed by incomplete contracts, explicit and implied. “Markets” are, at best, metaphors.

The elaborate theory of market price gives us an abstract ideal of allocative efficiency, in the absence of any firm or household behaving strategically (aka perfect competition). In real life, allocative efficiency is far less important than achieving technical efficiency, and, of course, everyone behaves strategically.
In a world of genuine uncertainty and limitations to knowledge, incentives in the distribution of income are tied directly to the distribution of risk. Economic rents are pervasive, but potentially beneficial, in that they provide a means of stable structure, around which investments can be made and production processes managed to achieve technical efficiency.
In the imaginary world of complete information of Econ 101, where markets are the dominant form of economic organizations, and allocative efficiency is the focus of attention, firms are able to maximize their profits, because they know what “maximum” means. They are unconstrained by anything.
In the actual, uncertain world, with limited information and knowledge, only constrained maximization is possible. All firms, instead of being profit-maximizers (not possible in a world of uncertainty), are rent-seekers, responding to instituted constraints: the institutional rules of the game, so to speak. Economic rents are what they have to lose in this game, and protecting those rents, orients their behavior within the institutional constraints. Those constraints are in the nature of a public good, and if that public good is well-provided, the behavior is socially beneficial and technically efficient.
It is within this context, that risk and innovation (aka, changing institutional structure) can pay off.
So, yes, licensing barbers can make perfect sense. It creates a small economic rent, and if that rent is tied effectively to barbers being scrupulous about safe and healthy technical practice, that’s a economic benefit. The gain is in technical efficiency, not allocative efficiency.

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