The idea of rent seeking by companies is a common theme of Stirring the Pot. Rent seeking occurs when firms or whole industry groups lobby government bodies to fix the rules of the market to benefit one particular firm or group of firms. This can be as simple as getting the government to buy a particular product to boost the market price (wild blueberries for example) to arcane arrangements giving groups of firms a market advantage (catalytic converters on automobiles).
Companies can earn economic rents (profits above what competitive markets would earn) in more subtle ways. A good example might be the relationship between the charity Wreaths Across America and the Worcester Wreath Company of Columbia Falls. A recent story in the Ellsworth American explores the relationship.
The heart of the story is that the same family that founded and continues to run the charity owns the wreath company, from which the charity buys all its wreaths. The charity has begun a bidding process for the purchase of wreaths, but the company has been the only bidder to date. So your donation to the charity to support its work is effectively an order for another wreath from the company. Since Worcester Wreath is a privately held company, we don’t know whether it is earning economic rents from this relationship.
What we do know is that the work of this charity has become a favorite holiday patriotism story for the news media. Indeed, in the very issue of the Ellsworth American with the story cited above, there was another about the Wreaths Across American convoy with Maine politicians prominently on display. We all feel good knowing that the charity helps us remember the debt of gratitude we owe our veterans.
But we are left with the question, is patriotism that is good for business another form of rent seeking behavior?