Rents. How Marketing Causes Inequality

A surprising new explanation for the radical growth of income inequality—and a new strategy for stopping it.Income inequality has risen dramatically since the 1970s. But why, exactly? In Rents, Gerrit De Geest argues that the main cause is advances in marketing. Marketers have become better at causing and exploiting market distortions in legal ways. The legal system tries to prevent the deliberate creation of market failures, but it has not evolved at the same speed. Business schools have outsmarted law schools.Over the time span 1970–2015, the impact of marketing on the economy has steadily increased, transforming competitive markets in less competitive ones by making prices less transparent, splitting informed and uninformed consumers, making products incomparable, locking in consumers, or exploiting psychological biases. This has increased the amount of artificial profits in the economy—called “rents” in economic jargon.The result? Using a novel method, De Geest estimates that rents now amount to 35 percent of the economy. This means that out of every $100 you spend, on average $35 goes to profits that could not have been made in perfectly competitive markets. That was only $20 in 1970. The book shows how getting wealthy has become less a matter of working hard than of capturing rents.A book that will explain both why your boss makes many times your salary and why the prices you pay for groceries keep changing.“If you have a favorite brand of cars, airlines, aspirins, or s...