The US Federal Trade Commission is now suing Amazon on grounds that it is duping customers into unknowingly signing up for its Prime service and “sabotaging” their efforts to unsubscribe. I know, shocking, right?
Unfortunately, undue attention to Amazon’s abuses conceals a broader and troublingly pervasive rent-seeking pattern. Economists classify as “rent” any activity aimed at extracting value or profit from someone else as opposed to actually producing value. While the latter increases the size of the proverbial economic “pie,” rent only redistributes shares of the pie. As major economies have generally grown less productive over time, rent extraction has become a critical means of keeping profits up. The predictable result has been growing inequality.
“Convenience” charges. Administrative fees. Billing errors, invariably in the company’s favor. Price discrimination. These are but a few examples of ways that businesses exploit the fact that the average consumer is too overburdened to bother contesting such forms of legal extortion. Everyone knows about such abuses, and the news media does us all a disservice by presenting the Amazon case as a one-off instead of merely one of the larger scale examples of a broad trend.