IIPP explores economic rents and algorithmic monopolies in the digital economy
30 September 2020
Does value extraction cause economic stagnation and growing inequalities?
Photo credit: FT
Economic rents can be broadly defined as income derived from ownership or control over a limited asset or resource, without any expenditure or effort on behalf of the resource holder. Today, there is an increasing consensus that capitalist systems are suffering from excessive rent extraction in different sectors.
IIPP is exploring how and why a large part of the value created within the society is extracted in the form of rent payments. These include the financial, insurance and real estate sector (FIRE sector) but also non-financial firms who are becoming increasingly adept at extracting value from citizens, gaming regulations, and engaging in rent-seeking motivated lobbying.
Most notable in recent years has been the enormous growth of digital platforms such as Amazon, Google, Facebook, and Apple. Despite the fact that we all enjoy services offered by these firms, their control over digital data, algorithms, and the digital architecture allows them to determine which products users will be able to choose. This gives them huge rent extraction opportunities against both producers and consumers, i.e. the productive sectors of the economy. A deeper understanding of how these actors extract value beyond their contribution to value creation will improve our understanding of rent-seeking in contemporary economies and how to regulate it.
In a new project, generously funded by the Omidyar Network, IIPP will develop a new theoretical approach on the rent dynamics in digital platforms, real estate, and finance. Given the importance of these sectors, our new lens will create important insights into the commonalities and unique aspects of each sector. As rents in digital platforms are largely overlooked, comparing and contrasting it with other rentier models is essential in understanding its nature. Therefore, IIPP will look at how algorithms can enhance rent extraction, and what new types of governance structures are needed to tackle this phenomenon.
Meet the team
- Professor Mariana Mazzucato, Professor in the Economics of Innovation & Public Value at University College London (UCL) and Founding Director of the UCL Institute for Innovation & Public Purpose (IIPP)
- Professor Rainer Kattel, Deputy Director and Professor of Innovation and Public Governance at the UCL Institute for Innovation and Public Purpose (IIPP)
- Dr Joshua Ryan-Collins, Head of Finance and Macroeconomics and Senior Research Fellow at the UCL Institute for Innovation and Public Purpose (IIPP)
- Dr Giorgos Gouzoulis, Research Fellow in Economic Rents at the UCL Institute for Innovation and Public Purpose (IIPP)
- Tim O’Reilly, Visiting Professor of Practice at the UCL Institute for Innovation and Public Purpose (IIPP)
This project is funded by the Omidyar Network. The project is also supported by the UCL IIPP professional services team. IIPP will recruit a specialist postdoctoral researcher.