It's not "cannibalization", it's competition. We don't say that firm A "cannibalizes" the sales of firm B, they compete for customers just like states and regions compete for residents and their tax dollars.
If you can appropriate benefits whilst imposing costs on others, it's absolutely cannibalisation. It's a parasitic process which benefits one part of the whole at an overall cost to the whole. It is not wealth creation, it is liquidity extraction.
And this absolutely can apply to businesses operating in markets, as it can governments operating in regions.
When business competition goes awry, government steps in to correct the market failure. Who steps in when government competition goes awry?
Governments are not perfect substitutes for each other. Packing up and moving to another city is harder than changing almost any other consumer choice.
Government officials don't compete to make their citizens as happy as possible, they compete to make their voter base as happy as possible. If they can improve the lives of the majority of their voters by hurting non-voters or those who vote for someone else, they have every incentive to do so.
>Government officials don't compete to make their citizens as happy as possible, they compete to make their voter base as happy as possible.
No, government officials compete to make their donors and patrons as happy as possible. A government functionary that stands to land a cushy 6 figure job in the private sector if he does what he is told while he is in government service usually does what he is told.
It's one thing to have different systems of government. It's quite another to have arbitrarily-constructed political boundaries (and very nearly all boundaries in the US are highly arbitrary), in which the design intent is quite often to execute precisely the benefits-inclusion / cost-exclusion dynamic I've described.
Even where that's not the design intent, it's often the practical result, and systems have a strong tendency, though path dependencies, compunding factors, emergence, etc., to evolve in certain ways.
Or do we allow every political unit sited, physically or metaphorically, upriver and up-wind from its neighbors to dump raw sewage in its waters and foul the air. After all, the source community doesn't bear those burdens.
It's that analogue which, extended, is at play here.
Now: you want to find a way to improve the general state of Your Fine City and make an appeal to others elsewhere on that basis? That's quite a different discussion. It's actually what the many-and-sovereign state system of the US was meant to provide -- a laboratory, if you will for governance experiments.
But even there, I believe there's a line to be drawn on principles which, once established, cannot be continuously relitigated, or at least not without exceptionally good reason.
Maybe. It depends on the kind of competition. Having been a resident of Michigan (which has a film tax credit like nearly every state) and Washington (which generously supports Boeing in return for annual not-far-from-extortion attempts), I have seen bad competition up close and personal. On the other hand, a state offering a great school system (the UC system of yore, anyone?) is pretty hard to argue with as good competition.
If we're going to throw around bad words, we need to get them right, and your definition isn't it. "Cannibalising" is used pretty narrowly in business to refer to when a new development in one area hurts sales in another, and the new product fails to increase the market size enough to make up for it.
What you're describing is a zero (or negative) sum game. Liquidity extraction isn't on its own a wealth generating action (although what you do with the liquidity will very often be, that's typically the motivation for extracting the liquidity), but otherwise it has no relation to what you're describing.
Interactions (whether accurately described as competition or not) between separate units (such as two different governments) can't be "cannibalisation", since neither is "eating their own". However, it certainly can be zero (or negative!) sum. I suppose you could describe certain actions of a single government as cannibalising one part of its population's well-being for the benefit of another, but that's really out of scope here.
Not necessarily, though I'd have to think about that.
Economic rent is essentially payment for time-based access to some capability which isn't (generally) consumed in use. Agricultural rents are the nominal case, though others apply.
One characteristic of rents, as opposed to raw material inputs, is that while high material costs lead to high general price levels, that is, a supply-shock inflation, high price levels lead to high rents.
(If you're living in the San Francisco Bay Area, that check you're cutting every month is due, at least in significant part, to the high local labour pay rate. Though yes, a constrained housing supply has a great deal to do with this.)
The landlord (or rentier) can successfully extract liquidity, but she isn't imposing costs elsewhere.
There's a difference if you, say, have one part of a region which offers employment, and another which offers housing, but they're unconnected. The externalities of employment (congestion, traffic, pollution, crime, infrastructure provision) aren't borne by the housing provider. Though the employment region may also be spared other expenses, e.g., residential sewerage and education costs, though those are often much lower.
Here you've got a situation where arbitrary division lines of cost burden vs. profits accrual. This is distinct from the typical case of rent-seeking, in which a landlord's privileged position allows them to extract the benefits of increased demand.
Your question goes deep into the questions of cost, value, and price theory, and it's a very common element of much economic theory, which treats the behaviors of prices for wages, stocks, capital, rents, and goods fairly distinctly. Particularly in the 18th and 19th century discussion, but also in much 20th century literature.
Interesting definition of economic rents. Much more constrained than the generalised rents == unearned profits. It's definitely given me something to think about. However, I have to disagree with a number of your points. The assertion that rentiers and more generally, the existence of private economic rents, do not impose costs elsewhere is not correct. In a direct sense, they reduce the general wealth level around them because that is precisely what they are extracting from others.
In addition, privatised rents distort the allocation of capital and labour towards the direction of wherever that rent exists. This is bad for a number of reasons: productive inputs are not being put to their most productive use, often large proportions of a community's or country's productive capacity is being employed to enrich a relatively small rentier class, other non-rentier businesses are either hobbled or destroyed by higher input prices and if the rent is attached to an exportable commodity (e.g. iron ore, coal, oil), export facing businesses suffer due to relative appreciations of their domestic currency.
It's interesting you bring up raw materials: I assume you mean natural commodities like iron, coal, gas, oil etc. These are the classic example of rent-generating commodities that make a small number of people very rich, while severely distorting the capital structure of an economy. For example, take a look at: https://en.wikipedia.org/wiki/Dutch_disease. Ironically the Netherlands has probably some of the world's best policy in this regard, mainly focussed on their successful oil export industry. They ameliorate the effect by a combination of high rent-recovery taxes ~%60, a significant degree of nationalised production and a very well-funded sovereign wealth fund.
And it may be true that retiers may, in some circumstances, be the main beneficiaries of increased demand. However, this could be said of many businesses. I don't think this is the primary issue. Although it sounds a bit trite, the primary issue is that rentiers enjoy unearned private profits. So when a local council builds a nice park somewhere (with public money), nearby private landholders get to privatise a significant share of the benefit economic via increased land-rents (capitalised as higher private land prices).
Although it doesn't sound 'so bad', this kind of system can fuel very damaging economic behaviours: notably it can encourage speculative investment, lead to inter-generational wealth concentration, and it can severely distort the political economy. For instance, a land developer, fortunate to inherit the lucrative family business, can suggest to one of his long-time family friends, an influential member of government, where the government should locate that new train station they're planning to build (co-incidentally near some land he has been 'banking').
He might also provide his views that the government should tighten up on zoning laws (you know, to ensure family friendly suburbs), and that the government should slow the pace of its land-release programme (you know, because there's a glut at the moment and we need to combat urban sprawl). And he'll be listened to, thanks to his family connections and inherited wealth (a portion of which he donates to various political parties).
Wow this turned in to a bit of an essay. Just one last thing: I found your last paragraph very interesting. It's an area I'd love to see given more focus by academic economists, given the mainstream view appears to have whittled things down to just two factors of production: capital and labour. Perhaps we're trying to push a number of square pegs through a number of round holes here...
One party (the prosecutor) has the option to threaten a severe penalty (high cost) to the defendant, whilst the defendant (often indigent) has little means to mount a defense. The DA's benefit is not only offsetting court costs (an interest in which the Court is complicit), but in racking up a conviction.
That is, the costs (overbearing convictions, often false convictions) are externalised, the benefits (trial costs, political advantage) are internalised.
I don't see how this can be considered "rent seeking". It's simply a strongly asymmetric power relationship and cost/benefit allocation.
That's not really relevant here. What I'm talking about is how moving residents from a Massachusetts suburb to a Rhode Island suburb will not by itself create any net-gain for the region's economy. Perhaps there are knock-on effects if living in Rhode Island makes people more productive in some way, though.
Anyway, the competition angle makes more sense when you're looking at different regions (e.g., Boston vs. New York).
When someone moves from A to B, it's usually because they can get a better deal on the tradeoff between better/cheaper housing and quality of life. In the larger picture, expanding the available mass of viable residential space for a given urban area means (on the margin) lower costs, allowing more people in a wider range of jobs to consider moving to that urban area. That's a net positive, not "cannibalising" or even competing anything.
Anecdote time: I live in London, about 40 minutes from work, in a pleasant but fairly boring area (not many big city things to do around here, a few pubs and decent but medium-low end restaurants - pretty much anything else beings and ends with a 30-40 minute journey). My wife got a new job, so we have a bit more cash between us, and have decided to move closer to the city (I'll be about 10 minutes from work, she will be 15-20), and we'd be in a very nice urban area with tons of amenities just around the corner. We will be paying a fair bit more in rent, but expect a substantial bump in quality of life. When looking at a flat, we met the outgoing couple -- they are moving to an extra-urban place (in another country, even) to get more space, be closer to family and nature (and, presumably, pay less rent). Someone else yet will move into our current flat, which has served us very well for five years, and is excellent value for money in London.
In another five years, we'll probably be ready to leave the city behind, and the shuffle will repeat.
Because of the difference in preferences (which changes over time), everyone are better off than before. This is obviously not facilitated by commuter rail, but the dynamics are the same (or, commuter rail would allow the dynamic to act across a larger spectrum of people and houses).
>And gain for the people paying these now-low prices?
Indeed, the OP is committing the broken window fallacy, seeing only company profits, not savings on behalf of the consumer.
A move from one region to another is zero-sum? It might be, but that depends on many factors. Does the person move closer to work? That's fewer miles driven, one less car on the road, less pollution, more happiness, higher productivity. Is one local government more efficiently run than another? That's better use of tax dollars. And on and on. Competition drives these factors.
No, because when you compete on only prices there is no brand loyalty, no customer relationship, and no r&d spent on feature development.
For a community; businesses might move for tax breaks, which benefits them greatly, but there might be more traffic / no high quality living that increases commutes. The employees might have to pay all relocation costs, and then the business that has no loyalty moves when the next tax break becomes available.
