“Rent seeking” occurs when companies secure government benefits for actions that do not otherwise create wealth.
An example of rent seeking is California’s subsidy program for zero emissions vehicles (ZEVs)—primarily electric vehicles. Under the state’s ZEV credit program, automakers that sell cars in California must offer a minimum number of ZEVs. Automakers that exceed the standard may sell compliance credits to automakers that can’t make their targets. In recent years, luxury electric carmaker Tesla has been a major beneficiary of the ZEV program. Since 2013, the company has taken in more than $400 million by selling ZEV credits. These subsidies have been integral to the company’s bottom line. In fact, this money is unrelated to meeting consumer demand; it is, rather, a direct transfer from certain automakers to others—primarily Tesla.
Tesla’s CEO, of course, is famous entrepreneur Elon Musk. Last week, the carmaker had an earnings call, during which Musk “hammered” the ZEV program that’s been so good to him. Here’s what Musk said, as reported by Bloomberg Markets:
The California Air Resources Board is being incredibly weak in its application of ZEV credits. The standards are pathetically low. They need to be increased. There’s massive lobbying by the big car companies to prevent CARB from increasing the ZEV credit mandate, which they absolutely damn well should. It’s a crying shame that they haven’t. And as a result, you can barely sell the ZEV credits for pennies on the dollar … CARB should damn well be ashamed of themselves.
Talk about chutzpah. In the course of campaigning to increase a wealth transfer to Tesla from other companies, Musk complains about other car companies lobbying to decrease the wealth transfer. It seems that Musk thinks there are two kinds of lobbying: 1) the kind that makes him richer, which is good lobbying; and 2) the kind that threatens his handouts, which is bad lobbying. Musk’s haughty rent-seeking regarding California’s ZEV program is all the more dubious in light of the fact that his car company benefits from so many other government policies, including a regressive $7,500 federal tax credit. Given his unseemly reliance on political favoritism, Musk should be damned well ashamed of himself.