The chain across the river
Robert Shiller’s textbook example of rent-seeking is almost too simple. A landowner strings a chain across a river, hires a man to lower it, and charges passing boats a toll. Nothing gets built. Nothing gets improved. A fee appears where none existed, and the boats pay because the alternative is not passing.
Now hold two recent events next to that image.
At the most important chip company on earth, the chief executive steps down, and the coverage turns almost immediately to a duller question: who now decides which customers get scarce silicon. In Kuala Lumpur, a former prime minister serves time for a state fund that lost billions to people with the right phone numbers.
One is a boardroom story. The other is a police story. I think they are the same story.
What I actually believe
Rent-seeking monopoly does more than lift prices. It decides who gets to participate. It rewards the wrong talents. And it wears down the institutions that would otherwise correct it. Markets rarely fail because there was too much competition.
They fail because somebody bricked up the exit door.
Then comes the part I find most underrated. When enough people discover the door is bricked up, they stop writing policy papers and start replacing governments. 1MDB did not just cost Malaysia money. It changed who governed the country.
Two things we keep getting wrong
The first mistake is treating monopoly as a market share number. Share is a symptom. The thing itself is contestability: can a customer leave without losing more than the rent is costing them? Nvidia’s share has actually fallen from a peak near 87 percent in 2024 toward an estimated 75 percent in 2026, according to Silicon Analysts’ synthesis of Bloomberg Intelligence and IDC data. Its pricing power has not fallen with it, because leaving is still expensive. That gap between share and power is the whole point.
The second mistake is splitting the private monopolist from the state monopolist as if they were different species. They run on the same machinery with different owners. George Stigler’s 1971 paper started from a plain premise: the government’s main resource is the power to coerce, so a rational interest group will work to have that power used on its behalf. The state is the ultimate monopoly not because it owns everything, but because it defines what is legal, who may compete, and who gets exempted.
My earlier instinct was to draw a line between a licensing gatekeeper and a dominant firm. That line collapses the moment you look at how each one actually works. A ministry that rations approvals and a vendor that rations GPUs both sell access. One calls it compliance. The other calls it allocation. The boat pays either way.
What the research actually says
Gordon Tullock noticed something odd. A political favor worth a billion dollars often costs a fraction of that to obtain. The gap between the value of the favor and the price of buying it is the corruption margin, and it explains why rent-seeking spreads faster than the rents themselves.
Kevin Murphy, Andrei Shleifer and Robert Vishny asked why rent-seeking is so costly to growth and landed on talent. When privately profitable but socially wasteful opportunities exist, the ablest people join the lobbying contest instead of pushing out the productive frontier. You do not get a slower economy. You get a differently staffed one.
Robert Laband and John Sophocleus estimated in 1988 that rent-seeking had cut total US income by 45 percent. I think that understates the damage. A national income estimate cannot count the businesses never started, the talent diverted into gatekeeping, or the habits of petty extraction that spread through ordinary life.
My own view is starker: all governments are corrupt, differing in degree rather than kind. That does not mean every official takes a bribe. It means the underlying philosophy concentrates coercive power and treats politically sanctioned extraction as legitimate. Build a system on that premise, and corruption is not a failure of the system. It is one of its predictable outputs.
A 2013 World Bank study is more useful here, because it names the conditions. Whether an official hands out rents depends on the institutions around them. Elected officials in stable, high income democracies did it least. Entrenched bureaucrats did it most, along with their counterparts in young or quasi democracies.
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Now the two cases.
The Nvidia half deserves care, but not for the reason the coverage suggests. The resignation is being sold as a spy story, complete with an investigation and salacious allegations. That is the distraction. Whether or not any of it proves true, it tells you nothing about why one executive’s departure can rattle an entire industry. What explains that is the structure around him, and the structure is documented. Nvidia guaranteed more than $105B of financing for an SB Energy data center campus in Pike County, Ohio that OpenAI will lease for 20 years, with 4.25 gigawatts of initial capacity. That is a chip vendor underwriting the real estate and power of its own customers. In December 2025 the administration permitted sales of advanced H200 chips to China in exchange for a share of export revenue, an arrangement senators described as an unconstitutional export tax. Whether that was industrial strategy or a tax on access is a fair argument. That it was a political allocation of market access is not really in dispute.
The Malaysian half is settled fact. Prosecutors put Goldman Sachs’ fees on those bond deals at roughly $600M, against $6.5B raised for the fund. Najib Razak is serving 12 years on the SRC International case, and in December 2025 the High Court handed him 15 years and a $2.8B fine across 25 counts tied to more than $1B that reached his personal accounts. The coalition that had governed since independence lost power in 2018. Read those two sentences in order and you have the thesis: the rent came first, the political collapse came second.
A better metric than market share
If share is the wrong measure, what replaces it? I would use two costs.
Exit cost is what a customer pays to leave, denominated in engineering months, retraining, renegotiated contracts and lost performance. Permission cost is what a firm pays to operate at all, denominated in licenses, approvals, audits and relationships.
Both are rents in disguise. Both are measurable, if anyone bothers. A market where exit costs are falling is competitive even if one firm holds 80 percent. A market where permission costs are rising is captured even if a hundred firms are registered.
The reframing predicts failure better too. Collapse does not arrive when a share number crosses some threshold. It arrives when exit costs fall faster than the incumbent can raise permission costs. Anthropic’s IPO roadshow material says its Mythos model got Claude running on AMD’s MI355X in about three days, against the six to twelve months such porting usually takes. That is Anthropic’s own figure and nobody independent has verified it, so treat it as a claim. Even so, it is a signal that exit cost dropped, and that the incumbent has less room to keep raising the other number.
What it looks like on the ground
There is a third column nobody puts in these tables, and it is the one I care most about: what the person at the bottom does about it.
A contractor whose margin is eaten by permits, facilitation payments, and a subcontractor with the right uncle does not absorb the loss. He bundles it. He short specifies. He pads the bill. He invents the charge nobody asked for, because the honest version of his quote loses the tender. The customer at the end pays the rent, and the customer learns the same lesson in turn: take yours where you can, because everyone upstream is taking theirs.
That is how a rent economy stops being an economic arrangement and becomes a social one. It reproduces in invoices, in hiring, in how people treat each other at a service counter.
Corruption at the top does not stay at the top. It gets subcontracted downward until it reaches people who never met a minister in their lives.
Where this leaves us
Monopoly power corrupts in a specific direction. It turns builders into gatekeepers, then makes gatekeeping the sensible career advice to give a bright nineteen year old. Markets do not collapse in a single dramatic crash. They erode one exit at a time, until nobody can leave. And governments? They rarely change because someone gives a good speech. They change when the toll gets visible enough that the boats refuse to pay it.
That is why I read the Nvidia story as a political economy story wearing a corporate costume.
The interesting question was never who sits in the chair. It was who holds the chain.
And it is why the spy story should be resisted as a frame. A honeypot explains a man. It cannot explain a market. If the industry only functions when one broker stays clean, the problem was never the broker.
If exit cost and permission cost were the numbers your board or your ministry actually tracked, what would you measure first in your own industry?
