Over the past 24 hours, a remarkable confrontation has unfolded on X (formerly Twitter) that perfectly encapsulates the inherent contradictions in Elon Musk’s political positioning and the broader tensions within American tech politics.
The drama began when Musk, the owner of X and Tesla CEO, launched into an expletive-laden defence of the H1B visa programme, declaring “The reason I’m in America along with so many critical people who built SpaceX, Tesla and hundreds of other companies that made America strong is because of H1B.”
When challenged by MAGA supporters, Musk’s response escalated dramatically: “Take a big step back and FUCK YOURSELF in the face. I will go to war on this issue the likes of which you cannot possibly comprehend.”
The reaction from MAGA figures was swift and severe. Laura Loomer, a prominent voice in the movement, immediately countered: “We have an incoming President and his name is Donald Trump… We won’t allow Big Tech to create their fantasy monarchy in America and make MAGA their indentured servants slaves.”
The confrontation intensified when Musk attempted to use his platform control to mark critics’ posts as “spam” – a move Loomer immediately characterised as “totalitarian conduct by an incoming admin official.”
This exchange lays bare not only the fundamental contradictions in Musk’s position but also serves as a perfect case study for understanding the evolution of rent-seeking behaviour in the modern technological age.
Modern Rent-Seeking Through Tullock’s Lens
What we’re witnessing with Elon Musk’s business empire represents precisely the kind of rent-seeking behaviour Gordon Tullock warned about in his seminal 1967 work on the welfare costs of tariffs, monopolies, and theft.
Tullock’s central insight was that the social costs of rent-seeking vastly exceed the nominal value of the rents themselves, as resources are expended not just in securing preferential treatment but in creating and maintaining the institutional frameworks that make such treatment possible.
The proposed Strategic Bitcoin Reserve perfectly illustrates Tullock’s principle.
When Tesla entered the Bitcoin market in late 2020, triggering a price surge to $63,000 in 2021, it wasn’t merely engaging in financial speculation. Rather, it was positioning itself for what would become a sophisticated form of rent extraction through potential government policy.
The correlation between Tesla’s stock price and Bitcoin since then shows remarkable synchronisation, suggesting that the market understands this connection between private gain and public policy.
Stigler’s Regulatory Capture in the Digital Age
George Stigler’s theory of economic regulation provides the perfect framework for understanding Musk’s approach to government interaction. Stigler argued that regulatory capture occurs when regulatory agencies, created to act in the public interest, instead advance the commercial or special interests of the entities they are meant to regulate.
In Musk’s case, this manifests through a complex web of subsidies, regulatory credits, and government contracts.
The implications for taxpayers worldwide are staggering. American taxpayers fund SpaceX contracts and EV subsidies. European taxpayers, particularly German citizens, fund factory subsidies and EV incentives.
Now US taxpayers might effectively fund Bitcoin price support through the proposed Strategic Bitcoin Reserve.
What makes Musk’s case particularly interesting is how he has managed to secure these benefits while simultaneously maintaining a public image as a free-market innovator.
This is precisely the kind of sophisticated regulatory capture that Stigler warned about – where the line between regulator and regulated becomes so blurred that the public can no longer distinguish between market success and political favoritism.
The Collision of Rent-Seeking and Populism
The sophistication of Musk’s rent-seeking strategy is now colliding spectacularly with political reality.
The confrontation on X over immigration reveals how the careful balance of maintaining political influence while extracting government benefits can suddenly unravel.
As Tullock observed, the resources invested in securing and maintaining regulatory capture can quickly become stranded when political winds shift.
The China dimension adds another layer to this complexity. Musk’s recent statement that Taiwan is a natural part of China exposes not just his dependence on the Chinese Communist Party’s goodwill for Tesla’s Chinese production, but also the inherent instability of global rent-seeking arrangements.
As Loomer pointedly noted in today’s barrage of posts: “A lot of compromising news involving China dropped today… Tumultuous times are definitely upon us as it relates to China.”
This international dimension would have fascinated Tullock. His analysis of rent-seeking primarily focused on domestic arrangements, but Musk’s empire shows how modern corporations can extract rents across multiple jurisdictions simultaneously. The risk, as we’re now seeing, is that these arrangements become increasingly difficult to maintain as nationalist politics resurges.
The Social Costs Mount
The social costs of this rent-seeking behaviour, so central to Tullock’s analysis, are becoming increasingly apparent. Resources that could be directed toward genuine innovation are instead channeled into maintaining political relationships and regulatory advantages.
Tesla’s regulatory credits alone represent a massive transfer of wealth from traditional automakers (and ultimately their customers) to Tesla’s shareholders.
Stigler’s insights about regulatory capture help explain why these arrangements persist despite their obvious costs. The benefits are concentrated among a few well-organized interests, while the costs are diffused across the broader population. However, as today’s Twitter confrontation shows, even this dynamic can shift when populist movements mobilize against perceived elite privilege.
Markets at Risk
The current surge in tech stocks following Trump’s electoral success may prove to be built on dangerously naive assumptions.
Just as MAGA’s fundamental opposition to immigration and free trade has caught tech leaders like Musk off guard, the movement’s latent hostility to technological advancement – particularly AI and automation – presents a serious threat to market valuations.
Trump’s recent meeting with the International Longshoremen’s Association, where he strongly criticised port automation, provides a troubling preview of what might come.
His economic thinking increasingly resembles that of a 1970s New York union leader more than a free-market Republican.
This philosophy, fundamentally opposed to the forces that drive productivity growth – whether they come in the form of immigration, trade, or technological advancement – poses a direct threat to the tech sector’s growth narrative.
The End Game
The world Tullock and Stigler described – where corporations invest resources to capture government benefits – has evolved into something far more complex but no less wasteful.
The confrontation on X between Musk and MAGA supporters isn’t just another social media spat – it’s a preview of how quickly carefully constructed rent-seeking arrangements can unravel when confronted with populist politics.
For tech companies like Tesla, which have benefited from both government subsidies and market optimism about technological disruption, this presents a perfect storm.
The same populist forces that are now turning against Musk over immigration could easily pivot to attack AI and automation.
The tech elite’s fundamental miscalculation extends beyond immediate political dynamics. Their naive belief that they could harness MAGA populism while avoiding its anti-modernisation impulses may prove to be an extremely costly miscalculation.
The profound irony is that while Trump claims to put “AMERICA FIRST”, his opposition to automation and technological advancement could ultimately leave American tech companies – and by extension, the broader American economy – at a competitive disadvantage in the global marketplace.
This outcome would represent exactly the kind of deadweight loss that Tullock warned about – where rent-seeking behaviour ultimately damages both the rent-seekers and the broader economy.
As we watch this situation unfold, the prescience of both Tullock and Stigler becomes increasingly apparent. Their fundamental insights about the nature of rent-seeking and regulatory capture remain as relevant as ever. The only difference is that modern rent-seeking has become more sophisticated, more global, and more technologically complex – but its essential nature, and its fundamental instability, remains unchanged.
Note: Cartoon created with fal.ai/FLUX