Dear Reader,

Al Gore has been taking some heat recently for his dual role as advocate and investor. Critics say Mr. Gore is poised to become the world’s first “carbon billionaire,” profiteering from government policies he supports that would direct billions of dollars to the business ventures he has invested in.

Gore says that he is simply putting his money where his mouth is. But is that really the case?

Here’s an excerpt from The New York Times about one of Gore’s recent deals.

Former Vice President Al Gore thought he had spotted a winner last year when a small California firm sought financing for an energy-saving technology from the venture capital firm where Mr. Gore is a partner.

The company, Silver Spring Networks, produces hardware and software to make the electricity grid more efficient. It came to Mr. Gore’s firm, Kleiner Perkins Caufield & Byers, one of Silicon Valley’s top venture capital providers, looking for $75 million to expand its partnerships with utilities seeking to install millions of so-called smart meters in homes and businesses.

Mr. Gore and his partners decided to back the company, and in gratitude Silver Spring retained him and John Doerr, another Kleiner Perkins partner, as unpaid corporate advisers.

The deal appeared to pay off in a big way last week, when the Energy Department announced $3.4 billion in smart grid grants. Of the total, more than $560 million went to utilities with which Silver Spring has contracts. Kleiner Perkins and its partners, including Mr. Gore, could recoup their investment many times over in coming years.

Silver Spring Networks is a foot soldier in the global green energy revolution Mr. Gore hopes to lead. Few people have been as vocal about the urgency of global warming and the need to reinvent the way the world produces and consumes energy. And few have put as much money behind their advocacy as Mr. Gore and are as well positioned to profit from this green transformation, if and when it comes.

I have no problem with Gore getting involved with business and starting companies. Indeed, business and entrepreneurship is the most noble of paths. But Gore is no businessman or entrepreneur, he (like Ken Lay and Enron) is a rent-seeker. None of his ventures would be profitable on their own without government assistance (either in the form of direct subsidies or laws against competing firms).

Rent seekers use political means – the government’s authority to initiate violent aggression and fraud – to contrive rents by preventing others from competing with them or by forcibly taking the wealth of others. Unlike profit-seeking, rent-seeking does not create wealth, it just transfers it from one person or business to another. When Gore wins rents by using political means, he is better off, but others, including potential competitors and consumers, are worse off.

To quote Sanford Ikeda’s “Rent-Seeking: A Primer”:

The latter [consumers] will pay higher prices, get poorer quality, or have fewer choices because political means are quite effective in discouraging rival entrepreneurs. The results of rent-seeking also stifle the competitive discovery process, so that consumers are less likely to become aware of more efficient methods or better providers.

Thus the resources that competitive rent-seekers spend in their quest for these politically created rents are indeed wasted because they are used to produce an outcome in which nothing of value is created. Indeed, rent-seeking of this kind destroys wealth.