In my view, rent seeking is the great evil of the modern world, largely explaining the poverty of countries like Iraq and India. The main problem in the world today is people who put the self-interest of their narrow special interest group ahead of the well-being of society. I also believe that a relative lack of rent-seeking largely explains the success of the Nordic countries.
Kay does make a good point and it's one that the late public choice economist Gordon Tullock made in a famous article titled "The Transitional Gains Trap." Tullock pointed out that although many economists can agree that it's inefficient (and, I would add, wrong) to give monopolies or subsidies to various industries, after those monopolies and subsidies have been around for a while, many of the "gainers" are people who paid for their gains.
This is a good observation. On the other hand I don't think Tullock's point has any normative policy implications. Even if some rent seekers paid for their current position, and thus are not earning excess profits, they are still engaged in an evil enterprise. When Amazon drives Borders out of business, we don't shed any tears for Borders, even though they had previously earned their success fairly. If Uber drives the traditional taxicabs out of business, we certainly shouldn't shed any tears for the medallion owners, as they did not fairly gain their current position, they earned it by getting the police to arrest competitors.
(Just to be clear, I'm disagreeing with Kay, not Henderson).
This also explains my objection to Steve Waldman's critique of zoning reform:
Existing homeowners bought into particular neighborhoods in large part because of their "character", which includes nice-sounding things like walkability or "charm", as well as not-so-nice-sounding things like access to exclusionary education. Newer residents have bought and paid for those amenities, while older residents may feel they have earned them by helping to create them. Economists describe houses as a form of capital that provides a stream of services, rather than a cash flow, to owner-occupants. We should also describe the arrangement of neighborhoods as a form of capital that provides services people value. Property owners have disproportionate use of, and, informally, enjoy substantial control rights over this "neighborhood capital", and these benefits have been capitalized into residential real-estate prices. (Location, location, location!) "Zoning reform" is an anodyne way to describe an expropriation of those customary rights. It amounts to diminishing residents' ability to preserve or control the evolution of their neighborhoods, in order to challenge the exclusivity on which the value of existing neighborhood amenities may be based.
Money spent on housing is a sunk cost; zoning policy should be forward looking--relentlessly trying to make the world a better place. Homeowners should buy property with their eyes wide open, with the knowledge that zoning policy will evolve over time in a way that society thinks is optimal.