Tuesday, November 24, 2015

"Rent Seeking"

"...rent-seeking is an attempt to obtain economic rent
by manipulating the social or political environment in which economic activities occur,
rather than by creating new wealth.

...spending money on political lobbying in order to be given a share of wealth
that has already been created.

...People accused of rent seeking typically argue
that they are indeed creating new wealth (or preventing the reduction of old wealth)
by improving quality controls,
guaranteeing that charlatans do not prey on a gullible public,
and preventing bubbles.

Many current studies of rent-seeking focus on efforts
to capture various monopoly privileges stemming from government regulation
of free enterprise competition.

The term itself derives, however,
from the far older practice of appropriating a portion of production
by gaining ownership or control of land.

...the expenditure of resources attempting to enrich oneself
by increasing one's share of a fixed amount of wealth
rather than trying to create wealth.

Since resources are expended but no new wealth is created,
the net effect of rent-seeking is to reduce the sum of social wealth.

Rent-seeking generally implies the extraction of uncompensated value
from others
without making any contribution to productivity.

...a more common example of rent-seeking is political lobbying
to receive a government transfer payment,
or to impose burdensome regulations on one's competitors
in order to increase one's market share.

...such behaviors may result in substantial social losses.

Studies of rent-seeking focus on efforts to capture special monopoly privileges
such as government regulation of free enterprise competition.

The term "monopoly privilege rent-seeking" is an often-used label
for the former type of rent-seeking.

Often-cited examples include a farm lobby that seeks tariff protection
or an entertainment lobby that seeks expansion of the scope of copyright.

It is important to distinguish between profit-seeking and rent-seeking.

Some will try to say that rent-seeking is a creation of wealth.

However, profit-seeking should be understood as the creation of wealth,
while rent-seeking includes the use of the power of the state or government
to distribute wealth between different groups of individuals."