Rent seeking

Rent seeking

In economics, rent seeking occurs when an individual, organization or firm seeks to make money by manipulating the economic and/or legal environment rather than by trade and production of wealth. The term comes from the notion of economic rent, but in modern use of the term, rent seeking is more often associated with government regulation and misuse of governmental authority than with land rents as defined by David Ricardo.

Description of concept

Rent seeking generally implies the extraction of uncompensated value from others without making any contribution to productivity, such as by gaining control of land and other pre-existing natural resources, or by imposing burdensome regulations or other government decisions that may affect consumers or businesses. While there may be few people in modern industrialized countries who do not gain something, directly or indirectly, through some form or another of rent seeking, rent seeking in the aggregate may impose substantial losses on society.

Most studies of rent seeking focus on efforts to capture special monopoly privileges, such as government regulation of free enterprise competition, though the term itself is derived from the far older and more established practice of appropriating a portion of production by gaining ownership or control of land. 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. Other rent seeking is held to be associated with efforts to cause a redistribution of wealth by, for example, shifting the government tax burden or government spending allocation. A temp agency can also become a rent-seeking entity for longer-term position placements, continuing to take a portion of an employee's paycheck months or even years after providing the initial job placement service, often providing no insurance benefits or anything that might otherwise justify taking cuts of employees' wages.

Development of theory

The phenomenon of rent seeking was first identified in connection with monopolies by Gordon Tullock, in a 1967 paper. [] It has been shown that rent-seeking by bureaucracy can push up the cost of production of public goods [
*cite book|last=Tullock|first=Gordon|title="" |year=1987|publisher=Palgrave Macmillan|isbn=0333372352|pages=vol. 4, pp.147-149|chapter=Rent seeking
*cite book|last=Tullock|first=Gordon|title="" |year=2005

External links

* [http://www.rent-seeking.net "Rent-Seeking Network" by Behrooz Hassani-M]
* [http://www.edcnews.se/Research/RentSeeking.html "EDC News" page on rent seeking]
* [http://perspicuity.net/politics/rentseek.html "Rent-Seeking Behavior" by Leon Felkins]
* [http://www.friesian.com/rent.htm "Rent-Seeking, Public Choice and the Prisoner's Dilemma" by Kelly L. Ross]
* [http://www.geocities.com/jamil_03/index.html "Corrupt Bureaucracy and Privatization of Tax Enforcement in Bangladesh" by Faizul Latif Chowdhury]
* [http://www.progress.org/geonomy/ "The Geonomist" by Jeffery Smith]
* [http://mercury.soas.ac.uk/users/mk17/Docs/Rent-Seeking%20as%20Process.pdf "Rent-Seeking as Process" by Mushtaq Khan]


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