Rent-seeking

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Rent-seeking is the socially non-productive activity undertaken to maximize an individual or a firm's economic rent. Examples include bribery, lobbying to pass government regulations in one's favor, manipulation of market environment, and outright stealing. Rent-seeking depresses the overall social surplus, and is one of the causes of economic inefficiency.

Cost

The social cost of rent-seeking resembles the one of taxes on graph, but in reality it also includes the cost of rent-seeking behavior itself.

Examples

In 2006, there was a Massachusetts initiative to allow grocery stores to sell wine. The liquor stores, unwilling to allow new competitors to enter their market, vigorously opposed the measure in the guise of protecting safety and restrict teenagers' access to alcohol. Supermarkets, in contrast, supported the initiative. Both sides spent 11.5 million dollars in the campaign, and voters eventually rejected the initiative.[1] This kind of campaign efforts undertaken by industries can be seen as an example of rent-seeking.

References

  1. Weber, David. Massachusetts voters reject proposal on wine in grocery stores. Associated Press. November 8, 2006.