This chapter explores the concept of rent seeking. When resources earn returns in excess of those they could earn in their next best opportunity, economists call those returns “rents.” In the market, the seeking of rents is known as profit seeking; in politics it is known as “rent seeking.” Profit seeking generates social value through the competitive market process. Rent seeking results in social losses as finite resources are used to pursue transfers of wealth rather than in the production of new wealth. This entry explores the distinction between rent seeking and profit seeking and discusses the implications.
Economic rent accrues to owners when their resources earn returns over and above those resources’ opportunity cost. Rents can exist in private markets or in political settings. In private markets, rent seeking is referred to as “profit seeking” to denote that it generates a social surplus that is beneficial to society. In contrast, in political settings...
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