rentseeking

Rent-seeking is the pursuit of economic rents through the manipulation of the political or regulatory environment rather than through productive activity. In practice, actors seek to capture value created by others—such as monopoly profits, subsidies, or protected markets—by shaping laws, regulations, or enforcement in their favor.

Common mechanisms include lobbying, regulatory capture, and preferential treatment in licensing, subsidies, or public procurement; protective tariffs and trade barriers; patent extensions or other forms of exclusive rights; and bailouts or state-backed guarantees. These activities aim to raise the returns to a specific firm, sector, or interest group without adding new wealth to the economy.

Economic effects of rent-seeking are debated but often seen as welfare-reducing. By diverting resources from productive use to influence or maintaining barriers to entry, rent-seeking can cause misallocation, slower innovation, higher costs, and increased inequality. It may also raise the incidence of corruption and distrust in institutions. Quantifying its size is difficult, but the concept is widely used to explain why markets with partial competition or weak governance underperform.

Policy responses focus on reducing opportunities for rent-seeking and improving incentives to compete. Approaches include strengthening competition policy, reducing regulatory discretion, increasing transparency, implementing anti-corruption safeguards, and using competitive bidding or sunset clauses for licenses and subsidies.

Rent-seeking was coined by Gordon Tullock in 1967 and later developed by Anne Krueger, among others, as a framework in political economy and development economics. See also regulatory capture and crony capitalism.