Rent-Seeking

CORE DEFINITION

Rent-seeking, also known as competitive rent-seeking, refers to a 'non-productive profit-seeking activity' in which, without engaging in production, one seeks to monopolize social resources or maintain a monopoly position in order to obtain monopoly profits (i.e., economic rent). The total economic loss from rent-seeking activities far exceeds the 'deadweight loss' triangle in traditional monopoly theory. The market that enterprises or individuals strive for in the rent-seeking process is called the 'rent-seeking market'. The larger the rent-seeking market, the more things in an economic environment that can be unjustly monopolized, and the lower the overall economic efficiency. Rent-seeking is the act of increasing one's existing wealth without creating new wealth by manipulating the social or political environment. Rent-seeking activities have negative impacts on other parts of society. They lead to economic inefficiency through misallocation of resources, reduced wealth creation, loss of government revenue, increased income inequality, increased risk of political bribery, and potential national decline. Attempts to capture regulatory agencies to obtain coercive monopolies (see regulatory capture) may give rent-seekers an advantage in the market while disadvantaging their non-corrupt competitors. This is one of many possible forms of rent-seeking behavior.