Rent-seeking
Successful capture of regulatory agencies (if any) to gain a coercive monopoly can result in advantages for rent-seekers in a market while imposing disadvantages on their uncorrupt competitors.
Rent seeking to the Georgist does not include those persons that may have invested substantial capital improvements to a piece of land, but rather those that perform in their role as mere titleholder.
Because the nature of rent-seeking implies a fixed cost payment, only wealthy participants engage in these activities as a means of protecting their wealth from expropriation.
Rent-seeking is distinguished in theory from profit-seeking, in which entities seek to extract value by engaging in mutually beneficial transactions.
[16] An example of rent-seeking in a modern economy is spending money on lobbying for government subsidies to be given wealth that has already been created, or to impose regulations on competitors, to increase one's own market share.
[17] Another example of rent-seeking is the limiting of access to lucrative occupations, as by medieval guilds or modern state certifications and licensures.
Studies of rent-seeking focus on efforts to capture special monopoly privileges such as manipulating government regulation of free enterprise competition.
Often-cited examples include a lobby that seeks economic regulations such as tariff protection, quotas, subsidies,[21] or extension of copyright law.
An example of this occurred in Latin America in the 1960s with Joaquín Balaguer's response to pressure from the United States to open the Dominican Republic's export market.
At the time, the United States was a massive trading partner for sugar while providing foreign aid and military support which allowed Balaguer's regime to take hold.
[29] In the 1980s, critiques of rent-seeking theory began to emerge, questioning the ambiguity of the concept of "wasted resources" and the reliability of the assumptions being made from it.
[30] Writing in The Review of Austrian Economics, Ernest C. Pasour says that there may be difficulties distinguishing between beneficial profit-seeking and detrimental rent-seeking.
If "buying" a favorable regulatory environment seems cheaper than building more efficient production, a firm may choose the former option, reaping incomes entirely unrelated to any contribution to total wealth or well-being.
This results in a sub-optimal allocation of resources – money spent on lobbyists and counter-lobbyists rather than on research and development, on improved business practices, on employee training, or on additional capital goods – which slows economic growth.
[33] Government agents may initiate rent-seeking, as by soliciting bribes or other favors from the individuals or firms that stand to gain from having special economic privileges, which opens up the possibility of exploitation of the consumer.
Dougan says that the "total rent-seeking costs equal the sum of aggregate current income plus the net deficit of the public sector".
Welfare states incentivise unproductive migration and can create continuation of past behaviour of not accumulating personal wealth and being dependent on government transfers.
Additionally, they suggest that many economic performance measures, such as Gross Domestic Product, include goods and services that are part of the rent-seeking process.
