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Rent seeking is any business strategy that seeks to increase one's share of wealth without creating any new wealth.The term is often applied to lobby groups or companies that seek special treatment from governments such as exemptions to laws, reduced taxes, protective tariffs or subsidies. By definition, rent seeking adds no value to the economy. In many cases, it causes damage as rents may increase prices, decrease efficiency and increase government expenditures. When governments allow rent seeking to occur, a perception that the system isn't fair can damage economic activity. For example, if a government allows a large firm to avoid taxes, other firms may be encouraged to do the same.
ExamplesTax avoidanceSubsidies and tariff protection.Exemption from laws and regulations.Special interest laws that benefit a company or industry such as limiting liability, silencing critics, reducing competition or raising prices with special taxes or fees.Preferential treatment such as a company that uses government resources for its own purposes.Protections from competition such as licenses that are difficult to obtain. Preferred access to government contracts.High priced government contracts or consulting roles.|
Area | | Definition | Seeking to increase wealth without creating new wealth. | Related Concepts | |
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