Rent Seeking Is Government/Business Collusion Benefiting Special Interests And Hurting The General Interest

First, watch this short video https://www.youtube.com/watch?v=95pyLE_ZsDg Mostly summarized from article: Rent Seeking, David R. Henderson, econlib.org People are said to be rent seeking when they try to obtain benefits from the government to give them special privileges, especially to help increase their or their organization’s income. They typically do so by getting a tax break, subsidy, regulation, or import protection for a good they produce. … Companies seek tax breaks from state governments when building a new factory. Companies get subsidies from government for politically favored products such as those for creating solar energy. Licensed electricians and doctors lobby to keep regulations in place that restrict competition from unlicensed electricians and doctors. Steel producers seek tariffs and quota restrictions on imports of steel. … Rent-seeking expenditures cause overall economy inefficiency. For example, a steel firm spends $1 million lobbying for restrictions on steel imports, seeking a revenue gain of $2 million. The revenue gain of $2 million is reduced by the $1 million in lobbying costs resulting in a net gain of $1 million. Such an expenditure is rational from the narrow viewpoint of the firm that spends it. But the overall economy is $1 million poorer because of the rent seeking lobbying costs. … Another term for rent seeking is crony capitalism. Rent seeking costs are similar to advertising costs, they both are subtracted from revenues they create. Differences are -rent seeking tends to reduce competition -advertising tends to increase competition -the rent seeker’s money goes to government, enlarging government including bureaucracy created to oversee the rent seeker after it receives the favor -the advertiser’s money goes to advertising businesses, enlarging the economy … Rent-seeking -protects established businesses from competition creating monopoly profits -enriches politicians and their supporters -reduces the size of the economy -increases the size of government The most common and most economy-damaging form of rent-seeking is industries lobbying government to limit imports. … …

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