Rent Seeking Is Government/Business Collusion Benefiting Special Interests And Hurting The General Interest
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What is rent-seeking?
ChatGPT:
Rent-seeking is when individuals, companies, or groups try to increase their own wealth by gaining special advantages through political or legal means rather than by creating new goods or services.
"Rent" here means economic rent — extra income above what’s needed to keep a resource in its current use (e.g., monopoly profits, subsidies, exclusive licenses).
"Seeking" means using resources (money, time, influence) to obtain or protect that rent.
The goal is to capture existing wealth, not produce new wealth.
Examples:
Lobbying for a law that bans foreign competitors’ products.
Getting a government subsidy for your industry without increasing output.
Securing an exclusive license to operate a certain service (e.g., taxi medallions) by influencing regulators.
Why economists criticize it:
No new value is created — it’s a redistribution of wealth.
Resources are wasted on lobbying, legal fights, or political campaigns instead of producing goods and services.
It often distorts markets, raising prices and reducing consumer choice.
In short:
Rent-seeking is using the political system to make money without adding value to the economy — and it often leaves society poorer overall.
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In 2024, federal lobbying spending—which includes businesses, trade associations, labor unions, and others—reached approximately $4.4 billion.
Bloomberg Government reported even higher numbers, citing $4.5 billion in federal lobbying expenditures that year.
More broadly, total U.S. lobbying—across all groups—grew from around $3.5 billion in 2020 to $4.26 billion in 2023.
Summary: Businesses and related groups spend on the order of $4 billion to $4.5 billion annually lobbying the federal government.
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Estimate of deadweight loss in the U.S. economy caused annually by rent-seeking.
ChatGPT:
There’s no precise, agreed-upon figure, but economists agree U.S. rent-seeking causes tens to hundreds of billions of dollars in losses each year.
The damage comes from:
Market distortions - higher prices, reduced output.
Wasted resources spent chasing political favors.
Some theoretical models suggest losses could be several percent of GDP, but hard data is limited.
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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 organization’s income.
They typically do so by getting a tax break, subsidy, regulation, or import protection for a good they produce.
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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.
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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.
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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 lobbyists and enlarging government including donations to politicians’ campaign funds and bureaucracy created to oversee the rent seeker after it receives the favor
-the advertiser’s money goes to advertising businesses, enlarging the economy
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Rent seeking
-protects established businesses from competition, less competition means more sales and profits
-causes expensive and unnecessary public construction projects whose public costs exceed benefits
-enriches politicians because rent-receiving business owners contribute to the involved politicians’ election funds, and even pay direct bribes
-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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A helpful video:
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Own comment:
I once found a $100 bill blowing across the parking lot of a D.C. government agency office I was visiting.
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