"Rent seeking" refers to the pursuit of economic benefits by lobbying the government for subsidies, beneficial regulations, monopoly privileges and the like. When the government has the power to hand out large amounts of wealth by intervention in the economy the effective 'return on investment' by convincing them to intervene on your behalf can be very high. It can be a lot easier to get a Congressman or Senator to slip a helpful clause into a bill than to design, build and market a new product that people actually value and pay for. The former involves schmoozing with powerful people at cocktail parties and expensive restaurants; the latter sounds an awful lot like actual work and who wants to do that?
This is one of the mechanisms by which government economic controls lead to further controls. Government's ability to dispense favors attracts some people, companies and groups seeking to benefit. Those benefits are exacted from other people, companies and groups, who set up their own lobbying efforts in self-defense. Once set up, the temptation to use them to exact benefits in turn is often irresistible. More exactions leads to more lobbying in a vicious escalating spiral, resulting in the special interest 'war of all against all' that characterizes public life in an advanced mixed economy.
The only way to effectively combat this phenomenon is by attacking it at the root. Rent seeking is enabled by the government's power to violate the principle of individual rights in the realm of production and trade. A government properly and constitutionally limited to the protection of individual rights across the board, including economic liberty rights, is the only real solution to the problem of rent seeking.
answered May 03 '11 at 16:24
Kyle Haight ♦