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06/20/2005

Rent seeking behavior

Whenever there is a situation in which a person or group is in power over a community, some in the community will seek to obtain special favors at the expense of all others in the community –this behavior in the political/economic world is called rent-seeking. The term rent-seeking is first used in publication in Anne O. Krueger's article "The Political Economy of the Rent-Seeking Society," (1974). Seven years earlier Gordon Tullock (1967) had offered the first systematic discussion of "rent-seeking" activities. The expenditure of resources in order to bring about an uncompensated transfer of goods or services from another person or persons to one's self as the result of a "favorable" decision on some public policy – is known as rent seeking behavior. Examples of rent-seeking behavior would include all of the various ways by which individuals or groups lobby government for taxing, spending and regulatory policies that confer financial benefits or other special advantages upon them at the expense of the taxpayers or of consumers or of other groups or individuals with which the beneficiaries may be in economic competition. Rent-seeking is most likely to occur when states (governments or monarchs) grant monopolies or other privilege through licensing. It may also occur by private collusion. Rent-seeking is not limited to producers or firms. Rent-seeking by individuals or groups can occur wherever there are artificially contrived transfers or the output level is not competitive.

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