Rent-Seeking Essay ⋆ Political Science Essay Examples ⋆ EssayEmpire

Rent-seeking, broadly conceived, is the allocation of resources by people or organizations in the pursuit of rents created by the government. The conceptual framework of rent-seeking emphasizes the net welfare loss to society because of intervention failure. An increased economic and financial regulatory role of the government is blamed for encouraging aRent-seeking, broadly conceived, is the allocation of resources by people or organizations in the pursuit of rents created by the government. The conceptual framework of rent-seeking emphasizes the net welfare loss to society because of intervention failure. An increased economic and financial regulatory role of the government is blamed for encouraging and rewarding unproductive activities, such as lobbying for protection, competing for import licensing, and persuading legislators to enact barriers to domestic entry, to allocate income to the target interest groups.
The term rent-seeking was coined in the 1970s, a time of academic and intellectual reassessment of prevailing Keynesian economics, which allows for an economic regulatory role for the government. With the end of the Bretton Woods system in 1973, free market or laissez-faire economic literature, emanating primarily from the Chicago school of economics and its prominent scholar Milton Friedman, advocated for a limited role for government in economic affairs. Monopoly and monopolyinducing legislations were perceived as the antithesis of competition and free market activities. The prevailing literature at the time cited primarily the net welfare loss to society because of diverting resources from production through lobbying, or what was later termed as rent-seeking.
Gordon Tullock (1967) first explored the implication of rent-seeking behavior on conventional welfare as a result of tariffs, monopoly, and theft within the tradition of positive economic analysis and public choice theory. Ann Krueger (1974) officially coined the term rent-seeking and focused on government interventions in developing countries with respect to quantitative restrictions on international trade. Richard Posner (1975) went a step further and contended that there is a higher social cost from public regulation than there is from private monopoly. Jagdish Bhagwati (1982) tried to expand the term to include a synthesis of market-distorting activities, including rent-seeking as a subcategory. Rent-seeking also has been cited as a possible explanation for the reported increase in government expenditure as a percentage of GNP between 1960 and the 1990s.
Two of the most cited examples of rent-seeking relate to lobbying activities of dairy farmers and the automobile industry in the United States. Lobbying activities by dairy farmers include milk price support and other agricultural policies that are ultimately taken up by the consumer through higher costs. U.S. import restrictions on automobiles support the stakeholders and workers of the automobile industry while disadvantaging the consumer. Gordon Tullock (1993, 2005) cited the lack of information, ignorance, romanticizing of farm life in the American psyche, and the patriotic ideologies that weaken voter resistance to such legislations as possible explanations for the continuation of lobbying and other rent-seeking activities of both industries.
Bibliography:
1. Bhagwati, Jagdish, “Directly Unproductive, Profit Seeking (DUP) Activities.” Journal of Political Economy 90, (October 1982): 988–1002.
2. Krueger, Ann. “The Political Economy of the Rent Seeking Society.” Economic American Review 64, (June 1974): 291–303.
3. Posner, Richard. “The Social Costs of Monopoly and Regulations.” Journal of Political Economy 83, (August 1975): 807–827.
4. Tullock, Gordon. “The Welfare Costs of Tariffs, Monopoly, and Theft.” Western Economic Journal 5, no. 3 (1967): 224–232.
5. Rent Seeking. Aldershot, U.K.: Edward Elgar, 1993.
6. Tullock, Gordon, and Charles Kershaw Rowley. The Rent-seeking Society. Indianapolis: Liberty Fund, 2005.nd rewarding unproductive activities, such as lobbying for protection, competing for import licensing, and persuading legislators to enact barriers to domestic entry, to allocate income to the target interest groups.

The term rent-seeking was coined in the 1970s, a time of academic and intellectual reassessment of prevailing Keynesian economics, which allows for an economic regulatory role for the government. With the end of the Bretton Woods system in 1973, free market or laissez-faire economic literature, emanating primarily from the Chicago school of economics and its prominent scholar Milton Friedman, advocated for a limited role for government in economic affairs. Monopoly and monopolyinducing legislations were perceived as the antithesis of competition and free market activities. The prevailing literature at the time cited primarily the net welfare loss to society because of diverting resources from production through lobbying, or what was later termed as rent-seeking.

Gordon Tullock (1967) first explored the implication of rent-seeking behavior on conventional welfare as a result of tariffs, monopoly, and theft within the tradition of positive economic analysis and public choice theory. Ann Krueger (1974) officially coined the term rent-seeking and focused on government interventions in developing countries with respect to quantitative restrictions on international trade. Richard Posner (1975) went a step further and contended that there is a higher social cost from public regulation than there is from private monopoly. Jagdish Bhagwati (1982) tried to expand the term to include a synthesis of market-distorting activities, including rent-seeking as a subcategory. Rent-seeking also has been cited as a possible explanation for the reported increase in government expenditure as a percentage of GNP between 1960 and the 1990s.

Two of the most cited examples of rent-seeking relate to lobbying activities of dairy farmers and the automobile industry in the United States. Lobbying activities by dairy farmers include milk price support and other agricultural policies that are ultimately taken up by the consumer through higher costs. U.S. import restrictions on automobiles support the stakeholders and workers of the automobile industry while disadvantaging the consumer. Gordon Tullock (1993, 2005) cited the lack of information, ignorance, romanticizing of farm life in the American psyche, and the patriotic ideologies that weaken voter resistance to such legislations as possible explanations for the continuation of lobbying and other rent-seeking activities of both industries.

Bibliography:

Bhagwati, Jagdish, “Directly Unproductive, Profit Seeking (DUP) Activities.” Journal of Political Economy 90, (October 1982): 988–1002.
Krueger, Ann. “The Political Economy of the Rent Seeking Society.” Economic American Review 64, (June 1974): 291–303.
Posner, Richard. “The Social Costs of Monopoly and Regulations.” Journal of Political Economy 83, (August 1975): 807–827.
Tullock, Gordon. “The Welfare Costs of Tariffs, Monopoly, and Theft.” Western Economic Journal 5, no. 3 (1967): 224–232.
Rent Seeking. Aldershot, U.K.: Edward Elgar, 1993.
Tullock, Gordon, and Charles Kershaw Rowley. The Rent-seeking Society. Indianapolis: Liberty Fund, 2005.

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