Rent Seeking

CLAPTON

cells wrote: »

So by your definition

profit seeking is profit seeking from non government policies

and rent seeking is profit seeking from government policies

seems lile splitting hairs

only the difference from a (fairly) free market and a directed economy of a socialist state

globalds

what relationship do cartels have to this ?

What is Opec doing ?
Is that a kind of rent seeking or something else entirely ?

Generali

cells wrote: »

So by your definition

profit seeking is profit seeking from non government policies

and rent seeking is profit seeking from government policies

seems lile splitting hairs

Not really.

Rent seeking is looking for excess profits as a direct result of Government intervention in the market.

Generali

globalds wrote: »

what relationship do cartels have to this ?

What is Opec doing ?
Is that a kind of rent seeking or something else entirely ?

A cartel is different to rent seeking. A cartel is a (usually) illegal getting together of businesspeople to restrict supply and raise prices as a result.

Cartels can be legal (e.g. OPEC) but can also be illegal.

buglawton

Generali wrote: »

The term is neither positive or negative: it refers to a concept called economic rent which is the extra amount of profit you can earn over a 'normal' amount (the 'normal' amount is generally unspecified).

Where do you get the idea that the term 'rent seeking' was termed as a negative phrase? It's perfectly normal behaviour. If someone (e.g the Government) is going to pay me to drink wine rather than beer or tea rather than coffee that is bound to have an impact on my behaviour.

From the first paragraph of the Wikipedia article on this topic:
"rent-seeking is expending resources on political activity to increase one's share of existing wealth without creating wealth. The effects of rent-seeking are reduced economic efficiency through poor allocation of resources, reduced wealth creation, lost government revenue, increased income inequality"

Quite fair to say if one means, negative for society in general rather than special interest groups.

buglawton

globalds wrote: »

what relationship do cartels have to this ?

What is Opec doing ?
Is that a kind of rent seeking or something else entirely ?

OPEC is doing a good job of proving how in the long term, cartels don't work (but they may temporarily distort/disrupt markets).

Generali

buglawton wrote: »

From the first paragraph of the Wikipedia article on this topic:
"rent-seeking is expending resources on political activity to increase one's share of existing wealth without creating wealth. The effects of rent-seeking are reduced economic efficiency through poor allocation of resources, reduced wealth creation, lost government revenue, increased income inequality"

Quite fair to say if one means, negative for society in general rather than special interest groups.

You do seem to have changed your point quite a lot but the wiki quote is completely valid IMHO.

buglawton

Hmm I had to re read my own posts to see what point I started to make and then what point I changed I to. I remain bewildered on that one. In any case, in a discussion thread it would expected to look at a topic from a number of angles.

andyfromotley

Generali wrote: »

I have occasionally sought to explain economic terms as I see them and thought I would look at rent seeking.

To start with what it isn't, it's not renting stuff out: it's not Air BnB or Uber!

Rent seeking occurs as a result of Government actions in the economy. An example of rent seeking is the use of subsidies in agriculture to push up agricultural production. The European Union pays huge amounts of money to farmers to encourage them to produce more food. The impact of this is:

1. More expensive food
2. Higher taxes
3. A load of agricultural production which either gets wasted or sold overseas at below the cost of production

Farmers who overproduce food in the expectation of receiving a subsidy rather than because there is a market for the food are rent seekers. (This is not an anti-farmer rant or even an anti-CAP moan, it is just an example)

There are many more examples of rent seeking in the economy. Markets from pubs to taxis to house building to banking have some aspect of rent seeking baked in to the current model.

Except that isn't true. Examine any basket of subsidised foodstuffs and they overwhelmingly have fallen in price (in real terms) over the term of the subsidy period. Loads of studies to back this up.

the_flying_pig

Generali wrote: »

Not really.

Rent seeking is looking for excess profits as a direct result of Government intervention in the market.

that's a very narrow definition.


e.g. i drive past stonehenge moderately often, it used to be possible to just stroll up to it & have a good look. then at some point they erected a fence & made it so you have to pay cash to get close to it. a fairly clear example of 'rent seeking', no? not that I'm saying it's unambiguously a bad thing.