Rent Seeking

princeofpounds

Yes, I think that is a narrow definition.


Rent-seeking more broadly is the extraction of profit through an activity without the provision of value-creating goods/services.

A classic example would be installing a toll booth on a pre-existing road.

It does not require government action, although it frequently involves it because government is a useful tool to provide the coercion necessary to get people to pay something for nothing.

Indeed, government itself is typically the biggest rent-seeker around.

Planning permission, and the various Section 106 agreements (i.e. taxes) around it is a classic example. Government is charging vast amounts to rubber-stamp a piece of paper that has no intrinsic value.


The inefficiency caused by the rent-seeking is evident in this instance by the dire shortage of permitted building land and the knock-on effect that has had on all of us in terms of prices for accommodation whether renting or buying.


I suppose at the most charitable level, you might suggest that the government is providing a community master-planning service that we are all paying for. Not sure I see the value proposition myself but this post isn't a rant, it's a serious example.


In countries that produce natural resources, rent-seeking on those resources can be a real plague. Government and their cronies squeeze value from the oil at every stage, placing artificial obstacles that need their help to overcome, whether that is bandits, local protests, pipeline access, official permits etc.


In the UK, we just do it with land instead.

purch

the_flying_pig wrote: »

i drive past stonehenge moderately often,

I'm not sure moving at sub 5mph counts as "driving" :eek:

buglawton

andyfromotley wrote: »

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.

Remember that in the EU (the last time I heard about it), food subsidies are accompanied by tough quotas and restrictions on food imports from really cheap countries. It's something developing countries complain about all the time. I suspect the EU subsidies somehow go with the restrictions - the subsidies keep the EU natives quiet since they cannot access the world market prices so need a different mechanism to get cheap food.

On top of all that, you could even argue that suppressing the agricultural sectors of developing countries is partly responsible for their instability and the pressure of refugees wanting to enter the EU.

Not sure if there are any substantial example developed countries in the world that have neither subsides no import restrictions/taxes, where one could prove what food prices would look like in a pure laissez faire model.

tincans6

Generali wrote: »

Social housing absolutely is: a favoured client group is defined and then provided with heavily subsidised housing.

The NHS to a large extent too. If we were spending our own money, we would make many fewer visits to see a GP with a minor head cold. There is a definite misallocation of resources as a result of the NHS being 'free'. Whether non-Government maintained healthcare systems are better remains moot however and life isn't just about economics and the economy: it is perfectly reasonable to make bad economic decisions for non-economic reasons (let's not play the game that the choice is between the 'American System' and the NHS as that is a false dichotomy).

'Free' education might well see examples of rent seeking too. There are huge numbers of young adults leaving university with a degree that they simply will never need and never pay for. IMHO there is a huge oversupply of education as it is massively subsidised.

I'm not sure that these are the best examples (if they are at all) of economic rent seeking (at least in their original guise).

The creation of the NHS could hardly be described as rent seeking as doctors were generally against it.

Likewise compulsory education started in 1880 could hardly be described as rent seeking, and I'm not sure if most <16 education now could be described as rent seeking now. Just because you could describe teaching unions as rent seekers doesn't mean that the whole of eduction can be described as rent seeking.

Much of the NHS and education would be better described as transfer payments rather than rent seeking, although I would certainly agree that the Higher Education system seems increasing like rent seeking.

The trouble is, if you expand the definition of rent seeking too widely as some Libertarian economists like to, it loses any meaning.

To take it to its logical conclusion any government intervention (street lighting ?) is rent seeking. Clearly nonsense and not what Gordon Tullock conceived.

Prince of pounds provides a better definition.

Generali

Erm I precisely used the example of the over provision and consumption of university education.

andyfromotley

buglawton wrote: »

Remember that in the EU (the last time I heard about it), food subsidies are accompanied by tough quotas and restrictions on food imports from really cheap countries. It's something developing countries complain about all the time. I suspect the EU subsidies somehow go with the restrictions - the subsidies keep the EU natives quiet since they cannot access the world market prices so need a different mechanism to get cheap food.

On top of all that, you could even argue that suppressing the agricultural sectors of developing countries is partly responsible for their instability and the pressure of refugees wanting to enter the EU.

Not sure if there are any substantial example developed countries in the world that have neither subsides no import restrictions/taxes, where one could prove what food prices would look like in a pure laissez faire model.

Good points and agreed. Evidencing something that does not occur is always going to be difficult.

You can always point to the period before the Subsidies as evidence that the market didn't reduce the prices, but of course most have been in place for an age and the world and emerging markets have changed enormously in that time.

So i think a fairer assessment may be to say that subsidies MAY lead to prices being higher than they would be if the subsidies were removed?