What is ‘Rent-Seeking’
Rent-seeking is the use of the resources of a company, an organization or an individual to obtain economic gain from others without reciprocating any benefits to society through wealth creation. An example of rent-seeking is when a company lobbies the government for loan subsidies, grants or tariff protection. These activities don’t create any benefit for society; they just redistribute resources from the taxpayers to the company.
BREAKING DOWN ‘Rent-Seeking’
According to Adam Smith, individuals and businesses can earn income from three sources: profit, wages and rent. Generating profit usually requires risking capital in hopes of a return, while earning wages tends to be labor-intensive and requires hard work. Rent is the easiest and least risky type of income one can earn, as it requires only the ownership of resources and the ability to use those resources to generate income through lending their use to others. Because rent income necessitates less risk or work than other types of income, it follows logically that individuals and companies seek to earn this income whenever possible. Rent-seeking becomes a problem when entities engage in it to increase their share of the economic pie without increasing the size of the pie.
Does that remind you of anyone?
El Paso’s problem is that the rent seekers have infiltrated the government.