Chapter 26: Rent-seeking Diagrams
Anne O. Krueger INTRODUCTION Rent seeking is a resource-using activity undertaken by individuals or groups from which they seek to profit, but from which activity there will be no increase in output. It is a socially unprofitable but privately profitable undertaking for successful rent seekers. Examples of such activities include lobbying to get a tariff increased, bribing to obtain a necessary license, and queuing to receive rationed goods when the quantity demanded at the ration price exceeds the supply. In the first case, the resource is the time of the lobbyist(s) and any capital and goods and services the lobbyist may employ to influence the decisions of the tariff-making body. In the second case, the resource, in the first instance, is the time of the briber and his money (or goods) paid as a bribe, but bribes make officials wealthier, and hence increase competition for entry into government service, which in turn may lead to multiple efforts to pass entrance examinations, more than needed years of schooling, and so on. Queueing to receive rationed goods requires the time of someone, often the servant of the eligible party. Not all rent seekers will be successful: some may not receive licenses or receive the rationed item, but the expected returns from the activity induce people to undertake it. In each of these examples, and any other case of rent seeking, the critical points are two. First, whether the lobbyist obtains the tariff increase or not, whether the briber obtains the license...
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