Edited by William F. Shughart II, Laura Razzolini and Michael Reksulak
Chapter 19: Rent seeking
The public-choice school was the originator of the view in the modern economics literature that incentives of self-interest apply in all human behavior, including personal behavior of political decision-makers and government bureaucrats, as well as individuals, groups, and corporations seeking favors from government. Rents are akin to favors or gifts; if it is known that political decision-makers and government bureaucrats are prone to exercise discretion in assigning rents, and if the privileged favors that provide the rents are contestable, it is in the self-interest of prospective beneficiaries of the rents to contest the rents. The time, effort, initiative, and resources used in contesting rents are lost to productive contribution to a society’s output. A social loss is therefore incurred because of rent seeking. The focus of the rent-seeking literature has been on evaluating the magnitude of the social loss. The rent-seeking concept was initiated by Gordon Tullock (1967), who observed that contestable rents attract resources. Anne Krueger (1974) used the term ‘rent seeking’, which has remained the terminology for Tullock’s concept. A compendium of papers edited by Buchanan et al. (1980) provided the foundation for further development of the concept of rent seeking and its applications.
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