Saturday, March 24, 2012

What is "Rent Seeking"?: "Stanley Furniture may relocate HQ to High Point"

"The move would add 42 jobs.

The High Point Economic Development Corp. said today
that Stanley is considering 200 N. Hamilton St.
for a joint corporate headquarters and showroom.

Unidentified locations in two other states are also under consideration.

The High Point City Council will hold a public hearing April 2
to consider $340,000 in incentives for the project.

The Guilford County Board of Commissioners will meet April 12
to discuss $76,000 in incentives."

" is an attempt to obtain economic rent
by manipulating the social or political environment
in which economic activities occur, rather than by creating new wealth.

...spending money on political lobbying in order to be given a share of wealth
that has already been created.

...People accused of rent seeking typically argue
that they are indeed creating new wealth (or preventing the reduction of old wealth)
by improving quality controls,
guaranteeing that charlatans do not prey on a gullible public...

Many current studies of rent-seeking focus on efforts
to capture various monopoly privileges stemming from government regulation
of free enterprise competition.

The term itself derives, however,
from the far older practice of appropriating a portion of production
by gaining ownership or control of land.

...the expenditure of resources attempting to enrich oneself
by increasing one's share of a fixed amount of wealth
rather than trying to create wealth.

Since resources are expended but no new wealth is created,
the net effect of rent-seeking is to reduce the sum of social wealth.

Rent-seeking generally implies the extraction of uncompensated value
from others
without making any contribution to productivity.

...a more common example of rent-seeking is political lobbying
to receive a government transfer payment,
or to impose burdensome regulations on one's competitors
in order to increase one's market share.

...such behaviors may result in substantial social losses.


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