<p>My best definition: <strong>lobbying to gain special privileges from the government</strong>.</p>
<p>Rent refers to the concept of <a href="https://en.wikipedia.org/wiki/Economic_rent" rel="nofollow noreferrer">economic rent</a>. Economic rent can be thought of as profit. The amount earned beyond costs. So rent seeking is looking to make more profit and specifically make more profit without producing anymore wealth. The best way of doing this is to rig the rules in your favor and get special privileges. Think of a kid playing a game a playground, it is easier to change the rules of the game in their favor than to become better at the game.</p>
<p>The special privileges can be anything from lower taxes, to reduced regulation, to a monopolistic charter, limiting competition etc. Rent seeking is particularly common among monopolistic companies. If I am a monopoly (by definition controlling the market) then I its nearly impossible to make more money so the company is incentivized to lobby the government for more privileges or to maintain current privileges.</p>
<p>Generic Examples:</p>
<ol>
<li>A business lobbying to reduce taxes on the specific industry it is in (rent seeker: business, rent: money made from less taxes)</li>
<li>A bribe paid to the government for a favorable regulation (rent seeker: the payer of the bribe, rent: the regulation)</li>
</ol>
<p>Specific Examples:</p>
<ol>
<li>Before the days of Uber taxi companies would lobby local governments to keep the number of taxi licenses or medallions static and then they would be able to charge more as demand outstripped supply.</li>
<li>Guilds in medieval Europe would act as barriers of entry to industries and they would maintain their privileges by receiving special charters.</li>
</ol>
<p>A common criticism of the rent seeking idea is it can be very difficult to determine if the rent seeking is beneficial or detrimental. In the first example I gave the business might be able to use the lower taxes to increase investment which would be good rent seeking. Usually rent-seeking is meant negatively, but it could be a positive thing in some cases.</p>
<p>I've never come across any examples of a state being called a rent-seeker but I suppose if a country was lobbying the World Trade Organization or UN or some international body that it could be called rent-seeking.</p>

CC BY-SA 4.0
2020-07-10T11:53:50.217Z
Thanks for your lucid explanation! I often come across articles where bureaucracy is accused of rent-seeking. The usage in [this example](https://publicpolicy.substack.com/p/49-will-sons-of-soil-do-tons-of-toil) (originally linked in the question) for instance claims the State is rent seeker. Is the bribe the rent that the State is receiving? Your assertion that payer of the bribe is rent-seeker and the regulation or subsidy received is rent seems to be contradictory. Could you please clarify?
yathish
CC BY-SA 4.0
2020-07-10T12:42:33.340Z
I read over the example. I don't believe it is claiming the state is the rent seeker. I think it is trying to say that the state will leave itself open to rent-seeking from businesses. " The ‘business’ of issuing domicile certificates will take off at the lower levels of the administration. Companies will have to receive permits to hire for skills they can’t find in Haryana." These sentences make me think that the rent seeker here is business and the rent they are seeking is these permits.
Scc33
CC BY-SA 4.0
2020-07-11T15:48:39.350Z
This sounds like a valid interpretation as well. However in that example I feel the intent was to imply bureaucrats resorting to bribes in order to give those permits. @KennyLG 's answer above and the comment discussion below it also allows for both these interpretations. Thanks for your time and help!
yathish
CC BY-SA 4.0
2020-07-10T00:28:03.913Z
2020-07-10T00:28:03.913Z
Scc33
<p>It's income earned above what is needed to bring a factor into production. It stems from David Ricardo, who defined it as the income earned from having more fertile land. It comes from situations where exclusive rights to a scarce resource gives you an extra income. Land gives you exclusive rights to a location earning you rent from the inevitable increases in demand. Patents give you exclusive rights to a product (earning you market power which means you can charge above market rate prices).</p>

CC BY-SA 4.0
2024-05-01T19:33:24.870Z
2024-05-01T19:33:24.870Z
Victor Nielsen
<p>Please answer assuming I have no background in economics. I keep coming across this term in various articles (<a href="https://publicpolicy.substack.com/p/49-will-sons-of-soil-do-tons-of-toil" rel="nofollow noreferrer">Example</a>) but get more confused every time I look up what it means.</p>
<p>I have read about the <a href="https://www.investopedia.com/terms/r/rentseeking.asp" rel="nofollow noreferrer">concept of economic rent</a> and how it is different from colloquial use of the word rent. But it still doesn't help because the definition of economic rent is too technical for me :(</p>
<p>Here's an example of rent-seeking from <a href="https://en.wikipedia.org/wiki/Rent-seeking#Examples" rel="nofollow noreferrer">Wiki</a>:
An example of rent-seeking in a modern economy is spending money on lobbying for government subsidies in order to be given wealth that has already been created.</p>
<p>Who is the rent-seeker in this example? And what is the rent - the money spent for lobbying or the subsidy availed?</p>
<p>It'd be great if someone can give a few more diverse examples (like where the State is rent-seeker or an individual businessman is rent-seeker). More importantly, please break down the example by who is the rent seeker and what is the rent. Thanks!</p>

CC BY-SA 4.0
2020-07-09T09:51:02.637Z
Investopedia's definition does not seem very technical: "*Rent seeking (or rent-seeking) is an economic concept that occurs when an entity seeks to gain added wealth without any reciprocal contribution of productivity.*"
Giskard
CC BY-SA 4.0
2020-07-09T09:51:11.020Z
And what exactly is wrong with Investopedia's examples? Companies/industries getting government subsidies, companies/industries protected by tarrifs, occupational licensing, etc.
Giskard
CC BY-SA 4.0
2020-07-10T11:56:21.650Z
@Giskard As I said I have minimal background in economics and I find this definition technical. I'm not sure how wealth is different from income (is it just accumulated income?) and how productivity (or actual production) is tied up in defining the concept. That is why I am hoping to understand it better through examples. At this point I'm frustrated because the more number of times I read the definition the more I get confused. Knowing what is rent and who is rent-seeker in the examples is very likely to help me.
yathish
<macroeconomics><definition>
Need examples for confusion about rent-seeking. Who is the seeker and what is the rent?
yathish
# Need examples for confusion about rent-seeking. Who is the seeker and what is the rent?

(Asked by: username_0 on 2020-07-09)

Please answer assuming I have no background in economics. I keep coming across this term in various articles ([Example](https://publicpolicy.substack.com/p/49-will-sons-of-soil-do-tons-of-toil)) but get more confused every time I look up what it means.

I have read about the [concept of economic rent](https://www.investopedia.com/terms/r/rentseeking.asp) and how it is different from colloquial use of the word rent. But it still doesn't help because the definition of economic rent is too technical for me :(

Here's an example of rent-seeking from [Wiki](https://en.wikipedia.org/wiki/Rent-seeking#Examples):
An example of rent-seeking in a modern economy is spending money on lobbying for government subsidies in order to be given wealth that has already been created.

Who is the rent-seeker in this example? And what is the rent - the money spent for lobbying or the subsidy availed?

It'd be great if someone can give a few more diverse examples (like where the State is rent-seeker or an individual businessman is rent-seeker). More importantly, please break down the example by who is the rent seeker and what is the rent. Thanks!

**Tags:** macroeconomics, definition

> **Comments:**
> **username_1**: Investopedia's definition does not seem very technical: "*Rent seeking (or rent-seeking) is an economic concept that occurs when an entity seeks to gain added wealth without any reciprocal contribution of productivity.*"  
> **username_1**: And what exactly is wrong with Investopedia's examples? Companies/industries getting government subsidies, companies/industries protected by tarrifs, occupational licensing, etc.  
> **username_0**: @username_1 As I said I have minimal background in economics and I find this definition technical. I'm not sure how wealth is different from income (is it just accumulated income?) and how productivity (or actual production) is tied up in defining the concept. That is why I am hoping to understand it better through examples. At this point I'm frustrated because the more number of times I read the definition the more I get confused. Knowing what is rent and who is rent-seeker in the examples is very likely to help me.  

---

## 2 answers

### Answer by username_2 on 2020-07-10. Score: 2

My best definition: **lobbying to gain special privileges from the government**.

Rent refers to the concept of [economic rent](https://en.wikipedia.org/wiki/Economic_rent). Economic rent can be thought of as profit. The amount earned beyond costs. So rent seeking is looking to make more profit and specifically make more profit without producing anymore wealth. The best way of doing this is to rig the rules in your favor and get special privileges. Think of a kid playing a game a playground, it is easier to change the rules of the game in their favor than to become better at the game.

The special privileges can be anything from lower taxes, to reduced regulation, to a monopolistic charter, limiting competition etc. Rent seeking is particularly common among monopolistic companies. If I am a monopoly (by definition controlling the market) then I its nearly impossible to make more money so the company is incentivized to lobby the government for more privileges or to maintain current privileges.

Generic Examples:

1. A business lobbying to reduce taxes on the specific industry it is in (rent seeker: business, rent: money made from less taxes)
2. A bribe paid to the government for a favorable regulation (rent seeker: the payer of the bribe, rent: the regulation)

Specific Examples:

1. Before the days of Uber taxi companies would lobby local governments to keep the number of taxi licenses or medallions static and then they would be able to charge more as demand outstripped supply.
2. Guilds in medieval Europe would act as barriers of entry to industries and they would maintain their privileges by receiving special charters.

A common criticism of the rent seeking idea is it can be very difficult to determine if the rent seeking is beneficial or detrimental. In the first example I gave the business might be able to use the lower taxes to increase investment which would be good rent seeking. Usually rent-seeking is meant negatively, but it could be a positive thing in some cases.

I've never come across any examples of a state being called a rent-seeker but I suppose if a country was lobbying the World Trade Organization or UN or some international body that it could be called rent-seeking.

> **Comments:**
> **username_0**: Thanks for your lucid explanation! I often come across articles where bureaucracy is accused of rent-seeking. The usage in [this example](https://publicpolicy.substack.com/p/49-will-sons-of-soil-do-tons-of-toil) (originally linked in the question) for instance claims the State is rent seeker. Is the bribe the rent that the State is receiving? Your assertion that payer of the bribe is rent-seeker and the regulation or subsidy received is rent seems to be contradictory. Could you please clarify?  
> **username_2**: I read over the example. I don't believe it is claiming the state is the rent seeker. I think it is trying to say that the state will leave itself open to rent-seeking from businesses. " The ‘business’ of issuing domicile certificates will take off at the lower levels of the administration. Companies will have to receive permits to hire for skills they can’t find in Haryana." These sentences make me think that the rent seeker here is business and the rent they are seeking is these permits.  
> **username_0**: This sounds like a valid interpretation as well. However in that example I feel the intent was to imply bureaucrats resorting to bribes in order to give those permits. @KennyLG 's answer above and the comment discussion below it also allows for both these interpretations. Thanks for your time and help!  

---

### Answer by username_3 on 2024-05-01. Score: 0

It's income earned above what is needed to bring a factor into production. It stems from David Ricardo, who defined it as the income earned from having more fertile land. It comes from situations where exclusive rights to a scarce resource gives you an extra income. Land gives you exclusive rights to a location earning you rent from the inevitable increases in demand. Patents give you exclusive rights to a product (earning you market power which means you can charge above market rate prices).


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