The Pros And Cons Of Rent Hiking

The term “rent-seeking” was coined by a man named Gordon Tullock in the late 60’s, then became an expression in 1974, by Anne Krueger. Rent-seeking involves seeking to increase an individual or a business organization’s wealth without creating a new wealth. Attempts to capture regulatory agencies to gain a monopoly can result in positive results for the rent seeker in the market while imposing disadvantages on competitors and the economy. The word “rent-seeking” does not as a refer to a payment on a lease but originated from Adam Smith’s division of incomes into profit, wage, and rent. Rent-seeking is an attempt to obtain economic rent by manipulating the social or political environment in which economics activities occur, rather than creating …show more content…
Rent seeking harms economic growth by reducing competition and innovation. It leads to the wasteful use of valuable resources and talents in unproductive activities and invariably redistributes resources from large unorganized populations to small organized groups. Rent seeking is not only bad for economic growth because most rents are ultimately dissipated, but it also produces divided societies and non-inclusive polities. In the short term of rent-seeking, income inequality turns into wealth inequality in the long term, which them fuels more inequality because wealth not only creates more wealth but also warps our political system to its favor. As the distribution of wealth becomes increasingly unequal, the returns to that wealth and will produce more inequality. In addition, the fact that those at higher wealth levels seem to receive higher returns to capital, when coupled with reductions in tax rates on capital income in recent decades, has increased the contribution of capital income to overall inequality. Furthermore, if some firms earn monopoly profits, owners of those firms may benefit more than others. Rent-seeking not only does not generate new product, it also slows down economic