Rent-Seeking

Rent-seeking is a term coined by Anne Kreuger for a topic first looked at by economist Gordon Tulloch. It refers to lose-lose activities in which real resources are expended in an effort to capture money from others. In the modern economy, it takes innumerable forms, such as extortion, civil law cases, manipulation of financial markets, lobbying of politicians etc.

Many forms of rent-seeking are not illegal, in fact, some are even encouraged by law makers, either due to the vested personal interests or mistaken notions about the importance of economic growth. A moment's thought should show it to be pernicious: Money is an imaginary resource. Life will go on without it. By contrast, clean water, food, fresh air (and hard disks) are real resources. Running short of these will present a problem, so we should not destroy real wealth in pursuit of imaginary wealth.

"To consume real resources in pursuit of an imaginary resource is a form of collective insanity."

A fundamental flaw of the current money system is that it cannot distinguish rent-seeking (the capture of value) from profit-seeking (the creation of value). Whilst the progress of technology facilitates the creation of value by the industrious, it also facilitates its capture by the unscrupulous - since in the information age business is increasingly virtual and complex. The zero-sum nature of the money system means that those who don't engage in rent-seeking are disadvantaged by the profit of those who do. The anonymity of modern money is such that those who lose out (typically, tax-payers) may not even be aware of their loss.

Rent-seeking, robbery and theft are possible because the money system abstracts value from what is done to create it. We are developing a relationship-based trading system based on accreditation by friends which does not do this. Under Altruistic Economics, there is nothing to steal; you cannot put a gun to someone's head and extort their "good name".

Downloads Title Author(s)         Date        Reference  Shelling Out - The Origins of Money  Nick Szabo  2002  How Money is Created  Smithy  2004-04-24 Wizards Of Money 1  Banking on Poverty  Smithy  2001-09-30 Wizards Of Money 3   How Money is Created  Smithy  2001-07-29 Wizards Of Money 1   Banking on Poverty  Smithy  2001-09-30 Wizards Of Money 3  The Great Cookie Jar - Taking The Mysteries Out Of The Money System  Edward E. Popp  1978  Beyond Money  John Taylor Gatto
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Gordon Tullock: (1967) The Welfare Costs of Tariffs, Monopolies and Theft, Western Economic Journal (Issue 5) pp.224-232
Anne Kreuger: (1974) The Political Economy of the Rent-Seeking Society, American Economic Review (Issue 64) pp.291-303