Friday, March 7, 2008
Rent Seeking... US Style
"Rent Seeking"- using resources to try to influence governments (legally) to pass laws that assist you financially- leads to economic inefficiency, and ultimately lower economic growth. But rent seeking is common, even in high income economies. It also leads to some strange behaviours. For example, fruit and vegetable producers (who do not receive subsidies) lobby the US government to keep subsidies for producers of other crops as it means that fewer producers switch to producing fruit and vegetables, and therefore reduces the competition that they face! It sounds like a win-win for everyone, EXCEPT the consumer- who ends up paying a higher price for non-subsidised crops- and the taxpayer, who finances the subsidies! See this Marginal Revolution link for more.