Rent Seeking: Taking Without Giving

Learn about the concept of rent-seeking and its impact on economic efficiency in this 5:29 minute video lesson.

Rent-seeking is a behavior that describes the tendency of people to seek profits without doing any real work. This reduces economic efficiency through the misallocation of resources. Rent-seeking also hinders the creation of wealth, reduces government revenue, increases income inequality, and potentially leads to national decline.

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COLLABORATORS
Script: Jonas Koblin and Jonas Jacquet
Artist: Pascal Gaggelli
Voice: Mithril
Coloring: Nalin
Editing: Peera Lertsukittipongsa
Head of Partnership Programme: Selina Bador
Production: Bianka
Proofreading: Susan
Sound Design: Miguel Ojeda

SOUNDTRACKS
Tarantella - Adieu Adieu

DIG DEEPER with these top videos, games and resources:
Private and Public Rent-Seeking (and Chilean Buses), listen to Russ Roberts and his guest Mikel Munger discuss rent seeking on econtalk
What is Rent Seeking - what Forbes Magazine explains it
Evonomics 101 — How we can prevent rent seeking
Another way of preventing rent-seeking and corruption - real life example

SOURCES

CLASSROOM EXERCISE
Role play with your students: If available, find a real life example of a company exhibiting rent-seeking behavior that was brought to the public eye and resolved recently. Split your class into company representatives, company employees and government officials or other key players in the case. Act out the case of how the officials are accusing the company of rent seeking behavior. But how should the company react? How does this affect the employees? What would your students do differently as compared to how the case was resolved in real life?

CHAPTERS
00:00 Intro to Rent Seeking
00:21 The classic example
01:07 Direct costs
01:19 Opportunity costs
01:35 Moral costs
03:49 Adam Smith's definition
04:22 What do you think?
04:40 Ending

[KingUnKaged]

I work as a consultant/research analyst. My company and career are based entirely around rent seeking. Sometimes it's tragically comical how blatant this kind of thing can get. You can go to meetings and see that everybody in the room (or Teams call) is aware that what you're doing is either pointless or actively harmful, but nobody cares because the project is needed to tick a box or to appease some weird fringe, or is a vanity project for some manager or bureaucrat with nothing better to do. People often don't care because it's not their money being spent and they know that they'll get in trouble if they say anything, so they just go along with it and tell the client what they want to hear (I am one of these people).

As bad as the indifferent people are though, the true believers, the people who think their rent seeking is actually moral or a force for good, are worse, because they will pay you to tell them something they already think they know, use it to justify bad decisions, and then when they fail, pay you to explain how the main reason they failed is because people didn't listen to them enough or give them enough money. The true believers tend to be the most aggressive, so they take control quickly and since most of the people they're dealing with are indifferent, they get their way easily and steamroll over everyone else. The apathetic people do this too, but they're generally smart enough to know their limits, in my experience they tend to recognise that if they go too far they risk losing control, or needing to explain themselves, they're the kind of parasites who just want a free meal. The true believers are the kind that will eventually kill the host organism.

[danielstone]

And you know, I like the way Robert Kyosaki writes & presents alternate views on how to prosper in a world where jobs are disappearing, but at the end of the day, what he teaches is how to be a better 'rent seeker.'

[ronwalker]

As a carpenter, I've often thought of this when seeing something that I built years ago. As a very young man, focused on pursuing wealth, I took an aptitude test for getting into insurance sales. After the initial disappointment of hearing that I failed it, my attitude quickly changed when I realized what that actually revealed.

[LukeSumIpsePatremTe]

I knew about this concept, but now it has a name. Thanks for educating us, Sprouts!

[shanaiajishin]

Unfortunately we are full of these people who take without giving and they call themselves successful. As Einstein said, "strive to be a person of value, not a person of success"

[cokebottles]

Rent seeking has become a larger and larger part of the US. You see it in the government of course, but you also see it with the mass number of land lords, who inevitably become the only ones that can afford to buy more property due to the prices. You see it in people purchasing companies then taking the lions share of the profits from the people that actually do the work, you see it in finance, crypto, and many other places. They usually have skin in the game, just not nearly as much as the people buy charge over. The ratios are rarely the same.

I’m not a socialist, just a capitalist that understands capitalism can only go so far before the people losing so vastly out number those taking the winnings that a revolution or tyranny is inevitable. I think we’re getting close.

[Stoneman]

In Australia, rent-seeking is the main game in town, mainly through banking and property. Literally trillions of dollars wasted just to trade houses back and forth between each other. Insanity.

[Larry]

Rent-seeking is enabled when excessive wealth is passed to the generation who did not earn it. With the power of their wealth and their lack of ability, they degrade the government and economy. Because of their resources, they are also unequal under the law. The question would then be, who controls the excessive wealth.

[Dan-udhz]

"The first man who, having fenced in a piece of land, said 'This is mine', and found people naïve enough to believe him, that man was the true founder of civil society. From how many crimes, wars, and murders, from how many horrors and misfortunes might not any one have saved mankind, by pulling up the stakes, or filling up the ditch, and crying to his fellows: Beware of listening to this impostor; you are undone if you once forget that the fruits of the earth belong to us all, and the earth itself to nobody."
— Jean-Jaques Rousseau, 1754

[brandonbridge]

This issue is also generational. Why should people born decades earlier be able to rig the system in their favour and against the interests of future generations.

[lachlanraidal]

Landlords are the prime example of rent seekers.

[LECityLECLEC]

These new economic theory videos ARE GENIUS I love you guys keep it up. Rent Seeking and Skin in the game, super important concepts that are not burden with crazy equations and graphs. Keep up the good fight, enlighten the people like me who have trouble making sense of the world!

[PichuElric]

This could literally be most of my country, there's a constant effort by some otherwise lazy people make money by privatising public spaces. Even libraries weren't spared, and parks are closely following (most parks take a fee to enter these days anyway).

Thank you for teaching me what the concept was called!

[PapaBear]

I think "rent" should be replaced with "toll"...its less misreading

[EnjoyGengar]

It almost sounds like goverment in some countries.

[Stylez-]

Like selling you free water in bottles after you contaminate the sources so no one can drink it free....

[formerevolutionist]

This sounds a lot like licensing. These days, you need to get a license for almost everything. You need a license to braid hair. You need a license to open businesses. You need a license to sell cigarettes. Everything needs a license. It is not merely done for financial reasons, but the state's ever-growing need to control everything. It is all done under the guise of protecting the consumer from incompetent or immoral practitioners.

However, the free market is much better at dealing with this problem. For starters, people who provide low-quality goods and services will quickly get a bad reputation. The same goes for scammers and cheaters. Honest people who provide high-quality goods and services will get a good reputation. Furthermore, businesses will want to build trust with customers, so they seek certification and verification from independent inspectors.

Let's say a restaurant opens up. The owner will want to hire good workers to work there. He will want to make sure his restaurant is clean and safe. Since it is a new restaurant, people don't know if it is good or not. The owner will seek an inspection from a reputable firm to convince customers that his restaurant is clean and safe. He also knows that if his food makes people sick, then it will be very difficult to convince everyone to eat there, again.

[kenny]

In Indonesia, the road belong to gangsters who call themselves to be the parking men. We have to pay them for parking.

[BranEman]

Great information and illustrations. This lesson on rent is thought provoking. Makes me rethink investing, even if most of us didn't inherit wealth.

[martyns]

This is how the Nigerian government operates. So sad