Rent Seeking
Interest group behaviour in the political market is a form of rent seeking. Economic rent is defined as any higher return, income, or receipt that cannot be reduced or eliminated by the normal competitive factors in the economy (Johnson 1991, pp.328-30). It applies particularly to cases where there are barriers to entry to an industry, especially where these are created by government. In public choice economics, the term is used for those individuals who use government legislation and regulations to transfer wealth (rent) to themselves. It applies to all cases where government restricts competition, erects entry barriers, or grants special privileges to certain segments of society and not to others. Rent seeking is inefficient in this view because it diverts resources from the activity which could have been producing real goods and services.
In the political market, special interest groups concentrate on obtaining preferential legislation at the expense of the public at large (Pasour 1993, p.8). Large amounts of time and money can be spent in lobbying, campaign contributions, community gifts etc. by occupational groups as well as industrial groups. Such legislation restricts competition and raises prices and incomes through political power. Rent seeking biases the perspective of elected government representatives as they cater to groups seeking policies that benefit the few at the expense of the many.
A more positive view is that interest groups can also contribute to the pool of information that is available, thus improving both the quality of decision making and the equality between the parties to the decision. As suggested below, majority decisions may follow from the pressures created initially by the individual interest groups.
| © MAF 1994 | ||
| MAFnet Help | Important Disclaimer |
Contact for Enquiries
Rural Affairs Coordinator
Sector Performance Policy
MAF Policy
Ministry of Agriculture and Forestry
PO Box 2526
Wellington
NEW ZEALAND
Phone: +64 4 894 0675
Fax: +64 4 4 894 0745
Contact this person
