The excess of profits over what they would be in a competitive market is called economic rents.
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Tuesday, January 4, 2011
Definition of the Day
I hear a lot about "rent-seeking" and have been looking for a very straightforward definition. This is one from Maxine Udall:
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That is a fine definition of "rent" but doesn't address the key idea of rent seeking.
ReplyDeleteRent seeking is the costly expenditure of resources to transfer wealth or prevent the transfer of wealth (through government).
This definition captures the key idea that it is negative sum as opposed to the positive sum nature of creating wealth and that the term is most frequently used in the political context (and by definition might apply only to politics) but need not.
I prefer my definition.
ReplyDelete@David: Could rent seeking not occur through other mechanisms (like collusion between firms)?
ReplyDelete@Andrew: I love your definition. :-)