Google
Thursday 
September 20, 2018 

AmosWEB means Economics with a Touch of Whimsy!

AmosWEBWEB*pediaGLOSS*aramaECON*worldCLASS*portalQUIZ*tasticPED GuideXtra CrediteTutorA*PLS
CHANGE IN SUPPLY: A shift of the supply curve caused by a change in one of the supply determinants. In essence, a change in supply is caused by any factor affecting supply EXCEPT price. This concept should be contrasted directly with a change in quantity supplied. You should also review the terms change in quantity demanded and change in demand, too. A change in supply is a change in ALL supply price-quantity supplied pairs, meaning that each price is matched up with a different quantity (which is illustrated as a shift of the supply curve). And this change in supply is caused by a change in any of the supply determinants. In contrast, a change in quantity supplied is a change from one price-quantity pair to the another (which is illustrated as a movement along a given supply curve).

Visit the GLOSS*arama


RENT SEEKING:

The inclination of everyone who is alive and breathing to get as much extra income, wealth, profit, or satisfaction as they can. Rent, while technically considered the factor payment for the use of land resources, is also commonly used as a synonym for economic profit, for the acquisition of benefits above opportunity cost. Rent seeking is the entirely rational process of obtain as much "extra" as possible. In effect, rent seeking is nothing more than utility maximization. Efficiency problems can arise, however, when rent seeking is enhanced and enabled through market control, political influence, or actions of special interest groups.
Rent seeking is the rational pursuit of extra benefits above costs, of obtaining the most for the least, of getting as much profit, income, satisfaction, or utility as humanly possible. The motivation to seek rent is basically the standard pursuit of utility maximization. The rent seeking term is most often used who those doing the seeking have some degree of control over the process, especially through market control or political influence.

For example, if Lilith Quirkenstone, a working class woman barely able to make it from one paycheck to the next, purchases a basket of goods that generates the highest level of satisfaction given her limited income, then she is maximizing utility. However, if Mona Mallard, owner and President of Mona Mallard Duct Tape Industries contacts her long-time friend, Victor Thurgood, who also happens to be Mayor of Shady Valley and frequent recipient of campaign contributions, and requests that he overturn a new environmental regulation that might hurt her bottom line, then she is rent seeking.

The difference rests not so much with the motivation as with the ability to influence the process so that as much "rent" is extracted from the process as possible.

Economic Rent

This rent-seeking concept stems from the idea of economic rent. Rent itself is consider the factor payment for the use of land resources. In the early study of economics, land was considered a somewhat passive resource, a resource that wasn't actively involved in the production process like labor and capital. Hence the rent paid for the use of land was viewed as a "extra" payment.

The modern study of economics recognizes the importance of land as a factor of production and that rent is an important factor payment to compensate for the opportunity cost of using land. The phrase "economic rent" is holdover from this early view and is used in reference to a payment received by a resource over above the opportunity cost.

Economic rent is almost synonymous with the term profit. If there is a difference, profit is the revenue received over and above the opportunity costs of all resources combined, and economic rent is the revenue received over and above the opportunity cost of one resource.

People are said to be rent seeking when they try to get revenue (or other benefits) over and above their opportunity cost, the minimum they would be willing to accept.

Utility Maximization

Rent seeking is really nothing more than the motivation to maximize utility. Utility maximization is simply the process of choosing among options that provide the highest possible level of satisfaction. This satisfaction can result from consuming goods (eating a Hot Fudge Bananarama Ice Cream Sundae) or from other activities (enjoying a multi-hued sky as the sun sets below the horizon). People prefer more to less. They are motivated to obtain as much as they can. The seek out economic rent.

Because choices have consequences, utility maximization is really all about weighing benefits and costs. Choices are based on comparing the benefits generated with the opportunity costs foregone. The decision to consume a Hot Bananarama Ice Cream Sundae is based on a comparison of the satisfaction obtained with the satisfaction foregone by NOT consuming other goods that were NOT purchased with the income used for the sundae. The decision to enjoy a sunset is based on a comparison of the satisfaction obtained with the satisfaction foregone by NOT spending time pursuing other activities.

Public Choice Inefficiency

A primary concern with rent seeking arises from the study of public choice. Public choice identifies assorted inefficiencies in the government (or public sector) based on decisions (or choices) made in the political arena by votes, nonvoters, politicians, and government employees. Some degree of government ineffiency arises from rent-seeking behavior among the players in the political game.

The inefficiency, however, arises not from the rent-seeking motivation, but from the ability to achieve success. Motivated by the maximization of utility, elected politicians are well-known rent seekers. They tend to be more successful in this pursuit than others because their leadership positions provide greater abilities.

Special interest groups also seek rent. And to the degree they are able to influence elections, public policies, and the actions of politicians, they too have greater abilities to acquire economic rent.

The inefficiencies of successful rent seeking are two-fold. First, the existence of any economic rent, any revenue over and above opportunity cost, is an indication of inefficiency. A "perfectly" efficient economy would have NO economic rent. Second, the process of seeking rent often leads to actions that disrupts what might otherwise be an efficient allocation of resources. That is, resources employed to seek out rent from the political arena (such as lobbyists) are not being used for other types of productive activity (such as making cars). Society receives less production from a given resources.

<= RELATIVELY INELASTICRENTAL INCOME OF PERSONS =>


Recommended Citation:

RENT SEEKING, AmosWEB Encyclonomic WEB*pedia, http://www.AmosWEB.com, AmosWEB LLC, 2000-2018. [Accessed: September 20, 2018].


Check Out These Related Terms...

     | public choice | government failures | voting rules | rational ignorance | rational abstention | principal-agent problem | voting problems | special interest groups | government bureaucracies | political entrepreneurs |


Or For A Little Background...

     | market failures | government functions | market control | profit | opportunity cost | public finance | efficiency | public sector | private sector | utility maximization | market efficiency | land |


And For Further Study...

     | median voter principle | logrolling | voting paradox | capture theory of regulation | Tiebout hypothesis |


Search Again?

Back to the WEB*pedia


APLS

BROWN PRAGMATOX
[What's This?]

Today, you are likely to spend a great deal of time flipping through the yellow pages wanting to buy either a wall poster commemorating the first day of spring or a lazy Susan for you dining room table. Be on the lookout for rusty deck screws.
Your Complete Scope

This isn't me! What am I?

Potato chips were invented in 1853 by a irritated chef repeatedly seeking to appease the hard to please Cornelius Vanderbilt who demanded french fried potatoes that were thinner and crisper than normal.
"No amount of business school training or work experience can teach what is ultimately a matter of personal character. "

-- Truett Cathy, Chick-fil-A Inc. founder

EC
European Community
A PEDestrian's Guide
Xtra Credit
Tell us what you think about AmosWEB. Like what you see? Have suggestions for improvements? Let us know. Click the User Feedback link.

User Feedback



| AmosWEB | WEB*pedia | GLOSS*arama | ECON*world | CLASS*portal | QUIZ*tastic | PED Guide | Xtra Credit | eTutor | A*PLS |
| About Us | Terms of Use | Privacy Statement |

Thanks for visiting AmosWEB
Copyright ©2000-2018 AmosWEB*LLC
Send comments or questions to: WebMaster