Title: How Campaign Contributions and Lobbying Can Lead to Inefficient Economic Policy - Center for American Progress
Headings: How Campaign Contributions and Lobbying Can Lead to Inefficient Economic Policy
How Campaign Contributions and Lobbying Can Lead to Inefficient Economic Policy
Rent-seeking
A modern example: Tesla Motors
Campaign finance, lobbying, and influence
Campaign contributions lead to policy outcomes
Lobbying leads to policy outcomes
Conclusion

Content: Policies sought by rent-seeking result in an inefficient use of resources. Rent-seeking policies may prove so destructive that they cause resources to sit idle. The first inefficiency created by rent-seeking is that private resources are intentionally wasted on pursuing and competing for rents rather than producing economic gain. An important caveat of this waste is that it is irrelevant whether or not the rent-seeker achieves the sought-after policy goal. What triggers this waste is the fact that time, effort, and resources were diverted away from producing goods or rendering services that others are willing to pay for and instead used to influence policy for private gain. The second economic concern of rent-seeking behavior is that the policy positions sought and protected create a misallocation of government or private resources. In the case of government resources, it may be that scarce government revenue is used to create a special interest tax subsidy instead of investing in research or infrastructure that would be more beneficial to society as a whole. Private resources may also be misallocated. Without proper regulations, for example, banks may overleverage themselves if they believe that the federal government will bail them out. Finally, rent-seeking could prove so harmful to the economy that not only are resources not used in the most efficient manner possible, but they are actually idle.