Title: What Is Rent-Seeking Behavior?
Headings: What Is Rent-Seeking Behavior?
What Is Rent-Seeking Behavior?
Content: But when government bails out these risky banks, they give them a large advantage over their more cautious competitors. These banks are able to privatize any profits from their risky ventures, yet through rent-seeking they have managed to coerce the public to pay for their failures. Rather than having an incentive to lend prudently, there is a greater incentive to be categorized as too big to fail. A wasteful amount of rent-seeking accompanies most government spending. Studies suggest that $1.5 trillion is wasted on public sector rent-seeking. However, because each individual is making a personally profitable decision even if it is a waste of resources overall, it is hard to move a society away from such unproductive behavior. The best way to improve the situation is to reduce the size of government. When there is less money, there will be less corruption and less incentive to rent-seek. This article was co-authored by Megan Russell. Subscribe to Marotta On Money and receive her Kittenomics series every week.