Rent Leaving


Iris Bohnet,, & Frey, B. S. (1997). Rent Leaving. Journal of Institutional and Theoretical Economics ({JITE}) / Zeitschrift für die gesamte Staatswissenschaft , 153, 711–721.


Economic rents are the driving force of market economies. Resource owners constantly look for opportunities to create and exploit economic rents which, however, in the dynamics of the market process dissipate as new entrants try to appropriate the profits. In equilibrium, economic rents are eliminated. Not so in different institutional settings. While rents in the market endogenously come and go, they are artificially created and sustained in political and bureaucratic decisionmaking. In analogy to individuals’ behaviour in the market, it is assumed that politicians, bureaucrats, pressure groups, voters and taxpayers strive for political rents. Rent seeking in the political arena may also increase an individual’s income but in contrast to the market, is not socially beneficial. “The term rent seeking is designed to describe behavior in institutional settings where individual efforts to maximize value generate social waste rather than social surplus” (Buchanan 1980, 4).

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See also: Decision Making
Last updated on 11/24/2014