Rent Seeking

This term may not be familiar to many but this is a serious and potentially destructive force at work in our economy. This article on the new White House economic advisor describes the activity. In essence, for a couple decades or more we have had a revolving door between government and big banks. Far from being benign, it creates a moral hazard. It extracts money (rents) from the economy via out sized payments to former/future government officials without any corresponding increase in productivity/wealth creation. It amounts to exploitation of the political system for income (rents) . The term rent seeking traces back to Adam Smith as he described components of income : wages; profits; and rents. This is something of a shadow economic system that no one really talks about.