Rent seeking behaviour this refers to an activity of individual or groups with an intention of obtaining favourable or unfavorable outcomes from a political process at the expense of other majority. The incentive for individuals to spend more time and effort in rent seeking will be determined by how attractive it is. A good example of rent seeking behaviour is found in the political context of African countries. Politicians interested in maximizing votes and thus re-election, seek contributions from interest groups to finance their campaigns for public office. Interest groups eager to influence policy outcomes willingly provide the campaign contributions hoping that once elected the law–maker will support special interest legislation to create rents and improve the ability of the interest group to extract those rents from the economy. This process of expending resources in an attempt to influence public policy outcomes is known as rent seeking ...view middle of the document...
Special interest groups include; businesses, labour unions, trade associations and professional organizations.
The acquisition of information is always a costly undertaking. It is possible that it may cost more to acquire certain information than the benefits such information will confer. When the cost of acquiring is high than the benefits derived, then it is rational for an individual to be ignorant. The end result is poor quality of decisions made by the individual. In a general election, each voter is confronted with a tiny chance that his/her vote will affect the outcome of the election. As a result, the rational decision a voter finds feasible to undertake is to be ignorant of politics or refrain from it if possible.
Because voters have a weak incentive to acquire information, current economic conditions will have a major effect on choices at election time. Social security or restructuring of health programs involve future benefits and costs; will be difficult for voters to assess. As a result, incumbent politicians will want to make sure that economic outlook is good on Election Day. This is accomplished by favoring policies that present current benefits and are easily identified by the voter. Similarly, they will tend to oppose legislature that imposes higher cost to the citizen or voter but yield future benefits. This effect is referred to as shortsightedness
There are three reasons why government processes or transfer activities are likely reduce the size of the economy. First, income redistribution deteriorates the link between productivity and reward. This explains why taxes take a significant portion of a person’s income reducing hi/her rewards and productivity. Secondly, as public policy redistributes a large share of income, more resources tend to flow in wasteful rent-seeking activities. Resources used for lobbying and bribery will not be available to increase the economic pie of the country.
Finally, higher taxes to finance income redistribution and an expansion in rent seeking will induce tax payers to focus less on income-producing activities and more on actions to protect or advance their income. Rent seeking behavior in an economy results in massive waste of public funds and pervasive schemes that punish unaware voters or ordinary citizens.