This weekend, I’m helping sell goodies at a charitable fundraising booth at a local Labor Day weekend festival when I came across a good example of rent-seeking.
Rent-seeking is service that many lobbyists perform for their clients. They lobby government to pass laws that protect their clients from competition, which allows them to charge higher prices and make more profit. They often dress this up to be more politically palatable by justifying the laws as being good for the consumer.
Rent-seeking profits are often mistaken by the public as capitalist profits, when they are the opposite. Rent-seeking profits are made by reducing consumer choice. Capitalistic profits are made by consumer choice.
Anyway, back to the fair.
While working the booth, I learned that one of the major soda makers bought the rights from the festival organizers to be the sole soda provider at the festival. So, each fundraising booth has to sell their products.
So, in this example consumer choice and competition is limited, while the festival organizers and soda makers benefit.
To be fair, this example does differ from the typical example of the government acting as the rent-seeking enforcer. The festival organizers apparently add value by organizing the event, as evidenced by the tens of thousands of people who attend. Since the consumers still have a choice whether to show up or not, their limited choice of soda must not make much difference to them.
But, it would still be nice to able to enjoy the soda I prefer along with my funnel cake, without having to smuggle it in.