Compare the special-interest effect with rent-seeking

Question

Please provide the best answer for the statement.

Answer 1

Special interests and rent-seeking both promote the interests of a small group at the expense of society at large. The special-interest effect is a situation where a small number of people will receive large gains at the expense of a much larger number of people who individually suffer small losses. Examples of the special-interest effect would be pork-barrel politics whereby by local constituents get a government project for their district. Rent-seeking behavior occurs when individuals or groups seek specific government action that transfers wealth at taxpayers’ or someone else’s expense to the individuals or group. In this case, the term “rent” means any profit or income to a business, a resource owner, or other organization that is above that which would be paid to the individual, corporation or group under competitive market conditions. The government is able to distribute the rent through laws, rules, hiring practices, or purchases, and it leads to government inefficiency.