The Dynamic Rent-Seeking Theory: A Response to Critics

Abstract

Why is rent-seeking highly relevant for recent economic theory? In this paper, I argue that the common criticism of rent seeking theory is not new and relevant. First, I explain the basis of rent seeking and the main contributions to this theory including the theory of bureaucracy. Then, I explain the criticism of this approach, which attacks the static grounds of this theory stemming from the perfect competition equilibrium model and the normative concretizing of rent-seeking actions. I argue that the rent-seeking theory had already abandoned the static perfect competition model in the 1980s and that arguments using dynamic rent-seeking theory remain normative until they explain the institutional causes of economic development, which has been the centre of the economic profession for centuries.