What is economic rent and why is it important?

An economic rent is an excess income above the normal levels in competitive markets. Economic rent is caused by possession of a scarce or exclusive factor. Examples of natural scarce factors are land, oil and gas. Examples of artificially scarce or exclusive factors are monopolies, licenses and patents. If the price is for example 10% higher than in a competitive market then this 10% is an economic rent.

Rent-seeking is a deliberate attempt to obtain economic rent. An example of rent-seeking is to modify a medicine just a little bit with the only objective to extend the patent, without any economic effort for innovation.

Are economic rents  and rent-seeking good or bad for economic development? Do economic rents increase income inequality? Is it a good idea to tax economic rents? Such questions are the subject of this site.

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