When one group tries to obtain privileges from the government to secure profits beyond those available under well-functioning markets. Importantly, such privileges-seeking does not create new value in the economy. It merely transfers value from one group to another, while wasting physical, human, and social capital.
“The existence of an opportunity to obtain monopoly profits will attract resources into efforts to obtain monopolies, and the opportunity costs of those resources are social costs of monopoly too… Theft provides an instructive analogy. The transfer of wealth from victim to thief involves no artificial limitation of output,’ but it does not follow that the social cost of theft is zero. The opportunity for such transfers draws resources into thieving and in turn into protection against theft, and the opportunity costs of the resources consumed are social costs of theft.” Richard Posner – The Social Costs of Monopoly and Regulation (1975)
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