Fintech: Antidote to Rent-Seeking?
28 Pages Posted: 17 Aug 2017 Last revised: 14 Mar 2018
Date Written: August 15, 2017
Innovations in financial technology, or Fintech, has been ongoing for decades but has recently begun to accelerate. Soon, it will begin to outstrip the ability of regulators to keep pace. What will be the result if the financial sector becomes unregulated? One possibility — drawn from public choice economics — is that rent-seeking will be inhibited or eliminated. Rent-seeking is the distortion of law and regulation for the benefit of special interests, who expend resources to guarantee those distortions in their favor. Rent-seeking is inefficient and inhibits growth and innovation, yet it continues so long as the government has the power to intervene and play favorites in markets. As innovation accelerates, the power of regulators to effectively interfere will be significantly reduced, making rent-seeking an unprofitable venture and advancing the cause of markets and consumers.
Keywords: Public choice, lobbying, special interests, cronyism, corporatism, rent-seeking, innovation, technology
JEL Classification: D01, D22, D43, D72, K23
Suggested Citation: Suggested Citation