The quiet logic of rent-seeking

There is a peculiar feature of modern economic life that most of us accept without much thought: we pay, regularly and obediently, for things we do not use. We are told this is prudent. Sometimes we are told it is unavoidable. Often, no explanation is offered. The payment simply exists, like a charge whose purpose has been forgotten but whose collection is scrupulously enforced.

Economists have a name for this kind of income. They call it rent.

Not rent as in apartments or landlords, but income earned not by producing something useful, but by controlling access. Once rent takes hold, a curious thing happens: systems reorganise themselves to protect it, justify it, and eventually forget that any alternative ever existed.

To see how this works, it helps to start with a small story.

Prodipnagar and the bridge

Welcome to Prodipnagar, a perfectly sensible town with one small peculiarity. Everyone there pays rent for a bridge they do not always cross. The bridge is solid, well built, and often empty. It is owned by a wizard.

The wizard insists that the bridge is essential. The town nods. You never know when you might need it.

So the rent is paid. Reliably. Automatically.

One day, a child asks why the wizard must be paid even when no one is using the bridge.

The wizard explains patiently. "This is not payment for crossing," he says. "This is payment for availability."

The town nods again. That sounds technical. And so the payments continue. The bridge stands. The wizard smiles. That, in essence, is rent. 

Soon, the town adapts.

The bridge is declared "strategic infrastructure." Expansion follows, even as the roads meant to carry traffic to and from it remain an afterthought.

None of this is demanded by the wizard. After all, the payments already exist. Someone has to harvest them. Before long, Prodipnagar has more people employed to defend the bridge than to cross it.

That is rent-seeking. Nothing about this makes the town richer or the bridge more useful; it simply attracts more lobbyists for an existing payment.

When rent becomes normal

Bangladesh's power sector did not set out to become Prodipnagar. It arrived there gradually, through a series of decisions that all seemed reasonable at the time.

Electricity generation expanded rapidly. New plants were built. Installed capacity surged. Demand, however, did not keep pace. Utilisation fell. Quietly, the system acquired more power than it could routinely use.

This is when governments often pause. Bangladesh did not. Instead, it leaned into a particular solution: contracts that guaranteed payment regardless of whether electricity was actually consumed.

These are capacity payments. In theory, they compensate generators for being ready. In practice, they ensure that investors are paid first and without interruption. Whether the power is needed becomes a secondary question.

The logic was familiar and comforting. Investors require certainty. Power shortages are politically unforgiving. Better to overprepare than to underdeliver.

So the payments continued. Even when plants sat idle. Even when demand softened. Even when everyone knew the system was already long on capacity.

And the payments kept coming.

This was not corruption in the cinematic sense. Just contracts, duly signed, ensuring that money would flow whether electricity did or did not.

The bridge remained available. The tolls were non-negotiable.

How systems learn to love rent

Once rent enters a system, institutions adapt around it. Rent is like a subscription that quietly auto-renews: once it's in place, the system starts treating cancellation as a dangerous disruption rather than a normal choice.

In Bangladesh's power sector, this adaptation followed a predictable rhythm. Projects were declared urgent. Competitive tendering was portrayed as slow. Unsolicited proposals became common. Transparency dulled.

Each step had a justification. None appeared outrageous in isolation. Together, they produced a system in which questioning rents became harder than defending them. Scrutiny did not disappear – it simply became tiring, technical, and easy to postpone.

This mattered. When officials are not rewarded for asking "Is this necessary?" and are not punished for answering "Better safe than sorry," a system learns which answers it prefers.

Rent-seeking does not require villains. It reproduces itself by reshaping institutions and incentives around extraction.

The wizard, after all, never lies. He only calls it the way it is – and it suits him.

Power, without the power

Nowhere is this logic clearer than in the structure of power contracts themselves.

Generators are insulated from demand risk. Fuel costs are passed through. Market fluctuations are absorbed by the buyer. Policy changes are treated as someone else's problem.

In effect, nearly every major risk that would normally justify caution is shifted away from those receiving the payments and onto those making them. The system is designed so that revenue remains predictable even when reality is not.

This arrangement is often described as technical or unavoidable. It is neither. It is intelligible once one asks a simple question: who feels the consequences when things go wrong?

The answer is rarely those who approved the arrangement. Rent flows upward. Costs disperse outward.

Some economic models suggest that rent-seeking can, in theory, offset pre-existing distortions by lubricating rigid systems. What this arrangement shows instead is the opposite: rent-seeking here did not correct inefficiency; it industrialised it – redirecting capital, attention, and institutional energy away from value creation and toward the preservation of payment streams.

Not a "Mistake"

It is tempting to explain outcomes like this as miscalculation or poor forecasting. That is comforting. It implies the system works – except when it doesn't.

But this was not a mistake made under uncertainty. Surplus capacity and low utilisation were visible. The mismatch between obligations and need was not hidden. It was discussed, documented, and then quietly accommodated. 

Necessity did not constrain the system. Accountability might have – but it did not.

When those who decide are insulated from the costs of their decisions, unnecessary bridges proliferate. As one power-sector official put it, half joking and half defeated: "Sir, we reduced system loss – but added decision loss." 

In the absence of urgency, bargaining power shifted not to the buyer or the supplier, but to the gatekeepers who controlled access to the deal. The structure rewarded cooperation among insiders, since no single actor could capture the surplus on their own.

This is how rent-seeking endures: not through force or fraud, but through the normalisation of coordinated extraction.  It presents itself as prudence. It speaks the language of certainty so convincingly that extraction is rebranded as stability.

Bangladesh's power sector did not invent this logic. But it illustrates it with unusual clarity.

Why it matters

A child's question cuts through the fog adults cultivate. If the child of Prodipnagar were to ask why an entire society pays rising electricity bills for power it rarely receives, the honest answer would be uncomfortable – but necessary.

We celebrated capacity additions as national achievements. But capacity is not power, and power is not value. We built plants faster than we built institutions. We added megawatts faster than we added accountability. In the end, the system delivered exactly what it was designed to deliver: a stable stream of rents for those inside it, and rising costs for those outside. The result was not a second-best efficiency, but a system that consumed real resources to protect payments rather than produce value.

So when the child asks, "What made us so?" The answer is not that we are uniquely flawed or unusually greedy. It is that we built a system where rent was easy to create, rent-seeking was rational, and payment became routine even as purpose faded.

The harder question – the one the child will eventually ask – is whether we can build a system where value, not rent, is what earns a return.

Zahid Hussain is a former lead economist of The World Bank, Dhaka Office