Innovations in financial technology, or Fintech, has been ongoing for decades but has recently begun to accelerate. Some observers have argued that it will soon begin to outstrip the ability of regulators to keep pace. If those predictions are accurate, what would the world look like with a financial sector that cannot be effectively regulated? 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.
Jeremy Kidd J.D., Ph.D,
Fintech: Antidote to Rent-Seeking?,
Chi.-Kent L. Rev.
Available at: https://scholarship.kentlaw.iit.edu/cklawreview/vol93/iss1/6