Policy-created scarcity invites unproductive competition for favors (rents).
Krueger's 1974 paper coined rent-seeking. The waste is not the transfer itself but the resources spent competing for it: lobbying, queuing and licensing effort that produces nothing.
In practice
- A licensing regime worth £50m a year to holders attracts £45m of lobbying, consultancy and legal effort that produces nothing.
- A queue for a rationed permit consumes weeks of applicants' time, and the time is a pure loss to everyone including the issuer.