Parking Apps and Rent Seeking

Photo by Joshua Santos, Pexels

I’m not an economist, but I’ve read enough Adam Smith to know he wasn’t a fan of rent‑seeking behaviour. The complication is that “rent” in economics isn’t quite the same as the rent I pay on a flat. Rather than tie myself in knots defining terms, I’ll set out what I mean through something concrete: the app my council uses for car parking.

A parking app as a local monopoly

On the face of it, the parking app is a small convenience: a slightly easier way to pay for a space. But the provider is in a very strong position. To switch to a different supplier, the council would have to:

• Replace a lot of physical signs with new codes and instructions.
• Update websites and back‑office systems.
• Retrain traffic wardens and call handlers.
• Manage angry residents who’ve already downloaded “the” app and don’t want to learn a new one.

Those switching costs make the provider a local monopoly. Once the system is embedded, it’s easy for them to raise fees faster than inflation without losing the contract. The extra margin isn’t really payment for a better service; it’s monopoly rent, that is to say, profit sustained by market power rather than productivity.

Even if you think the app adds some value through convenience, the above‑inflation price rises look like rent extraction: income derived from control over access, not from creating new wealth.

From one app to the whole economy

My hunch is that this isn’t just about parking. The UK (and many other advanced economies) increasingly looks like a rentier economy, where a growing share of profits comes from positions of market power rather than from innovation and investment.

The mechanism isn’t only higher prices. The bigger problem is how resources – talent, capital, managerial effort – get allocated. When the rules of the game make rent‑seeking more lucrative than innovation, people and money flow into appropriative activities:

• Lobbying and regulatory gaming.
• Complex contracting and legal manoeuvres.
• Financial engineering designed to extract value rather than fund new capacity.

instead of into R&D, process improvement, or productive investment. [1][2]

Cross‑country work finds that economies with more corruption and rent‑seeking tend to have lower capital accumulation, lower productivity, and slower growth. [1] In industries with weaker competition, technological innovation and diffusion are slower, and aggregate productivity growth disappoints. [3]

Dominant firms can earn high profits without improving efficiency, so there’s less pressure to innovate or adopt best practices. A growing share of corporate profits looks like economic rents rather than returns to productive investment. [3]

This also helps explain why wages have stagnated while measured productivity rose for decades: firms capture more surplus as rents rather than passing it on as wages or reinvestment. Weak wage growth then dampens demand for investment in productivity‑enhancing technologies. [2][3]

Regulation, red tape, and contract design

This is where the contested word “regulation” matters. Some rules entrench incumbents; others can restore competition.

Think about other digital platforms that intermediate existing transactions – payments, bookings, app stores – and use lock‑in, data advantages, and network effects to extract fees. Or outsourced public services with complex, long‑term contracts and costly switching (IT systems, proprietary standards, specialised equipment). You can see the same pattern in heavily regulated industries, from energy to water, where incumbents shape rules in ways that raise rivals’ costs and divert resources into compliance and lobbying rather than innovation.

If we want to reverse this, we need to:

• Strengthen competition and curb practices that entrench dominant firms. [3]
• Reduce lock‑in in public contracts:
  • Require open standards and data portability for digital services (payments, IT, platforms).
  • Limit proprietary signage and branding where feasible; use generic QR codes or URLs that can be redirected if providers change.
  • Make exit costs and transition plans explicit in contracts, including who pays for replacing signs, re‑integration, and user communication.
  • favour shorter, performance‑based renewals over long, hard‑to‑exit agreements.

These measures aim to restore competitive pressure that forces firms to innovate and improve productivity rather than rely on rents. [2][3]

As a user, I can also ask simple questions: why do I have to use the council’s app of choice for parking? Why can’t I use my app of choice, and why isn’t there more than one? The same question applies to many other public digital services.

Other examples that fit the pattern

The parking app isn’t an isolated curiosity; it’s a representative microcosm of a broader shift toward rent‑extraction and market power.

• what3words: a proprietary three‑word geocoding system now embedded in many UK emergency services. Open alternatives exist (Plus Codes, OS Grid Reference, Geohash), but marketing, early adoption, and system integration create lock‑in. A private firm effectively controls a basic location‑referencing layer and can extract rents from public bodies. [4]
• Proprietary software stacks: organisations standardise on closed tools (office suites, design software, cloud platforms) because of training, file formats, and workflows. Open‑source alternatives exist (LibreOffice, PostgreSQL, etc.), but switching costs and vendor lock‑in sustain monopoly‑like profits. [6]

In each case, talent and capital that could drive innovation and decarbonisation are discouraged or pushed out, while incumbents earn secure, rent‑like profits.

Why this matters for productivity

Research links rising market power and rent‑seeking to slower productivity growth through several channels:

• Talent allocation: when rent‑seeking rewards ability more than entrepreneurship, the marginal genius becomes a lobbyist, litigator, or financial engineer rather than an innovator. [1][2]
• Weaker innovation and diffusion: dominant firms face less competitive pressure to improve processes or adopt new technologies, so aggregate productivity growth slows. [3]
• Profits without productivity: a growing share of corporate profits reflects economic rents rather than returns to productive investment. [3]
• Wage stagnation: monopoly power helps explain why wages have stagnated while measured productivity rose; firms capture more surplus as rents rather than passing it on as wages or reinvestment. [2][3]

The parking app example is small, but it points to a large issue: a substantial body of research links these trends to lower productivity growth, weaker innovation, and wage stagnation across advanced economies. [2][3]

What would better look like?

If we take this seriously, we should be asking:

• Why do public bodies accept proprietary, lock‑in‑prone systems for basic functions like parking, location referencing, or payments?
• How can procurement be redesigned to favour open standards, interoperability, and easy exit?
• Where should competition policy focus to reduce monopoly power and rent extraction, especially in digital and platform markets?

The goal isn’t to abolish apps or platforms, but to ensure they compete on value created, not on control over access.

References (selected)

1. Murphy, Shleifer & Vishny (1991), The Allocation of Talent: Implications for Growth, NBER Working Paper 3530. [https://www.nber.org/papers/w3530]
2. Progress Wiki (2026), Rent‑seeking drags economic growth. [https://www.progress.org/wiki/rent-seeking-drags-growth/]
3. Brookings Institution (2018), Today’s economic puzzles: A tale of weakening competition. [https://www.brookings.edu/articles/todays-economic-puzzles-a-tale-of-weakening-competition/]
4. what3words discussions and critiques (e.g. Techdirt, OpenStreetMap Wiki, BBC).
5. OECD (2022), Competition and Regulation in the Provision of Local Transportation Services.
6. Lists of open‑source alternatives to proprietary software (e.g. GitHub “open‑source‑alternatives”, Opensource.com cheat sheets).