I like your point. When I see the term "passive income", I immediately convert it to "rent seeking". _Some_ amount of rent seeking will always exist in any capitalist system, but there is a limit where it becomes inefficient. However, most capitalist systems are self-adapting enough, such that when too much of one type of rent seeking appears, eventually new joiners are priced out with zero or negative returns. A simple example to understand is rental property: In many big cities, the ROE on rental cashflow can be nearly zero. (However, there is still a good chance for capital appreciation.)
The original definition that's been hopelessly muddied (language evolves, so eh; I find the etymology interesting) of rent-seeking was that of powerful business men using politics to get benefits. Like a subsidy for their product or some regulation passed that favors them.
