The Theory Of Rent Essay

Submitted By nilesh81
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The theory of rent-seeking is a hot topic in the Economic society. It is also one of the most challenging subjects in research. The behavior of rent-seeking is a common phenomenon in the market economy. Rent-seeking is a non-productive form economic gambling, leading to the waste of Social resources, repression of fair competitions, refusal of system creation, and resistance of social civilization. Therefore, it is of both theoretical and practical significance to analyze the problem of rent-seeking in the government to probe into the methodology of supervising and controlling the behavior of rent-seeking. This paper starts with a review on the theory of rent-seeking, and proceeds with an analysis on the government behavior. Finally, suggestions are reached to renovate the problems in the current government. There are three parts in the paper. First, is a general discussion of the definition and classification of rent-seeking, the review of major theoretical schools of rent-seeking, and the system environment, cost and aftereffect of rent-seeking. Second, focuses on the basic theory of the government’s behavior of rent-seeking, including the causation, evolution and the effect on the development of economics in our society. Last, I will discuss the types and reasons for political and social inequalities created by rent-seeking.
Rent-seeking in a modern economy is spending money on political lobbying for government benefits or subsidies in order to be given a share of wealth that has already been created, or to impose regulations on competitors, in order to increase market share.The concept of rent-seeking would apply to corruption of bureaucrats who solicit and extract bribe or rent for applying their legal but discretionary authority for awarding legitimate or illegitimate benefits to clients.
Regulatory capture is a related concept which refers to collusion between firms and the government agencies assigned to regulate them, which is seen as enabling extensive rent-seeking behavior, especially when the government agency must rely on the firms for knowledge about the market. Studies of rent-seeking focus on efforts to capture special monopoly privileges such as manipulating government regulation of free enterprise competition. The term monopoly privilege rent-seeking is an often-used label for this particular type of rent-seeking. Often-cited examples include a lobby that seeks economic regulations such as tariff protection, quotas, subsidies, or extension of copyright law.
Inequality means there is a gap between the highest income earners and the lowest income earners. On the one hand, you can argue inequality is necessary for providing incentives in a free market economy; without a degree of inequality there would be economic stagnation and lack of enterprise. On the other hand, you could argue that inequality has many disadvantages and is evidence of fundamental problems in society.

Arguably, inequality is a type of market failure. Market failure occurs when there is an inefficient allocation of resources in a free market. If firms have monopoly power, they are in a position to set higher prices to consumers. This leads to a redistribution of income from consumers to the shareholders of monopolies. Here, the inequality is based on an unfair distribution of power in society. Monopoly
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