Rent-seeking

In public choice theory and in economics, rent-seeking involves seeking to increase one's share of existing wealth without creating new wealth. Rent-seeking results in reduced economic efficiency through poor allocation of resources, reduced actual wealth-creation, lost government revenue, increased income inequality,[1] and (potentially) national decline.

Attempts at capture of regulatory agencies to gain a coercive monopoly can result in advantages for the rent seeker in a market while imposing disadvantages on (incorrupt) competitors. This constitutes one of many possible forms of rent-seeking behavior.

Description

The idea of rent-seeking was developed by Gordon Tullock in 1967,[2] while the expression rent-seeking itself was coined in 1974 by Anne Krueger.[3] The word "rent" does not refer specifically to payment on a lease but rather to Adam Smith's division of incomes into profit, wage, and rent.[4] The origin of the term refers to gaining control of land or other natural resources.

Georgist economic theory describes rent-seeking in terms of land rent, where the value of land largely comes from government infrastructure and services (e.g. roads, public schools, maintenance of peace and order, etc.) and the community in general, rather than from the actions of any given landowner, in their role as mere titleholder. This role must be separated from the role of a property developer, which need not be the same person.

Rent-seeking is an attempt to obtain economic rent (i.e., the portion of income paid to a factor of production in excess of what is needed to keep it employed in its current use) by manipulating the social or political environment in which economic activities occur, rather than by creating new wealth. Rent-seeking implies extraction of uncompensated value from others without making any contribution to productivity. The classic example of rent-seeking, according to Robert Shiller, is that of a feudal lord who installs a chain across a river that flows through his land and then hires a collector to charge passing boats a fee (or rent of the section of the river for a few minutes) to lower the chain. There is nothing productive about the chain or the collector. The lord has made no improvements to the river and is not adding value in any way, directly or indirectly, except for himself. All he is doing is finding a way to make money from something that used to be free.[5]

In many market-driven economies, much of the competition for rents is legal, regardless of harm it may do to an economy. However, some rent-seeking competition is illegal – such as bribery or corruption.

Rent-seeking is distinguished in theory from profit-seeking, in which entities seek to extract value by engaging in mutually beneficial transactions.[6] Profit-seeking in this sense is the creation of wealth, while rent-seeking is "profiteering" by using social institutions, such as the power of the state, to redistribute wealth among different groups without creating new wealth.[7] In a practical context, income obtained through rent-seeking may contribute to profits in the standard, accounting sense of the word.

Tullock paradox

The Tullock paradox is the apparent paradox, described by Tullock, on the low costs of rent-seeking relative to the gains from rent-seeking.[8][9]

The paradox is that rent-seekers wanting political favors can bribe politicians at a cost much lower than the value of the favor to the rent-seeker. For instance, a rent seeker who hopes to gain a billion dollars from a particular political policy may need to bribe politicians only to the tune of ten million dollars, which is about 1% of the gain to the rent-seeker. Luigi Zingales frames it by asking, "Why is there so little money in politics?" because a naive model of political bribery and/or campaign spending should result in beneficiaries of government subsidies being willing to spend an amount up to the value of the subsidies themselves, when in fact only a small fraction of that is spent.

Possible explanations

Several possible explanations have been offered for the Tullock paradox:[10]

  1. Voters may punish politicians who take large bribes, or live lavish lifestyles. This makes it hard for politicians to demand large bribes from rent-seekers.
  2. Competition between different politicians eager to offer favors to rent-seekers may bid down the cost of rent-seeking.
  3. Lack of trust between the rent-seekers and the politicians, due to the inherently underhanded nature of the deal and the unavailability of both legal recourse and reputational incentives to enforce compliance, pushes down the price that politicians can demand for favors.

Examples

PapalPolitics2
Antichristus,[11] a woodcut by Lucas Cranach the Elder, of the pope using the temporal power to grant authority to a ruler contributing generously to the Catholic Church

An example of rent-seeking in a modern economy is spending money on lobbying for government subsidies in order to be given wealth that has already been created, or to impose regulations on competitors, in order to increase market share.[12] Another example of rent-seeking is the limiting of access to lucrative occupations, as by medieval guilds or modern state certifications and licensures. Taxi licensing is a textbook example of rent-seeking.[13] To the extent that the issuing of licenses constrains overall supply of taxi services (rather than ensuring competence or quality), forbidding competition from other vehicles for hire renders the (otherwise consensual) transaction of taxi service a forced transfer of part of the fee, from customers to taxi business proprietors.

The concept of rent-seeking would also 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.[14] For example, tax officials may take bribes for lessening the tax burden of the taxpayers.

Regulatory capture is a related term for the 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.[15] 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,[16] or extension of copyright law.[17] Anne Krueger concludes that "empirical evidence suggests that the value of rents associated with import licenses can be relatively large, and it has been shown that the welfare cost of quantitative restrictions equals that of their tariff equivalents plus the value of the rents".[18]

Economists such as the chair of British financial regulator the Financial Services Authority Lord Adair Turner have argued that innovation in the financial industry is often a form of rent-seeking.[19][20]

Development of theory

The phenomenon of rent-seeking in connection with monopolies was first formally identified in 1967 by Gordon Tullock.[21]

Recent studies have shown that the incentives for policy-makers to engage in rent-provision is conditional on the institutional incentives they face, with elected officials in stable high-income democracies the least likely to indulge in such activities vis-à-vis entrenched bureaucrats and/or their counterparts in young and quasi-democracies.[22]

Criticism

Critics of the concept point out that, in practice, there may be difficulties distinguishing between beneficial profit-seeking and detrimental rent-seeking.[23]

Often a further distinction is drawn between rents obtained legally through political power and the proceeds of private common-law crimes such as fraud, embezzlement and theft. This viewpoint sees "profit" as obtained consensually, through a mutually agreeable transaction between two entities (buyer and seller), and the proceeds of common-law crime non-consensually, by force or fraud inflicted on one party by another. Rent, by contrast with these two, is obtained when a third party deprives one party of access to otherwise accessible transaction opportunities, making nominally "consensual" transactions a rent-collection opportunity for the third party. The high profits of the illegal drug trade are considered rents by this definition, as they are neither legal profits nor the proceeds of common-law crimes.

People accused of rent-seeking typically argue that they are indeed creating new wealth (or preventing the reduction of old wealth) by improving quality controls, guaranteeing that charlatans do not prey on a gullible public, and preventing bubbles.

Possible consequences

From a theoretical standpoint, the moral hazard of rent-seeking can be considerable. If "buying" a favorable regulatory environment seems cheaper than building more efficient production, a firm may choose the former option, reaping incomes entirely unrelated to any contribution to total wealth or well-being. This results in a sub-optimal allocation of resources – money spent on lobbyists and counter-lobbyists rather than on research and development, on improved business practices, on employee training, or on additional capital goods – which retards economic growth. Claims that a firm is rent-seeking therefore often accompany allegations of government corruption, or the undue influence of special interests.[24]

Rent-seeking can prove costly to economic growth; high rent-seeking activity makes more rent-seeking attractive because of the natural and growing returns that one sees as a result of rent-seeking. Thus organizations value rent-seeking over productivity. In this case there are very high levels of rent-seeking with very low levels of output. Rent-seeking may grow at the cost of economic growth because rent-seeking by the state can easily hurt innovation. Ultimately, public rent-seeking hurts the economy the most because innovation drives economic growth.[25]

Government agents may initiate rent-seeking – such agents soliciting bribes or other favors from the individuals or firms that stand to gain from having special economic privileges, which opens up the possibility of exploitation of the consumer.[26] It has been shown that rent-seeking by bureaucracy can push up the cost of production of public goods.[27] It has also been shown that rent-seeking by tax officials may cause loss in revenue to the public exchequer.[14]

Mancur Olson traced the historic consequences of rent seeking in The Rise and Decline of Nations. As a country becomes increasingly dominated by organized interest groups, it loses economic vitality and falls into decline. Olson argued that countries that have a collapse of the political regime and the interest groups that have coalesced around it can radically improve productivity and increase national income because they start with a clean slate in the aftermath of the collapse. An example of this is Japan after World War Two. But new coalitions form over time, once again shackling society in order to redistribute wealth and income to themselves. However, social and technological changes have allowed new enterprises and groups to emerge.[28]

A study by Laband and John Sophocleus in 1988[29] estimated that rent-seeking had decreased total income in the USA by 45 percent. Both Dougan and Tullock affirm the difficulty of finding the cost of rent-seeking. Rent-seekers of government-provided benefits will in turn spend up to that amount of benefit in order to gain those benefits, in the absence of, for example, the collective-action constraints highlighted by Olson. Similarly, taxpayers lobby for loopholes and will spend the value of those loopholes, again, to obtain those loopholes (again absent collective-action constraints). The total of wastes from rent-seeking is then the total amount from the government-provided benefits and instances of tax avoidance (valuing benefits and avoided taxes at zero). Dougan says that the "total rent-seeking costs equal the sum of aggregate current income plus the net deficit of the public sector".[30]

Mark Gradstein writes about rent-seeking in relation to public goods provision, and says that public goods are determined by rent seeking or lobbying activities. But the question is whether private provision with free-riding incentives or public provision with rent-seeking incentives is more inefficient in its allocation.[31]

The economist Joseph Stiglitz has argued that rent-seeking contributes significantly to income inequality in the United States through lobbying for government policies that let the wealthy and powerful get income, not as a reward for creating wealth, but by grabbing a larger share of the wealth that would otherwise have been produced without their effort.[32][33] Piketty, Saez, and Stantcheva have analyzed international economies and their changes in tax rates to conclude that much of income inequality is a result of rent-seeking among wealthy tax payers.[34]

See also

References

  1. ^ IMF. "Rent-seeking and Endogenous Income Inequality" (PDF). Retrieved 30 April 2014.
  2. ^ David R. Henderson. "Rent Seeking". Econlib.org.
  3. ^ Krueger, Anne (1974). "The Political Economy of the Rent-Seeking Society". American Economic Review. 64 (3): 291–303. JSTOR 1808883.
  4. ^ "Rent-Seeking". Investopedia. 25 November 2003. Retrieved 27 October 2016.
  5. ^ Robert Shiller. The Best, Brightest and Least Productive?, Project Syndicate
  6. ^ Robert Schenk. "Rent Seeking". CyberEconomics. Archived from the original on 3 January 2006. Retrieved 11 February 2007.
  7. ^ Conybeare, John A. C. (1982). "The Rent-Seeking State & Revenue Diversification," World Politics, 35(1): 25–42.
  8. ^ Tullock, Gordon (1980), "Efficient rent-seeking", in Buchanan, J.; Tollison, R.; and Tullock, G., Toward a theory of the rent-seeking society, College Station: Texas A&M Press, pp. 97–112CS1 maint: Uses editors parameter (link)
  9. ^ Connes, Richard. "Loss Aversion and the Tullock Paradox". SSRN 467901. Missing or empty |url= (help)
  10. ^ Zingales, Luigi (2014), A Capitalism for the People: Recapturing the Lost Genius of American Prosperity, Basic Books, pp. 75–78, ISBN 9780465038701
  11. ^ Passional Christi und Antichristi Full view on Google Books
  12. ^ Sample, John. "An Introduction to Rent Seeking".
  13. ^ McTaggart, Douglas (2012). Economics. Pearson Higher Education. p. 224. ISBN 978-1-4425-5077-3.
  14. ^ a b Chowdhury, Faizul Latif (2006). Corrupt Bureaucracy and Privatization of Tax Enforcement. Pathak Shamabesh, Dhaka. ISBN 978-984-8120-62-0.
  15. ^ Feenstra, Robert; Taylor, Alan (2008). International Economics. Worth Publishers, New York. ISBN 978-0-7167-9283-3
  16. ^ Charles Kershaw Rowley (1988). The Political Economy of Rent-Seeking. Springer. p. 226. ISBN 978-0-89838-241-9.
  17. ^ Lanier Saperstein (1997). "Copyrights, Criminal Sanctions and Economic Rents: Applying the Rent Seeking Model to the Criminal Law Formulation Process". The Journal of Criminal Law and Criminology. 87 (4): 1470–1510. doi:10.2307/1144023. JSTOR 1144023.
  18. ^ Krueger, Anne. O (1974). "The Political Economy of the Rent Seeking Society", The American Economic Review, 64(3): 291–303.
  19. ^ Turner, Adair (19 April 2012). "SECURITISATION, SHADOW BANKING AND THE VALUE OF FINANCIAL INNOVATION" (PDF). SCHOOL OF ADVANCED INTERNATIONAL STUDIES (THE ROSTOV LECTURE ON INTERNATIONAL AFFAIRS). Johns Hopkins University. Retrieved 10 January 2013.
  20. ^ Turner, Adair (17 March 2010). "WHAT DO BANKS DO, WHAT SHOULD THEY DO AND WHAT PUBLIC POLICIES ARE NEEDED TO ENSURE BEST RESULTS FOR THE REAL ECONOMY?" (PDF). CASS Business School: 27. Retrieved 10 January 2013.
  21. ^ Tullock, Gordon (1967). "The Welfare Costs of Tariffs, Monopolies, and Theft". Western Economic Journal. 5 (3): 224–32. doi:10.1111/j.1465-7295.1967.tb01923.x.
  22. ^ Hamilton , Alexander (2013), Small is beautiful, at least in high-income democracies: the distribution of policy-making responsibility, electoral accountability, and incentives for rent extraction [1], World Bank.
  23. ^ Pasour, E.C. "Rent Seeking: Some Conceptual Problems and Implications" (PDF). The Review of Austrian Economics.
  24. ^ Eisenhans, Hartmut (1996). State, class, and development. Radiant Publishers. ISBN 978-81-7027-214-4.
  25. ^ Murphy, Kevin M., Andrei Shleifer, and Robert W. Vishny (1993). "Why is Rent-Seeking So Costly to Growth?," The American Economic Review, 83(2): 409–14.
  26. ^ Michael Dauderstädt, Arne Schildberg (editors), ed. (2006). Dead Ends of Transition: Rentier Economies and Protectorates. Campus Verlag. ISBN 978-3-593-38154-1.CS1 maint: Extra text: editors list (link)
  27. ^ Niskanen, William (1971). Bureaucracy and Representative Government. Aldine-Atherton, Chicago.
  28. ^ Mokyr, Joel and John V. C. Nye. 2007. "Distributional Coalitions, the Industrial Revolution, and the Origins of Economic Growth in Britain". Southern Economic Journal, 74(1):50–70.
  29. ^ Leeson, Peter T. The Invisible Hook: The Hidden Economics of Pirates. Princeton University Press. 2009. p. 191.
  30. ^ Dougan, William R. (1991). "The Cost of Rent Seeking: Is GNP Negative?" Journal of Political Economy, 99(3): 660–664.
  31. ^ Gradstein, Mark (1993). "Rent Seeking and the Provision of Public Goods," The Economic Journal, 103(420): 1236–1243.
  32. ^ Stiglitz, Joseph E. (4 June 2012). The Price of Inequality: How Today's Divided Society Endangers Our Future. p. 32. Norton. Kindle Edition.
  33. ^ Lind, Michael (22 March 2013). "How rich "moochers" hurt America". Salon. Retrieved 7 April 2013.
  34. ^ Piketty, Thomas, Emmanuel Saez, and Stefanie Stantcheva (2011), "Optimal Taxation of Top Labor Incomes: A Tale of Three Elasticities", CEPR Discussion Paper 8675, December.

Further reading

  • Chowdhury, Faizul Latif (2006). Corrupt Bureaucracy and Privatization of Tax Enforcement (A Rent Seeking Bureaucracy ed.). Pathak Shamabesh, Dhaka. pp. 25–34. ISBN 978-984-8120-62-0.
  • Ikeda, Sanford (2008). "Rent Seeking". In Hamowy, Ronald. The Encyclopedia of Libertarianism. Thousand Oaks, CA: SAGE; Cato Institute. pp. 422–23. doi:10.4135/9781412965811.n259. ISBN 978-1412965804. LCCN 2008009151. OCLC 750831024.
  • Krueger, Anne (1974). "The Political Economy of the Rent-Seeking Society". American Economic Review. 64 (3): 291–303. JSTOR 1808883.
  • Tullock, Gordon (1987). "Rent seeking". The New Palgrave: A Dictionary of Economics. 4. Palgrave Macmillan. 147–49. ISBN 978-0-333-37235-7.
  • Tullock, Gordon (2005). The Rent-Seeking Society: The Selected Works of Gordon Tullock, Vol. 5.

External links

Bootleggers and Baptists

Bootleggers and Baptists is a concept put forth by regulatory economist Bruce Yandle, derived from the observation that regulations are supported both by groups that want the ostensible purpose of the regulation, and by groups that profit from undermining that purpose.For much of the 20th century, Baptists and other evangelical Christians were prominent in political activism for Sunday closing laws restricting the sale of alcohol. Bootleggers sold alcohol illegally, and got more business if legal sales were restricted. "Such a coalition makes it easier for politicians to favor both groups. ... [T]he Baptists lower the costs of favor-seeking for the bootleggers, because politicians can pose as being motivated purely by the public interest even while they promote the interests of well-funded businesses. ... [Baptists] take the moral high ground, while the bootleggers persuade the politicians quietly, behind closed doors."

Corruption in Brazil

Corruption in Brazil exists on all levels of society from the top echelons of political power to the smallest municipalities. Operation Car Wash showed central government members using the prerogatives of their public office for rent-seeking activities, ranging from political support to siphoning funds from state-owned corporation for personal gain. Specifically, mensalão typically referred to the practice of transferring taxpayer funds as monthly allowances to members of congress from other political parties in consideration for their support and votes in congress. Politicians used the state-owned and state-run oil company Petrobras to raise hundreds of millions of reais for political campaigns and personal enrichment.

Corruption was cited among many issues that provoked the 2013 protests. Corruption reduced public investments in health, education, infrastructure, security, housing, among other essential rights, expanding social exclusion and inequality.

Crony capitalism

Crony capitalism is an economy in which businesses thrive not as a result of risk, but rather as a return on money amassed through a nexus between a business class and the political class. This is done using state power to crush genuine competition in handing out permits, government grants, special tax breaks, or other forms of state intervention over resources where the state exercises monopolist control over public goods, for example, mining concessions for primary commodities or contracts for public works. Money is then made not merely by making a profit in the market, but through profiteering by "rent seeking" using this monopoly or oligopoly. Entrepreneurship and innovative practices, which seek to reward risk are stifled, since the value-added is little by crony businesses as hardly anything of significant value is created by them, with transactions taking the form of "trading". Crony capitalism spills over into the government, the politics and the media, when this nexus distorts the economy and affects society to an extent it corrupts public-serving economic, political and social ideals.

The term "crony capitalism" made a significant impact in the public as an explanation of the Asian financial crisis. It is also used to describe governmental decisions favoring "cronies" of governmental officials. In this context, the term is often used comparatively with corporate welfare, a technical term often used to assess government bailouts and favoritistic monetary policy, as opposed to the economic theory, described by "crony capitalism". The extent of difference between these terms is whether a government action can be said to benefit the individuals rather than the industry.

Distortion (economics)

A distortion is "any departure from the ideal of perfect competition that therefore interferes with economic agents maximizing social welfare when they maximize their own". A proportional wage-income tax, for instance, is distortionary, whereas a lump-sum tax is not. In a competitive equilibrium, a proportional wage income tax discourages work.In perfect competition with no externalities, there is zero distortion at market equilibrium of supply and demand where price equals marginal cost for each firm and product. More generally, a measure of distortion is the deviation between the market price of a good and its marginal social cost, that is, the difference between the marginal rate of substitution in consumption and the marginal rate of transformation in production. Such a deviation may result from government regulation, monopoly tariffs and import quotas, which in theory may give rise to rent seeking. Other sources of distortions are uncorrected externalities, different tax rates on goods or income, inflation, and incomplete information. Each of these may lead to a net loss in social surplus.

Economic inequality

Economic inequality covers a wide variety of topics. It can refer to either income distribution (measuring the amount of money people are paid) or the distribution of wealth (the amount of wealth people own). Besides economic inequality between countries or states, there are important types of economic inequality between different groups of people.Important types of economic measurements focus on wealth, income, and consumption. There are many methods for measuring economic inequality, with the Gini coefficient being a widely used one. Another type of measure is the Inequality-adjusted Human Development Index, which is a statistic composite index that takes inequality into account. Important concepts of equality include equity, equality of outcome, and equality of opportunity.

Research suggests that greater inequality hinders the duration of growth but not its rate. Whereas globalization has reduced global inequality (between nations), it has increased inequality within nations.

Economic rent

In economics, economic rent is any payment to an owner or factor of production in excess of the costs needed to bring that factor into production. In classical economics, economic rent is any payment made (including imputed value) or benefit received for non-produced inputs such as location (land) and for assets formed by creating official privilege over natural opportunities (e.g., patents). In the moral economy of neoclassical economics, economic rent includes income gained by labor or state beneficiaries of other "contrived" (assuming the market is natural, and does not come about by state and social contrivance) exclusivity, such as labor guilds and unofficial corruption.

In the moral economy of the economics tradition broadly, economic rent is opposed to producer surplus, or normal profit, both of which are theorized to involve productive human action. Economic rent is also independent of opportunity cost, unlike economic profit, where opportunity cost is an essential component. Economic rent is viewed as unearned revenue while economic profit is a narrower term describing surplus income earned by choosing between risk-adjusted alternatives. Unlike economic profit, economic rent cannot be theoretically eliminated by competition because any actions the recipient of the income may take such as improving the object to be rented will then change the total income to contract rent. Still, the total income is made up of economic profit (earned) plus economic rent (unearned).

For a produced commodity, economic rent may be due to the legal ownership of a patent (a politically enforced right to the use of a process or ingredient). For education and occupational licensing, it is the knowledge, performance, and ethical standards, as well as the cost of permits and licenses that are collectively controlled as to their number, regardless of the competence and willingness of those who wish to compete on price alone in the area being licensed. In regard to labor, economic rent can be created by the existence of mass education, labor laws, state social reproduction supports, democracy, guilds, and labor unions (e.g., higher pay for some workers, where collective action creates a scarcity of such workers, as opposed to an ideal condition where labor competes with other factors of production on price alone). For most other production, including agriculture and extraction, economic rent is due to a scarcity (uneven distribution) of natural resources (e.g., land, oil, or minerals).

When economic rent is privatized, the recipient of economic rent is referred to as a rentier.

By contrast, in production theory, if there is no exclusivity and there is perfect competition, there are no economic rents, as competition drives prices down to their floor.Economic rent is different from other unearned and passive income, including contract rent. This distinction has important implications for public revenue and tax policy. As long as there is sufficient accounting profit, governments can collect a portion of economic rent for the purpose of public finance. For example, economic rent can be collected by a government as royalties or extraction fees in the case of resources such as minerals and oil and gas.

Historically, theories of rent have typically applied to rent received by different factor owners within a single economy. Hossein Mahdavy was the first to introduce the concept of "external rent", whereby one economy received rent from other economies.

Economics of corruption

Economics of corruption applies economic tools to the analysis of corruption. Rigorous study of corruption by economists commenced in the 1980s.

Faizul Latif Chowdhury

Faizul Latif Chowdhury (Bengali: ফয়জুল লতিফ চৌধুরী; born 3 June 1959) is a civil servant from Bangladesh, who currently serves as the Director General of Bangladesh National Museum. Chowdhury has written on a variety of academic topics, including corruption in public administration, tax policy , economics of tax evasion and tax avoidance, smuggling, and international trade policy. He is also a translator of Bengali poetry, and has researched the modern poet Jibanananda Das.

Gordon Tullock

Gordon Tullock (; February 13, 1922 – November 3, 2014) was an economist and professor of law and Economics at the George Mason University School of Law. He is best known for his work on public choice theory, the application of economic thinking to political issues. He is one of the founding figures in his field.

Infant industry argument

The infant industry argument is an economic rationale for trade protectionism. The core of the argument is that nascent industries often do not have the economies of scale that their older competitors from other countries may have, and thus need to be protected until they can attain similar economies of scale. The argument was first fully articulated by Alexander Hamilton in his 1790 Report on Manufactures, was systematically developed by Daniel Raymond, and was later picked up by Friedrich List in his 1841 work The National System of Political Economy, following his exposure to the idea during his residence in the United States in the 1820s.Many countries have successfully industrialized behind tariff barriers. For example, from 1816 through 1945, tariffs in the United States were among the highest in the world. According to Ha-Joon Chang, "almost all of today's rich countries used tariff protection and subsidies to develop their industries".Despite this, infant industry protection is controversial as a policy recommendation. As with the other economic rationales for protectionism, it is often abused by rent seeking interests. Even when infant industry protection is well–intentioned, it is difficult for governments to know which industries they should protect; "infant" industries may never "grow up" relative to "adult" foreign competitors. For example, during the 1980s Brazil enforced strict controls on the import of foreign computers in an effort to nurture its own "infant" computer industry. This industry never matured; the technological gap between Brazil and the rest of the world actually widened, while the protected industries merely copied low-end foreign computers and sold them at inflated prices. In addition, countries that put up barriers to imports will often face retaliatory barriers to their exports, potentially hurting the same industries that infant industry protection is intended to help.

Ernesto Zedillo, in his 2000 report to the UN Secretary-General, recommended "legitimising limited, time-bound protection for certain industries by countries in the early stages of industrialisation", arguing that "however misguided the old model of blanket protection intended to nurture import substitute industries, it would be a mistake to go to the other extreme and deny developing countries the opportunity of actively nurturing the development of an industrial sector".

Mercantilism

Mercantilism is a national economic policy that is designed to maximize the exports of a nation. Mercantilism was dominant in modernized parts of Europe from the 16th to the 18th centuries before falling into decline, although some commentators argue that it is still practiced in the economies of industrializing countries in the form of economic interventionism.It promotes government regulation of a nation's economy for the purpose of augmenting state power at the expense of rival national powers. Mercantilism includes a national economic policy aimed at accumulating monetary reserves through a positive balance of trade, especially of finished goods. Historically, such policies frequently led to war and also motivated colonial expansion.Mercantilist theory varies in sophistication from one writer to another and has evolved over time. High tariffs, especially on manufactured goods, was an almost universal feature of mercantilist policy. These policies aim to reduce a possible current account deficit or reach a current account surplus.

With the efforts of supranational organizations such as the World Trade Organization to reduce tariffs globally, non-tariff barriers to trade have assumed a greater importance in neomercantilism.

National Competition Policy (India)

National Competition Policy is formulated by the Government of India with a view to achieve highest sustainable levels of economic growth, entrepreneurship, employment, higher standards of living for citizens, protect economic rights for just, equitable, inclusive and sustainable economic and social development, promote economic democracy and support good governance by restricting rent-seeking practices. Dhanendra Kumar was the Chairman of the committee which was entrusted the task of formulating India's National Competition Policy.

Property rights (economics)

Property rights are theoretical socially-enforced constructs in economics for determining how a resource or economic good is used and owned. Resources can be owned by (and hence be the property of) individuals, associations or governments. Property rights can be viewed as an attribute of an economic good. This attribute has four broad components and is often referred to as a bundle of rights:

the right to use the good

the right to earn income from the good

the right to transfer the good to others

the right to enforce property rightsIn economics, property is usually considered to be ownership (rights to the proceeds generated by the property) and control over a resource or good. Many economists effectively argue that property rights need to be fixed and need to portray the relationships among other parties in order to be more effective.

Public choice

Public choice or public choice theory is "the use of economic tools to deal with traditional problems of political science". Its content includes the study of political behavior. In political science, it is the subset of positive political theory that studies self-interested agents (voters, politicians, bureaucrats) and their interactions, which can be represented in a number of ways – using (for example) standard constrained utility maximization, game theory, or decision theory. Public

Choice analysis has roots in positive analysis ("what is") but is often used for normative purposes ("what ought to be") in order to identify a problem or to suggest improvements to constitutional rules (i.e., constitutional economics).The Journal of Economic Literature's classification code regards public choice as a subarea of Microeconomics, under JEL: D7: "Analysis of Collective Decision-Making" (specifically, JEL: D72: "Economic Models of Political Processes: Rent-Seeking, Elections, Legislatures, and Voting Behavior").Public choice theory is also closely related to social-choice theory, a mathematical approach to aggregation of individual interests, welfares, or votes. Much early work had aspects of both, and both fields use the tools of economics and game theory. Since voter behavior influences the behavior of public officials, public-choice theory often uses results from social-choice theory. General treatments of public choice may also be classified under public economics.

Raul V. Fabella

Raul V. Fabella (born 12 April 1949, Bacolod, Negros Occidental, Philippines) is a Filipino academic, economist and National Scientist of the Philippines. He was born to Estelito Fabella and Magdalena Villaseñor in Bacolod, Negros Occidental. Raul is the grandnephew of Gabriel Fabella, father of June 12th. Raul's grandfather Adriano was Gabriel's brother.

Fabella was educated at the Seminario Mayor-Recoletos (now the Casiciaco Recoletos Seminary, Ph.B. 1970); the University of the Philippines School of Economics at UP Diliman (M.A. 1975); and Yale University (Ph.D. 1982). His entire academic career has been spent with the faculty of the University of the Philippines School of Economics (UPSE), which he served as dean from 1998 to 2007.

Fabella has written articles in both theoretical and applied fields: political economy and rent-seeking; the theory of teams; regulation; international economics; and mathematical economics. Notable concepts associated with him are the "Olson ratio" in rent-seeking, egalitarian Nash bargainng solutions, and the debt-adjusted real effective exchange rate.In public-policy debates he has been a prominent advocate of a policy of currency undervaluation as a tool of development.

Fabella was elected to the National Academy of Science and Technology (NAST) in 1995. Upon endorsement by NAST, he was awarded the title of National Scientist by President Benigno Aquino III on 27 July 2011. The National Scientist title is the highest recognition given by the Philippine Government to a Filipino for his or her outstanding contributions to science and technology.

Seek

Seek may refer to:

Disk seek, in which the read head of a magnetic disk repositions itself

Zero seek

Rent seeking

Job seeking

Goal seeking

Seek Limited, an Australian recruitment website

Social choice theory

Social choice theory or social choice is a theoretical framework for analysis of combining individual opinions, preferences, interests, or welfares to reach a collective decision or social welfare in some sense. A non-theoretical example of a collective decision is enacting a law or set of laws under a constitution. Social choice theory dates from Condorcet's formulation of the voting paradox. Kenneth Arrow's Social Choice and Individual Values (1951) and Arrow's impossibility theorem in it are generally acknowledged as the basis of the modern social choice theory. In addition to Arrow's theorem and the voting paradox, the Gibbard–Satterthwaite theorem, the Condorcet jury theorem, the median voter theorem, and May's theorem are among the more well known results from social choice theory.

Social choice blends elements of welfare economics and voting theory. It is methodologically individualistic, in that it aggregates preferences and behaviors of individual members of society. Using elements of formal logic for generality, analysis proceeds from a set of seemingly reasonable axioms of social choice to form a social welfare function (or constitution). Results uncovered the logical incompatibility of various axioms, as in Arrow's theorem, revealing an aggregation problem and suggesting reformulation or theoretical triage in dropping some axiom(s).Later work also considers approaches to compensations and fairness, liberty and rights, axiomatic domain restrictions on preferences of agents, variable populations, strategy-proofing of social-choice mechanisms, natural resources, capabilities and functionings, and welfare, justice, and poverty.Social choice and public choice theory may overlap but are disjoint if narrowly construed. The Journal of Economic Literature classification codes place Social Choice under Microeconomics at JEL D71 (with Clubs, Committees, and Associations) whereas most Public Choice subcategories are in JEL D72 (Economic Models of Political Processes: Rent-Seeking, Elections, Legislatures, and Voting Behavior).

Three Stricts and Three Honests

The Three Stricts, Three Honests (Chinese: 三严三实) is an internal education campaign led by the Communist Party of China advanced by General Secretary and President Xi Jinping in 2014, aimed at improving the ethical conduct of party officials and "improving political ecology". The campaign was essentially a response against perceived moral laxity in the Communist rank and file which has, over the years, according to the party itself, distanced government officials from ordinary people they were supposed to serve.

The campaign was also aimed at tackling the endemic careerism, collusion between business and political elites, rent-seeking by officials, and superficiality that became pervasive in Chinese politics. It took place in the backdrop of the wider anti-corruption campaign, creating a culture where officials "don't want to be corrupt, don't dare to be corrupt, and don't have the means to be corrupt." Since 2015, a party-wide "education campaign" began under the leadership of Xi and the senior official in charge of party affairs, Liu Yunshan, to instill these ideas in officials of all levels.Xi initially raised the concept on March 19, 2014, at a panel discussion at the National People's Congress.The "three honests" are:

Be honest in making decisions (谋事要实, also can be translated as "be honest in doing things")

Be honest in forging a career (创业要实, also translated as "be honest in business")

Be honest in personal behavior (做人要实)The "three stricts" are:

Be strict in moral conduct (严以修身, also can be translated as "be strict in self-cultivation")

Be strict in exercising power (严以用权)

Be strict in disciplining oneself (严以律己)

By owner
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redistribution
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