Economic Analysis For Rent Trading

In modern economic life, we often can see those behaviors that people or interest groups try to effect decision-making of the government or the officials so as to obtain their own interests.On the hypotheses of "economic man", "principal-agent relationship" and "venture market", the author uses terms of rent, rent setting and rent seeking, to analyze the problem of rent trading. The author believes that:Rent setting rises on the basis of the "economic man" nature of government officials. The fundamental condition of rent setting is officials' monopolization of the public power, under the circumstances that there's no monitoring system as clear as a bell. Similarly, rent seeking rises on the basis of the "economic man" nature of firms or people who try to maximize their incomes while pursuing the enlargement of capitals. Government's intervention in economic life affects the collocation of resources and the distribution of interests, and coins tremendous latent rent, producing necessary soils for behaviors of rent seeking. Anyway, rent setting or rent seeking is all based upon the individual's "benefit and cost" calculation.Rent setting makes supply of rent, rent seeking makes demand of rent, both the two sides follow the principle of utility maximization while doing venture business with each other. During the process of "1×1" type rent trading, facing the risk of being punished, the rent-seeking part bids in the extent of his possible commission scope according to his attitude to risk; While the counterpart who takes dominant status may choose commission higher or lower to his like. During the process of "1×n" type rent trading, competition brings the rent-seeking part another risk: risk of failure, thus he adjusts his extent to offer commission, meanwhile, the rent-setting part still takes dominant status, he will calculate his function of utility according to bids of the competitors and to his personal judgment of the exact risk of the deal, and then chooses his final counterpart.Although just a behavior between two parts, rent trading makes great externalities, causing huge social costs. First, it leads to unproductive collocation of resources, covering direct investments and the relevant opportunity cost; Second, the rent-seeking part can establish monopolistic status if the deal succeed, which will then causes damage to social benefits and brings X-inefficiency; what's more, rent seeking of firms leads to consumers' rent avoiding, and consequently, the firms will set to seek rent in a second circle just in order to protect their monopolistic status already established, circle by circle, the multiplying-effect will surely cause serious waste of social resources.At present, rent trading at home is rampancy; China hence is believed to be one of "most corrupt countries". Ever since reform and open, rent trading in China has experienced a three-phase-and-two-level development. China really has its particularity in the matter, for it is just in the process of transformation. In the country, step- by- step type reform, payment to civil servants, monitoring system, status of rule of law, social morals and some other aspects all have many defects. The situation of China offers rent trading convenient background.To keep rent trading within limits is undoubtedly a systematic work. We should push forward holistic institution reformation from all aspects. In detail, we should take feasible steps such as reducing gross rent, improving civil servants' welfare, increasing the chance of exposure, strengthening the punishment, enhancing the transaction costs and so on, exactly to the matter. In fact, the most important step to take is nothing else but to take steps to limit rent trading actually.