The Analysis On Cost Of Rent-Seeking

The Rent-seeking theory which was start up in the sixties and seventies of the last century has penetrated to the political, economic and philosophical with its unique perspective. The so-called rent-seeking, means seeking rent. This rental is often derived from government intervention in the domestic economy as well as intervention in international trade. After word war 2, in order to recover the economy, governments have adopted the views of Keynes, extending the"visible hand"into the various areas of the economy. Too much interference, however, is the breeding ground for monopolies and rent-seeking behavior, a serious impediment to fair competition in the market, the healthy development of the market economy. Our country has experienced a long transition period, because of legal gaps and the absence of a system, there provide a greenhouse-like room for rent-seeking behavior during this period. Power trading, trading power for money is very popular, which is not only undermine the social climate, even limited to our future development.One of the basic assumptions of economics - to maximize their personal interests, revealing people's behavior is an inherent pattern of doing things: To compare the benefits and costs. If there are huge economic temptations, rational actors often take the profit-seeking activities in the form of legal or illegal. Individual interests maximizing behavior will lead to enormous waste of scarce production resources and non-productive use in the case of missing System and competitions.This article draws on rent-seeking theory of the western economics analyses the personal and social costs caused by rent-seeking as the summary of the definition of rent-seeking and the constitution of the costs the beginning. Among personal costs include the cost of creating rent, the cost of avoiding rent, the cost of contesting for rent, the cost of protecting rent, the cost of covering rent. Rent-seeking also has huge social costs, such as distort resource allocation, innovation stagnated and so on. In short, rent-seeking is the behavior of a negative externalities, it needs to pay a high price for society. This article aims to reveal in detail the enormous cost of rent-seeking composition, and analyses the net social welfare losses caused by rent-seeking using the rent-seeking activities in conduct of government procurement as an example. So this paper is briefly presented some suggestions in the last part for the rent-seeking governance, and warning the world to eliminate rent-seeking activities through this analysis. I will combine the standard analysis and case studies, observation and literature to analyze the cost of the rent-seeking with the research tools and methods of development economics and political economy.This paper is divided into six parts:The first part states the background and significance of this writing, and research ideas and research methods. After three decades of reform and opening up, China has scored remarkable achievements. However, due to the no perfect legal system in the planned economy period and the period of economic transition, there provide a fertile ground for rent-seeking activities. Whatever it is large or small, rent-seeking activities caused huge losses to the state, a serious impediment to the smooth development of China's economy. We have to control the social cost of the rent-seeking activities, to governance the all rent-seeking activities which is not conducive to social development, so promote resources configuration more effectively. The detailed analysis on the huge cost of rent-seeking activities is using to warn the people eliminate rent-seeking activities.The second part gives an overview of domestic and international economic scholars'research in the definition and cost composition of rent-seeking. Found, whether domestic or foreign scholars can not give a precise answer to address the definition of rent-seeking, the vacant of the definition of rent-seeking has been seriously affected the application of rent-seeking theory, which restricts the development of rent-seeking theory. Similarly, economists can not give a consensus view on the composition of rent-seeking costs. The third part detailed analyses the enormous personal cost of the rent-seeking from several aspects: the cost of creating rent, the cost of avoiding rent, the cost of contesting for rent, the cost of protecting rent, the cost of covering rent. In this section, I introduce an example: the rent-seeking behavior of business of a commodity in order to obtain the franchise rights which lobbying and bribery the government officials. And the government officials do some no-bright a series of activities in order to obtain franchise rights for the approval. Then analyses the costs of rent-seeking from the perspective of entrepreneurs and government officials.The fourth part of this paper analyses the enormous social costs generated by rent-seeking. Rent-seeking has strong negative external effects, manifested in: rent-seeking would lead to distortions in the allocation of resources, stagnation in social innovation, the whole social welfare loss. In the discussion of distortions allocation of social resources caused by rent-seeking, the article to restrict the import of high-tech products, for example, from the perspective of individual enterprises and the whole of the society to analyses the enormous social costs of rent-seeking. Rent-seeking activities has a strong "squeeze effect", because the rent-seeking activities taking up other productive resources, is not conducive to enterprises to improve productivity, enhance innovation, so this result is that the level of benefits of the whole society was seriously affected.The part V of this paper analyses rent-seeking behavior concretely by using a example: Government Procurement. There are four parts: the phenomenon of rent-seeking, the reasons of rent-seeking, the costs of rent-seeking, the governance of rent-seeking. Government procurement is more familiar behavior of a government in which key players are government procurement officials and suppliers of goods. Since government procurement is a complex chain of trust on which the rent-seeking activities developed. The government, enterprises and individuals will participate in and strengthen supervision and cooperation to treatment the rent-seeking behaviorBecause of the high cost of rent-seeking, in the last part of this article there are some suggestions to the governance of rent-seeking, respectively from the macro level and micro level. Which macro-level measures include: strengthening the competitive mechanism, the acceleration of market reforms, reduce government intervention, the development of market economy; complete building the system; government affairs and so on. At the micro level, its need to strengthen moral education of citizens, established the reputation mechanisms, increase punishment, upgrade their rent-seeking costs for rent-seeking, prevent the occurrence of the phenomenon from the source. This article hopes to give some contributions to the management of the rent-seeking from the micro and macro perspective.Through the previous six-part analysis and discussion, we have know that the cost of rent seeking is large, it not only to spend a lot of individuals financial and material resources who rent-seeking, and make the whole society to pay at great cost. Control rent-seeking is urgent. However, due to my poor knowledge, there are only a few suggestions in the last part of the article for control the rent-seeking. We need more people to limit rent-seeking involved, from ourselves and from yourself. When there is a good competition environment, people are living in a good environment. I believe that the rent-seeking will not find a place to grow.